Fiscal Committee Recommendations 2016 & 2017 Repair & Replacement Reserve Funding Amounts July 2015

Repair & Replacement Reserve Fund (RRRF) Policy Assessment & Finance Resolution 3; Repair & Replacement Reserve Fund Reserve Study –  Required to be conducted every five years to determine necessity and amount of Capital Reserves required to repair, replace and restore the Capital Assets. (Also a statutory requirement).  Translated into a 10 year “look forward” forecast by staff - “10 Year Repair and Replacement of Capital Assets Forecast.“  Reviewed annually to determine sufficiency of RRRF balance. 2

Fund Designation –  Dollars for the repair and replacement of the Association’s Capital Assets and lake dredging expenses are maintained in RRRF.  RRRF monies are used for the replacement or capital repair of existing Capital Assets including lake dredging.  Monies in the RRRF CANNOT be used for operating expenses or new Capital Asset acquisitions, unless permitted by the Board.  Balance in the RRRF should consist of:  Annual appropriations from current assessments;  Minimum annual RRRF balance (discussed in a moment); and  Amount for contingencies (discussed in a moment). 3 Repair & Replacement Reserve Fund (RRRF) Policy Assessment & Finance Resolution 3; Repair & Replacement Reserve Fund

RRRF Funding Sources –  Investment earnings  Annual appropriation of the current year’s revenues at 1/10th of the forecasted 10 year Repair and Replacement expenditures based upon latest 10 Year Repair and Replacement of Capital Assets Forecast prepared by staff  Borrowing (permitted but governed by other RA requirements). 4 Repair & Replacement Reserve Fund (RRRF) Policy Assessment & Finance Resolution 3; Repair & Replacement Reserve Fund

Board Authority – The policy authorizes the Board, by a two-thirds vote to:  Allocate surplus dollars from the Operating Fund to the RRRF; and/or,  Designate, for a given year, less than the full 1/10 th of the 10 year forecasted Repair and Replacement expenditure appropriation to the RRRF. 5 Repair & Replacement Reserve Fund (RRRF) Policy Assessment & Finance Resolution 3; Repair & Replacement Reserve Fund

Minimum Annual RRRF Balance – Requires RA to maintain a minimum annual RRRF Balance equal to: (1) Average annual planned repair and replacement capital expenditure over the next 10 year period; plus (2) Reserve for contingencies of a minimum of 10 percent of the average RRRF spending over the ensuing ten years. 6 Repair & Replacement Reserve Fund (RRRF) Policy Assessment & Finance Resolution 3; Repair & Replacement Reserve Fund

Fiscal Committee Recommendation RA Board should fund the RRRF for the 2016 and 2017 budget years as follows to maintain the required minimum Repair & Replacement Fund Balance: Amount Financed From Assessment Revenues Minimum Annual Fund Balance 2016$2,705,645$2,976, $2,833,437$3,116,781 Using the 2015 Assessment rate ($642) as a starting point, an additional $14 would be added to the Assessment. 7

RA Board Decision Point  Accept the funding recommendations of the Fiscal Committee or finance the Repair Replacement & Reserve Fund at a lesser amount. 8