As propaganda continues to be generated around the community by leadership and others in justification of the redesign and/or renovation of our community’s golf courses, there are also a number of valid reasons to delay or defer the project. However, one consideration that has not been properly addressed is depreciation expense and the remaining useful life of our golf courses.
Regardless of which side of the golf issue one might fall, and before reading any further, please note our POA President’s exact words. “the greens . . . these are old greens that have not been rebuilt . . . they are well beyond their estimated original life . . . life that has been estimated for them”. (1) Unfortunately, and according to the Reserve Management Plan (RMP), required by Big Canoe Covenants, (2) and prepared for the POA with information provided by management, (3a) this statement appears to be untrue.
In actuality, per the RMP, the greens on each of the three nine hole courses (Creek, Cherokee and Choctaw) have estimated useful lives ranging from 2030 through 2037. And in fact, these greens have been renovated, or to use the President’s words, rebuilt. (3b)
For the purpose of this paper, only the Creek nine will be addressed as that is the oldest section and appears to be at the forefront of board discussions
- The Creek greens were renovated in 2000 at a cost of $480,000.
- Management estimated the useful life of this renovation to be 30 years.
- End of useful life and/or replacement date of this renovation is July 2030. (3b)
Before even moving on with this discussion, one has to ask…. why would leadership provide property owners with such incredibly, inaccurate information?
Furthermore, the Creek nine is broken down into several other components as well on the RMP. For example, the scheduled replacement date (estimated useful life) of the actual course (presumably fairways) is July 2025 with the cart paths scheduled at July 2029. In fact, the only component nearing the end of it’s useful life is the irrigation system in July 2020. Surely that component could be replaced, if necessary, without requiring a redesign or renovation of the entire course! (3c)
In other words, other than the possible need to replace the irrigation system in 2020, none of the components of the Creek nine have reached the end of their useful life or presumably even been fully depreciated.
And, although no depreciation schedules have been provided to the property owners, it is reasonable to assume that those schedules would use the same estimated useful life as that shown on the reserve study unless that projection had been adjusted since preparation of the report. However, no adjustments appear to have been made as information found in the audited financial statements prepared by Mauldin & Jenkins for the previous three years, indicated that “management did not believe there was any impairment to long-lived assets. “ (4) (5)
That being the case, all golf course components, including the Creek nine, have a significant amount of depreciation expense that has not yet been recognized on the POA profit and loss statements. Specifically, the Creek greens would have approximately $175,000 remaining depreciation expense. The course renovation would have approximately $200,000 remaining with the cart paths having approximately $75,000 remaining depreciation. What happens to that $450,000? It doesn’t just disappear. Somehow, that seems like a pretty hefty price tag for a renovation before even moving the first shovel of dirt. Is it an expense that must be fully recognized at the time of any reconfiguration or renovation of the components? Or is it an expense that must be recorded as an addition to the renovation’s basis or cost? Either way, it must surely be recognized and included in any presentation to property owners for a vote or otherwise.
This is not a golfer versus non-golfer issue. Although only 8% of Big Canoe property owners play golf (6), 100% of Big Canoe property owners have historically and willingly paid for the courses, equipment and any renovations or improvements via property owner assessments.
This is an issue that effects ALL property owners. This is about property owners asking why. It is about insisting on honesty and full disclosure from management and leadership. It is about demanding that information, financial and otherwise, be factual, accurate, current and complete. It is about mandating that decisions made by leadership are made at all times based on the will and in the best interest of the majority of property owners.
Please feel free to distribute, share and pass this on. Likewise, if you have questions or would like further discussion, I can be contacted at thepcrosses@gmail.com.
Patricia Cross
10438 Big Canoe
References:
1. June 2019 Board Work Session Video at 47:16
(See POA Website>POA Login>POA Tab>Meetings>Videos>June Board Work Session)
2. Second Amendment to Amended and Restated General Declaration of Covenants and Restrictions of the Big Canoe Property Owners Association, Inc. and Big Canoe Company – August 21, 2010 (Section 13c)
3(a,b,c). Big Canoe Property Owners Association – Reserve Management Plan, August 7, 2016 (3a) pgs. 3 – 4; (3b) pg. 20; (3c) pg. 19; Full 40 Pg Report
4. 2017 Audited Financial Report prepared by Mauldin & Jenkins, pg. 12
5. 2018 Audited Financial Report prepared by Mauldin & Jenkins, pg. 13
(See POA Website>POA Login>POA Tab>Financials>Audited Financials 2018, pg. 13)
6. Bergin Golf Video at 1:40:35
(See POA Website>POA Login>POA Tab>Reports & Studies>Golf Course Renovation Master Plan)
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