White Sand Harbour

WHITESANDHARBOUR

PROPERTY OWNERS’ ASSOCIATION

P.O. Box 1

EDWARDSVILLE, VA22456

ANALYSIS OF RESERVE

REQUIREMENTS

November 1, 2008

RESERVE REQUIREMENTS

The purpose of the reserves is to ensure funds are available for various purposes as outlined below:

1. To replace current assets of the Association when the asset reaches the end of its useful life;
2. To set aside funds needed to preserve and maintain our beach;
3. To set aside funds needed to maintain our private roads and bring them up to VDOT standards for acceptance into the State system; and
4. To provide a contingency or general reserve fund for unexpected opportunities or problems.

The analysis on the following pages addresses each of these reserves to clarify the intent and use of the reserve and to determine the annual amount that should be put into each reserve. The three reserve accounts shall be maintained as part of the general fund as separate line items. The funds in Reserve for Capital Assets replacement and beach preservation can be withdrawn only to replace or modify the assets listed there under.

The policy is to manage our financial assets so as to not require a special assessment to replace capital assets.

1. CAPITAL ASSET REPLACEMENT

The table below estimates the amount to be placed annually into the special reserve account, budget item #901, Capital Asset Replacement for all association amenities except those designed specifically to protect our shoreline. Catastrophic loss caused by fire or severe weather are not considered in this table.

* 25% increase due to estimated escalations in material costs.

The amounts estimated for replacement costs are based on the experience of the association, consultations with licensed contractors, and most recent actual cost data. Estimates of future inflation effects are not included in these data. Refurbishment to extend amenity life rather than replacement will be undertaken where possible. Expenditures that are required to ensure community access and public safety concerns for these amenities must also come from these funds. Routine maintenance is assumed to be provided for these assets from operating funds.

The following table estimates the amount needed to preserve our beach as our natural amenity and is budget item #902.

BEACH MAINTENANCE, PRESERVATION, AND RESTORATION

Notes:

1. Placed in 2005. Seven boxes destroyed during tropical storm “Ernesto” were replaced in 2006,eight were replaced in 2008.
2. Estimated cost of debris clean-up and replacement of materials assuming a major storm once every five years.
3. Estimated beach refurbishment costs are not included in replacement costs.

These data are estimated and subject to significant variations and uncertainties and will be reviewed on an annual basis and adjusted according to experiences as well as to ensure that adequate reserves are maintained.

2. ANTICIPATED OUTLAYS FOR PRIVATE ROADS

This category includes the items of expense that might be incurred in the future for the Association Private Roads. At present, these items represent the costs involved in resealing the Private roads to insure continued usability of the roads. All private roads were sealed in 1992. It is assumed that resealing will cost $3.00 per square yard, the same as experienced in the VDOT-required resealing of Holly Drive in 2005.

COSTS

Notes:

1. Anne Court needs 1 house to meet VDOT requirements. Should that occur, an additional expenditure to correct drainage issues will be necessary to meet VDOT standards. Up to $5,000 may be required.
2. VDOT categorized this home as being on Peninsula Dive in 2005. This court is unlikely to ever be conveyed to VDOT standards.

The $12,835 estimated is a definite future requirement and the monies are “frozen” for this effort and identified as Road Fund in the Budget.

3. ANTICIPATED OUTLAYS FOR CONVERSION TO STATE ROADS

When VDOT accepts a roadway for maintenance, it accepts drainage responsibilities only to the point to protect the roadway. Any siltation, erosion, or damage problems beyond protection of the roadway are the responsibility of the property owners. Also it is the responsibility of the property owners to maintain the roadways until the roads are accepted into the secondary system. An estimated turnover date of any of the Private roads listed above has not been determined. A road must have at least three houses before VDOT will accept responsibility for maintenance.

As three houses are built on a Private road, the cost for acceptance by VDOT include the condition of the road, removal of trees and brush five feet beyond the bottom of the ditch for the entire roadway, removal of trees and brush on 15 foot drainage easements (15 foot width), identified on the Association plat, and length of the road are factors which will comprise the Association’s costs. Once the roads have been built to VDOT standards and meet the public service requirements, the property owners must get a resolution passed by the CountyBoard of Supervisors requesting the department to maintain these roads. After the Board of Supervisors has passed the resolution, VDOT requires a Surety Bond, a Maintenance Fee, and an Administrative Recovery Fee. These fees are computed based on the aggregate mileage proposed for addition based on the date of the local government’s resolution requesting acceptance.

4. UNANTICIPATED EXPENDITURES - CONTINGENCY

An amount of annual income will be set aside for unanticipated expenditures when the budget process allows for the designated finds. These funds would cover such items as additional development of common property or legal fees not covered by insurance, poor budget estimates or unanticipated maintenance items.

The amount of monies placed in this reserve category will be shown as budget line item #903 and be labeled “Contingency Fund”. The designated funds will be capped at no greater than 5% of the annual income and will be placed in an interest bearing account.

Reserve RequirmentsPage 1November 2008