Reserves 2007 V1 Business Plan Review

• The 3 Keys to Reserves

• The final form as presented on page 4 of the Business Plan.

• A breakdown of the detail that makes up the 30 year projections.

• Business Plan Charts

• Based on this we will address two areas of concern:

  • Shingle Roof Replacements.

  • • Prior to 2001, all of the shingle roofs had a projected 20 year life.

    • In 2001 the roofing contract called for the installation of 40 year roofs which should delay future costs by an additional 20 years beginning in 2021.

    • Even though this cost error does not impact the monthly assessments until approximately 2021 and can be corrected by PCM at any time prior to 2021, the error can effect plans and resulting reserve costs in the immediate future. Expenditure Chart. Assessment Chart.

    • How does this affect the immediate Reserves? - Let's look at:

 

• Copper & Cast Iron Pipes.

• Unfortunately, we are several years behind understanding the Cause and Impact of the In-Wall Water Leaks in LWV. This results in having insufficient data for analysis to make any major remediation decisions at this time.

• Estimates of future needs will take several years to accumulate and until then monies can be allocated for the reserves assuming a "PESSIMISTIC" or "OPTIMISTIC" SWAG. The current V1 of the 2007 Business Plan reflects a "pessimistic" view of the future. This view in conjunction with the error in the Composite Shingle Roof projections will impact the immediate future Reserves.

• An "OPTIMISTIC" view can be considered based on the overestimated costs for the Composite Shingles beginning in 2021, and, the following two comments by the Consultant that that did the Copper Pipe analysis for Third Mutual:

• 1. There is no deterioration in the thickness of the copper pipe walls, and,
  2. The actual failure mechanism, "pin hole leaks" occur where excessive flux was used at the time of construction and would only affect a percentage of the total copper pipe joints. Expenditure Chart. Assessment Chart.

Since Version 1 was presented, an analysis was completed by Strategic Reserves Corporation on 7-13-06. This was considered by the Board and was voted on to be a part of the 2007 Business Plan.

Comparisons of Strategic Reserves Corporation with Version 1 are:

1. Expenditures
2. Assessments - Normal scale, Necessary Scale
3. Reserve Balance

The major factors, when compared between these two analysis, reflect a difference in a 2035 Reserve Fund of $3,591,652 in Version 1 vs $274,317,993 in the Strategic Reserve plan.

A Reserve Balance of $274 million dollars equates to $43,384 per manor.