Spent into oblivion . . .

In the last formal action of the year, this Board publicly approved the 2025 operating and capital budgets that they previously approved privately in late October. (1) And certainly at first glance, one might breathe a sigh of relief to learn that the assessment increase will total only nineteen dollars, but rest not easy. This is only a mirage.

Instead, with either a remarkable lack of understanding or else a complete disregard of our governing documents, the General Manager has delivered and the 2024 Board of Directors has likewise approved an operating budget  (2) projecting a net operating loss of $59k. This can not be.

Further, this is a clear violation of Article V, Section 5.2 of the 2006 Association bylaws which state verbatim “The Operating Budget must be balanced: expenses must not exceed revenues”. (3)

But then, as a reminder, this board has been ignoring the laws of the State of Georgia (4) and sidestepping this community’s governing documents throughout this entire year setting up this beautiful community and future leadership to fail.

What a year.

Intoxicated . . .

Seemingly enthralled by the amount of cash generated (from us as property owners by the way), leadership and management will most certainly offer net income before depreciation as their defense or rationale in an attempt to redefine the real meaning of the 2006 bylaws, but let’s be clear.

Depreciation is an expense.

And even though depreciation is a non-cash expense, nothing in the Association bylaws allows leadership to disregard it as a component of the balanced budget.

In reality . . .

As stated by Warren Buffet, “Depreciation is a real cost that can’t be ignored” (5)

By ignoring depreciation expense, (the allocation of cost of a capital asset over its useful life) both management and leadership are missing critical red flags while also failing to present the community with an accurate picture of the Association’s true financial health.

Note: It might also be worthwhile to recognize that earnings before interest, taxes, depreciation and/or amortization is not a financial metric recognized by GAAP.

No cutting back in sight . . .

Despite the net operating loss, this writer is not advocating additional assessments to balance the budget but rather budget cuts and spending restraints.

Without these, the current minimal assessment increase will indeed be nothing more than a “teaser” and precursor to what is to come.

And just as the extensive renovations to the Choctaw nine, clubhouse and Lake Petit dam repairs will max out our credit line and significantly reduce our capital funds, depreciation expense will continue to increase for some length of time further driving down the net income of the Association.

And yet, management and leadership make no attempt to curb or reduce spending in other operational areas. Just a few examples include the following:

• The approved operating budget includes the addition of a Utility Technician, Assistant Carpenter and an Amenity Maintenance employee. The addition of these three employees adds a financial impact of $87k. (6a)

• Housekeeping expenses which will increase $93k (30%) over 2024 projections include a professional cleaning service for the newly renovated clubhouse. (6b) (7)

Note: Interestingly, continuing as the registered agent, CFO and CEO of      Auerlife, Inc. (8), owner of a Molly Maid franchise, the General Manager should have first hand knowledge of such arrangements.

And then there’s that Capital Budget . . .

Moving along, it is also important to recognize that every dollar of cash generated in the operating budget plus the capital assessments and capital contribution fees will be immediately consumed by debt service and often extravagant and unnecessary capital expenditures as outlined in the $7.985 million 2025 capital budget approved by the board on November 18^th. (9)

Note: It is precisely this spending mentality over recent years that has created the significant depreciation expense reflected today.

Further, even after consuming all of these cash resources, the capital budget will still carry a deficit of approximately $2 million which appears will be drawn from either any remainder in the credit line or the Master Plan Fund now known as the CCF Fund.

Thus, after conversion of the credit line in May 2025 and significant depletion of the Master Plan fund, one must seriously question where the many millions will be found to complete the Lake Petit spillway in 2026.

Note: Perhaps this is a concern also privately on the minds of this board, as during a November 18^th closed door meeting, the POA Treasurer “updated the Board on her meeting with a government professional for research on the procedure for grant requests pertaining to infrastructure projects within Big Canoe”.

Without any restraint . . .

