MORE ON TRANSPARENCY…….

Information access has long been a contentious issue in the public sector as well as in the private sector. Focus on the issue has brought forth a myriad of Legislation to open up the process. More recently, the high profile accounting and corporate financial scandals have brought new urgency for far greater information disclosure. And as a consequence of the digital advances, technology has both created the expectation and provided the tools to deliver greater information detail and provide more timely access to that information. Stakeholders and political bodies are increasingly demanding that organizations fully embrace greater Transparency.

One author recently described Transparency as a condition opposite of secrecy! “Secrecy means deliberately hiding your actions, transparency means deliberately revealing them. It is the deliberate attempt to move from a secretive or opaque organization to one that encourages open access to information, participation, and decision making, which ultimately creates a higher level of trust among stakeholders”

Many articles and conferences have been devoted to discussions on Transparency. It has become a focal point for Associations. Paul Meyer in his book “the will to Govern Well Knowledge, Trust and Nimbleness” which was based on research done under the auspices of the American Society of Association Executives found that transparency and trust are inextricably connected. He suggests, as others do
· to provide [on-line] access to decision-making documents;

· to share background information about important decisions;

· to provide clearer financial reporting;

· to Open up the decision-making process and expand breadth of governance

Full and complete Transparency will take a bit of time, but small steps are important.

Note: From excerpts from Paul Meyer’s article “The Truth about Transparency”
See: http://www.centeronline.org/knowledge/article.cfm?ID=2495&ContentProfileID=135187&Action=searching

Golf and Cost…..In Search of a Solution

Golf and Cost are both four letter words; both cause a lot of frustration. And, the objective with each when keeping score is to drive them lower!

Significant progress was made on a December 5th Monday meeting of resident golfers and the Developer. Residents successfully negotiated to have the operating and maintenance of the two golf courses to be bid by outside professional golf course management companies. Additionally, golf fees were stabilized at the current 2005 level, along with some minor other changes. Hopefully, golf fees can remain at a reasonable level if the cost of golf operations can be brought under better control. Congratulations to the residents that played a part in bringing this about. But now the hard work begins—the selection of a professional golf management firm that can manage our golf courses for golfers on a breakeven basis.

A greater focus on Cost is in order…

Cost of SCTX total Golf operations in 2006 will approach $90,000 per hole. This is substantially higher than operations cost of the top Austin Municipal courses for which detailed data is available. Teravista, Cimarron Hills and Mill Creek each have lower operating costs per hole, according to representatives contacted. Maintenance cost of White Wing and Legacy Hills on a per hole basis are even greater than the renowned Pinehurst Country Club. See: www.nccbi.org/Golf/2003.Golf.Maintenance.htm

…And Losses need to be Addressed

Losses for Golf have been large and continue through 2009, according to the budget unanimously approved in November. Losses were projected remain with us, despite the very significant price increases previously planned for 2006. Cumulated projected losses, including current year, are estimated to approach $1million by 2009. Since 2003 through 2006, annual increases in expenses range from 7.2 to 8.8 percent, according to Audited financial reports and the 2006 budget plans. Clearly, these are the issues that a professional Golf management company will need to address while maintaining a pleasurable golfing environment.

The Future
If Golf Costs cannot be brought under control and losses eliminated for the current courses-White Wing and Legacy Hills- there is a real question why current residents [especially non-golfing residents] would want to take on a third, money losing golf course. While the Developer may want another golf course in order to market higher margin [profit] homes, perhaps a third course should be developed financially separate and apart from this Community Association. It could be privately operated by the Developer or Agent. Current residents, surely, do not want their Homeowner Assessments increased further to support ongoing losses of a third Golf Course!

Some have said, “Don’t fret”, the Developer picks up the short fall resulting from any golf or restaurant loss. Really? Then why are Resident Assessments going up?

Time For You To Be Heard

Many of the readers of the last newsletter are still asking what they could do. Perhaps now is the time to request that Assessments be frozen until golf and restaurants are managed on a breakeven basis!

You can Email/call/write:

Gary Newman, Gary.Newman@delwebb.com
Rob McDaniel, rob.mcdaniel@delwebb.com,
Mark Thomas, mark.thomas@pulte.com
Ira Dolich, idolich@aol.com
Frank Miller, terfra2@cox-internet.com,
Jerry Boynton jerboy@cox.net.

Let them know your concerns –it is time to challenge “costs” in order to avoid spiraling increases in fees and Assessments.

Let them know that since Golf Fees are frozen at the 2005 level, we strongly supports rolling back Resident Assessments to the January 2005 level until both Restaurants and Golf Operations are at breakeven.

Lease the Restaurant Problem away…..

Leasing one or both restaurants would appear to be in the best interest of residents based upon a financial review of restaurant operations. In fact, leasing may be the only viable option to stem the growing red ink!
Restaurants losses will total more than $355,000 during 2005 [according to the Budget Plan approved on 11/17/05] and these losses are growing. For 2005, losses for the restaurants will total more than $90 per home. That’s correct; you paid a $90 restaurant tab even if you didn’t choose to dine.

