Asphalt & Reserve Studies

Asphalt Expenditures and Reserve Studies

Your Association’s reserve study is an invaluable tool for long-term planning that often includes costly expenditures such as painting, roofs, pools and spas, and asphalt streets.  Does your reserve study include more costly asphalt work such as R&R, crush-in-place, and overlay in addition to typical seal coating?  If it does not, then you should seriously consider revising the report to include some of this heavier work.  If your Association is not well funded and the streets are in disrepair, you may well be in for a rude awakening when presented with bids from contractors for eight to ten times the cost of just sealing!  How will you pay for that? A bank loan, a special assessment, or just write a check from the reserve account?  If you want to just “write a check”, then you need to have a solid funding plan that will ensure the Association will have the necessary funds available when the time to expend them comes.   The following information is a breakdown of the different reserve studies services available.

Reserve Specialists – Held to Higher Standards

Have you ever received a proposal from a company that has an individual who is a “Reserve Specialist” providing the reserve studies?  A Reserve Specialist is also known as an RS, this is a special designation from the Community Association Institute (CAI), more specifically the National chapter.  An RS has a wealth of experience in the diverse aspects of component analysis and financial planning for community associations and is bound by the Professional Reserve Specialist Code of Ethics.  They can help ensure more consistent report information throughout the reserve study.

The three prices on your proposal were likely three different levels of service.  Here is a look at the differences, as defined by the National Reserve Study Standards of the Community Associations Institute.

I. Full, With-Site-Visit

A Reserve Study in which the following five Reserve Study tasks are performed:

  • Component Inventory (verification and quantification)
  • Condition Assessment (based upon on-site visual observations)
  • Life and Valuation Estimates
  • Fund Status
  • Funding Plan

II. Update, With-Site-Visit/On-Site Review

A Reserve Study in which the following five Reserve Study tasks are performed

  • Component Inventory (verification only, not quantification)
  • Condition Assessment (based upon on-site visual observations)
  • Life and Valuation Estimates
  • Fund Status
  • Funding Plan

III. Update, No-Site-Visit/Off-Site Review

A Reserve Study in which the following three Reserve Study tasks are performed:

  • Life and Valuation Estimates
  • Fund Status
  • Funding Plan

Notice that all three levels include life and valuation estimates (which is the full and remaining life of the components and the current and future replacement cost of the same components), fund status (current level of funding), and a funding plan (so the association reserve fund will remain fully funded, not run out of money, or somewhere in-between).

A level I reserve study is considered a full report, a level III reserve study is considered a financial update, but what about the one in the middle?  A level II reserve study has been accepted as an on-site update report.  Once great care and time have been spent counting and measuring an association’s components it can be argued; how many times does someone need to recount and measure those same components?  The only difference between a level I and a level II reserve study is that a level II report does not quantify (count) the components.  It will save the association money; it is for that reason a level II was developed.  A level II reserve study DOES satisfy the California Civil Code with respect to the on-site inspection requirement every three years (§5550).

It is important to know what you are paying for and what you are receiving before deciding who will perform your association’s reserve study.  Once you have determined that, apply practical review of the reserve study.

Contributed by Michael C. Graves, RS, the 39th designation recipient and owner of SCT Reserve Consultants.  He is a member of several CAI chapters and CACM; his firm provides reserve studies throughout much of Southern California.