And here we are again in late February with no year end financial reports posted to the POA website. Without that information, as the stakeholders of a $51 million corporation, we have no fourth quarter itemization of the association’s capital expenditures and few details of the overall year end performance. In fact, details found in the GM’s constantly changing and creative slides are so sketchy, that the financial performance for the month of December was not even included in his January board meeting presentation.
Without mention or discussion . . .
However, using the year end income disclosed at $1.450 million (1) as compared to the previous month’s year to date income of $1.617 million, (2) a simple math exercise reveals that the association recorded a significant net operating loss for the month of December totaling approximately $167k.
Needless to say, it is perplexing that the GM would choose to omit the December financial performance from his board presentation.
Interest rates continue to move upward . . .
On February 1st, the Fed raised interest rates another .25% resulting in a current SOFR rate of 4.55%. (3) With $15 million of the Wells Fargo credit facility tied to the SOFR (secured overnight financing rate) plus 1.70%, the rate at adjustment will now be 6.25%.
As a reminder, leadership made the unfortunate decision last year to roll the balance of the 2016 Land Loan at a fixed rate of only 3.29% into the new credit line with the current floating rate.
As for that old “worn out” pontoon boat fleet . . .
Although this writer continues to consider the pontoon boat fleet replacement premature, kudos are due to the new POA Treasurer (4) for at least providing a rational argument to support the board’s January 26th 6-0-1 vote of approval for the $320k purchase. The Treasurer explained that the Marina is a very profitable amenity while also expressing his disfavor of lease financing. Again kudos.
Note: Apparently, due to a lack of available leasing options, the new fleet will be purchased with capital funds (cash) rather than proceeds from an operating lease as originally requested and budgeted by the GM in November. (5)
However, that $320k approval represents only the cash outlay for the fleet after the trade in of the old fleet. For example, without specifying any amount, it was noted that the association actually received a high trade-in allowance for the old boats. Thus . . . what is the true cost of those new boats?
Unfortunately, management does not appear to believe the property owners have a right to know the answer to that question as demonstrated by their response to this writer’s inquiries. (6) AskthePOA Ticket#8790
Security? Really? . . .
It has been learned that property owner dollars will now be used to hire security at POA board meetings when deemed necessary by the General Manager. The GM was granted this authority by the board during their January 9th closed door meeting.
And one must immediately ask, security from whom? The property owners? Some undisclosed external threat? Needless to say, this question deserves an immediate answer.
Note: Perhaps this newly granted authority explains the presence of a Pickens County Sheriff at the January 26th open board meeting.
Cash Flow 101 . . . nothing has changed . . .
And finally, special thanks are extended to the new Finance Committee Chair for his January 26th presentation of a slide titled Cash Flow 101 (7) containing information that not only confirmed the unpaid balance of 2022 capital projects (8) but also documented the significant negative cash flow the Association will experience in 2023.
Although spun by the Chairman in an oddly positive manner, the slide lists the 2022 carryover items at $1.598 million. Given that information, with 2022 showing a positive cash flow of only $1.275 million (9) (even after the infusion of $510k in additional cash from the proceeds of the fire engine loan), it remains crystal clear that “the POA never had the 2022 funds to pay for these projects without relying on future 2023 dollars for payment or reaching out to other inappropriate sources”. (10)
Further, using the Chairman’s own numbers, with capital expenditures and debt service projected at $9.184 million for 2023 and revenues lagging behind at only $6.610, the Cash Flow 101 slide clearly documents anticipated negative cash flow for 2023 at ($2.574 million). In other words, the association continues to spend more than it is taking in.
And unfortunately, the association is commingling funds and depleting other cash reserves in order to fund this shortfall.
It must also be noted that $700k in capital contribution fees are included in the projected revenue (sources of cash) which by statute, can not be used to fund “principal payments on borrowings”.
Again, neighbors and friends . . . the money simply is not there.
. . . . .
If you believe the information in this blog to be important, please pass it on. Should you wish to see additional articles posted in the future, please subscribe for an email notification or check back frequently. Likewise, please feel free to post comments below or contact me at thepcrosses@gmail.com for questions or further discussion. Meanwhile, take care, stay safe and thank you for your readership.
Patricia Cross (10438 Big Canoe)
References:
1) January 26th Board Meeting, GM’s slide presentation titled 2022 Full Year Financial Summary
2) November 2022 Financial Package, Summary of Operations, pg. 1
(POAwebsite>login>POA>financials>2022November)
3) https://www.newyorkfed.org/markets/reference-rates/sofr
4) Big Canoe POA Board meeting, January 26th, 2022, video on Youtube at 1:14:10 (Terry Stewart, Treasurer)
5) Big Canoe Board of Directors Meeting Minutes, January 26th, 2023
((POAwebsite>login>POA>Meetings>Minutes>January>January26BoardMeeting)
7) Slide presentation titled Cash Flow 101 (January 26th Board Meeting)
8) Slide titled 2022 Capital Projects (January 26th Board Meeting)
9) Slide titled Statement of Cash Flows (January 26th Board Meeting)
Please post specific questions during the board meeting.