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

One would think so.

 

Yes I do and you were on the Board also when she talked about using the “cash carry forward” money to balance the budget. The thing was I repeatedly asked where this money was and why isn’t it on the financial statement. After a half hour of obfuscation I just gave up and called it the “Brigadoon money” as it appeared from the mists of the golf courses in the early morning.

 

Regarding the golf fees, we have always been faced with the reality the structure created years ago for our golf courses was simply not sustainable. It should have been addressed back as costs kept rising and we kept pretending that cheap golf was somehow a smart play. Then when the damn broke and we couldn't keep employees on our golf courses and the rounds hit a record 350,000, people started paying attention. What we found was non-residents buying full play passes and paying less than RCSC members. With all due respect to your thoughts, that should NEVER happen. The idea RCSC members were subsidizing non-member rounds of golf was ludicrous on its face.

Even now, as we are faced with the cost of golf increasing and rounds of play dropping, the structure still needs be addressed. In spite of the lament by golfers, "it's not fair," that's how the courses were purchased. The fear always has been they would become a "money pit," and now it has come to pass. Golfers have been shouting they more than pay their freight and there was one year that was true.

The CFO and interim GM did an amazing job of showing it all on a spread sheet back in 2023. As i have written more times than i can count, i don't care if we help subsidize golf for our members, not one freaking nickle for non-residents. And so we are really and truly talking about our future, the 10 year PIF plan has roughly 45 million dollars budgeted for the courses and related outbuildings.

My hope is, at some point this community and their leadership sits down and does a serious look at long range planning. You know, 10, 15 and 20 years out.Will golf still be the game of choice for seniors/retirees? I argued this years ago while on the board and it was ignored as folly. We no longer have that luxury.

 

Dang, i tried to cut and paste the Income and Expenses Statement for the end of the year, 2024, but it looked like mush. I wanted to address 3GenSCAZ comments about golf being the driving force behind the sea of red. That's what i had heard had been the source for the losses. Clearly they played a part, but they missed the boat on projections far beyond golf.

We have watched year after year, as the RCSC soft sold all of our projected budgets and the result was our numbers always looked spectacular. As i noted, the RCSC is far from broke, or underwater, or whatever the lament is, but i would argue they need do a better job at writing budgets for the coming year than they did for 2024. It might just have been a symptom of putting too much on their plate at once, as the 2023 budget and finance committee was covering a boatload of bases as they increased and enhanced their transparency. That was a good thing, it still is.

My bigger rub was the nonsense the red ink wasn't a problem because the interest income from the PIF covered their shortfall. Far better to just tell us they missed their projections and they would do a better this year.

 

Bill, my understanding is that any interest income plus capital gains (buy low, sell high) would remain with the PIF account as it is result of utilizing restricted funds. This is what I have learned from my financial training during my career. I still have to think the sentence was poorly written. If not I would really appreciate clarification from Kevin as I trust him as opposed to Matt who is a BS artist.

 

That is the case and to my limited knowledge Dave, has always been the case. Both the restricted and unrestricted funds have always kept the interest earned in their accounts.

I would agree but with a little more forceful response; "this wasn't poorly worded, it was indeed a bullshit excuse to cover their missed targeted budgets." There's nothing wrong with being wrong, just own it for what it is.

 

I didn't mean to infer that golf was the driving force, NPI of the sea of red. While golf had a $255K shortfall housing sales were an even larger issue at $287K. We have very little control over housing sales but golf is within our control and needs to be addressed. We can either accept continued losses (and growing IMHO) or go back to the bad old days where we depended on non residents to subsidize the courses. This is a tough issue and not everyone plays but many more enjoy the green spaces and let's face it, unless you inherited a residence we all bought in to a golfing community.

 

There's nothing wrong with non-residents playing on our courses, after residents get their tee times, and they pay more than members pay. Which is really the problem from my perspective, we've made absolutely no effort to address the future of golf in our community...other than from how big our investment will be over the next ten years (45 million dollars BTW).

Don't get me wrong 3GenSCAZ, i love the fact the golf advisory committee has gotten involved. The system/structure of really cheap full play passes was always going to be a problem. They compounded it with allowing really cheap non-resident full play passes. Now as they raise the rates to be more in line with real world golf rates, tee times are slipping.

So what's the answer? Way beyond my pay grade, but we know with 8 golf courses, there is a massive number of tee times to fill. We also know, like every other golf course in AZ, the peak months are when you need 100% bookings (or very near). The summer months will always be where everyone gives it away.

