LAKE NAOMI CLUB HORIZON PLAN and
PHASE ONE PROPOSAL TIMBER TRAILS GOLF CENTER TIMBER TRAILS CLUBHOUSE
Planning the Next 50 Years
Dear Lake Naomi Club Members, The Club has just celebrated 50 years of uncompromising Member services, top-tier amenities and the creation of extraordinary lifelong family memories. The Lake Naomi Club continues to be at the forefront of recreational communities in the mountains of Northeastern Pennsylvania and throughout the United States. In order to maintain this platinum level of Member satisfaction it is imperative that the Club look ahead and prepare the facilities for the next 50 years. The Horizon Plan (HP) and the proposed Strategic Financial Plan (SFP) are critical steps to ensure this outcome. This booklet provides an overview of Phase One and the proposed Strategic Financial Plan to help Members make an informed decision in the upcoming vote. Taking direction from the Member Survey and suggestions, the Horizon Plan is a tiered approach to repair and update the Clubsâ€™ amenities to meet the needs of our expanding Membership. The Plan is broken down into four manageable phases: Phase One, Timber Trails Golf Center, Timber Trails Clubhouse and Timber Trails Pool; Phase Two, Logan Steele Community Center; Phase Three, Beaches and Lake Naomi Tennis Center; Phase Four, Lake Naomi Clubhouse. Each phase requires approval through a membership vote. Before asking for this approval, all Members will be informed as to the scope and cost of each Phase and the cost to the Members. The membership vote for Phase One is scheduled for June 2014. In order to avoid a large Member assessment that when combined with the existing fee structure could become a deterrent to new Members, the Finance Committee is proposing the Strategic Financial Plan to pay for the first three phases. The SFP leverages the favorable terms of our existing loan to secure the funding for these projects with the plan of paying it back with existing revenue source and the annual Capital Enhancement (CE) Fee. The CE Fee will be adjusted as the Membership approves each phase of the Horizon Plan as detailed in the SFP Projections enclosed in this booklet. All phases of the Horizon Plan are important to ensure that the Club continues to be a thriving and active Community. We ask you to become informed about all aspects of the HP and the SFP so you can cast an informed vote on each phase as they are presented for Membership approval. Contact us if you have questions about any aspects of the plans. Very truly yours, Long Range Planning Committee, Finance Committee, Board of Governors and Board of Trustees
Members Involved The following members have dedicated their time and energy to develop this plan. BOARD OF TRUSTEES Robert S. Mills, Jr, President Connell McGill, Vice President Cary S. Levinson, Secretary Brian J. Snyder, Treasurer George E. Bernardin Michael Christian Kathryn J. Hyatt
FINANCE COMMITTEE Howard Cooper, Chair Steve Bram Robert Bruschi Larry Chimerine Constance Delnero Robert Deluca Robert Kauffman Kathleen Manzella Carl Rosenfeld Allan Spielman Frederick Tim
BOARD OF GOVERNORS Mark Ierardi, Chair Tony Zanin, Vice Chair Denise Alexander Rick Hawley Steven Amend Carolyn Kopchains Dave Carbone Jerry Merola Randy Compton Bill Nathan Howard Cooper Carol Ann Parisi Anthony DeFranco Mary Kay Posselli Frank Delnero Roger Rosen John DeMott Steve Spencer Albert Franzone Barry Trachtenberg Bill Gamble Shelly Wismer Steve Harker Jim Zagelmeyer
LONG RANGE PLANNING COMMITTEE Barry Trachtenberg, Chair Robert Baechtold Steve Bram Don Campbell Kathy DeMeo Brad Graham David Guba Paul Messina Dominic Parisi Joseph Straton Dan Tabor
Mission Statement Our mission is to provide our Members with a premier year-round family-friendly community offering recreational activities in an environment that fosters an appreciation of nature’s beauty and encourages the formation of lifelong friendships.
