Is it a Reserve Component (or a Capital Improvement)?

Interesting question, and not always clear. First we go to National Reserve Study Standards and the definition there of a Reserve component. A Reserve Component must pass all the following four tests:
1) that it is a common area maintenance responsibility
2) that it has a limited life
3) that it has a predictable remaining useful life
4) that it is above a minimum threshold cost of significance.

So the first criteria for a Reserve component is that it exists. If it does not exist, it is a new asset to the community, and therefore a Capital Improvement. But what about a black-and-white closed circuit camera system? Can it be replaced through Reserves with a color-digital system with a one-week digital video backup system? Such a system is obviously new (of course), and different (color, and now with storage), but I would argue that it continues to serve the intended purpose of the original asset, with current technology.

What if the asset is listed as “B&W Camera System” in the Reserve Study? I would argue that is only a description, not a limitation. The essence, the reason the component exists at the association, is to provide a visual record of what is happening. At this time, while a color digital system with digital backup is “new”, it is truly just doing what the old one did, but with current technology. Adding a gate system where one previously did not exist would be a capital improvement, but replacing an old camera system with a new camera system sounds like a Reserve project to me.

The same case can be made for new roofing materials, pool and spa surface materials, computers (and software and printers) in on-site management offices, decking systems, furniture in the rec rm, etc. If the asset existed, and if the old asset can be replaced with new assets that perform the same underlying function, such projects pass the test as being a Reserve Component.

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