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Threshold Funding Model

One of four primary types of funding models that provide a sensitivity analysis of the impact of different funding levels for the reserve components in a building. 

The models are typically presented as part of the financial analysis in a reserve study and answer the question: "How much money will we have?".

The threshold method is sometimes similar to the baseline funding method in so far as the reserve balance is set at a predetermined amount; however the predetermined amount is set according to some criteria that are meaningful to the owners. 


Purpose
Funding models help the owners conduct a sensitivity analysis to determine how to pay for future projects. Reinvestment models are used to determine the size of the expenditures.


Threshold Criteria
Some of the criteria used to determine the threshold are as follows:


Types of Thresholds
Listed below are some of the different types of thresholds that can be considered when establishing a threshold funding model:
  • Minimum Threshold and Maximum Threshold
  • Variable Threshold and Fixed Threshold

Examples

Listed below are some examples of threshold funding levels

  • We, the owners of Building ABC, have set our reserve contribution threshold at 27% of annual operating budget.
  • We, the owners of Building DEF, have set our annual reserve allocation at 32% of the amount identified by the reserve study.
  • We, the owners Building KLM, have set our annual reserve allocations at 0.05% of our building reproduction value.

Evaluation


Workflow to illustrate how lumpy funding models form part of a sensitivity analysis.
Fig. Workflow to illustrate how a threshold  funding model could be included in the sensitivity analysis.

Compare with:
See also:

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