Eliminating the 610 golf player cap causes a bigger problem than it fixes

I get it. The membership model is complicated. It's complicated because it is a compromise that balances a number of competing priorities. In legal appeals, the "question presented" to the court frequently determines the answer the court provides. In fact, the Supreme Court frequently states the "question presented" that the Court wishes to answer.

Here are two versions of the "question presented" to the Owners:

  • Do you believe that every lot sold should have an absolute guarantee that a golf membership will be immediately available to the buyer?
  • Do you favor a cap on golf memberships that will ensure that tee times at our club will be readily available and that we won't turn into Belfair or Long Cove?
I suspect that one Owner may give two different answers if presented with the two questions. Unintended consequences abound and this complicated issue can't be reduced to a sound bite.

The problem de jour is that we could theoretically have more Owners who want Full (i.e., golf) Memberships than would be available pursuant to the governing documents:

  • Golf Players are limited to 610
    • Golf Players equals the sum of full members and Invitational Program participants.
    • We currently have about 540 full members and 25 IP participants, for a total of about 565 golf players.
      • We also have about 25 "Lifestyle" members
    • The Board has pretty much shut down new IPs.
    • Future demand for Full Memberships will come from the sale to new Owners who want Full Memberships of:
      • Club-owned Lots (including delinquent Lots)
      • Lots now owned by Lifestyle Members.
    • The potential demand for Full Memberships could be as high as 685
      • 540 current Full Members
      • 25 Lifestyle Members who may want to convert to be Full Members
      • 120 Club-Owned or delinquent Lots
      • So the number of Golf Players could grow to 710 (including 25 IPs).
        • Or 735 if the remaining authorized IPs were sold.
  • The Board has three "levers" to manage the number of Golf Players:
    • Stop selling IPs
      • This is pretty much the status quo, but is currently within the sole discretion of the Board.
      • The governing documents need to be changed to eliminate these sales (or at a minimum to require those future sales to be recalled by the Club by repaying the IP's initiation fee)
    • Reduce the price of Lifestyle Memberships relative to Full Memberships
      • Current Full Membership annual assessments (dues):$23,565
      • Current Lifestyle Membership dues: $15,874 (a discount of $7,691)
      • The governing documents require that the dues for Lifestyle Memberships must be at least 50 percent of the dues for  Full Memberships. This floor should be eliminated.
    • Remove Club-owned and seriously delinquent Lots from potential development.
      • This may be somewhat complicated by contractual commitments to EDC (which has the right to develop about 60 interior Lots and 20 alternative housing units).
  • Here's the "Catch 22":
    • If the "levers" are sufficient to limit the demand for Full Membership to less than 585 (with 25 IPs, 585 Full Members would be the most permitted under the 610 Golf Player cap), the 610 limit will never be reached--therefore, removing the cap is unnecessary.
    • If the "levers" are not sufficient to limit the demand for Full Memberships to 585, why would you believe that the levers would be sufficient to stop the number of Golf Players at any number before you reach the maximum of 710 Golf Players?
  • What's magic about the 610 cap?
    • Club Benchmarking advised the Club that exceeding 300 Golf Players (actually, family Golf Memberships) per course would put in peril the ability of the Club to offer an upscale golf experience.
    • Many current members have already commented upon a significant increase in course usage.
    • Removing the cap would be our first step to becoming Belfair or Long Cove, where tee times are in high demand and access to the golf course is often limited.
  • The bottom line is that "fixing" the problem of "guaranteeing" that Golf Memberships will be available at all times will create a situation where course congestion is highly likely, if not inevitable.
  • The 610 cap is a symptom--the problem is managing the membership levers to keep the demand for Golf Players below 610 (or possibly even a lower cap). What steps can the Board take to manage the Golf Players to an acceptable number?
    • Stop selling IPs (which they've done)
      • Amend the By-Laws to prohibit future sales of IPs unless those future IPs include the right for the Club to return the initiation fee to the IP and to terminate the IP license.
        • Changing the By-Law will remove from the Board the discretion to decide at some future point to resume the sale of IPs without an embedded call option.
      • Offer to "cash out" existing IPs by returning to them their initiation fee.
    • Increase the attractiveness of Lifestyle Memberships
      • Lower the limit of 590 for free conversion to Lifestyle Memberships to 575
        • The problem in 2020 when the membership model was approved was too much capacity and too little money. COVID has changed the environment to where capacity concerns have arisen and money is less of an issue.
      • Amend the Covenants to remove the requirement that Lifestyle dues be greater than 50 percent of Full dues.
        • We may need to cut the price of Lifestyle Memberships to attract more Lifestyle (rather than Full) Members. Removing the floor will increase the power of this lever.
        • There will be many more Full Members than Lifestyle Members, so a significant reduction in Lifestyle dues would require only a modest increase in Full dues.
    • Reduce the number of Club-owned and long term delinquent Lots that will be sold (possibly with Full Memberships) by converting some Lots to green space.
      • This effort may require negotiations with EDC.
      • Lots that have been forfeited for taxes and/or are seriously delinquent could be acquired in exchange for forgiveness of some or all unpaid dues.
The bottom line is that there's no free lunch. Removing the cap is either unnecessary (if the levers work) or will lead to more congestion on the golf courses (if the levers don't work). In The Godfather, Clemens's advice to Rocco was: "Leave the gun. Take the cannoli." My advice to the Board is: Strengthen the levers. Leave the cap in place. Here's the real choice facing our Club:
  • If you want crowded golf courses, remove the 610 cap on Golf Players.
  • If you want to keep the number of Golf Players under 610, strengthen the levers and use them proactively.

