Palma Sola Harbour Condominium Association Fiscal year March

Palma Sola Harbour Condominium Association Fiscal year: March, 2018 to February, 2019 Budget Presentation: February 22, 2018

AGENDA • Review PSH financial trends & proposed FYE 2019 Budget • Review Flood Insurance Proposal • Why Flood Insurance? • The current facts about flood risk • PSH comparison to peers • What is the cost? • How will it be funded?

PSH Budget Per Owner Per Month Trends

PSH Actual Expenses vs Billed Fee Trends $600 R 2 = 0. 5654 $ Per Unit per Month $500 $400 $300 $200 Expense Billed Fee Trendline $100 $0 2006 Expense $281 Billed Fee $280 2007 $321 $325 2008 $440 $325 2009 $340 $400 2010 $360 $400 2011 $427 $400 2012 $431 $425 Years 2013 $332 $425 2014 $350 $435 2015 $427 $439 2016 $547 $450 2017 P 2018 B 2019 $528 $467 $500 $450 $500

PSH Actual Capital Expenditures vs. Capital Deposits 500000 450000 400000 350000 300000 R 2 = 0. 121 250000 200000 150000 100000 50000 0 2008 2009 2010 2011 Owner Reserve Contributions (revenue) 2012 2013 2014 Less: Reserve Expenses 2015 2016 2017 2018 Linear(Less: Reserve Expenses)

PSH FYE 2019 Budgeted Expenses by Category Reserve $51 Employee & Mgmt Fees $44 Admin and Office Insurance Grounds & Landscaping $104 $52 $92 Buildgs, Repairs & Pool Utilities $142 Maintenance Fee Rate per Owner $16

PSH Cash Balance Trends Projection is based on YTD January, 2018 $1, 400, 000 $1, 200, 000 Cash Balance $1, 000 $800, 000 $600, 000 $400, 000 $200, 000 $0 2011 Capital Reserve Cash 374997 Operating and Insurance Cash 154307 2012 392898 150472 2013 598375 158448 2014 696302 270921 2015 876841 205405 2016 716877 437718 2017 504335 527236 P 2018 520397 517825

Managing Risk: When to consider self-insurance? Why & When to use Insurance Companies?

The “Self Insured” Flood Coverage Plan • Owners are financially responsible for both: • Exterior (delegated to the Assoc. ) • Interior (process may be delegated to your insurance carrier) • Both legal obligations due from owner • Self insurance on Exterior: High reliance on crisis collaboration • • Owners depend upon neighbors/heirs “fund their share” immediately Hope owners have compatible ideologies (no “walk away” pension plans) Hope owners set aside affordable funds Hope owners timing does not conflict with other owners/heirs preferences • This classifies Association purchaser as “lower priority” while in crisis • Diverts precious resources to collections of cash in time of major crisis • Bad debt, Liens and reallocation of bad debtor’s liability goes to remaining owners to pay.

Choosing an Option: What are the “Real Risks” of a Flood to PSH?

Experts suggest it is unwise to use past storm experience to predict future risk. For the Gulf Coast: Source: http: //statesatrisk. org/florida/coastal-flooding

11 Carriers have chosen NOT to Offer a Premium Insured: Palma Sola Harbour Condo Subm#: 128845127 Trading As Carrier 1 Am. Risc Broker: CBIZ Insurance Services Affiliate: Kathleen Gratz 2 Axis Pro Decline - modeling - negative elevation 3 Open market - pending Pending 4 Dual Commercial Decline - Concentration of risk and negative elevation 5 FW/IM Decline - negative elecation and surge risk. Do not like one story condo assoctns. 6 THB Decline - negative elvation and locationn 7 Liberty Delined - low rise high hazard zone with negative elecation 8 WKFC Decline - modeling - negative elevation 9 CSWH Decline - modeling - negative elevation Status Decline - negarive elevation and high slosh value 10 Aspen Decline - Modeling - Cat 1 would produce 6 ft over BFE 11 In-House Lloyds Decline - modeling - negative elevation 12 Hiscox Decline - modeling - negative elevation

Association Peer Comparisons • Picked 25 different Condo Associations reported in flood zones • 5 Associations (including PSH) are without flood insurance • Sorted Data By: Age, Size, Fees, Sales Price, Cable, Flood, etc. • OBSERVATIONS: • Low Fees: PSH ranked 5 th lowest. Lowest: Some Perico & Mount Vernon. Highest: Tidy Island • Sales Price/ Sq. Ft. : PSH ranked 13 th Lowest: Mount Vernon. Highest: Silver Sands • NOTABLE: Higher condo sales prices correlates to flood insurance.

Impact of Flood Insurance On Peer Sales Unit Averages PEER AVERAGES Avg. Maint. Fee Sales/Sq. Ft $ Avg. Sq. Ft. / Unit 20 Condos with Flood Ins. $721 $257 1674 5 Condos without Flood Ins. $456 $175 1384 6 Condos built pre-1979 $591 $305 1216 19 Condos built post-1979 $645 $212 1686 PSH Current Averages $450 $220 1296 Excludes Tidy Island Outliers

PSH Owners Are Losing Asset Value on Sales PSH Market Opportunity PSH Current Avg. Sales Price (7 units) Unit Sales Analysis $285, 000 $200/Sq. Ft. Avg 1296 Sq. Ft. Low range: High Range: Peers Average Sales Price would be: $333, 072 $425, 088 PSH’s Current Sales Average: $285, 000 Potential Sales value being lost: $48, 072 $140, 088 Sales Discount due to no flood insurance 17% 49% What if PSH had Flood Insurance ?

Current FEMA Quotes For Flood Insurance: • PSH Asset “Value”: $29, 432, 130 • Various Proposed Options for 80%-100% of replacement value • Various Deductibles ranging $2000 -$25000 /Building • Insurance Committee and Board’s “favored range”: Flood Premium Per Owner Deductible: Potential Exposure /Loss per Owner 100% 80% at 80%: $ 10, 000 $ 1, 385 $ 1, 157 $ 42, 522 $ 25, 000 $ 1, 192 $ 1, 000 $ 57, 522

Proposed PSH Flood Policy Funding Plan • Start with incremental budget integration plan. • Go slow. Study Ins. market dynamics (including flood) each year • Propose integrating a full policy expense into routine maintenance fees over 2 (or 3) years (FYE 2019 = $475/owner) • Propose a special assessment for the difference.

Current FEMA Quotes For Flood Insurance: Coverage Flood Option 1 (100%) Flood Option 2 (80%) $2000 Deductible (per Building) $350, 545 $290, 620 $5000 Deductible $310, 804 $259, 092 $10000 Deductible $250, 650 $209, 343 $25000 Deductible $215, 759 $180, 745 Flood Premium Per Owner Deductible: Remaining Exposure/Loss per owner Deductible: $ 2, 000 100% $ 1, 937 80% $ 1, 606 $ 2, 000 $ 34, 522 $ 5, 000 $ 1, 717 $ 1, 431 $ 5, 000 $ 37, 522 $ 10, 000 $ 1, 385 $ 1, 157 $ 10, 000 $ 42, 522 $ 25, 000 $ 1, 192 $ 999 $ 25, 000 $ 57, 522

Minor Tidal Flooding or “Nuisance Floods” are growing exponentially Even without hurricanes…. Flood frequencies have increased 130% from 1995 to 2016.