Deck Project Financing Strategy Overview

HCCCA Finance Team

August 2023

Bottom Lines

The Deck Project is the best and right thing for us to do

• It serves our best interests, financially
• It’s far costlier not to do the project than it is to move forward
• Current deck design will continue to degrade and require maintenance that ultimately costs more than the project to sustain safety�

Deck Project financing strategy was crafted to…

• Be the best way to handle costs of the deck project
• Protect the Association and thus our individual best interests
• Find acceptable middle ground between extremes that would preclude approval
• Be realistic, implementable, and approvable

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HCCCA Finance Team - June 2023

Overview

Relevant facts underlying Deck Project financing

• Deck project cost ~$500,000 (informed by bids from qualified contractors in May 2022)
• Project will be rebid after approval
• Final cost could be higher or lower than the May 2022 bids
• Materials costs have declined since 2022 and are declining, per the Buildings Team�
• Reserve Funds on Deposit $475,000-$515,000 as of 7/31/23
• Our reserves grow month-over-month in the absence of LTR expenditures, by design

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HCCCA Finance Team - June 2023

Financing Strategy

The Finance Team defined the following financing strategy for the Deck Project

• Pay for the project with a combination of Reserve fund expenditures and a Special Assessment
• The Special Assessment will be…
• a one-time charge invoiced by Advance HOA
• subject to same rules as regular dues payments (which is also an assessment), including remediation of late payments
• ultimately collected in full from all Association members

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HCCCA Finance Team - June 2023

Financing Strategy Details

Estimated project cost - $491,500 (from May 2022 bids solicited by Buildings Team)

Reserve fund expenditure ($240,441, +/-), to cover:

• Project-related costs equal to future deck-related LTR expenditures eliminated by the project
• (Contingency) any variance between estimated and actual project cost (higher or lower)
• (Contingency) late Special Assessment payments (higher, but only until ultimately collected)

Special Assessment - $6,276/household* ($251,059 total), to cover balance of project cost

• Reduces how much we have to deplete our reserves, in the short term, to pay for the project

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HCCCA Finance Team - June 2023

* Average - per-household amounts allocated by the same� formula as dues (aka “common expense assessment”)

2024 and Beyond Dues

Project financing strategy is structured to be “dues neutral”

Future dues recommended by the Finance Team are expected to follow what was communicated in the 2023 budget process (annual increases of ~5% +/- 2%, to offset rising costs and ensure we’re adequately replenishing our reserves)

Dues would likely have to be increased much more, if the deck project does not move forward

• We believe our decks, as-is, will require more work than covered by LTR study items and related reserve funds, if design factors are not mitigated

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HCCCA Finance Team - June 2023

What About Surprises?

We cannot seek “final” bids for the project until after approval

• Contractors won’t bid again until we have secured project approval
• Project approval assures contractors that we’re serious, and that we can and will pay project costs

Unfavorable gaps between future and May 2022 bids, and/or special assessment collections could lead to greater than intended LTR depletion

We will reevaluate and adjust, if final project if bids and/or dues collections surprise us

We will revisit project approval, if financing strategy terms need to change

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HCCCA Finance Team - June 2023

Unknowns / Variables

What is not known, or cannot be known with certainty

• Actual project cost
• Cost of deck-related maintenance and repair, if the project is not done
• Impact on property values, from renewed and redesigned decks

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HCCCA Finance Team - June 2023

Deep Dive

• Bottom lines
• Overview - relevant facts underlying deck project financing
• Approach - what the Finance Team needed to solve for
• Guiding principles - applied in crafting the financing strategy

• Financing strategy - concepts and details
• 2024 and beyond dues
• What about surprises?
• Protecting our reserves
• Special assessment collection
• Unknowns / variables
• Payment options

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A separate “Deep Dive” meeting will be held on 9/17 to address any remaining questions and concerns. Topics:

HCCCA Finance Team - June 2023

Open questions coming out of the Deep Dive can be addressed in Financing Strategy “Office Hours” on 9/21.