Reply To: Engine Rebuild Fund

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#9621
Don GrilloDon Grillo
Keymaster

I wanted to second Larry’s comments. I’ve been a member of two flying clubs and both had the same philosophy. Dues cover fixed costs such as the hangar, property taxes, utilities etc. All members pay those equally. Incremental costs related to the operations (gas, maintenance, engine overhaul fund), are covered by the rental rates, or in our case tow fees. It is done this way exactly because it is fair.

I believe that a special assessment to cover an incremental operation cost is far from fair. It is unfair to the members who are less active for whatever reason. At $30k for a 2000 hr recurring item, this should be costing members maybe $3 per tow. If this assessment had been in 2020, it would have been a $200 premium on each of my two tows (ouch indeed).

Now some may have strong opinions about less active members, but the fact is we are all different. Some live close to the field, some live far away. Some are students or are retired, some are toiling mid-career. Some have reason to take extreme Covid precautions, some are more relaxed about the virus. However, all are contributing much needed membership dues, and those who are unable to participate actively for whatever reason are probably those most on the fence about continuing to mail in those checks, so an assessment that unfairly impacts that group seems questionable.

Beyond less active members, this proposal actually unfairly treats all current members. Essentially by proposing an assessment rather than a loan, we would be asking all current members to overpay now, so that future members can underpay. I saw the proposal for 2021 joiners, but what about 2022, 2023 etc.

A special assessment of any kind is always problematic. It sends a signal to the current and potential future members that the cost of membership is unpredictable. Real estate people will always talk up the condo boards who have never had a special assessment. It shows consistent good management and makes prospective buyers more comfortable buying in. The parallels are obvious. There are some things in life where “zero times” is the only really acceptable answer (how many lifetime DUIs are okay for your kids’ school bus driver?).

Special assessments are typically only used in cases of dire need. If people have been willing to loan the club money, then this is an unnecessary special assessment. Possibly the main reason this is being proposed is that some people are naturally debt averse. However, particularly for a club like ours debt is actually beneficial in helping to offset assets. The club has assets such as the field and aircraft, and various loan liabilities. The assets minus the liabilities are our net assets. It can actually be problematic for an organization like ours if the net assets increase too much:

1. If net assets are high, the club is a more attractive target for lawsuits (day member accident?).

2. When net assets get too high there can be pressure to break up the club. When the net assets per member gets high, people start to question whether it would be better to cash out that equity. We surely have some protections against that in our bylaws, but all that stuff can change in the future. Nobody ever thinks it can happen until it does. A strong defense is to keep net assets low.

3. If net assets are growing, that means the current membership are overpaying (compared to stable low net assets). The result may be a debt free future, which sounds good from a personal finance perspective, but for an organization such as ours this just means that current members overpay so future members can pay less. Not exactly equitable.

In our case overhauling the engine increases the value of the plane (not 1:1 for sure), but a special assessment of $20k would unnecessarily increase the net assets of the club. A more balanced financial approach would be to offset the increase in value of the plane with a loan to cover the cost of the overhaul.

I apologize for the overly long email. I get that it is only $400, but it strikes me that this proposal is not a good direction for the club, and people should clearly understand the downside.

I do agree with Don’s point about there being many members of the club who end up making little to no financial contribution after instruction/tow credits. Maybe the credits program is too generous and should be looked at again? Obviously the instructors and tow pilots are critical to the success of the club, so radical changes are probably counterproductive. Perhaps credits should be capped at some agreeable percentage of dues (50% say). I can’t imagine anyone would instruct/tow until they reach their credit cap, then stop doing so. Arguably instructors and tow pilots are still individual members of the club, so should also pay their share of the fixed club costs. Instructing or towing is still flying for free, which is a pretty big benefit in itself. I wonder how do the other glider clubs approach this?

 

Aaron