Pledge • • • • • •
Preserve the lakes, streams and woodlands in an environmentally responsible manner Strive to provide Member services and facilities that exceed expectations Promote a spirit of mutual respect among Members and Staff Operate openly, transparently and fiscally responsibly Anticipate the needs and desires of our ever evolving community Provide the framework that supports Member participation in the governance of the community
Table of Contents
Phase One - Timber Trails Golf Center (Renovation)
Phase One - Timber Trails Clubhouse and Grounds (Renovation)
Strategic Financial Plan
Capital Enhancement Fee (CE Fee)
Strategic Financial Plan Projection
Strategic Financial Plan Q & A
Phase Two - Logan Steele Community Center (Expansion)
Phase Three - Lake Naomi Tennis Center, Lake and Beaches
Phase Four - Lake Naomi Clubhouse
Budget and Funds
LAKE NAOMI CLUB HORIZON PLAN PHASE ONE - TIMBER TRAILS GOLF CENTER ALL PROJECTS ARE SUBJECT TO APPROVAL BY THE MEMBERS OF LAKE NAOMI CLUB
Timber Trails Golf Center (Renovation): The Golf Center is one of the iconic images of the Lake Naomi Club. Originally stables for a horse riding program built in the mid 70’s, the building was converted to the Golf Pro Shop in 1987. In many ways it has come to the end of its useful life. It was recognized in the Member Survey as an important amenity in their decision to buy property at Lake Naomi – Timber Trails and a significant portion of the Membership expressed a desire to make improvements. The current Pro Shop is not accessible for many Members, bag storage area is inadequate and the lack of insulation has made hot and cold days uncomfortable for Members and staff alike.
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Scope of Work for the Golf Center • • • • • • •
Replace barn section of the building with a new accessible Pro Shop that provides an enhanced view to the approach of #1 tee box. Develop an expanded golf bag and pull cart storage on the ground level. Renovate the existing second level into an accessible social area and rainy day practice space with golf simulator. Develop an outdoor pavilion for golf events. Install a practice putting green adjacent to Pro Shop. Install restrooms on the ground level. Provide an area for ice machine and vending.
Golf Center First Floor Plan - Page 2 -
• Membership Vote in Spring of 2014. • If approved by Membership, construction scheduled to start September 2014. • Anticipated completion by May 2015.
Right Side Elevation
Golf Center Second Floor Plan
Total cost estimated not to exceed $821,722 with $119,585 funded from the Capital Replacement Reserve Fund. Total cost to Capital Enhancement Fund: $702,137.
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LAKE NAOMI CLUB HORIZON PLAN PHASE ONE - TIMBER TRAILS CLUBHOUSE AND GROUNDS ALL PROJECTS ARE SUBJECT TO APPROVAL BY THE MEMBERS OF LAKE NAOMI CLUB
Timber Trails Clubhouse (TTCH) (Renovation): The Timber Trails Clubhouse, constructed in the late 1970’s, is a very tired facility in need of renovation. Members’ concerns about the current bathroom and café facilities are expressed daily. The Timber Trails Clubhouse renovations will permit the Club operations to better serve the Timber Trails Pool Café with higher quality food and excellent service. The new kitchen will also permit the Club to operate a new eatery Timber Trails Grill on the upper level. The Timber Trails Grill will be open seven days a week for lunch and six nights a week for dinner from Memorial Day through Labor Day with quality food for the entire family. The Timber Trails Grill will have a “Casual Family Friendly” atmosphere with flat screen TV’s along with cozy Lake Naomi Club décor. All Members enjoying tennis, golf or swimming at the Timber Trails Amenities will have the opportunity to enjoy this great enhancement to the Timber Trails Clubhouse. Renovations to this facility will also create additional opportunities for Club functions as well as Member private events.
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SScope off Work W k ffor Clubhouse l bh • • • • • • • •
Develop a new accessible entrance with a handicap lift to the Timber Trails Clubhouse with direct access from the parking lot. Design seating area that will accommodate medium size events with family friendly atmosphere. Expand deck area for additional outdoor seating. Renovate and expand the lower level kitchen area to service both the Café operations and the new Timber Trails Grill. Eliminate existing locker rooms to update and expand restroom facilities with changing areas. Install restrooms on the upper level. Ensure proper climate control in the lower level to minimize wet/damp conditions. Insulate building and install energy efficient windows to provide adequate heat and air conditioning.