Comments

Post a Comment

Popular posts from this blog

Seawall Settlement: Promises made--promises kept?

As noted in two recent posts ( here  and  here ), there are a number of issues involved in the seawall settlement known only by the Board and the 12 Owners who have sued the Club. A video exists of Keith Wandell making an unequivocal promise to submit any settlement relating to the seawall to the Owners for a vote. Fortunately, the By-Laws empower the Board President to call a special meeting of the Owners--with or without the concurrence of the Board. Here are some things to ponder: -     No details on the settlement have been made available to the Owners. -     The Owners are already on the hook for the 1/3 of the J-Lot seawall owned by the Club. The settlement will deal with how much of the remaining 2/3 of the costs are paid by the Club. -       There are three types of costs involved: (1) past maintenance and repair costs; (2) the reserve for future maintenance and repair costs that should be established; and (3) future...
Read more

No excuses. A correction and an apology.

When I arrived at the United States Naval Academy on June 30, 1969, I was told that you can make it through life with five "basic responses": (1) yes, sir; (2) no, sir; (3) aye aye, sir; (4) I'll find out, sir; and (5) no excuse, sir. Fifty three years later I need to revert to my basic responses. On Saturday night, I published a post stating that the Board's statement at the annual meeting that the Third Quarter Financial Results had been published was a "lie." In fact, the Third Quarter Financial Results had been published, but were mis-labeled. In any event, an administrative error is not a "lie." I was wrong to refer to the administrative error in posting the Third Quarter Financials as a "lie" and wrong to use a sarcastic post to do so, and I have no excuse for making that post. I unreservedly apologize for the post. It was premature and unfair and I very much regret publishing it. I have deleted the post, but this post will remain o...
Read more

The Board Announces New Assessments

On Monday, November 29, the Colleton River Club Board announced increases in assessments and fees for both the Owners and Invitational Program ("IP") participants. For 2022, the annual assessments will be: Full Members:                  $23,565 Lifestyle Members:          $15,874 IP (Local):                        $18,000                   IP (National):                   $14,625 The assessments for Full and Lifestyle Members do not include the $20,000 assessment approved for the amenities in March 2021. Owners who elected to pay the special assessment under the five-year installment plan will pay an annual assessment of $28,015 (Full) or $20,324 (Lifestyle). Please recall that IP participants do not pay special assessments. Here are some fun facts: Full Dues (2017): ...
Read more