We ended the club’s fiscal year on March 31 with the strongest financial position in the past decade. Golf memberships grew by twenty with 312 on the books at year-end. Membership growth, a 13% increase in banquet business and closely managed department expenses helped meet planned cash targets. For the second consecutive year, F&B covered their expenses and avoided a long trend of being a drain on operating cash. The growth in banquet business and continued member dining support helped overcome the impact of a mid-March closure.
We began the new fiscal year with operating cash of $400,000 along with roughly $100,000 in both the long-term and short-term capital accounts. We are holding a $100,000 reserve in the property sale account for potential additional restoration of holes #10 and #11. We have exhausted the remaining property account with the payment of taxes for the gain on the sale and ADA compliance work, both unplanned. We will have some additional income as Arrowood completes units in their development.
With financial momentum, we planned to invest over $100,000 in capital projects during the 2020-21 year. The projects were a combination of repairs to existing structures and new items. In addition the budget allowed for growth in service staff.
And then came a pandemic…
The medical crisis and steps by public authority to mitigate COVID-19 have rocked the club. We have closed large portions of our operations and released most of our hourly employees. While able to enjoy golfing, the lack of other competing activities has led to a short-term inconvenience of getting tee times. These temporary inconveniences pale in comparison to the potential financial challenges we face as a member-owned club.
Here are some financial facts to help you understand the impact of this business interruption:
- Member dues represent 55% of annual revenues with golf dues 85% of all dues.
- With the exception of golf dues, all other sources of income have been significantly disrupted. In the case of April many were lost.
- The cost of operations is higher than normal for operations still open. We expect a similar expense burden as other areas of the club reopen. Beyond cleaning supplies and protection equipment, there are labor costs associated with new public health requirements.
- Dues income is roughly the same monthly from April 2020 to March 2021.
- Expenses are higher monthly from April-September during the peak golfing season. Nearly 65% of the golf course maintenance expense and 70% of the golf shop expense are spent during this 6-month period.
- Fixed costs continue even when portions of the club are closed. Property tax, insurance, network and software costs and service contracts are constant. Even utilities have a base cost regardless of usage levels.
In March, we established a three-month operating budget (April-June) with a set of assumptions regarding income, expenses and cash consumption. With the benefit of April results, we will be testing the strength of the forecast and updating assumptions. Uncertainty around when the sources of income will commence and the unpredictability of when they will return to previous levels makes long-range planning problematic.
Our best guess is that we will lose roughly $21,000 more than originally planned in the first quarter. With the mismatch of income and expenses outlined above we expected to go from $400,000 in operating cash to $347,000 in the quarter. We now project $326,000 in operating cash at the end of June. In order to limit a further drain of cash, we intend to suspend monthly contributions to the long-term and short-term capital accounts and will direct roughly $24,000 for operating expenses in the first quarter. So, the estimated real cost of the disruption is $45,000 for the first quarter.
We filed for relief under the Payroll Protection Program, which was intended to provide small business help as part of the larger CARES Act. While our application was accepted, we likely will not receive funding anytime soon. As a not-for-profit (c)7 corporation, our business type was not included in the first rounds of funding. We have had conversations with our Congressional representatives, who have indicated a willingness to advocate for our business type in future relief discussions.
Hopefully, the impact beyond June will gain clarity over the next two months. We are committed to restoring services with heightened controls as public authority allows. We should have a better idea of the cost of that commitment when income sources are restored. There is no interest in spending our way back to a financial position that took nearly a decade to dig out from. We are equally committed to being in a solid financial position when the impact of the virus is behind us. We will continue to keep you aware of the financial impact as we move through the year.
Thank you for your continued support of the restaurant takeout, Mulligan’s window service, and the club. We are still operating under the governor’s open-ended emergency order. Deschutes is not considered a rural county, which the Governor suggests may reopen by May 15. Stay tuned.
BGC Board President