In my mind and limited capacity, the old $620 pass (that's how long since i have golfed) has been the perfect mix of buying the per rate round down and still paying something every time you play. Summer used to be nothing and then became a dollar, if memory serves me. Again, above my pay grade but the one given from my perspective has always been unlimited golf was folly. We lost high season tee times to folks paying as little as $5-$10 per round.

When we let the non-members buy those same card for $15-$20 a round it was even dumber. Members were bumped from play as non-members with cards enjoyed a booking system giving them preference. With the buy-in at $6k ($5k PIF, $1K CIF) and $650 lot assessment, outsiders should never get preferential treatment.

All of which is why we need become more focused on what we can do/should do going forward. We know water rates are going up, we know employees need be paid competitive wages and we know the cost of equipment, seed and fertilizer will continue to create budget strain. What we don't know is how badly the next generation of home buyers will be invested in playing golf. I suspect it will be more the occasional twice a week player rather than 5 days a week man or woman.

We've become so conditioned to just kicking the can down the road, that when we do finally address the reality of costs rising, we all get sticker shock. My take is pretty simplistic: Every new home buyer should get a really sound understanding of how Sun City works, made to feel they made the right decision of buying here and then an ongoing relationship as stakeholders in their community.

Sadly, we've done little in that regard.

 

And I thought that Director Nettsheim raised the question about using interest income at the last meeting!!

 

Strayed from original topic - using interest income to offset budget deficit.

 

One Day, if the interest is from investments, probably CDs, that were purchase with operational funds, then using that money to offset operational deficit is kosher. The budget deficit is revenue that was not generated by the budget, hence a deficit. I believe it is better to keep the interest revenue where it was generated rather than in the wish list list category. Also, if it was used for the budget shortfall, how would the funds be divvied up?
I think John and I have a difference of opinion on this point.

 

Bill, sorry this has taken so long as I have been occupied with other problems.
First, you must understand the difference between the budget and the operational figures. Budget figures are put together the previous year (2023 for 2024) and are assumptions based on past experiences for the line items. Operational a/k/a statement of income and expenses represents the actual amount of money generated during the year and where it was spent.

If you look at the Statement of Income and Expenses, the large heading saying Operating Income and look to the right for the heading YTD Actual, this column represents all forms of revenue collected during the calendar year 2024. The next column to the right is YTD Budget which represents the amount of revenue the RCSC HOPED to collect. The bottom line so to speak, RCSC collected over $26.6M in operating income as opposed to the budgeted amount of $27.1M presenting a deficit of $494k of money not collected for one reason or another, which I will get to shortly.

Nowgo to the heading listed as Operating Expenses, then move to the right to YTD Actual and look at total operating expenses which has a figure of $26.64M. Now take the total operating income of $26.6M and subtract total operating operating expenses of $26.64M and it will show a deficit of $9,422. While a deficit, it is actually quite good to lose such a small amount on a $27,1M budget.

Factors in 2024 that effected both revenue and the budget were insurance which the cost nearly doubled, a very rainy January, February and March which adversely effected golf play, summer heat which basically lasted from the end of March to the end of October also adversely effecting golf revenue and slow housing sales due to high interest rates. In spite of all of this, the Board and Management did their best to make any and all losses as small as possible.

While we will try to return to profitability, external forces have to be mitigated the best we can, We have no control over weather, Wild fires, tornadoes, hurricanes, flooding which effect insurance rates no matter what our experiences may be as well as revenue generating outdoor activities providing amounts commensurate with budget projections.

If there is anything in this explanation you require further explanation, you know how to reach me me.

 

Just my opinion but I do think non members need to pay more when they use our facilities. I also think guests who come in to play pickleball should have a larger fee for using our facilities, say $20 for every visit to use our courts. Sorry, but I think we are being taken advantage of from the non member plow in..to use all our facilities, wearing out our showers, tearing up grass. You cannot even get into a real private country club in the country for most non members without paying a large sum. Things cost money and the facility upkeep is a real issue now. Sorry but I say this every year and don't know if anyone cares. Thanks

 

Agree. This topic has been bantered about for at least 16 years which leads me to believe that no one cares.

 

It could have been fixed but people insisted on keeping punch cards. With day passes they would be able to know who was taking advantage by coming too often and could most likely raise the price as needed or by season. $2.50 a visit is way too low. A single homeowner would have to use the facilities 260 times a year to get their average per visit down to $2.50.

 

Does it really matter anymore? I was at a block party last Friday. No one really cares. Not many use the pools. Someone asked about the water temp at Bell showers, no warm water. On the agenda it says it will not be addressed. Not important in the summer, but it is now. I really don't enjoy public pools anyway. Several golfers saying they won't be renewing their annual pass. Too much money. They will cut down the number of times they play per week. No crafters there so that did not come up.