Board hears how longer asset lives and reserve study shape capital plan

CFO Clifford Swan told the governing board the association relies on a reserve study to convert original asset costs to current costs using annual inflation assumptions, and to set the "fully funded balance" used in reserve policy calculations.

"When we purchase an asset... that's the cost at that time. Then what the reserve study does is we'll assign an inflation value to that for every year," Swan said, adding the association uses 2.5% inflation for assets with useful lives exceeding 10 years and 4% for shorter-lived assets. He said that approach, combined with longer design lives for new irrigation materials, has materially lowered annual replacement requirements.

Swan cited the irrigation program as an example: shifting to longer‑life materials increased expected useful life from 35–40 years to about 70 years, substantially reducing annual funding requirements and improving the fully funded balance. He said the board finished the year at roughly 49% fully funded versus the 40% policy target, while cautioning that some year-end audit entries remain to be posted.