Letter #34

Good morning everyone,

Sorry for the delay, this is well overdue now. The Board needs your input in order to get a bearing on what the TPC membership wants its Club to look like in the coming 3-5 years. Before looking forward with a survey (coming this week via email), let’s take a quick look back at where we’ve come from.

In 15yrs, the Club has evolved from a smaller scale, casual, recreation-center like facility for swimmers and tennis players. It had a tiny outdoor-only snack bar and do-it-yourself barbeques, 2 pools, some courts and a particular charm that members from back then reflect upon fondly. Most of our physical world plays out in step function or waves and rarely proceeds in a steady straight line; our Club’s path has been no different. Beginning about 10yrs ago, two events occurred that radically changed the Club, for better or worse (and there are constituents in both camps). The great remodel with a new Clubhouse, pools, and fitness center was the first (2006-ish) followed by a step-up in the cost of initiation for new members (from $5000 in 2006 to $18,500 in 2008 where it remains today). The look and feel of the Club changed irreversibly but perhaps more importantly, so did member expectations. You could say both were elevated (again, for better or worse depending on your perspective).

The Clubhouse building, the Fitness Center, the pool area (less the main pool), the locker rooms, and the upper court area – all of these areas are quite nice and represent areas that the membership is pleased with. Collectively, they set the standard bar for our Club. Areas below that standard are: the tiny kitchen, the tired mall food-court feel of the dining areas, the sub-Harlem Public Park appearance of the whole south property area with its porto-potties and dumpsters. And then there’s the main pool, we all know it’s coming, the ultimate demise of the 55yr old main pool (it’s a centurion in pool years) and it’s only a question of when it will fail. Upon its demise, if we have to make a mammoth investment into its rebirth anyway ($100’s of k’s), shouldn’t we consider a broader change – perhaps combining pools?

What we want the Club to look like in 5yrs is most heavily regulated by how much it will cost and how we go about paying for it. I already know the answer if you ask children (or me) if they want cookies or ice cream. The answer is invariably “yes!” Before surveying you for your wishes let’s review the Club’s finances. By now, if you’ve read only a few of the PresLetters this year, you have a working knowledge of the Club’s finances as they are today:

  • Dues pay for operations (keeping the lights on) ~$200/mo/reg member today.
  • Monthly debt assessment, as it’s set today, gets us debt free in a little over 10yrs from now (debt has been significantly overhauled in the past few years) ~$50/mo/reg member now.
  • Initiation fees are reserved for two kinds of capital expenses; maintenance and expansion. Initiation is $18,500, there are >100 prospective members on our waiting lists and the membership turns over ~5% every year. That’s about 35-ish new members per year and amounts to ~$650k/yr for capital expenses.
  • Activities (Aquatics, Fitness, Tennis, Youth) are all stand-alone business units designed to run self-sufficiently. No one is getting rich in these (all Directors are below their max comp cap in this eat-what-you-kill model) but no one is losing money either.

That’s the general overview of the operating model. Specifically, there is $1.6MM of cash in the coffers at the Club currently with next to nothing on the maintenance to-do list. Over the next 5yrs, the Club should take in about $3.2MM for capital expenses($650k x 5yrs). Let’s haircut that down 75% to be conservative – that’s $2.4MM in new money coming in added to the $1.6MM already there. A conservative total of $4MM over the next 5ys … the 5yr plan assumes, and this is going to be conditional to any approval for any project in this plan, that there will be no dues increase associated with the upgrades, no assessment, and no additional debt taken on (in fact we’ll have significantly reduced our debt 5yrs from now).

In a day or two, we will be sending an electronic survey to members. You will be asked to consider each question in the context of: we can do this assuming no dues increase associated with a project, no assessment, no additional debt. We’ll consider three main areas of the Club and in order of importance and immediacy: the kitchen/dining areas, the south property project, and the main pool area.

More on this very soon..

All the best,

Mike

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