Re: Reserve Studies
From: R Philip Dowds (rpdowdscomcast.net)
Date: Fri, 30 Dec 2011 02:52:05 -0800 (PST)
I agree with nearly everything that's been posted in this thread, but need to 
point out that adopting a reserve plan involve politics and policy choices, not 
just technical evaluations and calculations.  For instance ...

If you have a wood floor, how often do you refinish it?  Every five years?  
Ten?  Twenty?  In other words, what's the community's standard of excellence — 
or standard of tolerance — for finish conditions?
What if the plan says you should expect to replace the hot water heater every 
ten years?  So now ten years is up, and the heater still seems to be working 
OK.  Do you do the replacement because new heaters are more energy-efficient, 
and you've saved the money, and that's the plan — or, do you wait for failure, 
then scramble in the moment of urgency?
Same question for the roof — except that roofs generally do not experience 
catastrophic failures like hot water tanks, they just leak with greater 
frequency.  How do you know it's time to forego yet more patching, and instead 
do a replacement?  Similarly ...
Replacing all roofing, siding or windows is a very rare event — say, every 25 
to 40 years.  Rare, but also very big ticket: The sooner you start saving for 
new siding, the smaller your monthly fee will be.  But some households have a 
tough time picturing themselves enjoying new siding in 2030 or 2040, and aren't 
sure they want to pony up now for a re-siding that is decades away.  Instead, 
they want to see the members of the future carry more of the cost burden for 
the siding of the future.  Community policy on long-range planning and savings 
is ... what?
What's your guess for inflation?  Recently in the US, construction cost 
inflation has been about 3% a year (with a VERY big downturn in 2009-10 due to 
the debt collapse of 2008).  Even so, many industry experts — looking at 
increasing world demand, declining world resources, and escalating energy 
prices — now think that 6% to 8% a year is more realistic for the coming 
decades.  I cannot say what the right number is, but do the math, and you'll 
see that you have to save a lot more money to cover 6% inflation than 3%.

So Yes, get expert advice about building technology and system lifecycle costs. 
 But that is not the end of the story, it's merely the foundation for a 
community dialog about significant choices in saving and spending.

R Philip Dowds AIA
Cornerstone Cohousing
175 Harvey Street, Unit 5
Cambridge, MA 02140
617.354.6094

PS: Why is refinishing a wood floor with water-cured urethane a legitimate 
reserve plan expenditure, while refinishing a wall with latex paint is not?  
You have to ask the IRS about that one ...

On Dec 30, 2011, at 12:20 AM, Sharon Villines wrote:

> On 29 Dec 2011, at 12:03 PM, Douglas G. Larson wrote:
> 
> An excellent post on reserves. Just some additions.



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