John, Dave...little help here...

So i popped open the RCSC email with the agenda for the January board meeting next week. Not much happening, so i went to the Treasurer's Report and found this:
Recreation Centers of Sun City, Inc. Treasurer’s Report January 30, 2025`
The balance of unrestricted funds as of December 31, 2024, was $13.8 million, which includes a $2.5M cash reserve. Restricted funds include the Preservation and Improvement Fund (“PIF”) and the Capital Reserve Fund. As of December 31, 2024, PIF had a balance of $37.8 million and the Capital Reserve Fund had a balance of $5.9 million. CIF fees collected to date in 2024 are $1.4 million.

The corporation generated a Net Operating Deficit of ($9.4k) year to date, which is ($1,575k) below budget for 2024. This unfavorable Net Operating Deficit variance was more than offset by Interest and Investment income from the Unrestricted, Capital Reserve and PIF funds that totaled $3,188k in 2024 and was $2,009k favorable to budget.

The first paragraph in italics shows us with a substantial amount of cash on hand in both restricted and unrestricted funds. No surprise there as the money keeps rolling in from home sales and funds created years back to act as buffers.

My shock came in the second paragraph where we read about the ($1,575k) below budget for 2024. We knew they were going to miss their budgeted amount so shock may have been the wrong word. What really threw me was when they argued the loss was no big deal because the Interest and Investment Income from the Capital Reserves and PIF funds more than covered those losses.

I have never seen or heard anyone at the RCSC try and make that kind of argument. Clearly that interest earned is credited back to the funds they sit in. Clearly they have no relationship to the yearly operating budgets and the targets they missed so badly on.

So, for the guys i know who are way smarter than me regarding our financials, doesn't that last paragraph sound like pure and utter bullshit? Sorry for being so graphic, but i'm still off kilter over how they are mixing pools of money rather than just owning their flock-up.

 

I will be eagerly awaiting an answer from them or anyone else out in TOSC land who knows financials and can explain this. I had the same thoughts when I read the Treasurer's Report. I seem to remember Board Director Chris Nettesheim making a comment at the last meeting about not using Interest income in this manner.

Thanks for asking this question, Bill!

Jean Totten

 

Bill, give me a chance to take some notes as I have the info on my computer but my printer doesn’t work.

The first thing I remember is the revenue from assessments is larger than last year at FYE but a large sum is slowing either not collected and is probably placed in collection therefore can no longer be considered revenue unless collected.
Budget deficits are just the result of assumptions from the previous year. For example, bowling generated three times the normal historical revenue. The next year, the thinking goes that bowling won’t do as well but we will increase projected revenue at 30% more than the historical average in the budget. The budget year fails to produce the expected 30% increase, BUT does produce a 20% increase over the historical average. Now while revenue for bowling increased, it did not meet budget projection therefore there was a shortfall in budget of X amount of dollars. The first figure is based in reality, the second was based on an assumption.
Long winded but another way of looking at things. My advice is to compare budget actual as of 12/31/24 with budget actual for 12/31/23. This will give you an idea what I was talking about.

 

I hope to catch up with you and Jean at the monthly Board meeting and explain this with paper in front of us. If you have laptops or iPads, bring them with the budget on them so we can compare apples to apples. The last sentence bothered me also and I think it might have been poorly written. The interest income should have been designated to the proper account.

 

Bill,
Sent a message to Dave and offered my computer to utilize for viewing the documents. I am not going anywhere, as I am still fighting infection in the wound on my ankle. I hope he gets my text message and I also sent him a message here on TOSC. If I hear back from him, I will notify.

 

So what happened to the $600,000 deficit recently reported. Is it couched in the $1,600,000 stated on this report?

 

Dave. so i am clear, two points of interest for me personally after 21 years of watching the RCSC.
1). Between operating income and operating expenses, there were 15 line items that were a negative variance from the year to date against what was budgeted. I don't recall every seeing anything close to that. We always budgeted on the conservative side. So, what happened? I can see it in a line item or two, but 15 times?
2). This is the one that sent me up the wall: Do you ever recall a time when the RCSC argued income from restricted and unrestricted funds made up for their revenue shortfall on the capital side of the ledger? They are two different and distinct pools of money and my take was it was just an effort to minimize their failed budgeting process.

I have freely admitted i'm not a numbers guy but both of these were firsts from my memory.

 

Dave and I have made contact with each other. As soon as he gets the file together, he will send it to me, and I will print it for his use.
He is more than willing to help, just working out logistics. More to come I trust.