Clubhouse Upper Level Plan
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Right Side Elevation
Clubhouse Lower Level Plan
Timber Trails Swimming Pool (TTP) and Grounds: Timber Trails Pool is in good condition and has maintained just moderate usage. Improvements to the accessibility, parking, lounge area and aesthetics will increase the Members’ satisfaction and make the Timber Trails Pool a viable alternative and relieve some usage pressure from the Lake Naomi Pool.
Scope of Work • • • • • •
Expand the seating area around the pool apron. Replace existing slide with new slide. Install new Aquatic Climbing Wall. Add shuffle board and bocce court. Build a paver walk to the pool entrance from the parking lot for improved accessibility. Install a handicap lift into the pool.
• • •
Membership Vote in Spring of 2014. If approved by Membership, construction scheduled to start September 2014. Anticipated completion by May 2015.
Total cost estimated not to exceed $1,558,170 with $660,307 funded from the Capital Replacement Reserve Fund. Total cost to Capital Enhancement Fund: $897,863. - Page 6 -
Strategic Financial Plan The Strategic Financial Plan (SFP) provides the structure to finance the improvements defined in the Horizon Plan. The Finance Committee, Board of Governors and the Board of Trustees have approved the SFP. The Club requested and received approval of an $8 million loan commitment until December 31, 2016 from Peoples Security Bank & Trust. This is the same bank that financed the Community Center, Lodge, Park, and the new parking lot at the Lake Naomi Clubhouse. The loan commitment will be available to fund Phases One, Two and Three through 2016. Phase Four, with an expected vote date in 2019, will require a separate funding method to be determined once the project and its cost are finalized. Each Member should realize that the loan funds will not be borrowed unless and until each Phase is approved by the Members. The Club is under no obligation to borrow the funds. Any funds we borrow under this commitment will be added to the existing loan, under the following favorably renegotiated terms: Interest rate: 5% to 7% until October 2023 6% to 8% from October 2023 until October 2028 A rate to be negotiated from October 2028 until February 2, 2033. Maturity Date: February 2, 2033. Repayment of Principal: Monthly payments adjusted annually based on fully repaying the loan by the maturity date. The Club, after overwhelming Membership approval, purchased the former Ice House Property (now called “Gateway”) by borrowing the required funds under this bank commitment. Repayment of the bank loan will be made from the following sources: • The assessment currently being paid by existing and new Members. These are the funds originally assessed for the Community Center, that we now call the Capital Assessment. • Net proceeds generated by the Mountaintop Lodge. • Annual CE Fee.
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Capital Enhancement Fee (CE Fee) In past years, capital enhancements were funded from the operating budget. As a consequence, enhancements were sometimes sacrificed in order to keep Membership dues increases to a minimum. This led to the Club not keeping up with Membership demands for improvements to the Clubâ€™s facilities. To correct this, the Club started a Capital Enhancement Fund (CE Fund) to provide a funding source for the capital improvements the Club needed in order to achieve, maintain and improve its platinum level of Member service. Beginning in 2010, the entire New Member Application Fee of $3,500 has been allocated directly to the CE Fund. In 2011, the Club began to separately charge Members an annual Capital Enhancement Fee that went directly into the CE Fund. The CE Fee is $175 for 2014. The monies in the CE Fund can only be used for capital enhancements and repayment of the bank loan, and are not comingled with operating or other reserve funds. The smaller annual projects are paid directly from this fund as the cost is incurred. The cost of each Phase under the Horizon Plan, after Member approval, will be borrowed from the bank under their commitment. The CE fund is responsible for paying the debt service on the bank loan. The Club projects that the loan will be completely repaid by 2033. Enclosed is a projection of the Strategic Financial Plan over the term of the loan. It shows the effect on the CE fee of completing Phases One, Two and Three in the projected time frame. Maximum interest rates allowed under the loan have been used until February 1, 2028 and then 8% thereafter. Other conservative assumptions are listed in the projection.
