1. Draft 1 – 2016/2017 Biennial Capital & Operating Budgets July 2016

2. Draft 1 - High-level Overview Capital Budgets & Repair, Replacement & Reserve Funding 2  Only those items that are essential/mission-critical fixes or are fully scoped will be undertaken in 2016.  1 st Quarter 2016 - Complete review of results of GMU Recreation Program, Service & Facility Study to determine what facilities are most valued by our members and require “priority attention”.  3 rd Quarter 2016 - Present to the Board a Strategic Capital Repair & Replacement Plan for 2017 through 2020. Financing to RRRF Capital Expenditures Transfer to/(from) RRRF 2016$2,705,645-$2,485,977=$219,5668 2017$2,833,437-$2,868,833=($35,396) NOTE: 2017 figures subject to change.

3. Draft 1 - High-level Overview Operating Revenue & Expense Budgets 3 Proposed 2016 Budget Proposed 2017 Budget Operating Revenues$17,533,586$17,994,952 Operating Expenses$14,926,195$15,209,783 Surplus from Operations$2,607,391$2,785,169 Capital Expenses$2,485,977$2,868,833 Funding to/(From) RRRF$219,668($35,396) Transfers to RRRF$2,705,645$2,833,437 Funding to/(From) Tetra-Comstock $650k Fund($98,254)($48,267) Net Fund Transfers$2,607,391$2,785,169 Surplus/(Deficit) After Transfers to RRF$0

4. Draft 1 - High-level Overview Comparison of Assessment Cap to Proposed Rates for 2016 and 2017 4 201520162017 Assessment Rate$642$675$692 Dollar Change from Prior Year$8$33$17 Percent Change1%5%3% Assessment Cap$687$718$750

5. Draft 1 - High-level Overview 2016/2017 Operating Revenue & Expense Budget Details 5  About 10% of revenues derived from Resident and Non-resident Pool & Tennis Passes sales are now being allocated to the cost center Tennis (4300).  In the Operating & Expenses Budgets:  The POAA cost center (2300) has been collapsed in to Covenants Administration (2200).  Operating Expenses related to Legal (1600) have be reallocated to Corporate and Board (1300), Management Services (1700), and Land Use (4900).  In support of the Strategic Area of Focus – Leading Sustainable Change - a new cost center for Land Use (4900) was added to track revenues and expenses related to land use planning activities including but not limited to legal consultation, monitoring/advocacy for multi-modal transportation infrastructure, development/redevelopment tracking, and addition to property opportunities.  In support of the Strategic Areas of Focus - Optimizing Member Experiences & Leveraging Technology - included in the 2016/2017 Operating Expense and/or Revenue budgets are: Software licensing expenses related to a new on-line purchasing “Storefront” application and an application to report and track facility maintenance requests. Software licensing for expenses related to RA’s new document management system and Covenants software business process system – Smart Webs. Enhanced recreational program offerings for all age groups.

6. Draft 1 - High-level Overview Tetra Impact on 2016/2017 Operating Revenue & Expense Budgets 6 For auditing purposes, revenues and expenses related to Tetra are shown in the Operating Budget However, no expenses related to Tetra impact the Annual Assessment in 2016 or 2017 Tetra Separated Out Tetra 2016 Budget Tetra 2017 Budget Tetra 2016 Pro-forma Tetra 2017 Pro-forma Tetra 2016 Difference Tetra 2017 Difference OPERATING REVENUES $ 105,110 $ 172,791 $ 100,069 $ 65,246 $ 5,041 $ 107,545Note 3 OPERATING EXPENSES $ 203,364 $ 221,058Note 1 $ 131,280 $ 127,784Note 1 $ 72,084 $ 93,274Note 3 Surplus/(Deficit) from Operations $ (98,254) $ (48,267) $ (31,211) $ (62,538) $ (67,043) $ 14,271 Funding To/(From) Tetra / Comstock $650k Fund $ (98,254) $ (48,267)Note 2 $ (31,211) $ (62,538)Note 2 $ (67,043) $ 14,271 $ (0) $ 0 $ - $ (0) $ 0 Impact on Assessment $ (0) $ 0 $ - Note 1 - Operating expenses include loan interest. Note 2 - Funding To/(From) includes loan principal and fund transfers when needed. Note 3 - Tetra 2016 & 2017 Budget difference compared to Pro-forma. Overall timing has changed with current tenants only staying through December 2015, Pro-forma had rental income through December 2016 with current tenants. Therefore an impact on renovation and ramp up and timing of start of recreational programs and a change in timing of related expenditures.

7. Draft 1 - High-level Overview 2016 Operating Revenue Variance Summary 7 Assessment Revenue  Per the recommendation of the Fiscal Committee, about $220,000 additional in assessment revenue is being collected to finance the Repair, Replacement & Reserve Fund.  The remaining $763,000 is required to cover the Association’s Operating and Capital Expenses. Non-Assessment Revenue Excluding expenses associated with Tetra, the 2016 Operating Revenue Budget shows a net increase of just over $55,000 as compared to 2015. These revenue increases are primarily attributed to:  Website and Newsletter Advertising $10,000  Community Building & Garden Plot Rentals $4,000  Fees for Land Use Seminars/Work Shops & Corridor Design Guideline Administration $26,000  Service charges, late fees and penalties $15,000

8. Draft 1 - High-level Overview 2016 Operating Expense Variance Summary 8 Excluding expenses associated with Tetra, the 2016 Operating Expense Budget shows an increase of just under $750,000 as compared to 2015. These expense increases are attributed to:  Land Use & General Legal Fees $85,000  New Full time Employee - Land Use Assistant $62,500  New Part Time Employee - Volunteer Assistant $27,000  Federal and state employment taxes, health care insurance costs, and general full time and seasonal wage increases due to market fluctuations $411,584  Annual licensing fees associated with Covenants Administration Smart Webs/Document management software application $36,000  Court ordered repair costs undertaken by RA for external residential property maintenance $22,000  Recreation facility utility and maintenance supply costs $50,000  Additional pathway maintenance supplies and recycling/trash cans $25,000  Grounds maintenance tools and supplies $30,000 NOTE: In early September the Association will receive from its Health Insurance Broker quotes for possible 2016 increases or decreases. The Association’s health insurance costs have not increased since 2013 as a result of the organization’s healthy workplace practices and policies. Staff has planned for a 6% increase in health care costs; however, it is hoped that this figure will be lower than planned.

9. Board Budget Work Session  Scheduled for Monday, August 24, at 6 pm  Meeting purpose: Consider RA Board Decision Points presented during July 30, 2015 Meeting. 9

10. Combined RA Board Decision Points Areas to be discussed during 8/24 Board Budget Work Session  To increase sales of Non-Resident passes, should the board decrease fees?  Should the Board accept the funding recommendations of the Fiscal Committee or finance the Repair Replacement & Reserve Fund at a lesser amount?  Which priorities should be included in the 2016/2017 budgets?  How should these priorities be funded?  Through the annual assessment  By raising funds through the Friends of Reston  Identify grant opportunities 10  Is the Board comfortable with operating and maintaining the current number of pool and tennis facilities we have?  Is the Board willing to increase pass fees to shift a greater share of the costs to the actual users?  Is the Board willing to reduce the number of facilities to reduce operating and capital costs?  At what level does the Board wish to fund scholarships for camps, swim lessons and tennis lessons?  What is the ideal role for the Friends of Reston in fundraising for scholarships?  Should the board collapse its Non- Resident offerings to draw in more non- resident revenue?