OKW Budget Questions

[amcnj]

In the recently received budget document for OKW, the Capital Reserve Analysis on page 4 shows an Estimated Fund Balance of $19,881,021 as of 12/31/07, while the Estimated Current Replacement Costs for the items covered for 531 vacation homes is $38,495,441. This reserve is thus over 50% of the total estimated replacement cost. Is it common for such reserves to hold such a large percentage of the total replacement cost, especially given that the items covered have useful lives remaining of 1-17 years? Is there a ceiling at which point the reserves are or should be capped as a percentage of replacement cost, and thus dues increases be slowed?

It just struck me as odd to have a fund covering over half the expected cost of replacing all these items at one time, given they have with "useful lives" of 1-30 years. Hopefully they would never need to replace all, nor even half, of such items at one time. In fact based upon useful lives listed, at worst only 1/15 - 1/30 of any one item should be expected to be replaced in any one year. So why the big reserve? Am I not understanding this table correctly? And what would happen to these large reserves when the ownership interest ends, complicated even more by the dual ending dates now?

Thanks for any help with this.

 

[Plutofan]

I would fear that the reserves will be completly used up since the resort goes back to Disney upon termination of the members contracts so Disney has no incentive to lower the reserve.

 

[RobDoc]

The reserve is there to cover non-maintenance issues like roof repair and replacement of carpeting, appliances and furniture.

The reserve is not really a function of the replacement cost, since rebuidling the resort in the event of total destruction would most likely be covered by insurance.

The level of the reserve is based on construction estimates for repair, replacement of the types of items mentioned above. This portion of the budget is not reflected as a percentage of the cost to replace the resort.

Routine maintenance items (light bulbs, furnace filters, AC repair, landscaping, roadways) are covered in the maintenance portion of the budget. The Captial Reserve budget anticipates the replacement of the infrastructure items on an anticipated schedule. Hopefully, the needs will have been appropriately anticipated in advance and additional assessments will not be needed for these repairs.

 

[amcnj]

So perhaps these reserves have always been around 50% of the total , and I just never noticed?

 

[Buckeye Fan]

Wonder if our dues fall in line with what other comparable time shares charge? In all honesty, I never looked at Marriott or any of the others, as my BIL/SIL owned DVC and I really liked the program, flexibility and location. A friend of mine ownes through Marriott in Hawaii and he said his fees run about 1/2 of ours (390 pts at SSR @ $1,600+ a year), but I have no clue what his assessment is based on (1-BR/2-BR, peak season, low season???).

Interesting...

 

[RobDoc]

The Capital Reserve fund is not based on a percentage of the operating expenses or full replacement costs for the resort itself at all - that is based on estimated expenses to repair/replace structural components (roof, facade) and furnishings on a schedule determined by industry standards and estimated construction costs. It provides funds in accordance with Florida Statutes for items with a useful life greater than one year. Interest generated by these funds also remains in the Capital Reserve fund. The estimated Captal Reserve for OKW will be $19,881,021 at the end of 2007 - so the budgeted amount for 2008 will be in addition to the amount already set aside - minus any planned expenditures during 2008.

The Capital Reserve budget at OKW for 2008 will cost $0.65 per point for a total of $5,016,946.

The Capital Reserve Budget at HH for 2008 will cost $1.14 per point (due to a loan for Cap Res expenses that were accelerated in 2007). The current total thru 2007 fo rHH is at $5,787,658 and the replacement cost for that resort is $14,787,765 - so the Cap Reserve at HH is less than 1/3 of the replacement cost for the resort.

DVC is more expensive than many timeshares, but also includes expenses not found at most timeshares (very few have transportation costs included). I would also expect that the administrative/front desk costs are much higher than most other timeshares.