- Fiscal Irresponsibility, 10/6/17, Cash Flow Analysis by Steve Lockom
You are looking at a cash flow analysis for the Harbor Bay CDD starting with the published financials for August 2017 and moving through our estimates for September 2018. I have separated the spreadsheet into each individual fund. We have the General fund, the Reserve Fund and the Capital fund (Seawall fund). The General fund is for our operations and maintenance expenses. The Reserve fund is for replacement of our fixed asserts that will wear out over time. Items like the boat lift, concrete curbs and gutters, irrigation pumps, computer equipment, asphalt paving and exercise equipment wear out over time and need to be replaced. The Capital fund is for all things related to the Seawall.
Let's look at the general fund first. The balance in the account as of August 31, 2017 is $2,240,832. (Cell B 12) You can see the planned expenses for the coming year on row 4. These numbers are based on the budget adopted by the Board at the August budget meeting. The planned cash receipts are based upon the approved budget. The timing of the receipts is based on when they were received in 2017. It all depends when people pay their tax bill that is received in November. Some people pay right away and take the discount. Other folks wait until later in the year. Row 6 gives you the subtotals after subtracting planned expenses and adding in planned receipts. The Board has indicated and approved other projects to come out of the general fund. These projects are listed in rows 8-11. The estimated timing of those payments is listed and row 12 indicates how much cash should be in the account for each month. You can see we expect to have $1,855,052 in this account (Cell O 12) as of September 30th, 2018.
The reserve fund is set up the same way based on the reserve fund detail provided by Custom Reserves LLC. Row 18 shows the planned expenses for fiscal 2018. The total planned expense is $25,383 (Cell P 18) for fiscal 2018 per the reserve fund study. In cell A 18 you can see that this spending excludes $368,146 that should have already been spent per the study. Asphalt repairs are a large item that we should have done already. Since we have not done the repairs yet we need to identify that part of the reason the balance is as high as it is, is because we haven't done the work yet so the money is still in the account. We have 2 projects that we are working on right now that will be charged to the reserve fund. We have the clubhouse project on row 20 and the pool work including the slide and tower on row 21. We have spent $98,593 on the clubhouse through August 31. The remainder I expect to be spent in September and October (cells C 20 and D 20) The pool work is estimated on row 21. Paul's original estimate was $222,134. After receiving estimates from Cardno the total is now $262,135. I expect the payments to be made from March 2018 through May 2018 and you can see the associated amounts in cells (I, J and K 21) Row 22 shows the cash expected in the reserve fund for the each of the months listed. We expect to have $883,435 in the account at the end of the fiscal year on September 30, 2018 (Cell O 22) Based on the reserve study analysis we should have a balance of $1,550,636 at the end of fiscal 2018 (cell O 39.)
The Capital fund works the same way. Our planned cash receipts are $232,450 based upon what the Board approved in the general budget. It will be transferred from the general fund to the Capital fund in October and you can see in cell (D 4) the higher relative expense amount for the general fund and cell ( D28) the receipt of the funds in the capital fund. At the September meeting I asked Cardno for their planned expense for fiscal 2018. They thought that what we had planned was understated by $20,000 per month and I have added those expenses into the spreadsheet. (Row 29) I asked Mike Eckert about his planned expenses and he thought we were understated by $520,000 for fiscal 2018 so I added those expenses in. (Row 30) The RFP and emergent lots is accounted for on Row 31. The Board approved 4 lots as emergent and 10 other lots for weephole repairs to relieve hydrostatic pressure behind the wall. These repairs are due to Hurricane Irma. This cost was not in the July expenses and is added in as a planned expense of $200,000 in cell (E31) The RFP has 40 lots listed as Priority "A" lots. These lots total a little over 3000 linear feet and will be the first lots fixed. I used a cost of $550 per foot for these lots (my estimate and just a guess at this time) If we do 1000 linear feet per month those costs show up in cells (H, I, and J 31.) Row 32 talks about payment of upland damage claims. Paul's original estimate was $400,000. When we fix the 4 emergent lots and the 40 Priority "A" lots, the homeowners of these lots will want to get their upland damages repaired. Since the Priority "A" lots had the most seawall cap rotation, it would not be unreasonable to conclude that these lots have the most upland damages since their walls bowed out the most and therefore these lots had the most soil movement. If 30 lots file claims at $25,000 on average the total expense would be $750,000 for the year. I increased the payments on the worksheet to account for this $350,000 increase. Looking at the Capital fund we begin August 2017 with $889,131 (cell B 34) and end the year with a negative balance of $2,996,754. This is in cell O34. For the capital fund from August 31, 2017 through September 30, 2018 we will have revenue of $232,450 and expenses of $4,118,335.
Row 36 shows the total of all three funds cash balances by month. We will go from 4,115,123 in August 31, 2017 to a negative balance of $258,267 on September 30, 2018. (Cells B36 and O36).
I added in row 41 to show the remaining month Operation and Maintenance budget for the rest of the year.
Column "Q" accounts for changes from the July spreadsheet to the August spreadsheet.
Row 42 shows our financial equity by month. Cell B42 says we have "net worth" of $1,009,261 on August 31, 2017. Expected net worth on September 30th 2018 is negative $2,658,902. (Cell O42)
This Board is planning on spending $4,118,335 out of the capital fund and wants to deplete all excess cash out of the general fund and reserve fund to do this spending. This is fiducialy irresponsible as well as financially reckless. In the July meeting I received commitments from Paul, Ned and Tim that they would support a special assessment at the August meeting. (You can hear it at the 3:49 minute mark of the July meeting) I made a motion for that resolution at the August meeting and Tim seconded that motion. Both Paul and Ned went against their commitment and voted against it. I tried again at the September meeting and did not receive a second.
I will be making a motion at this upcoming meeting for a special assessment not less than $2M. Should this motion not pass, I will have no other choice but to resign. I can not be part of a Board that breaks every professional financial tenet that I learned at UPS as a financial controller for a district that billed $5M per week and had over 800 employees. We can’t continue to push this can down the road. We are heading to court to resolve the Seawall Alliance lawsuit and can’t issue a bond. This Board is bankrupting Mirabay and is on a path to ruin the beautiful community we live in.