The capital reserve study committee comprises Ruth Jenkins and Deanna Knox.  Here's what we did to develop the capital reserve plan for Wildflower II:

  First of all we studied a tutorial on how to create a capital reserve study.  Then we developed a list of all the common elements that our association is responsible for maintaining.

 Each element has an estimated lifetime (how many years between replacements), as well as an estimated remaining life (how many years are left in its current life time).  To develop these numbers we used the association's past experience in some cases; in other cases we asked contractors for estimates; in other cases we used "standard practice" numbers.

 Next we had to get estimates of how much each element would cost to replace, using 2001 as a base year.  We used Association records, contractor's estimates, and in some cases "guess work" to arrive at these costs.  By now we had put all of these data on a spreadsheet - including a notation of how we arrived at the values we were using.  This step actually involved a lot of legwork, phone calls, contractor contact and record searching, much of which Deanna did.

 Now comes the fancy part (or hocus pocus, depending on your point of view).  Ruth (that would be me) is a computer scientist by trade.  So, let me, Ruth, drop into the first person here, for just a minute to tell you what happened next.  I wrote a computer program.  TaDa!  The program works as follows:

• Divide the cost of the item by the years of life to figure out an "annual cost" for that item.
• Add up all of the items' annual capital reserve costs to get a total amount that the association should contribute to capital reserve this year.
• Include a consumer price index inflator to compute how much more we will have to contribute in each subsequent year, just to stay even. Use the same inflator to figure what our future annual operating expenses are likely to be.
• Compute dues: (operating expenses + capital reserve contribution) / 48 units / 4 quarters = quarterly dues / unit owner.
• Use the remaining life of each item to decide what expenses will occur each year in the future; include a cpi inflation factor.
• Compute how much interest we can make from savings when we don't spend all of our reserves each year.
• Put all of these values in a series of schedules to give us a picture of our finances for each of the next 20 years.
• Make it possible to update the data and recompute the values automatically whenever we get new or better information.

 It's a little complicated, but it's also pretty accurate.  It shows that the required expenditures in each of the next two years exceeds the amounts that we have saved. Hence, the special assessment. The good news is that once we are over the pain of the next two years, our dues schedule becomes quite reasonable but still provides adequate reserves to avoid special assessments in the future.

 Our capital reserve study provides estimates for the next 20 years.  Obviously, the data is more accurate for the next four or five years; but, if we update it annually, we can keep it accurate as time progresses.  The good part is that the computer program makes recomputation easy, once we collect the current costs and enter them into the spreadsheet.

 If you would like to view the current version of the capital reserve spreadsheets, click here .  You will need a copy of the Adobe Acrobat reader to view the file. To download a free copy of the reader, click on the icon: