EDITORIAL:  HOW FEE INCREASES AFFECTED REVENUE

I just thought I’d drop you a note to share some interesting trends I discovered in reviewing HSV past financial reports.  I was wondering if any of the prior Board members know how something this obvious got overlooked?

I realize that many of you on the Board have had real life business experiences.  From your resumes, however, it is hard to identify but a couple who have had formal business education.  So you may not be as vigilant as you should be in reviewing reports from the POA.  If you passed the opportunity to study business in an academic environment, then you missed a thorough understanding of many business principles that provide heightened insight into everyday economic life, most applicable being: finance, cost accounting principles, economics and consumer behavior.

The reality in HSV of having a retired population living on essentially a fixed income that began at the retirement date is that there is no more money; you know raises.  That retirement income has to be allocated between required expenditures, and discretionary spending to purchase leisure items (such as HSV amenities).  Over time the purchasing power of the discretionary portion of income diminishes due to inflation.  Fee increases only accelerated the impact of inflation on discretionary spending. 

For those who want a good review primer on Consumer Choice I refer you to http://www.basiceconomics.info/theory-of-consumer-choice.php

Most people when they bought in or moved to HSV had expectations of retirement in HSV as being very good—or they would not have purchased property here in the first place.  They had performed their own personal economic analysis and decided that with their projected retirement income/financial status and prevailing HSV amenity fees, coupled with Arkansas cost of living (given a normal inflation rate over time and no significant change in Arkansas cost of living), they could look forward to a good retirement lifestyle in HSV.  They were in error on both counts.

No one envisioned the Board of Directors would repeatedly increase amenity fees year over year without looking at the impact.  Fees were increased in the hopes of generating more POA revenue from residents, particularly golf at multiples of CPI changes, but essentially no net revenue was generated!  And apparently no one on the Board(s) or the POA or the RASP Committee bothered to look at the impact and draw responsible conclusions, that raising fees on a fixed income population only reduces utilization.  The following table illustrates the impact on revenue and rounds played (even though some data is unavailable) for golf and fee revenue over time as fees for all amenities are increased.

Property Owner (PO) Daily Green Fees and revenue, plus change in fee based revenue over time as fees were increased for all amenities.

Year	2006	2007	2008	2009	2010	2011
Green Fee	$12.00(1)	$12.50(1)	$13.10(1)	$14.10(1)	$15.10(1)	$16.85(2)
# PO Daily Fee Rounds	198,484	185,586	171,379	160,364	(4)	(4)
Revenue Golf PO Daily Rnds	$2,381,808	$2,319,825	$2,224,278	$2,261,132
POA Revenue Golf (3)	$6,659,923	$6,720,083	$6,686,800	$6,305,800	$6,449,200	$6,517,331
POA Revenue Golf + Recreation  (3)	$7,652,121	$7,864,525	$7,794,111	$7,346,030	$7,481,930	$7,554,787

(1)    Includes $2 surcharge/round for golf course construction

(2)    Surcharge ended at the end of 2010

(3)    From year end Financial statements

(4)    Currently not readily available per Golf Dept

While golf has experienced the largest percentage increases in fees (68% over 5 years; inflation CPI was 14.6%, compounded), all amenities have experienced increases, often greater than prevailing CPI with resulting stagnant revenue due to decreases in utilization.  The only Property Owner outcome has been fee expenses have increased.  Is this in the Property Owner’s best interest? 

In my opinion, past Boards, as well as the POA, have practiced bad business policy and thereby been less than vigilant in their duties to represent the Property Owner member’s interest in providing oversight of POA operations, especially in the area of fee and revenue management.  It is important that the Board ensure a critical review of the impact of budget (fee) decisions, as is illustrated in the table above, to ensure the viability and marketability of HSV to current and future residents/owners.  A year-end review should be performed to determine successes and failures, and learn from them by revising operating policy procedures.  This is not being done!

This Board with three new Directors has the opportunity to change this trend and take positive steps to enhance Property Owner members’ interests.  A giant step in a positive direction is to start a slow fee roll back in all fees and adopt a similar golf fee structure/policy to that proposed in my prior e-mail to you, “Proposed Golf Fee Increases for 2013”, dated July 15 or just reduce all fees 10-15%.  This will:

-          Be a positive step in representing the Property Owner member’s interests

-          Illustrate to non-resident Property Owners that the Board of Directors is not on a runaway train in fee increases and their investment in HSV is a good one

-          Increase HSV’s competitiveness in the marketplace for the shrinking population of retirees that are going to relocate

-          Increase all members’ property values and increase their enjoyment of our common property amenities

-          Generate more revenue

-          And perhaps, most importantly, generate some positive PR with your customer, the HSV Property Owner.

Think about it, do the right thing!

Larry Frazer
A Concerned Property Owner

PEEVER'S POSITIVISMS FOR HOT SPRINGS VILLAGE

* We need fewer rules and more common sense.  I hardly think we're children.
* We need economic development based on quality of life issues. People will do business with us if it looks good and feels right. We need to appeal to people who can do their work at home. We need a good high speed internet system. We need some relaxed, central meeting places. The Baby Boomers are coming. Get rid of all your preconceived notions for what this place should be and prepare for changes.
* We have a huge senior citizen population. How about some big bingo parlors with huge payouts, a better transportation system, and maybe a Saggies strip club.
* We should be able to capitalize on the low cost of living in this area. By and large, this is a low cost-of-living area. Your money can stretch a long way. But don't tell anyone about the state personal property tax, and keep them away from Cranford's.
* Diversity is paramount to the growth and well being of a community. The one thing Hot Springs Village is not is diverse. We are a white, Christian, right-wing Republican village. Anyone not meeting that criteria will feel oddly out of place.
* We could kick out all the right-wing Republicans, but I and a couple of other people would be the only one's left.
* We need a local beer. Having been a substance abuse counselor, I probably shouldn't make this suggestion, but a home brewed beer can do wonders for a community. And plenty of people drink around here. We could deliver our beer on the golf courses with a couple of pretty girls on carts. They would make enough tips to pay for their tuition, and we, the males, would be happy.
* We are in the heart of a golfing mecca. For a golfer, this is like dying and going to golf heaven. We do need to keep our prices in check, particularly for those of us living here, and our families. One course could be devoted to nude golfing, but I doubt that would be a good idea around here. For a lot of reasons. I have made enough contacts to understand that we do not pay our golf course workers near enough. These people keep the courses in excellent shape and should be able to make a living wage. And remember the beer, the girls, and maybe free popcorn.
* We have water galore. Fishing, swimming, boating. Golfing and water sport heaven. Now if we only had someone who could walk on water. That would be worth marketing.
* We need to spruce up our governance: The POA is a little shaky. Cooper couldn't have been near as bad. Or at least not any worse. We elect 7 people to lead us. I don't know where this people come from, but it must be someplace weird. They know rules and regulations. I'm guessing most are retired from the military. When you ask them a question, they either tell you to shut up, or tell you their rank. Last election, no one was re-elected. The next election, no one should vote. Giving us three minutes to say what is on our mind at meetings is ridiculous. How many of the board take three minutes to speak? It clearly violates our rights.
* We have so many things to do in the Village: We have a Bridge Club. Bridge seems to be a card game only us rich white folks play. A Civil War Club. I bet I know which side they are pushing for. If I joined the Democratic Club, I would probably be the only one there. The Village Skeptics has a certain ring to it, but I doubt they talk about anything but Obama. Then there's the Coin Club, the Cloggers Club, the Crochet Club, the Dulcimer Club, the Horseshoe Club, the Polish Heritage Club,  and the Irish Club. I'm surprised there is not a right-wing, Christian, Republican Club, but it's probably kept a secret. I'm going to start a recovery group for people who belong to too many clubs.
* We live in a gated community: This makes us feel safe and less fearful. Of course cows, pigs, sheep, and prisoners all live behind closed gates, so I'm not sure we should consider thlis as a positive.
You talk about being positive. The ideas just keep on coming.

WRITTEN JULY 29, 2012-TO DATE: 175,250 HITS

Welcome to The Village Planet. The first post will be an editorial that appeared in the Village Voice, written by me.

The Peever moves to the Village

My wife and I moved here full-time in August, 2011. Some initial observations:
     1. While there is a wide range of resident experiences, which I enjoy listening to, and a whole lot  of really good people, there is a serious lack of cultural, religious, and political diversity. I suppose I should have expected that. Gates don't just keep out criminals. At any rate, I miss the diversity and believe this is the biggest weakness of Hot Springs Village.

     2. I have mixed emotions about our leadership. Again, diversity is sadly missing. The POA seems mired down in the status quo and its own self-importance. On at least two or three occasions since we have been here, they have exerted their authority to keep the public in check and continue on as they see fit. They have committees that appear to have no authority and seem to be used to help maintain the illusion that there is citizen participation, when in fact the manager and board do as they please. It is particularly distressing to see all the reasons they use to go into executive session. Control at meetings is tight. While decorum does need to be maintained, people need to be heard. It is our fundamental right, which they are seemingly having some problems with, which leads to my final point.

     3. It is hard for people who might have some different ideas and opinions to communicate in the Village. There is really no good media outlet to express minority opinions or dissatisfaction with the way things are going. To that end, it would seem like a good idea to start something. Thus is born The Village Planet. The other side of a lot of stories needs to be told around here. Nothing is more damaging to a community than sameness and unquestionable acceptance of the status quo.