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Phase Cost Estimates
Strategic Financial Plan Projection
Cost $590,000 1,600,000 2,000,000 2,400,000 1,410,000 $8,000,000
Acquisition of Gateway property Phase 1 (Golf, TTCH,TTP) Phase 2 (Comm. Ctr) Phase 3 (Tennis, lakes, beaches, boats) Balance available for other projects Total loan commitment
Date Added 9/1/2013 9/1/2014 9/1/2015 9/1/2016
Summary Annual per member CE fee required to service loan Cumulative cushion Projection of Loan Balances Beginning loan balance Ending loan balance
2015 2016 2017 2018 $225 $275 $325 $350
528,252 485,275 316,574 197,576
$3,511,573 $4,132,484 $5,769,531 $7,591,996 $9,737,174 $9,400,518 $4,132,484 $5,769,531 $7,591,996 $9,737,174 $9,400,518 $9,039,175
Sources to Repay Loan Capital Assessment from existing members (net of refunds) New Members paying the full Capital Assessment Total Capital Assessment Cash flow from the Lodge CE fee Total payment sources Less debt service Excess of sources over debt service (Cushion) Cumulative cushion
-830,293 -1,016,756 -1,016,756
-$42,977 -$168,701 -$118,998
Number of members throughout projection period 1,600 Number of new members each year 60 Number of new members paying up-front and 5-pmt plan 51 Number of new members paying annually 9 Self-funding of refunds Maximum loan interest rates are applied 1/1/2014 - 1/31/2028 8% rate was used for the period 2/1/2028 - 1/31/2033
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(Assumed not to increase) (Assumed not to increase) (Based on a 3-year average) (Based on a 3-year average)
Strategic Financial Plan Projection
Minimum 5% 6% TBD
Interest rate: present until 1/31/2023 Interest rate: 2/01/2023 - 1/31/2028 Interest rate: 2/01/2028 - 1/31/2033 Loan due date: 2/01/2033
Maximum 7% 8% TBD
2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 $400 $400 $400 $400 $400 $425 $425 $425 $425 $425 $425
168,562 149,723 141,499 144,259 115,989 135,381 166,803 135,881 114,689 103,062
$9,039,175 $8,651,337 $8,236,669 $7,789,781 $7,310,124 $6,819,170 $6,290,916 $5,716,531 $5,093,786 $4,418,610 $3,687,417
$8,651,337 $8,236,669 $7,789,781 $7,310,124 $6,819,170 $6,290,916 $5,716,531 $5,093,786 $4,418,610 $3,687,417 $2,893,582
-1,016,756 -1,016,921 -1,016,954 -1,016,954 -1,059,326 -1,063,378 -1,063,418 -1,063,418 -1,063,417 -1,063,617 -1,063,657
Final payment Feb 2033 - $88,698
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Strategic Financial Plan Q&A Q1. It has been suggested that Phase One will not result in any increase to the current Member CE Fee. How can this be if the estimated cost of Phase One is $1,600,000 (does not include the portion paid from the Club’s existing Capital Replacement Reserve Fund)? A1. As stated above, the cost to the Club of Phase One is $1,600,000. The debt service required to pay for Phase One over the remaining term of the loan is $97 per Member (assuming 1,600 Members and maximum loan interest rates). This is well below the current annual CE fee of $175. Q2. The cost of each project in Phase One is referred to as, “ Total Cost Estimated Not to Exceed…”. How were these costs determined and what confidence do we have that the actual costs will not be higher? A2. Management has been through an extensive process to determine the cost of Phase One. This consisted of meetings with builders, choosing a general contractor, and fine-tuning subcontractor costs. The final cost estimate includes a contingency for unknown elements that invariably arise during construction. While it is possible that actual costs may be higher than the estimate, we are taking every precaution to avoid this occurrence. In fact, it is Management’s goal to bring these projects in below budget. Members will be notified as to the final costs. Q3. You state that a portion of the cost of both projects under Phase One is being funded by our Capital Replacement Reserve Fund (CRRF). What is the nature of this fund? A3. A portion of each project consists of replacing existing facilities versus adding new enhancements. Replacement costs are funded from our existing CRRF. Please refer to Page 17 - Budget and Funds, Capital Replacement Reserves Fund for a discussion of this reserve. Q4. Why are there incremental annual increases in the CE Fee before the Club Membership has voted to approve each phase? A4. The Club is planning as if Phases One, Two, and Three will be approved by the Membership. If this occurs, we want the increase in the CE fee to be in minimal annual increments so as not to unduly burden the Members in any one year. If the Members do not approve any Phase, the CE fee can be reduced accordingly. Please refer to the projection in this booklet. Q5. Why not just assess the amount needed to do the Phases as they are approved? The assessment can be refundable similar to the current Capital Assessment. A A5. This alternative is not feasible at this time because it could have a n negative effect on our ability to attract new Members. The new assessm ment could add up to over $5,000. A new Member would be looking aat a total assessment of about $10,500 ($5,472 for the current Capittal Assessment plus $5000+ for the new assessment). Although both aamounts could be paid over time, the mere mention of $10,500 could sscare away many prospective Members. We should save this alternattive for future phases. - Page 11 -
