Richard Anklin, a Tellico Village resident who has expressed concern over the property owners association finances for the past two years, said he believes the cash flow is down due to delinquent assessments and mismanagement of amenities such as the yacht club and golf courses.
The POA denies that assessments are down but admits it had to borrow $250,000 in September to meet expenses, including unusually high golf course maintenance costs.
Using lines of credit is a standard business practice, POA spokesman John Cherry said.
"Businesses only borrow money when they don't have enough cash to pay the bills," Anklin responded.
Cherry also confirmed the recent layoffs of 10 employees.
"There isn't a business, government or organization that isn't examining how to reduce expenses and improve operations," Cherry said. "That's what occurred in this case. Our estimated savings is $26,500 per month, however we gave up 10 people with a combined 80 years of valuable POA experience," he said.
The recent departure of longtime POA finance director Cotton Hunt also is cause for concern, according to Anklin. The POA announced Hunt was leaving Oct. 21 to pursue other opportunities.
The departure of Hunt at this time will increase the financial challenges facing the POA, Anklin said. Cherry said that Hunt will be assisting the POA during the search for a new finance director. Hunt could not be reached for comment.
The cash flow issue surfaced at the end of September, when the POA had to borrow on a line of credit to pay September bills of $83,000, according to Anklin.
Anklin, a retired Ford Motor Company executive who holds a masters degree in finance, said one of the biggest issues causing cash flow questions is delinquent assessments.
"We have always suspected the cash flow being a problem because of the number of lots owned and/or delinquent by the POA since 2009," Anklin said.
The number of delinquent assessments has been fairly stable at around 700 properties over the past two years, he said, adding that the POA has been counting the bad debt and the interest on the unpaid bad debt as revenue when it should be written off as a loss.
Simply writing off the delinquencies would not allow the POA to recover the bad debt, Cherry said, noting that the POA is pursuing delinquent property owners in a systematic manner, including the filing of liens against some properties.
Allowance for bad debt currently is $1,871,274 compared to a figure last year at this time of $1,362,557, or an increase year over year of $508,717, according to Anklin.
The Actual Operating Cash shown at the end of 2009 was $1,116,750; for 2010 was $868,343; and the 2011 forecasted year Operating Cash was $674,000, Anklin said.
Anklin projects the operating Cash Balance at the end of the year will instead be $69,000. The POA denies Anklin's claims and insists revenue will be sufficient to pay obligations.
Property assessments are $40,000 ahead of budget through end of September, Cherry said, with total revenue $88,000 better than budget. Cash on hand is about $800,000, he said. He added that assessments on residences are $94.50 per month.
Tellico has 6,740 lots in the community.
"We have no difficulties in meeting ongoing obligations. Additionally, our debt has been reduced by some $340,000 in just the last year as we have paid down long-term debt," Cherry said.
Another major disagreement between Anklin and the POA involves the cost of subsidizing services such as golf courses and the yacht club. The POA says cuts in services or amenities will not be necessary.
Anklin is recommending a freeze on all spending, cuts in operating hours at some of the amenities and elimination of non-essential positions. He also recommends closing the yacht club for a yearly savings in subsidies and operating costs of more than $500,000.
Proper management of the golf courses could save hundreds of thousands of dollars in revenue a year, Anklin said, adding that the POA should be studying changing demographics at the Village and adjusting expenditures to align with the current use of amenities.
Alan Hart is a Tellico Village resident currently running for a position on the board of directors. He said recent investments in the golf course were necessary to attract more players from outside the Village.
Hart said he is not worried about an imminent financial crisis at the POA. Cash flow problems are not unusual in businesses that do not have regular income streams, he said.
In the meantime, Tellico Village will have to adjust to new economic realities.
Hart said he is not in favor of starting any new projects or increasing expenditures.
"We don't have money to build new things," he said. "My concern is to keep the Village at the level that it is now."