Budget Stuff – Yeah Baby!
February 15, 2014: Annual budget discussion: How would Austin Powers approach it? When asked about it he might respond with “nerd alert”! I prefer to take the positive approach – “Budgets are my bag, baby!"
Seriously, having been Treasurer for two budget cycles, I know they can be as much fun as doing your taxes or going to the dentist. But we all know it is important. That is why I am grateful that new Treasurer Mike Thompson has worked so hard on this year’s edition, with the help of new Finance Chair Jack Morkan, past Chair George Miller, office accountant Donna Glessing, and General Manager Bill Kocan, as well as assistance from past Treasurer Ramzi Bannura.
The bottom line? Well, with the help of the dues increase approved by the members plus a full year of understanding our new clubhouse cost structure, we are in pretty good shape. But there were a few unforeseen challenges in getting to this point.
First, we began the year with approximately $17,500 of obligations to members who loaned money 1) for the Eisenglass that encloses the two covered outside decks and 2) to finance the sound abatement project in the bar. Both were good purchases and helped the quality of experience in our club but they must be paid.
Secondly, we will be experiencing reduced income from initiation fees this year. Why? Well, recall that we passed a by-law that reduced the age to become a voting member from 40 years to 35 years of age. To ease the transition of those who had to fleet up early, we agreed to allow them to take as long as four years to pay their initiation fees. This also means that we will take fewer members off the waiting list this year to keep our voting member rolls as close to the 600 cap as possible. This defers the income we would normally expect from initiation fees this year.
So, we begin this year with an outstanding debt and we have a temporary reduction in revenue from member initiation fees. However, the budget should still see us in the black even after paying our outstanding debts AND putting money away to build back our operating reserves (aka, “rainy day fund”). We are making a considerable investment in this fund as we promised our members at the Annual Meeting. We should be in a position to have three months of operating cash in reserves within four years – the stated financial objective of last year’s Board.
What about fun stuff like capital items? Current Club policy suggests the Board should target 4% of the previous year’s revenues to capital projects for the following year. That would mean something in the neighborhood of $50,000. Items identified for consideration as capital expenditures this year include:
- Two new Optis for Junior Sailing
- A new outboard engine for a new Whaler that has been procured previously
- Fixed radiant heaters for the covered outdoor decks
- Room dividers for the conference rooms to maximize meeting options
- Electrical upgrades to the marina
- Structural improvements to the marina to better facilitate transient docking
- Safety fence between the lawn and marina as identified by our insurance carrier
- Irrigation system for the back lawn
In order to assure that all items are within our means and will not negatively affect our overall budget performance or cash flow, the Board will treat each of these items as “discretionary” rather than approving the entire slate of projects as in years past. That means that when the item is needed, a request will be made to the board for purchase and a review of current cash and expected income will be made to determine if the item can be afforded. At this point, however, we have every reason to expect that we can afford all the identified items.
So, to summarize, we appear to be in good shape even when using conservative assumptions for both revenue and expenses. We will open the spigot a bit for capital items but will be judicious going forward and we will work throughout the year with our committee chairs to help them meet their budget objectives which should help the overall Club financial picture.
Well, I hope this discussion of budget items was not as painful as the subject sometimes sounds, but in the event that your appetite for such matters has not been satisfied, keep on the lookout for the final approved budget in all its glory coming to the webpage soon.
In the meantime, stay warm and think of Spring.