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Statutory Funding Model
One of four funding models to establish an appropriate funding level for the reserve components in a building so that the owners can make an informed decision based on their tolerance for risk.

This method uses local statutes to determine the minimum amount of money (ie., thresholds) to set aside in the reserve account for future renewal projects, such as replacement of the roof, boiler or hallways carpets.



Types/Variations
There are two types of statutory funding models:
  • Prescriptive Based - these use specific thresholds of minimum (and sometimes maximum) funding levels
  • Performance-Based - these use linguistic variables, such as "adequate funding"


Examples
Listed below are some examples of statutory funding models from different jurisdictions;
  • In BC, the owners are required to set aside a minimum 10% of the annual operating budget into a long-range reserve account until the reserve balance is equivalent to 25% of the operating budget.
  • In Ontario, owners are to establish an "adequate" reserve
  • In Hawaii, the owners are to set aside a minimum 50% of the funding level identified by the reserve study.


Evaluation
Listed below are some of the merits of the statutory funding model:
  • It satisfies the local regulatory requirements which are presumably grounded in some logical principles of adequate funding.
Listed below are some of the limitations of the statutory funding model:
  • Statutory funding levels often do not match with adequate funding requirements.


Management Principles
A statutory funding model is included in a reserve study if there is a statutory requirements. It serves as a benchmark to determine the variances to the status quo funding level.

The goals of these models are to avoid the following:
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Fig. Excerpt from a funding model graph.


Workflow to illustrate how lumpy funding models form part of a sensitivity analysis.
Fig. Workflow to illustrate how lumpy funding models form part of a sensitivity analysis
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See also:
Compare with:


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