Innovation Reserve Studies

for a Stronger Community By Monica Mack, Reserve Advisors

TED SALGADO AND JOHN POEHLMANN Co-founders of Reserve Advisors

THE RESERVE STUDY INDUSTRY FIRST APPEARED ON THE SCENE IN THE MID 1980’S. SHORTLY AFTER THAT, JOHN POEHLMANN AND TED SALGADO LEARNED OF THE COMMUNITY ASSOCIATION INDUSTRY THROUGH THEIR BACKGROUNDS WORKING FOR A MULTINATIONAL APPRAISAL COMPANY. THEY LEARNED THAT THERE WAS VERY LITTLE SPECIALIZATION OF SERVICES THAT FOCUSED ON COMMUNITY ASSOCIATION NEEDS, INCLUDING LONG RANGE PLANNING FOR THE REPLACEMENT OF THE COMMON ELEMENTS.

In the Beginning

Community living was a new concept and association boards struggled to understand the many issues that were unique to this young industry, such as the need for professional management, legal, insurance, accounting and budgeting for the future. As Community Associations Institute (“CAI”) notes, a community association is technically three things: a community, a governance, and a business.

Gaining valuable experience in business valuations, Salgado and Poehlmann understood the concept of being a “fiduciary” of the public and a client. The Appraisal Institute recognizes this concept in its standards of practice. Similarly, the concept of a fiduciary applies to association boards. The long-term financial future of associations is dependent on proper planning for the replacement of major common

54 | COMMON INTEREST®

elements and the equitable funding of reserves so money is available when needed. Managers, board members and accountants developed crude reserve budgets, focusing on only the obvious common elements, i.e., roofs and pavement, often using verbal quotes from contractors. While not highly accurate, it gave them a starting point.

Specialists were evolving to provide expert legal, accounting, and insurance services to the community association industry. Salgado and Poehlmann believed that there was also a need in the industry for accurate reserve planning through the expertise of engineers.

In 1991, they formed Reserve Advisors to help association boards fulfill their fiduciary responsibility to protect and maintain the common elements of community associations while treating homeowners fairly and equitably. Salgado,

A Publication of CAI-Illinois Chapter