Back to the numbers . . .

As things in Big Canoe slowly begin to settle down into the new normal after months of negotiations culminating in the official execution of the Bobby Jones Links agreement, it is important to remember how we presumably got here. The board’s rationale has always been that a change was needed due in part to the 2019 losses in food and beverage.

Let it not be quickly forgotten that those 2019 F&B losses totaled $775k and although no line item detail of those losses was ever provided by leadership, the interim general manager (BJL) has suggested that the losses occurred across all venues.

That was then, now is now . . .

As announced by the POA president, the newly selected  general manager  hails from Big Canoe and the finance committee. (1) Unfortunately, that same committee was unsuccessful in convincing leadership and management to take the remedial action needed at the clubhouse before it accumulated those massive 2019 losses.

However, it would be fair to say and assume that the 2019 loss would become the benchmark for improvement, although the new GM has provided an updated F&B forecast for 2020 with similar bleak predictions. (2a)

It is quickly learned that Food & Beverage once again has a projected loss in excess of $700k for 2020 . . .

While it is understood that the pandemic played a pivotal role in the $362k in losses sustained through May, the presentation provided by the new GM projects an additional loss for the remaining seven months of $360k or thirty four cents on each dollar of revenue. This calculation becomes problematic when one recognizes that the interim GM suggested a loss of sixteen cents per dollar of revenue. (2a) Simply achieving that BJL benchmark for the remainder of the year would reduce the projected loss $190k. Reducing the labor to 55% as a percentage of sales as directed by the interim GM at the March 28^th Town Hall (3) would immediately make that benchmark possible. Instead, as always, management continues to believe that increased sales volume in the form of banquets and weddings is the panacea for a successful F&B operation although history would indicate otherwise.

Further discrepancies are indicated when it is noted that while various members of the board continue to state that these events are profitable, there was nothing in the interim GM’s March 28^th presentation to indicate that to be so.

No business plan . . .

Surely this question regarding the profitability of banquets and weddings should be immediately resolved considering that no business plan has been completed for the Chimneys even though we have been told fourteen weddings have already been booked for 2021. (2c) Of further reminder and note, approximately $60k in rental revenue was lost by canceling the Talk of the Town Lease; $66,000 in kitchen renovations are scheduled; and additional redesign of other areas will now be required to conform to ADA requirements.

An exaggeration of pandemic effects . . .

Covid19 has undeniably made it’s mark on the 2020 financial results of Big Canoe, but to carry that burden forward as justification for the failure to meet future expectations without any remedial action being taken by management or leadership is a continued concern. With information found in the actual financial package posted after the June 18^th board meeting, it is learned that the F&B net loss through May was only $86k worse than originally budgeted. (4) Congratulations are absolutely in order to all responsible individuals for keeping that variance to a minimum even after having made the appropriate decision to pay all employees unable to work due to pandemic restrictions during thirty days of that period.

Yet now, as pandemic restrictions are lifted, F&B losses are projected to end up an additional $127k worse than originally budgeted. This is nonsensical, and no, this is not understandable.

Road paving deferred this year, but buildings and grounds will be “fresher” . . .

Turning to the remainder of the budget, it is also learned from the  presentation that certain capital projects, such as road paving, will be deferred into 2021 presumably due to ongoing repairs by various utilities. Although the approved capital budget contains $676k for roads (5) alone, etc., the actual amount to be deferred was not specified. However, rather than being prudent and setting those dollars aside for the 2021 repairs, those funds are being diverted to operating expenses for maintenance and such items as pine straw, fall plantings, etc. (2a) none of which were a part of the original 2020 approved operating budget.

As for the reforecast budget, it contains not only significant adjustments to food and beverage but also to the budget in it’s entirety. And although the association is only $102k under the original budget at May month end, (4) the adjusted forecast indicates a variance of $872k by year end. (2b) And why is that so? Failure to apply the efficiencies outlined by BJL along with increased expenditures to the operating budget for maintenance, etc. are major contributing factors to the numbers adjusted for the remainder of the year.

An adjusted 2020 net income of only $593k . . .

Quite honestly, given this detail, it is difficult to understand how the members of the board could have unanimously voted to approve these changes. This is not progress nor is it the result of the pandemic. Rather it is the shifting of priorities and failure to apply recommended efficiency metrics.

Too many budgets . . . Too many forecasts . . .

As property owners we are now faced with distinguishing between original budget numbers (approved November 2019); revised budget numbers (prepared by management and finance committee) and projected financial information provided by the interim GM in order to measure success.

As for the Bobby Jones Links agreement and further confusion. . .

According to the draft Bobby Jones Links agreement, “BJL shall develop a revised forecast for the period June 1 through December 31, 2020 and shall submit to Owner for approval no later than June 15.  This forecast shall reflect changes in circumstances that have occurred since the time the Owner’s original 2020 budget was approved to include the effects of the COVID-19 pandemic, approved employee actions, efficiencies from BJL purchasing leverage and F&B improvements as identified in the March 28, 2020 Town Hall presentation.”  (6)

With the new GM forecasting F&B labor percentages virtually the same as 2019, it is unlikely that could be the same forecast described in the BJL agreement.  Is this yet another forecast or is this the one referenced earlier as the interim GM’s forecast?  Either way, where is this budget published?  Approved?  And which budget prevails?

One thing is for certain, according to the BJL agreement, it will be used to determine the amount of any incentive paid to BJL at year end and the contents of that forecast should be freely available to all interested property owners.

. . . . .

Should you like to see additional articles posted in the future, please subscribe for an email notification.  Likewise, please feel free to share your comments on this site regarding these suggestions or contact me at thepcrosses@gmail.com for questions or further discussion.  Meanwhile take care and stay safe.

Patricia  Cross (10438 Big Canoe)

References:

1 Q&A with POA Board President . . ., June 16,2020, Smoke Signals

https://smokesignalsnews.com/news/big_canoe/q-a-with-poa-board-president-bob-crouch-on-the-selection-of-scott-auer-as/article_8148133e-b020-11ea-93d6-232ecd95a874.html

2 Meeting of the Board of Directors Video, June 18^th, 2020, at (a) 40:10 (b) 1:05:00 (c) 1:42:00 (POAwebsite>login>POA>Meetings>SubscribeToOurYouTube . . . >)

3 Town Hall Meeting, March 28^th, 2020

(POAwebsite>login>POA>Meetings>Videos>MarchTownHall)

4 May 2020 Financial Package, Income from Operations, pg. (a) Summary of Operations, pg. 16

(POAwebsite>login>POA>Financials>SummaryOfOperations>May2020)

5 2020 Capital and Master Plan

(POAwebsite>login>POA>Meetings>BoardDocuments>Capital2020Update)

6 BJL Management Agreement Draft, Attachment II, Pg. 28

(POAwebsite>login>POA>Meetings>BoardDocuments>BJLManagement Agreement)