Replacement Reserve reminders:
- Large Scale Items/Projects: When submitting replacement reserve requests covering large-scale capital projects ($50,000 or higher for a project or a product/system), please request preapproval from your Asset Manager before commencing the project or purchase. Larger capital requests are reviewed by our Design and Construction team for conformance with specification and documentation criteria set forth in the Development Handbook (Developers Handbook | RIHousing). Please note that the handbook sets the standards for the products and materials throughout the life of the project rather than just at the initial construction stage.
- Some examples of large-scale items/projects include but are not limited to:
- Roofing
- Siding
- Elevators
- Boilers serving entire buildings/filtration systems
- Generators
- Replacing all windows at the development
- Repair or replacement of historic building features
-
Permits: Please consult the town/city’s building department to determine whether a permit is required for the work that is being performed. If a permit is required by the town/city, then a copy of the approved permit is a required part of the reserve request final documentation prior to the release of funds. If you are not sure if a permit is required and cannot reach the buildings department, please reach out to your Asset Manager.
- Bids: RIHousing requires at least 3 bids for individual projects or items that cost over $10,000.00, including an applicable written explanation if the lowest bid was not chosen. If there were less than 3 bids received, please obtain preapproval from your Asset Manager. For more urgent cases where delaying commencement of repairs in order to obtain and evaluate bids would potentially cause a health or safety risk to residents, less than 3 bids may be allowed as an exception, but RIHousing staff should be notified of such situations at the earliest convenience rather than at the time of funds requisition. When providing bids, please also include the request for proposals, including the proposed scope of work, and the signed contract with the chosen vendor.
Replacement Reserve Account Minimum Required Balance:
In general, the replacement reserve balance should be maintained at $2,000.00 per unit to ensure that adequate funding will be available in later years to cover repairs and replacements of items reaching the end of their useful life, as the need occurs.
If the proposed project or purchase will cause the balance to fall below $2,000.00 per unit, a preapproval should be requested. RIHousing will consider exceptions to this requirement case by case upon review of the financial health of the development and if there is evidence that the development would not be able to easily undertake the expense without the use of the reserve or if the development would not cover its debt service without a release.
RIHousing staff will also check to see if there may be other reserves available that could instead be used if the replacement reserve is underfunded. The operating reserve could be considered for use if its balance exceeds the loan agreement required minimum.
This would simply require the owner’s written authorization (and syndicator’s if needed). If there are other types of reserves available, they may also be considered as a resource if the agreement terms would allow for it.
Requisition Reminders:
Please remember to note the unit number on the itemization page next to the invoice and dollar amount so that it may be easily matched to the evidence of payment document in the file. This will speed up the review process and allow for a quicker turnaround time.
Use of the Replacement Reserve Account:
Developments that are HUD Risk Share insured or those that have a Project Based Section 8 subsidy must adhere to HUD’s replacement reserve requirements cited in the following chapters of the related HUD Handbooks:
There is more flexibility with the use of the replacement reserve for developments that are not HUD regulated.
If there are any questions about the use of the replacement reserve or other types of reserve requirements, please contact Susan Halloran, Manager, Multifamily Financial Assets at 401-450-1339, or shalloran@rihousing.com.
