From the Desk of Tom Woodrum
Member OVA Finance Committee
First, a look at the cash balances on hand as of Jan 31,2017. The ARF (Asset Replacement Fund) has $1,167,600; The CIF (Capital Improvement Fund) has $ 746,400, and the Catastrophe Fund has $131,500. That’s a total of over $2,045,000 in cash reserves for the OVA. OVA has about $150,000 in the operating fund, over and above current liabilities, so at present the OVA has close to $2,200,000 in available cash.
The current budget calls for $845,000 of the income from our monthly $58 dues to be placed into the reserve funds. Projected 2017 expenditures from the Asset Replacement Fund (reserve funds) are $888,000 but we might not spend all that money on the items listed to be replaced in the reserve study depending on their current condition, so at 2017 year end there will be a combined total of about $2,150,000 in the Asset Reserve Fund, Capital Improvement and Catastrophe Fund.
Additionally, the association has NO debt, as the loan to build the Central Activity Center was paid off in May of 2016.
The reserve study professionally done for the OVA looks at replacement expenditures and funds available for each year, based on a detailed study of every asset and its expected lifetime and budgeted reserve contributions. This study showed that, starting with an ARF amount of $1,137,000 at year-end 2016, the fund stays positive for every one of the next 10 years and the ARF ends in 2026 with $2,724,265 in the bank.
The professional study conducted by Reserve Analysis Consulting shows that the OVA plans to more than adequately fund all anticipated replacement expenditures for the next 10 years.
How do these numbers reconcile with the statement in the reserve study that replacement of all existing assets is only 28 per cent funded? This simply means we now have in the bank enough money to replace 28 per cent of all of our existing assets, but these assets don’t need replacement now. They will wear out and need replacement over the next 30 years. It is an error due to lack of understanding of reserve accounting to imply that the 28 per cent number indicates inadequate reserve planning.
What about the Berger Center? The Berger remodel/renovations are hard to project, until the committee and ultimately the board decide what is to be done. But the OVA’s reserve study includes the Berger Center, so allowances have been made for replacing the various components of the building. If the board decides on a complete overhaul or rebuilding all at once, then OVA may have to finance the project with a lender, or issue a special assessment, but, depending on the scope of the work, it may be able to be done with the reserves on hand.