Flashback – Three years ago to February 2016. The Big Canoe Property Owners Association was in the midst of a $9.4 million dollar, 700+acre land purchase deal from the developer subject to property owner vote.
At that time, property owners were told the association was in excellent and sound, financial shape with the ability to fund not only the pending land purchase but also future capital improvement projects without unnecessary hardship being placed on the property owners. Indeed, we probably were. (1)
Subsequently, property owners voted resoundingly in favor of the land purchase deal with the agreement and understanding that the $25 special assessment approved in 2010 would continue beyond its original sunset of December 2016 and roll over into regular assessments for debt service.
That same year, an independent reserve study was prepared that addressed all capital components and the resources needed to replace and maintain these components according to their estimated useful life. The study indicated that yes, indeed, Big Canoe should be able to fund replacement and maintenance of these components without the addition of any special assessments. (2)
A Long Range Master Plan was also prepared in 2014 by qualified residents within Big Canoe to address future capital projects out to 2024 and beyond. (3)
Just one year later, these same property owners voted in favor of the $1.5+ million construction of the new fire station. Big Canoe property owners have always risen to the occasion and backed the POA when a legitimate need or project for the common good of the community has been put out before them. Our responsibilities as property owners have not been shirked.
Fast Forward Today – In just the two year period since that year end 2016, operating department expenses combined with net losses from amenities have climbed $1.5 million. And the majority of these increases can be found in administrative expenses and food and beverage. Further, not only have these expenses increased exponentially over the last two years, capital expenditures have increased as well with 2018 expenditures and 2019 budgeted expenditures not only exceeding depreciation but exceeding 2016 expenditures by approximately $1 million each year. (4) (5)
To be specific, administrative expenses alone have increased more than $400K since year end 2016, and food and beverage (clubhouse) has ballooned to a whopping $626K loss for 2018. (4) (5)
These types of increases resulted in a 2018 year end net income being under budget $466K and cash flow being negatively impacted over half a million dollars. These deficiencies simply are not sustainable and should be addressed prior to going to the property owners requesting additional assessments and capital infusions. (5)
Yet rather than proactively addressing these questions and ensuring that the property owners are given a fair presentation of the financial challenges facing Big Canoe, we enter 2019 by further increasing expenditures at additional cost to the property owners.
For example:
• Even though payroll expenses in administration and food and beverage were over budget $355k, an additional 2019 budget item of $73k was approved for free lunches for every employee for every working day of the year. (5)
• Presentations at the January board meeting did not address the $626k loss in food and beverage or mention that losses have actually increased as the revenue has gone up. And yet, we now have a $170k marketing budget to be used presumably to help further increase F&B revenues. (4) (5) (8)
• One amenity that has been profitable is the marina. Not only has it been profitable, but property owners have constructed portions of the facilities throughout the years, and yet boat owners have been penalized with a 33% increase in boat slip rates for 2019. This defies all logic unless the intent is to drive boat slip renters out. (5) (6) (7)
• Although a Master Plan was internally prepared in 2014 and an independent reserve study was prepared in 2016, an additional $125k and $36k respectively has been expended to Chambers and Bergin Golf Course Design for expanded capital improvements which the community can not afford without additional capital infusion and contrary to all 2016 assumptions. (2) (3) (5)
Property owners have fulfilled their responsibilities. Property owners approved the land purchase. Property owners agreed to pay an additional $25 assessment until 2026. And property owners agreed to the construction of the fire station. Property owners have definitely more than done their part.
Perhaps this is the time to tighten our belt. Perhaps this is the time to freeze all new and unnecessary capital expenditures until such time as the present financial situation has been analyzed and significantly improved. And at such time, perhaps the waters could be tested for property owner consensus prior to investing inordinate amounts of time and resources on new capital projects.
And perhaps this is also the time to redirect our dialogue to controlling expenses rather than increasing revenue. This down time could be used to truly examine the deficiencies in administrative and food and beverage and make adjustments where necessary. Property owners should not continue to be used as an instant source of revenue certainly without a clear and transparent understanding of the issues at hand.
In conclusion, we can not continue on this path of spending more than we take in and failing to adhere to our own budget. It is believed that this “freezing” of unnecessary capital expenditures is warranted along with the strict control and analysis of administrative and food and beverage expenses, and that doing so would surely be of benefit to the future of our community.
Patricia Cross
10438 Big Canoe
References:
(1) http://benttreevoice.com/wp-content/uploads/2016/02/SSpecialDigitalEditionFEB16-3.pdf
(2) https://bigcanoepoa.org/getmedia/492a10ea-07ef-40a5-9ad0-f2df923aa051/Reserve_Study_2016.aspx
(4) https://bigcanoepoa.org/getmedia/c36ef537-9343-4a31-b142-de66fa28d6f5/2019_Budget_version7.aspx
Highlited Version: http://bigcanoe.themountainsvoice.com/docs/2019_Budget_version7HIGHLIGHTED.pdf
(5) https://bigcanoepoa.org/getmedia/faa0b675-c249-4f50-8e29-e2e51608a122/December_2018_Financials.aspx
Highlited Version: http://bigcanoe.themountainsvoice.com/docs/December_2018_FinancialsHIGHLIGHTED.pdf
(8) https://bigcanoepoa.org/getmedia/1edcc18b-3599-42e2-8118-a1778f2ab8d5/December_Financials.aspx
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