Strategic Financial Plan Q&A
Q6. Will a lump-sum payment option be available if Members would prefer to pay in that manner? A6. No. There is no time limit for the payment of the annual CE fee and it therefore cannot be discounted into an up-front payment. Q7. We are raising the annual cost to belong to the Club, not including Membership dues increases. How can this be justified? A7. The Club has developed the Horizon Plan as part of the strategic planning process. The development of both plans has spanned many years and has involved all the Committees and Boards of the Club. In addition, these plans have developed as a result of the recent Membership Survey. Our bank has given us very favorable terms that will allow the Club to phase in the increase of the CE fee over time. We believe that the vast array of projects being considered more than justifies these increases. In addition, all of our property values will be positively impacted by these Phases. Making our Club an even better place than it currently is will make it even more in demand by people looking for the "mountain experienceâ€?. More demand translates into higher property values. Q8. Is there a limit as to how much the CE fee can increase in the future? A8. The annual CE fee is being used to repay the bank loan. It will be modified annually depending on what is needed to repay the loan for the coming year and our Membership levels. Future increases will depend on the funds needed for each Phase and each Phase will require a vote of the Members. Q9. What are the chances that the CE fee will need to be increased more than projected because of changes in interest rates and the costs of the Phases? A9. Interest rates should not cause any increase in the annual CE fee because we have used the maximum possible loan rate until 02/01/2028. In fact, it is reasonable to assume that this rate will not always be at the maximum, which will cause the annual CE fee to be less than projected. After 02/01/2028, the rate range will be determined by the bank. We have used 8% in our projections. If the rate exceeds this amount, we can utilize the projected cushion to fund the increased debt service before having to raise the annual CE fee. We expect that Management will obtain a not-to-exceed estimate from the contractor for each Phase before the Membership vote.
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Strategic Financial Plan Q&A Q10. How will this impact the Clubâ€™s ability to attract new Members (additional costs vs. additional and improved amenities)? A10. The issue comes down to whether, taken as a whole, LNC provides enough features to justify its annual cost. Analysis shows that we are still relatively inexpensive compared to our competition. We are doing a lot of improvements for what will be a small annual increase in Member cost. In addition, we are a Platinum Club and we want to maintain this status in the future. Q11. What do you think will be the effect of the improvements on the values of our homes? A11. This question is impossible to answer with any certainty. Home values should increase with better and more appealing facilities. We only need to remember the effect on our home values from the building of the Community Center to realize that the sum total of these projects will increase home values throughout the community. During the recent "great recession", we have increased our Membership due to the Community Center, the Lodge and the Park at Club Beach. Q12. The Horizon Plan calls for additional projects in the future (Phase Four). How do we expect to finance these projects? A12. The main project for the future is either renovating or replacing the Clubhouse. Further research is needed to determine which alternative is most cost effective and the cost of each alternative. The Finance Committee will then be able to develop ideas, which may include renegotiating the bank loan, a refundable assessment, an increase in the CE fee or a combination of some or all of these and other possible financing methods. Q13. What will be the effect of Phase One on operating expenses and will this increase Member dues? A13. Phase One consists of improvements to existing operating facilities. These improvements should not result in any significant increase in operating expenses. In fact, we expect that the enhancements to the Timber Trails Clubhouse will result in additional revenue from the cafĂŠ and dining facilities.