Given these budget deficits and significant capital expenditures of the clubhouse renovation along with the yet to be known actual costs of Lake Petit dam repairs, it is most concerning that this leadership is unable to exhibit any restraint regarding other unnecessary, untimely and/or extravagant capital expenditures. Examples include:

• • $250k for clubhouse kitchen upgrades. Keep in mind, the clubhouse kitchen was completely upgraded in March 2020 at a total cost of $275k and an assigned useful life of fifteen years (10) which will likely require a significant write down if replaced.

Note: It is also questionable why these upgrades were not included in the costs of the clubhouse renovation.

• • $175k for a turn-around at the Wellness Center.

• • $195k for clubhouse banquet and restaurant serviceware and silverware included in the 2024 capital budget to be expended in 2025.

All that said for now, let’s wrap up 2024 . . .

With another dog and pony show scheduled for December 7^th at the Chapel, leadership and management will project 2024 year end results while profusely applauding their accomplishments for the year.

As for the rest of us, if the recent past holds true, we will then go into the dark period of the Big Canoe POA until as late as mid March 2025 before seeing even a balance sheet much less any final results of the Association’s 2024 financial performance.

Keep in mind that the POA President who disingenuously stated that September negative operating results were indeed an anomaly as demonstrated by October’s positive results, (11) (12) failed to acknowledge that net income is projected by management to plunge an additional $271k (7) by year end all the while in the dark period of financial reporting. That said, perhaps October’s positive results were the real anomaly in POA land.

As for those October results . . .

With a cash ratio that has hovered below one for well over a year, now at .68, one must wonder how the Treasurer’s applauded ten year cash projection model could possibly be accurate without significant assessment increases when the current cash ratio clearly demonstrates that the Association does not have adequate cash to pay the Association’s obligations due within one year.

Note: It should not be forgotten that the POA Treasurer refused to provide this writer with a copy of the ten year cash flow projection model when requested.

And now, what does the dark future hold? . . .

• • Additional assessments?
  • Requests for a special assessment vote?
  • Requests for an addendum to the covenants permitting additional increases to the capital contribution fee?

All in all, rest assured, this $19 increase is only a mirage. Buckle up Big Canoe. While we can hope for the best, the worst may be yet to come.

. . . . .

If you believe the information contained on this site is important, please continue to share and pass it on. Should you wish to see additional articles posted in the future, please subscribe for an email notification or check back frequently. And as always, feel free to contact me at thepcrosses@gmail.com for questions or further discussion. Meanwhile, take care, stay safe and best wishes for the holidays.

Patricia Cross

10438 Big Canoe

References:

One: “It’s a mess”, November 8^th, 2024, bcmatters.org, https://bcmatters.org/its-a-mess/

Two: 2025 operating budget slide as presented at the November 18^th, 2024 regular board meeting.

Three: 2006 Third Amended and Restated Bylaws Article V, Section 5.2 – No login required

https://www.bigcanoepoa.org/property-owners/poa-community-governance/governing-documents/bylaws/article-v/

Four: Denied property owner access to specific accounting records as required by Georgia Code Section 14-3-1702. https://bcmatters.org/alarm-bells/

Five: https://www.investopedia.com/terms/e/ebitda.asp

Six: Budget Town Hall Meeting, November 11^th, 2024 video on Youtube at a) 7:56; b) 10:12; https://www.youtube.com/watch?v=Jj07tl4p9Xc

Seven: 2025 Operating Budget (October Net Income at $801k less $271k = projected year end net income of $530k)

(POAwebsite>login>POA>financials>Budgets>2024>OperatingBudget

Eight:  Auerlife, Inc.  State of Georgia registration

Nine: 2025 capital budget  as presented at the November 18^th, 2024 regular board meeting

Ten: 2021 Reserve Management Plan, pg. 32 – No login required

https://drive.google.com/file/d/19_4iD9bnmppqZWkEU39LNM8uTLm6vPaW/view

Eleven: Big Canoe POA Board Meeting, November 18^th, 2024, video on Youtube at 34:26

https://www.youtube.com/watch?v=iBBbu4QRkW0

Twelve: October 2024 Financial Package, Summary of Operations, Pg. 1

(POAwebsite>login>POA>financials>2024>October)