Dear Spring Run Member,
You may have heard a buzz out in the community about the total price of the project and what Spring Run is legally able to borrow. I just caught wind of it and want to make sure the membership has factual information instead of rumor.
In one particular email, it states “The original 2.5 million number was the ‘magic number’ to be under 50%” (of gross expenses). To be clear, the budget for the project was identified prior to determining how it would be financed. The number was the result of estimates provided by the architect and contractors for the scope of work the Board was considering. Once the $2.5M figure was released to the community, that became the magic number. The Club’s Bylaws Section 3.22 allow the Board to legally borrow money for discretionary capital improvements without approval of the NRs provided that the total amount of debt does not exceed 50% of the total gross expenses for that fiscal year. Gross expenses consist of operating expenses, capital expenses and reserve expenses. Using our budgeted operating expenses figure of $5,169,129 it came out to roughly $2.5M and we used that number. However, when we add in the capital expenses of $79,900 and the reserve expenses of $325,480, you find the total Association expenses for this fiscal year are $5,574,509. 50% of that total is $2,787,254, which still keeps the club within its legal borrowing limits.
It is important to note that the club loan is still for $2.5M, and it has not been drawn on yet. With sufficient club funds available and with a spread out progress payment schedule, it is unlikely that there will ever be an outstanding balance of $2.5M even with a higher project cost.
The email goes on to question the use of reserves against the total. The reserve amount in question is made up of line items such as kitchen equipment, pro shop furnishings, HVAC, asphalt, etc that would have been replaced or improved over the next few years had the renovation not taken place. Therefore, it is a natural component of the project.
I saw another email this morning from a member who is concerned that we did not anticipate some of these costs back in August, and now that we have a good handle on these costs, that is representative of what else could happen with this project. I did not have 8 months to plan prior to last August like I have just had these past 8 months. PLEASE UNDERSTAND…we have signed a contract for a Guaranteed Maximum Price. And now these Ancillary costs have been researched and vetted and sent out for rebid.