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LAKE NAOMI CLUB HORIZON PLAN - NEXT STEPS ALL PROJECTS ARE SUBJECT TO APPROVAL BY THE MEMBERS OF LAKE NAOMI CLUB
Phase Two: Logan Steele Community Center The Membership’s overwhelming satisfaction and support of the Community Center is undeniable. Members using the facility have identified areas that need some additional attention to meet the needs of our growing community. The expansion of aerobic and fitness facilities, addressing the need for shallow water areas in the pool and increased space in the locker rooms are a few items of concern. In order to expand these areas there will be a need to displace some of current activity rooms. This space can be replaced with construction of a large pavilion, with restrooms and a stage, on the north end of the property to enhance the Club’s camp, teen, pre-teen and family programs. Phase Two – Summary: Member vote in Spring of 2015. If approved, construction to begin in Fall of 2015 with anticipated completion Spring of 2016. Estimated cost of Phase Two: $2,000,000.
Phase Three : Lake Naomi Tennis Center and Beaches The Lake Naomi Tennis Center continues to be one of the Clubs most successful amenities. The proposal to reconstruct and enlarge the Tennis Center in order to provide better accessibility, a larger pro shop, improved restrooms, an improved café and expanded viewing area for tennis events and tournaments will help to ensure the future success of the Tennis program. According to the Member Survey, the lakes continue to be the Club’s number one resource and amenity. Recent improvements to Club Beach have demonstrated the Membership’s continued desire to have quality beach facilities for their families and guests to enjoy. Expansion of facilities at other beaches including restrooms, food service and increased watercraft storage would help to relieve some additional stress on Club Beach and accommodate the Club’s expanding Membership. Phase Three - Summary: Member vote in Spring of 2016. If approved, construction to begin in Fall of 2016 with anticipated completion Spring of 2017. Estimated cost of Phase Three: $2,400,000.
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LAKE NAOMI CLUB HORIZON PLAN - NEXT STEPS ALL PROJECTS ARE SUBJECT TO APPROVAL BY THE MEMBERS OF LAKE NAOMI CLUB
Phase Four: Lake Naomi Clubhouse The Clubhouse is the center of the Club’s social life and has served that function well, but is no longer meeting the Club’s needs as a result of expansion of the Membership and continued aging of the building. During the peak summer weekends, it has been common to have to turn away as many as 100 Members for dinner due to lack of space to accommodate them. Private functions, which are a very good source of revenue, can only be accommodated during limited times because there is not enough room to hold them and still have the Clubhouse open for Members. The Club has commissioned an engineering study to determine which is more cost effective - expansion or replacement of the Clubhouse - as the LN Clubhouse no longer adequately meets the needs of the Members of the Club and definitely will not meet the needs of Club Members in the future. Phase Four – Summary: Member vote in Spring of 2019. If approved, construction to begin in Fall of 2019. Estimated cost, completion date and funding source of Phase Four will be determined once there is a better understanding of the scope of work.
Land Acquisitions It has been the policy of the Club to consider acquiring property located on its borders. This has resulted in the acquisition of the Mountain Top Lodge, the Park and the Gateway property. We will communicate with the Members the details of any proposed acquisition, its cost and why it should be acquired, once negotiations have succeeded. All potential sellers of property to the Club will be informed that the acquisition of their property is subject to Member approval.
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Our Demographics Lake Naomi Club conducted a Membership survey in 2002 and then again in 2011 which has given us a basis for seeing how the Club’s demographics compare in that nine year period. Remarkably, although the number of Members increased, and obviously there was a turnover in the individuals, the overall composition remained essentially constant. What is even more remarkable is how the Club has remained strong through the economic downturn over the last five years.
