Response by Ed Plotts to Note from Bill Cullen:
Do you understand what you will be voting on with regard to club finances on September 21 st ?
I'm writing this article to bring the changes in the club finances to you attention. You may have missed this one, I almost did. Attached to the very bottom of the July 15 th Email Connection, right after the toilet paper graphic, was some very important information about the club finances. If you didn't look closely at all the attachments, you would have missed it.
A few years ago, the board increased the “Disaster Recovery Fund (AKA WCA Fund)” from $100K to $200K as a “goal”. Emphasis on the word goal, yet no time frame was established. We currently have about $150K in this fund. At the Membership Meeting July 20 th , Dan said that he wants to put a lock on this acct, and the club cannot borrow from it or use for anything else. This is in the proposed bi-law changes that you will vote on September 21 st . Currently, if we need to make a major repair such as the sea wall, we can use some of this money, say $50K, then over time repay it.
It's good to see that someone is reading and listening. Thank you for the opportunity to explain.
Response: Currently we have Article XV, Squadron Obligations, paragraph 2.0..... " A special reserve account shall be established"........ This is not a Disaster Recovery fund. It says, money from this account may be used for replacing, repairing or improving the Club. It also says, the fund shall alternately set aside $200,000. for a Disaster Recovery fund. This is a clear contradiction. We cannot spend this money on repairs and still have money to protect us from a Hurricane recovery. The current $150,000. is our insurance policy. Yes, the goal is to raise it to $200,000. It is currently funded with about approximately $12,000. per year from our income. With the changes to the Bylaws, the Finance committee and Board approval shall decide on the future payments to this fund depending on Profit/loss statement until the goal is met.
The bylaw change ( Article XVI, 2.0 ) will establish a Disaster Recovery Account. It will in effect, replace the Special Reserve Fund and start out with the current $150,000. funding. It shall only be used in the event of a major disasters resulting in significant damage to club facilities. We have no insurance on the dock systems. This is our insurance protection. It becomes a locked box.
In addition, based on the new Finance Committee's recommendations, the treasurer will move some of our available funds into this new locked Disaster Recovery Acct fully funding it at $200K within a few years. This will come from money we've saved to pay back the last of the dock bonds, and cash in our cash operating funds. This would accelerate the funding of the Disaster Recovery Fund.
Response: Hopefully, I have explained this with the previous explanation.
The treasurer will also establish a new fund called the Facilities Reserve Acct. I believe that the Finance Committee is proposing charging the membership $30,000 per year to fund this acct. I think some of this money for this will eventually come from the money we no longer need to put into the Disaster Recovery Fund. I'm not sure, and it's hard for me to understand all these proposals.
The Facilities Reserve Account is the most important change in the documents. It will establish a list of club assets reflecting a life term to each item and the cost to replace that item when the life term has expired. Currently, there are 28 assets listed. The replacement cost today would be $ 385,101. or $605,554. with a 1.5% inflation factor over the life of each asset. You can see this on the Facilities Reserve Schedule. The total amount for the current year is $30,712. This amount will be added to the budget and P/L statement to reflect the true cost to operate the club.
The new Bylaws will require the board to only pass a balanced budget which shall include this schedule.
Currently , we are using the WCA fund to pay back the loan on the dock, 2009, as well as fund the Special Reserve fund and pay for current repairs for a one year balanced budget. The Long Range Financial Committee is looking at 5 year budgets. There is not enough money to pay for the projects on the horizon. The perfect example just presented itself. We have $20,000. debt to pay down this year on the dock rebuild in 2009. We borrowed $120,000 from our members. The cost was $25,000 in interest charges because we did not have a reserve fund setup. This year we are contemplating spending $115,000. on the Seawall replacement. The Finance committee will be seeking the solution to cover this cost.
We have been under funded for years. An example of this would be a member could come and go in a ten year period and never pay toward replacement of the assets (unless they were replaced during that time period). We are proposing , all members pay as you go.
According to the proposed budgets, club general operating expenses are not rising very much, yet member's costs will. If the Finance Committee's recommendations are followed, Dry slip rent will nearly double over the next several years, the income from the wet slips will need to increase from $60K a year to $80K a year, and your dues will go up about 25% over the next several years. The rail way will go up 25% right away.
Response: I'm not sure where you are seeing all of these increases. Here are the facts. We have not had any increases in 6 years since the WCA fund was established in 2009. The cost of operations have increased substantially. We are proposing one increase at this time. The increase will effect the dues, the wet and dry slips, the rack storage and the rail car usage.
membership increases 10%
Wet slip (32 ft boat) increases 11% From $1136.44 to $1263.36 per year. $105 per month !!!
Dry slip (19 ft boat) increases 9% From $335.16 to $362.52 per year.
Railcar daily use increases $5 per day, from $ 25 to $30. yes a 20% increase.
A word about percent on increases. It does not matter if we have a 10 or 50 % increase. What matters is what is necessary to operate. You must look at the operating income and subtract the true operating cost.
I hope this article will generate a little lively conversation and interest amongst the membership. I think the membership needs a full presentation and discussion at the next membership meeting so we can all feel more comfortable about voting for the bi-laws changes as proposed. I do not doubt the wisdom and hard work of the board and the Finance Committee. I do think there needs to be a clearer understanding amongst the general membership of these proposed changes to our bi-laws. Particularly of why we must raise fees, and why we need to fund the Disaster Recovery Account within just a few years time.
A final note. What does Long Range Planning mean?
I mentioned a 5 year budget above. We are looking at 60 years for cost replacements.
How many members feel it will be ok to be holding meetings in the same Clubhouse 30 years from now?
How many members would like to start a New Clubhouse reserve fund?