In an operating budget, what term refers to the funds set aside for replacement expenditures?

The term that refers to the funds set aside for replacement expenditures is "reserve funds." These are specifically allocated to cover significant costs associated with replacing or repairing major components of a property, such as roofing, HVAC systems, or appliances. Having reserve funds helps ensure that a property manager can maintain the asset's value and functionality without needing to rely on operational income or emergency funding.

In contrast, expense reserves, while they might indicate set aside money for unexpected costs, typically refer to a broader category of financial planning rather than specifically for replacements. An operating surplus represents income exceeding expenses and does not directly relate to future expenditures. The maintenance budget, although important for ongoing upkeep, generally focuses on regular maintenance tasks rather than capital expenditures required for replacement or major repairs. Hence, reserve funds are the most accurate term for the funds designated for replacement expenditures in an operating budget.