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

Fiscal Committee Recommendations2016 & 2017 Repair & Replacement Reserve Funding Amounts

July 2015

Repair & Replacement Reserve Fund (RRRF) PolicyAssessment & 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.

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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).

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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).

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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 1/10th of the 10 year forecasted Repair and Replacement expenditure appropriation to the RRRF.

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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.

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2016 2017 2018 2019 2020 2021 2022 2023 2024 2025$.0M

$2.0M

$4.0M

$6.0M

$8.0M

$10.0M

$12.0M

$2.71 $2.83 $2.78 $2.90 $3.14 $3.25 $3.46 $3.43 $3.52 $3.64$2.49 $2.87

$2.44 $2.36 $2.74$1.93 $2.21 $2.38 $2.74

$4.90$4.52 $4.48 $4.83$5.37 $5.77

$7.08

$8.33$9.37

$10.14

$8.88

Reserve Funding CapEx (Revised) Reserve Balance

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 $2,976,210

2017 $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.

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RA Board Decision Point

Accept the funding recommendations of the Fiscal Committee or finance the Repair Replacement & Reserve Fund at a lesser amount.

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Documents

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