By Remmert Wolters
CYC Treasurer
Editor's Note: Remmert Wolters was appointed treasurer by the CYC Board on Dec. 8. He succeeds Jamie Thomas, who was re-elected at the club's annual meeting Nov. 18 but decided to step down.
Over the last year, I have attended quite a few meetings and there are two recurring statements that I would like the opportunity to address. Can I start out, for the sake of this article, with some brief definitions?
Capital Budget: This financial activity deals with the management of the club's hard assets. (Shilshole club house, race committee boats, whalers etc.) The capital budget is funded through operational budget surpluses and fund raising campaigns.
Operational Budget: This financial activity deals with the day-to-day operation of the club. On the income side we have dues, race fees, club house rentals, bar/food income etc. On the expense side, we have wages, office expenses, club house moorage. club house and race committee equipment maintenance, bar/food expenses etc.
What activity falls in what category is mostly determined by our tax laws. Let's use an example for illustration purposes. YC V's engine is having issues. The two options are replacement or a major overhaul. According to the tax man, the acquisition of a new engine would materially change the value of YC V and the expense of an engine replacement would therefore have to be capitalized and depreciated over time. An engine overhaul would just bring YC V back to operational order and we would therefore be able to expense that overhaul in our operational budget. It is therefore very clear that all the Shilshole club house renovations are part of the capital budget.
These are the questions that I would like to address:
1) After spending hundreds of thousands of dollars, in recent years, on the Shilshole club house, how can CYC suddenly claim financial distress?
The answer to that is one of classification. With the Heart of CYC campaign, we were very successful in raising funds for the capital budget, which facilitated all the Shilshole clubhouse improvements and moving expenses. For all intents and purposes, the capital budget has been well managed. The problem is that the operational budget is not funding the capital budget to the degree necessary. In the upcoming years, we have some large asset related expenses that need to be addressed that cannot possibly be funded by the operational budget on its own.
For instance, the Shilshole clubhouse will need to be dry-docked for maintenance at some point of time. That $75,000 to $100,000 expense cannot be funded by the operational budget without having substantial reserves build up. Our capital reserve funds would be allocated to cover such expenditures. In conclusion however, the Shilshole club house improvements have nothing to do with the financial problems with our operational budget but we need to make sure that the shortfall in our operational budget, will not continue to deplete our capital reserves, like they are this year.
2) Since it could be argued that the Lake fleets are the strongest and growing membership entity of CYC, is it fair to ask the Lake membership to subsidize the Shilshole based members by partially having to fund the renovation of the Shilshole club house while the Leschi club house is being abandoned for budget shortfall reasons?
As a Lake sailor myself, I have some sympathy for that argument but I would also like to take issue with it. This is again a capital/operational budget issue. The Shilshole club house renovations were entirely funded by the capital budget and not a penny of the Lake sailor's dues or race fee payments were used for that purpose. The renovation was funded by the Heart of CYC campaign and all contributions were voluntary and the use of these financial contributions was clearly identified and reported on.
When the initial Leschi club house lease was signed, about $100K of lease hold improvements were required and funded by donations from members. At that time, I am sure that Shilshole based members contributed to that cause, which primarily benefited the Lake membership. If an opportunity for anther Leschi-based clubhouse surfaces, we will probably ask all of our membership to contribute once again.
I believe that most members recognize that the loss of the Leschi club house was strictly an operational budget issue. The costs of maintaining it were just astronomical and we will be working hard with the BluWater Café, to provide an after-sailing venue that will be as attractive as the our own clubhouse was. There is no denying however that the loss of the Leschi clubhouse stirs some emotions, including my own.