By Robert “Bob” O. Jester
Finance Advisory Committee Chair
As published in The View, July 2022:
Question of the Month: What is the Replacement Fund?
Last month we discussed the Reserve Study, and this month we will learn how the Reserve Study affects the Sun City Shadow Hills Replacement Fund. The items that need replacement after their useful life are found on the replacement fund list if they have a useful life of 30 years or less. This list is created by the experts we hire to conduct the Reserve Study. During a Type 1 Full Study, these experts visit our community, take photographs of equipment, and record measurements. Then the experts develop a useful life schedule and determine an estimated cost to replace each item at the end of its useful life. Once the experts make these determinations, they then determine an amount each year that our HOA must put in reserve to replace that item at some predetermined time in the future.
When an item needs replacement, it is identified on the reserve study so that the department head, such as maintenance, can seek bids for its replacement. The department head evaluates the quality of the suppliers and suppliers’ product and prepares a Board Action Form (BAF) to which the suppliers’ bids for replacement are attached. There are usually at least three bids on each replacement request.
This BAF then goes to the SCSH General Manager who will in turn forward it to the Finance Advisory Committee and its Sub-Committee for pricing investigation, inspection of the item for which replacement is requested, and preparation of a recommendation to the Board about whether the replacement request is justified and priced properly. The Board makes the ultimate decision on the replacement purchase using the replacement funds.
The list of items covered by the Replacement Fund numbers in the hundreds. The items range from patio furniture to ice machines and golf course mowers. The FAC Sub-Committee has members who have experience in various fields like construction, purchasing, and engineering. These members are all volunteers who spend their time assisting our community in evaluating if the replacement request is justified or if it can it be safely deferred.
A lot of consideration has gone into keeping this community in first class condition, and we are fortunate to have had management practices over the years that have created a sound replacement fund to meet the needs determined by the Reserve Study, without which we could be exposed to special assessments or community loans.
The FAC Sub-Committee has two openings. If you possess specialized skills or experience from your past or current work activities, we encourage you to complete a Committee Interest Form and help us keep this community financially sound.
Contact the author at finance@scshca.com.