Kiawah Island Digest August 2020 - Page 6

ISLAND FINANCIALS Financial Update from KICA’s Treasurer below budget as of May. The majority of that shortfall is from collecting less in vehicle access fees ($85,000 below budget) and losses in Castle Grille, events and shuttle revenue ($83k behind budget). Looking at total revenue, which includes investments, KICA is about 2.6% down, with investment revenues coming in $200,000 under budget. This constitutes a big rebound for investment income, which was down $500,000 in March. At KICA’s July 13 Board of Directors meeting, treasurer Dave Morley gave a report on the financial status of the association. KICA always provides monthly financial reports to members but in this case, it’s important to highlight how the association is performing in this unusual year. Dave’s report looked at KICA’s finances through the end of May 2020 in comparison to the annual budget. As a reminder, KICA froze hiring and department heads cut a minimum of 10% from their approved budgets in anticipation of a possible shortfall related to COVID-19. The total savings for the plan, put in place in March, was $1,562,189 for the year. OPERATING EXPENSES Almost halfway through the year, KICA is seeing a $1.4 million total positive variance. Of that, about $736,000 can be attributed directly to the budget reduction. Those variances are from these expense categories: Payroll: $214,000 Administrative: $95,000 Common area: $186,000 Building repairs and Maintenance: $224,000 The remaining $673,000 of the variance is timing differences and deferrals on projects that are still expected to be completed. OPERATING REVENUE Dave reported that KICA’s operating revenue is 1.3% The complete picture looks rosier than previously expected. Despite early concerns, assessments are on budget for 2020. Contributions to Reserves (CTRs - real estate transaction fees) are on-budget through May. Once June’s financials are finalized, CTRs will be $150,000 above budget due to a large real estate transaction. Vehicle Access Fees are currently down by $85,000 but by the end of June will only be down $22,000 or 2% below budget. Investment revenue also improved in June compared to the budget, though a shortfall of $150,000 is expected. At this point, the financials are stronger than anticipated. Dave noted, “we had no way to forecast what COVID-19 would do to our revenue sources but right now, it doesn’t look like it has had a material impact.” RECOMMENDATIONS FROM THE FINANCE COMMITTEE Dave brought two motions before the board from KICA’s member-led Finance Committee. These motions were discussed at the committee’s Friday, July 10 public meeting. 1. KICA received an offer to refinance the mortgage on Beachwalker Center (23 Beachwalker Drive). KICA’s current mortgage has a balance of around $400,000 at an interest rate of 3.6%, while the proposed rate would be 2.9%. After noting that they had sought comparative offers from other companies, Dave characterized the rate as ‘very competitive.’ The offer is an unsecured loan rather than a real estate loan and there are no closing costs. This loan also has no prepayment penalty. Making this switch would allow a cash 6 | KIAWAH ISLAND DIGEST