Annual Memberships 1700 1600
1500 1400 1300 1200 1100
1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
Year of Membership
During the last seven years the Club has experienced a rejuvenation of sorts. Original owners who were no longer able to use, or interested in using, the Club’s recreational opportunities took advantage of the strong real estate market that Lake Naomi and Timber Trails experienced where most other Communities did not. The long time owners were able to sell their properties opening the door for new young active families with children. But, at the same time, there remains a solid core of older families who continue to enjoy the Lake Naomi-Timber Trails experience and are now sharing it with their grandchildren and great grandchildren. The Club must remain committed to serving the needs and desires of all of its’ Members, in all age groups and in all stages of Membership. These new and established Members have made a substantial investment in their properties and are willing to invest in the future of the Club. Those factors, supported by the opening of the Logan Steele Community Center, have resulted in a very strong Membership situation, despite the economic downturn.
Lake Naomi – Timber Trails Planning For An Extraordinary Future - Page 16 -
Budget and Funds Members regularly question the Club’s various budgets and funds and may not understand the difference or the long and arduous process involved in developing them. We thought a brief summary would be useful and enlightening. Operations Budget: This is the money used to run the Club’s day-to-day activities including things such as staff salaries, amenities’ utilities, food cost and craft supplies. The goal of each year’s budget is to match revenues with operating expenses resulting in a zero bottom line. The Operations budget is funded primarily by Membership dues and fees collected to run the amenities. All amenities with the exception of the Mountaintop Lodge are subsidized by the Membership Dues. Capital Enhancement Fund: Many Members express their excitement to return to Lake Naomi each summer and see what new programs and amenities we have to offer. These new enhancements are funded by the Capital Enhancement Fund. The amenity committees (pool, golf, tennis, et al) are asked for what they believe is desirable in the way of capital enhancements for the following year. Management also puts together its list of enhancements, including areas not covered by a committee. The items are priced, budgeted and presented to the Finance Committee, the Board of Governors and the Board of Trustees for final approval. The Capital Enhancement Fund is funded by the New Member Application Fee, Mountaintop Lodge net proceeds, Capital Assessment (formerly the Community Center assessment), and the annual Member Capital Enhancement Fee. The Fund also pays the debt service on the Club’s bank loan. Capital Replacement Reserves Fund: The Club’s Capital Reserve Study (CRS) lists all key assets and assigns a life expectancy. The asset cost is divided by the life expectancy and that amount of money is reserved each year until the asset needs replacement. The CRS is updated each year. Management budgets these items when they are in need of replacement using the money in this Fund. Since 2003, Capital Replacement Reserves have been funded by the Pocono Pines Community Association and the Timber Trails Community Associations. Any deficiency between the total reserves needed and this funding is the responsibility of the Club and becomes part of the operating budget.
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Budget Process In the fall of each year the Management Team works with the Clubâ€™s Business Manager to prepare a projection of the current yearâ€™s operations. This is based on the year to date numbers as of August 31 and projected results for the balance of the year. The Finance Committee uses this projection to provide management with assumptions, such as the estimated number of new members and continuing membership numbers to use in building the next years numbers. Any estimated shortfall for the current year is included as an operating expense in the next year. Based on these assumptions, management prepares a preliminary budget of revenues and operating expenses for the upcoming year. A dues structure is created which will ensure that projected revenue equals the total of operating expenses. This budget draft is presented to Finance in early October for a detailed review and modification. Finance is most concerned about maintaining the proper balance between dues increases and services to our Members.
In late October, a joint meeting is held between Finance, the Board of Governors and the Board of Trustees, at which time Finance presents the Operating Budget, the Capital Replacement Reserves Budget and The Capital Enhancement Budget for discussion and approval. Once approved, modifications may be made based on actual results during the months of September through December. Any estimating process is extremely difficult and subject to errors beyond the control of the estimators. As you can see by the above process, many involved and experienced people participate in development of the budget in an attempt to mitigate these errors. It is not unusual to review six or more budget drafts before the final budgets are approved. - Page 18 -