Written by Tom Blakeman, June 10, 2019
I read a post and comments on Nextdoor the other day about the so-called IRS “60/40 rule” and how/why we “subsidize” things. I’ve heard this talk before.
Many Villagers talk about the 60/40 rule; most don’t understand it. The perception seems to be that if we didn’t meet the 60/40 our world would end. Further, It appears that many Villagers think running the Village requires us to subsidize everything. Neither of these are true.
Earlier this year our CPA firm spoke at a board meeting about the 60/40 subject. Dry, boring stuff for most people. Basically, it has to do with whether or not the Village might have to pay Federal income tax. In almost 50 years we never have. In 2017 the ratio was 64% – so, no worries. Probably similar for 2018 but the tax return is not yet published.
According to Merriam-Webster, a subsidy is: “a grant by a government to a private person or company to assist an enterprise deemed advantageous to the public”. More simply, a subsidy is paying for something that doesn’t generate sufficient revenue to otherwise support itself. Here in HSV we have a few “enterprises” that are NOT necessarily advantageous to everyone but yet we continue to subsidize them.
Here’s an idea: Let’s all stop worrying about 60/40 and subsidies and figure out how the Village can increase revenue from certain operations that should be making a profit. Think about GOLF for example. Last year we “subsidized” golf (lost money) to the tune of almost TWO MILLION DOLLARS.
That’s real money. It could have easily paid for the new pool and a top notch, working gate system. So, what can we change about our golf program so that it begins making money or at least breaks even? I don’t mean raising green fees on the backs of the Members either. Think about it.
And, what other “amenities” or POA activities are sucking up our subsidy dollars and do not provide a true benefit to all the Members? I can think of several. Can you?
Tom Blakeman, June 10, 2019
Karen Lundberg
06/14/2019 — 12:30 am
As I understand it, we are subsidizing several restaurants. I know we subsidized our pickle courts with swimming pool money, but I don’t recall seeing the pickle ball numbers. I’m not saying the figures weren’t there, but I didn’t see them. I wold love to see the pickle ball numbers.
Gene Garner
06/15/2019 — 8:43 am
Tom asks a very difficult question; how do we make our golf program more self supporting w/o raising green fees? Below are the financials as reported by the POA in the Jan 25, 2019 edition of the Village Digest. On page 18 are the “Golf Subsidy” figures for 2018. These numbers are a little skewed because there are one time revenue streams of $364k for cart trade ins.
https://documentcloud.adobe.com/link/track?uri=urn%3Aaaid%3Ascds%3AUS%3A9abeb608-cdf8-466b-bbfe-403108e53c4d
There are two entries I would look at first, Golf Admin/Call Center & Golf Marketing subsidies, these two account for over $631,000. How effective has our marketing program been and can we cut some expense from the Admin/Call Center?
Also I understand the Troon contract is due for renewal this year, has it been cost effective?
After all is said and done, we have to ask the question; Can HSV support 8 golf courses with a population of less than 20,000 (includes non property owners)? This is a problem that will only get worse.—Gene