Key Benchmark Suggest Excessive Cost
A key measure in the Restaurant business is “Prime Cost”
Prime cost is the total cost of goods (food, beverage and related paper products such as disposable cups, napkins, etc.) plus the gross labor cost for all F&B employees. According to the experts, total Prime Costs should average no more than 60 to 69% of total F&B revenue; the closer to 60% the better.
Legacy Grill’s Prime Costs will total more than 106 % of revenue for 2005, according to the recently approved Budget. Labor costs are more than double the benchmark rate and cost of goods sold is nearly a quarter higher. There was zero contribution to overhead costs. This is a financially unacceptable condition for any business!
The Prime cost ratio for Accents is projected at 94.4 % for 2005, slightly better than Legacy Grill. But, this is woefully poor compared with a well managed, successful operation. Source: SC data from CA operating Budget 2006
____________________________
Read more about key financial measures for restaurants: http://www.whitehutchinson.com/leisure/articles/primetime.shtml
http://starchefs.com/business_tools/learning_materials.html/industry.shtml
www.restaurant.org/research/operations/report.cfm

Time for a New Approach
Given the dire nature of the Restaurant financials, it is unlikely that cosmetic changes and/or “tweaking” of operational factors are going to produce successful results. As noted above, Legacy Grill is not even covering “out-of-pocket”[variable] costs during 2005 and is projected to barely cover variable costs in 2006 only if projected revenues jump a forecast 9.6 percent.

Clearly, it would be in the best interest of the Residents for the CA and Developer to seriously evaluate Leasing-- one or both restaurants. A formal “Request for Proposal” format should be developed and circulated to 25-30 local [Greater Austin area] restaurant operator/owners, selected by reputation and by type of restaurant operation.
Operators/owners providing the most promising Proposal[s] should be asked to submit structured bids on leasing one or both restaurants. Should a satisfactory leasing agreement be unobtainable, closure of Legacy Grill as currently operated should be undertaken after reviewing other options and uses for the space.

As noted in an earlier newsletter, Developer’s marketing and business interests are frequently not the same as Resident interests. If the Developer wishes to continue status quo restaurant operations for marketing or other business purposes, the Developer should rebate to the Residents an amount equal to the restaurant losses to offset Resident Assessments—this year that would amount to about $90 per household.
Time for you to be heard
The 2006-2009 Budget Plan projecting continuation significant losses for Restaurants and Golf and calling for substantial resident assessment increases was adopted November 17th. The vote was unanimous and nary was a question or comment voiced regarding cost of operations or the size of the losses being projected. Just raise assessments to offset!
Many of the readers of the last newsletter asked what they could do.
Will your Neighborhood Representative support you by having a neighborhood meeting to hear your concerns? Ask him/her to schedule a Community Association Fee/Assessment Meeting. Email/call/write our CA Residents Board members, Ira Dolich, idolich@aol.com, Frank Miller, terfra2@cox-internet.com, and Jerry Boynton, Chairman of the Finance Committee, jerboy@cox.net. Let them know your concerns –it is time to challenge “costs” in order to avoid spiraling increases in fees and assessments.


Proposed Actions
In order to forestall further significant increases in annual assessments, advances in fees and the complete avoidance of special assessments, the following comprehensive actions are proposed: [Each of these proposals will require approval of the Developer controlled Board of Directors]

· Lease one or both Restaurants to an entrepreneur[s] that have successful track record in operating profitable, well run food and beverage establishments. [Discussed in current Newsletter]

· Change the trigger point from 95% to 75% for resident control. This would give residents time to review the expense side of the budget and make necessary adjustments. [Discussed in previous Newsletter]

· Change the nominating/election process now in place to an open election for Board and Governance Committee member’s similar to other Home Owner Associations and Municipalities.

· Contract with a known and established Golf Management Firm to manage and operate our courses. Many of the well known municipal and country golf club courses in central Texas are already doing this and have been pleased with the results.

· Contract a Community Association management firm with experience and reputation to manage our day to day business.

Our goal is to foster transparent discussions and actions regarding the issues confronting our Community Association. We welcome an open dialogue regarding the actions proposed and why they are proposed. And, we would very much appreciate additional input from the many residents that have offered ideas, concepts and details about how to address issues confronting the CA. We welcome comment on the problems outlined as well as the solutions—both positive and negative [hopefully constructive].

Our mission is to make Sun City Texas a community with a solid financial base with an active adult environment. If you support our mission please forward this email to your neighbors and friends. If your neighbors or friends do not have access to the internet, make them a hard copy. Only with your support will we be successful with the proposed actions. If you wish to have your name added or deleted from the email data base, email jackstro@verizon.net
Future newsletters will focus on the financial aspects of Operations, future Plans and how different approaches may be utilized to address poor financial results.