RESERVE STUDIES
Our Association is saying this: A full Asset Reserve Study was conducted in 2018 and a Phase II Asset Reserve Study in 2021. A full Asset Reserve Study is recommended when there hasn’t been a reserve study done for 10-15 years, and a Phase II study is done when there is a shorter period between reserve studies. SCOV policy says an Asset Reserve Study will be performed by a professional, outside consultant, every three (3) years, but no longer than every five (5) years, and will be funded from the Asset Reserve Fund.
This is all I can find on any “law”: A full Asset Reserve Study was conducted in 2018 and a Phase II Asset Reserve Study in 2021. A full Asset Reserve Study is recommended when there hasn’t been a reserve study done for 10-15 years, and a Phase II study is done when there is a shorter period between reserve studies. SCOV policy says an Asset Reserve Study will be performed by a professional, outside consultant, every three (3) years, but no longer than every five (5) years, and will be funded from the Asset Reserve Fund.
Our Bylaws were recently changed to state this: 4.0 Policy
1. An asset reserve study will be performed by a professional, outside consultant, every three
(3) years, but no longer than every five (5) years, and will be funded from the Asset reserve
Fund.
2. The funding level goal is sixty to seventy percent (60 to 70%). The funding level shall be
computed as of July 1 of each calendar year, the beginning of each fiscal year.
3. Determination of the annual dues contribution to the ARF shall consider, among other
things, the current ARF balance, and the Capital Requirements Forecast in accordance
with Policy FIN-013, for a forward looking five (5) year period to minimize fluctuations
in annual dues contributions.
We are arguing that a Reserve Study was due February 2023 this year as that was 5 years since the previous one. Why are they now saying no not true? And what is a “Phase II” study?
Are there any laws in AZ that require Asset Reserve Studies for HOA’s or Corportations? We are in dire financial straights we feel, and have found that “repairs/maintenance” that has been done is up to more 100% more than what the “asset reserve” schedule stated. And, most of our large roofs leak. We are running at a low 60% reserves.
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Marcia,
There are no state laws addressing long range planning or funding for these common interest communities. So unfortunately, each individual community is subject to their individual governing documents for any guidance in this area. In 2016 I drafted a comprehensive long-range planning and funding bill, but it went nowhere, and I simply had higher priorities since then. To get such a proposal adopted will take a major effort by homeowners from across the state to make this a priority for the legislators, we were certainly not large enough in 2016 and may still not be large enough to get this type of legislation passed. While my proposal was based on plain common sense and 30+ year of experience in major project and budget management , it will be an extremely difficult task to get the legislature to impose such controls in law.
I would not be too concerned about the reported % funding as this is simply smoke, and mirrors used by associations to justify and scare homeowners into more funding. The only true measure of funding readiness is what is known as baseline or just in time funding strategy. This is how every major corporation deals with capital expenditures, and funding. What it means is that it looks at every single planned maintenance project and makes sure that when that project is needed there are funds available to accomplish this project. It may look at projects 40 years down the road and make sure that when every project is planned there is enough money to pay for that project that year, the reserve fund never goes below $0. On a simplistic basis, % funding estimates look at all projects and determine how much money is available today to fund all of the projects if they were done today. A totally meaningless number. CAI and the HOA industry promote reserve studies and % funding because it helps them financially and not because they have any real value to communities or the people that live in them.
You can also see from your own observations that all of these funded reserve studies have done absolutely nothing to manage cost or even adequately predict the cost of any project. This is total bureaucratic waste and adds absolutely no value to your community. It is simply rationalized wasting of money for no purpose.
Dennis