El Niguel Country Club

T he world has changed dramatically over the last 18 months to say the least – it is no di&er- ent at El Niguel! Demand for golf at private clubs has accelerated during this period to a point that our waiting list continues to grow, and the membership cost has doubled. The Board has been challenged since the founding of the Club to 3nd ways to 3nance new proj- ects. Back in 2009, the Board instated the 3rst capital fee to start the process and prior Boards have focused on how to continue to fund the needs of the Club without relying solely on borrowings and assessments from the Member-Owners. With a combination of debt 3nancing, cash assess- ments, and assessment paid over time, Boards have been able to continue to chip away at the need. Path to prosperity Road map helps us achieve financial success • BY LYLE SCHEPPELE, PRESIDENT We are currently faced with replacing the Golf Course Maintenance Facility and are evaluating the options with its location to solve access and other issues. Regardless of where the facility may be located on the property, we will not be able to solve it without an assessment. We have been working with a consulting 3rm that spe- cializes in assisting clubs with issues such as capital needs planning for the long term. They have shared a number of ideas with Kimberly Wood, and the Board. Their planning model is based upon an Old Club located in Virginia that has used this concept for over 60 years. Three guiding principles to operate a club 3nancially are as follows: >> Run the annual operations, services and amenities for members at break-even and establish Member/Owner dues to achieve that result; >> Project the cost of capital needs over the next 20 to 30 years to maintain/replace the course and facilities, and collect a capital fee monthly to fund that over the term; >> Use Transfer fees from membership sales to fund new projects. Or as Kimberly Wood says, "the shiny new objects." The methodology is designed to minimize the need for assessment in the future, unless the members decide to do a project outside of the cost to maintain/improve/replace the existing footprint for the Club. This process is similar to how a Homeowner's Association would determine its needs over the years. The Club has obtained a capital study, and although it still needs some work, a good example of the challenges that lie ahead look something like this: Our current capital fees provide approximately $750,000 annually. This is a great result of work done by many prior Boards to get us where we are today. However, our current needs to main- tain/upgrade/replace our existing assets, excluding the cur- rent replacement of the Maintenance Facility, is twice that amount over the next 20 years. This does not mean we need all of this next year. By way of example, we will need to replace the irrigation system we are using in 2032 and we estimate the cost to be approximately $4.5 million to replace the asset we have been using for many years. To avoid an assessment to solve issues like this and smooth out the bumps over the years will require some increases in the capital fees to fund it. I have had some questions/comments about funding these future improvements early. I view this a bit di&er- ently – we are not funding future improvements, we are replacing the assets we have been using, and once they de- preciate to a point when they need to be replaced, we should already have them funded rather than assess the members for them after the fact. The Board and I feel very fortunate that the many Boards before us did great work on these issues and it appears they have gotten us half way there. We are pleased to have transfer fees from membership sales over the last few years as part of the planning for our long- term needs. The Board is working on these issues and will be evaluating how and when any changes should occur, and to create a policy to ensure that the reserve assets are properly funded and protected over time. This process would be gradual, and we expect it will continue to improve the Club and the value of the mem- bership, reduce surprises and allow the Club to provide the best experience to our Member-Owners. THE DIVOT | SUMMER 2021 • 3 PRESIDENT'S REPORT

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