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