Does the concept of “20 times current year depreciation” mean anything to you? As described below, that metric should be front and center as a discussion starter for your capital planning over the next 10 years. The key to proactive planning for most clubs is Thinking Bigger Sooner.

OBSERVATIONS
Over the years, we’ve observed many clubs deferring maintenance, making special assessments, and/or entering into third-party debt that is outsized relative to club resources. These loans have amortization periods that are too long and often rely on balloon-payment features that “kick the can” down the road. Electing long amortization periods and balloon payments are both driven by a fear of asking members (owners) to contribute the necessary amount of money. Even with the resulting artificially low debt repayments, these same clubs simply still fall short of the capital income necessary to meet the artificially low debt repayments while also funding perpetual, ongoing obligatory and aspirational capital needs.

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This is Part #1 of a two article series. Read Part #2:  Zombie Debt: Causes & Costs