Budget & Finance Committee Report – Comments on the 2008 and on 2009 Budgets.
By Don Backer, Treasurer
1/ Comments on the 2008 Budget
Closing the Resort did help us save significant cash flow and the following is a further explanation of how much.
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· The yearend deficit for the Resort was $97,000, which was $21,000 less than the budget of $118,000. However, we had already achieved a reduction in expenses of $14,000 as of the end of Q3.
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· In Q4, with the Resort closed, we achieved the additional $7,000 deficit reduction, and we also avoided having to hire the additional Resort staff, estimated at $20,000, that we determined would be needed for the busy season in the last quarter. The actual cash flow savings in Q4 resulting from closing the Resort is approximately $27,000.
On the Assessment side Expenses were $476,000, which was $25,000 less than the expense budget of $501,000. Most expense categories were managed to come in significantly less than budget, which allowed us to stay below the total budget, but three categories, legal expenses, office administration and collections expenses, exceeded the line item budget.
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· Budgeted legal, accounting and other professional fees were on target at $49,000. These legal expenses were necessary to deal with ingress/egress issues and foreclosure and other collections issues for the benefit of POATRI and the owners.
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· Other major legal expenses, which account for the budget overage of $89,000 on the Professional Fees line item, are for the use of legal counsel where POATRI is the defendant, and for legal counsel to assist with policy level decisions by the Board. As a result of property owners initiating legal action against POATRI, it is now necessary to include legal review of policy decisions in order to perform proper due diligence and to minimize the risk of more lawsuits in the future. The 2009 budget for legal expenses has been increased substantially to accommodate what we expect to be a continuing need for corporate level legal counsel.
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· The necessity of the amended TRMA ballot and the budget variance billing, both of which were unforeseen and unbudgeted, increased Administrative expenses by $11,000. Other savings in administrative area reduced the net budget overage to $6,000.
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· Collections expenses were over budget by $5,700, primarily due to county taxes and legal fees paid when property was deeded back to POATRI. Auction and tax sale proceeds of $38,700 offset this expense.
2/ Comments on the 2009 Budget
Wi With the rejection of the $248 assessment level, the 2009 budget will be based on an assessment level of $155: The outcome of this choice by property owners was clearly explained in the ballot and will result in the following:
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· Reduction in funds for road repair; a partial maintenance program will continue.
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· Reduction in funds available for the collection of delinquent assessment accounts and elimination of further foreclosure efforts.
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· Reduction in funds available for the collection of current assessments.
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· Elimination of printed newsletters and bulletins; the web site will remain for communication efforts.
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· Elimination of programs to resolve road easement, ingress/egress and gating issues.
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· Reduction in the care and maintenance of the Resort facility during its closure which will cause further deterioration of the infrastructure and increase the cost of reopening.
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· Delay to our ability to pursue options to settle the future of the Resort.
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· Extremely conservative spending on roads; and collections programs to ensure necessary funding for unpredictable economic events and expected legal costs.
It s It should be noted that this budget does not include funds for reopening the Resort, and restricts our ability to take care of the property to minimal, emergency only repairs.
BALANCING THE 2008 BUDGET
By Don Backer, Treasurer
When the Board of Directors approved the 2008 it was fully our intention to propose to the membership an amendment to the TRMA to increase fees to cover the projected deficit. This action was precluded by the proposal of a settled lawsuit which would address this issue, thus no amendment has been sent to the members at this time. Although it was hoped that the proposed settlement would have been approved by the January 26th meeting that did not turn out to be the case. As we await a final decision from the Court, we are prepared to take one of the following steps to ensure a 2008 balanced budget:
- If the Judge approves the settlement but directs us to get property owner approval, we will send out a ballot for property owners to approve or disapprove the proposed amended TRMA, including the new fee structure of $168 plus $.80 per acre. If approved, this would get us very close to a balance budget, with a shortfall of only $16, 800.
- If property owners do not approve of the proposed amended TRMA, or if the Judge does not approve the settlement, we must then request a property owner approved assessment increase of $48.26 under the existing TRMA flat fee structure. This would achieve a balance budget and enable us to maintain the current level of services.
- If neither of the above options are approved, we will be faced with very difficult decisions to cut enough services to eliminate the $159,255 shortfall in our 2008 budget. This will affect services across the board including reducing the amount and type of road maintenance we can provide. We will not know if we need to take this drastic action until we complete the two steps outlined above.
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