 

Makes ya wonder just what in the hell is going on. The more things change the more they stay the same.

 

I eagerly await Dave's take on all the red ink from the end of year financials and the far fetched suggestion that the overspending/under-budgeting shortfall was somehow okay because investment income from restricted and unrestricted funds made up from it. It's easy to find and agonize a plethora of would have's and should have's, i find some solace in the one redeeming quality of Sun City we often overlook.

From the day DEVCO walked away, our community documents included an aspect that is still true to this day. The goal was for the RCSC to be debt free. The safeguard of a membership vote for indebtedness of amounts greater than $750k has never been invoked/tested. The RCSC lists their assets in the neighborhood of 150 million dollars. The reality is, they are worth far more than that. Best of all, in spite of the rising costs (and fees), at the end of the day, between the restricted and unrestricted funds there is a cash on hand balance of roughly 58 million dollars.

The community is and always has been perfectly positioned to remain a destination of choice for seniors, whether continuing to work, or not. The key is to be forward thinking and capable of adjusting to changing expectations.

 

Reminds me of the old saying, "Figures don't lie, but liars figure"

 

Same paragraph from "Public Income Statement" thread, words changed up a bit but same meaning.

Total PIF Forecast 2025 - 2034 $115,405,878
10-Year-PIF-Forecast.pdf

How many home sales will cover that? Also it was suggested maybe altering a golf course and adding condos. Another suggestion was expanding SC marketing which is very costly. Then the next statement was "Bigger question, will anyone support the money needed to promote and market Sun City as a destination to consider?" The answer I got from ND was a resounding NO!!!!

I have asked this before with no answer. Why can't we keep what we have comfortable for those who live here now? Why are some so focused on what they want SC to look like after we are dead? We get one shot at life and most of us are in our last third of it. Why worry about what will happen after we die rather than enjoy the time we have left.

 

Have not heard from Dave yet today. As soon as I can make contact, I will be sure to get the information he needs.

 

You all want community involvement, then when people express opinions in writing in the Sun City Independent you get upset? I am not a numbers person either, but are the people writing these opinion letters? There were several new members at the last Exchange Meeting who knew what they were talking about and had valid points. I hope they do something rather than post on TOSC about building condos and trying to get more money from us members for advertising.

As far as changing numbers not a soul on the Board knew what the previous GM was doing. Surprise! $20 million deferred maintenance!! How did the Finance Committee or the Audit Committee not realize that? Any board member who did not realize what was going on during that time did not care and failed this community. The members are jaded, and we should be. Someone at the last meeting said we should have an outside agency/person come in and have a look. That I could get on board with because no board or committee member we have or have had has the knowledge/capability to run a business of this magnitude.

Oh and who signed the audited financial statements or the tax returns?

 

Still not able to contact Dave. Haven’t tried to go to his house. I will continue to be in contact with him to the best of my ability.

 

Not even remotely possible. There's no upside for it. The numbers are the numbers and now they are released, recreating them would be foolishness. I said it above, i'll post it again here because in the end, it is the proverbial bottom line:
From the day DEVCO walked away, our community documents included an aspect that is still true to this day. The goal was for the RCSC to be debt free. The safeguard of a membership vote for indebtedness of amounts greater than $750k has never been invoked/tested. The RCSC lists their assets in the neighborhood of 150 million dollars. The reality is, they are worth far more than that. Best of all, in spite of the rising costs (and fees), at the end of the day, between the restricted and unrestricted funds there is a cash on hand balance of roughly 58 million dollars.

 

Regardless of the operating budget, the restricted funds would have accrued interest of $3,188k in 2024. So, if there hadn't been a shortfall in the operating budget, we would be that much further ahead. To me, Bill is correct. You can't excuse what the right hand did just because the left hand had some extra cash in it.

 

Looking at the Income Statement should not be a surprise as all the uproar about non residents playing golf and the changes to the rules and fee structure caused that part of the budget to turn to a fairly large deficit. Also known is/was properties are not selling as fast as in previous years which impacted Assessments and Transfers which have also turned to a large deficit. Hopefully these new realities have been incorporated in the next year's budget.

 

I was told to delete my last post as it bordered on slander. It's deleted.
Jean

 

I assume the powers to be understood that it was possible the situation which you describe would/could happen. And they could have chosen to budget more conservatively. I don’t believe running a deficit and relying on interest income to cover the loss is a wise way to budget. Of course this is just in mho.