April 5, 2013

Did You Know: Financial report card


By Sean McDonald

CLPOA Treasuer

This is a financial report card on the Board of Directors from May 2011 to May 2013. Dawn Haggerty, Larry Neigel and Sean McDonald were elected to the Board of Directors in May 2011. Many decisions made have dramatically reduced the amount spent during our tenure. Some of these reductions will continue as savings long after our term has ended in May 2013.

Following is a list of expense reductions made:

? $900,000 Rescinded assessment increase in 2011

? $750,000 Reduction of expenses to offset loss of assessment income (11 to 13 percent) in 2011

? $750,000 Reduction of expenses to offset loss of assessment income (11 to 13 percent) in 2012

? $150,000 Reduction in cost of Golf Course maintenance contract ($750,000 over next five years)

? $4,300,000 Savings by paving all roads in same year (thanks to the Facilities Review Committee)

That's a total $6,850,000 estimated savings over the last two years.

Add $50,000 projected reduction in cost of set-up for non-revenue events for 2013/2014 and $750,000 continued reduced costs from 2011/12 cuts saved in 2013/2014 for $7,650,000 minimum savings by the current Board at next year's end.

The Pro-Forma Budget in 2011 did not reflect the reduction in income of approximately $1,200,000 due to 11 to 13 percent of homeowners not paying assessments. While we would not see this revenue, we still had corresponding expenses. We had two choices: borrow $1,200,000-plus from reserves or dramatically reduce expenses.

Due to our efforts, we reduced expenses by an additional $750,000 in 2011 and this savings has continued each subsequent year, including this year.

We borrowed $546,000 from reserves due to inheriting a debt from prior Boards. By cutting costs, we only needed $246,000. The Amnesty Program implemented in 2011 also helped reduce the amount we needed to borrow. Some reductions made to “rescind the assessment increase” also reduced expenses in subsequent years.

Remember, previous deficits (most due to non-payment of assessments and theft of money and goods in prior years) were paid for by taking money from reserves and or the Community Facilities Development Fund without Board or members being informed. We ended this illegal practice.

The only reason we had to increase assessments in 2012 was because we had to include the estimated homeowners not paying assessments in the 2012/13 Pro-Forma Budget.

Here is are examples of a $504,982 reduction since 2011:

? The Lighthouse subsidy in 2011 was $426,243. In 2012, we reduced the subsidy by $233,564. This is over 50 percent reduction in subsidy members had to pay.

? The Country Club subsidy in 2011 was $$407,466. In 2012, we reduced the subsidy by $271,418. This is a 65 percent reduction in subsidy members had to pay.

That total savings is $504,982. Costs were clearly out of control at both facilities when we were elected. All reductions in expense and proper management of both facilities contributed to the subsidy reduction at both facilities. There is a long list of changes made to reduce costs and we thank Melissa Patterson and Jeff Main for an excellent job running these two facilities.

For many members, it is hard to understand why we had to increase assessments with all the savings. While these reductions were made, the items below continued to escalate. We have little or no control over rising costs for the following items:

? Lake Lease ? Rises on average 8 percent each year

? Insurance ? Increased due to frivolous lawsuits filed by members and former employees

? Water/Electricity ? Continues to cost more each year.

? Workers Comp Insurance ? Excessive claims are the main cause of increase. We established a strong Human Resources Department and hope to see a significant reduction in the next year.

? Legal Costs ? We must defend the POA and Board for frivolous lawsuits and pursue homeowners delinquent in assessments and fines.

? Non-Payment of assessments this year estimated at 8 percent.

The increase in cost for the items above actually exceeded the 4 percent increase we had in assessments this year. We have put best business practices in place, reducing insurance and worker comp claims, but we cannot stop frivolous claims.

The current Board was determined to stop automatically settling claims, which, in the past, has been a guaranteed chunk of money for anyone who sued, due to prior legal policy. This should stop very quickly. We are making it very costly for anyone to file frivolous lawsuits against the POA.

The Board has been working toward reducing the lake lease and utility costs. It is currently looking at solar for energy savings. All remodels/buildings will include energy efficient lighting, windows and appliances.

We are looking at foreclosure on delinquent homeowners who refuse to pay, which will bring us new homeowners who will pay their assessments.

I want to thank all committee members, managers, staff, our General Manager Chris Mitchell and colleagues on the Board for helping achieve most of our objectives for the past two years. I am hopeful members will remember how important it is to elect Directors with a good business background, rather than anyone who just has their own agenda and does not equally serve all members.