WHERE DOES THE MONEY GO?
BUILDING A BUDGET THAT DELIVERS VALUE
Warren Buffett once put it pretty simply: “Price is what you pay. Value is what you get.”
That seems particularly appropriate as we begin another season at Heritage Palms.
Our seasonal residents are returning, golf and racquet schedules are getting busier, calendars are filling up, old friendships are being renewed, and our restaurants and social activities are shifting back into high gear. After a quieter summer, Heritage Palms is, once again, beginning to look and feel like Heritage Palms.
It’s also time for another annual tradition—not quite as eagerly anticipated as opening day on the golf course or the first cocktail by the pool—the Club budget. If there is one thing most of us can agree on, it’s that we’d prefer our dues not to go up. Of course, we would also prefer perfectly maintained golf courses, excellent dining, beautiful landscaping, great racquet and fitness facilities, sparkling pools, friendly employees, plenty of activities—and perhaps a tee time exactly when we want it. And therein lies the challenge.
Each year, our budget must balance two things that occasionally compete: the experience we want as members and what we are willing to pay for it.
With approximately 1,662 residences sharing the cost of operating and maintaining an extensive collection of amenities, our annual budget is substantial. But budgeting isn’t simply taking last year’s numbers and adding an inflation factor. Some costs rise faster than inflation, some more slowly, and others can change dramatically.
So, what goes into building a responsible budget for Heritage Palms?
It Starts with People
Our employees are at the heart of the member experience. Whether maintaining our golf courses, preparing and serving meals, caring for our facilities or supporting our many activities, labor represents one of our largest investments. Our budget must account for wages, benefits, payroll taxes, insurance, seasonal staffing and the realities of competing for good employees in Southwest Florida. We need to attract and retain good people while ensuring staffing levels and compensation remain appropriate for the services we provide.
Golf Courses Don’t Take Care of Themselves
Those beautiful acres of green require a considerable amount of green of another kind. Maintaining our golf courses requires specialized employees, fertilizer, chemicals, water, fuel, sand and expensive equipment. Florida weather, turf conditions and unexpected agronomic issues add another dimension.
The same applies to our racquet facilities, pools, fitness facilities, landscaping and other amenities. Each has its own cost structure, and those costs don’t necessarily move with the Consumer Price Index.
The Cost of Living in Paradise
SW FL is a wonderful place to live. It also comes with a few financial realities. Insurance is one of them. Property and windstorm coverage, flood protection, liability insurance, workers’ compensation, and hurricane deductibles can represent significant costs and can change substantially from year to year.
Hurricanes also remind us why maintaining adequate cash and reserves is important. Even with good insurance, a major storm can produce deductibles, cleanup expenses and delays before insurance proceeds arrive.
Financial preparedness isn’t pessimism. In Florida, it’s simply good planning.
What About Food and Beverage?
Club dining is an important part of the Heritage Palms experience, but evaluating it isn’t quite the same as evaluating a stand-alone restaurant. Like many private clubs, our objective isn’t necessarily to maximize restaurant profit. Dining is also an amenity.
That doesn’t mean costs don’t matter. We should understand what our food and beverage operations cost—including food, beverages, and labor—and any subsidy required to provide the level of service members want.
The important question isn’t simply, “Does the restaurant make money?” A better question is, “Are members receiving good value for what it costs to provide the dining experience?”
Today’s Budget Must Consider Tomorrow
Some of our largest expenses don’t occur every year. Roofs wear out. HVAC systems need replacement. Golf carts and maintenance equipment get old. Pools require renovation. Irrigation systems need repair. Kitchen equipment fails. Technology becomes obsolete. None of those things should surprise us.
A strong long-term capital and reserve program identifies future needs and begins setting aside money before the bills arrive. The alternative—deferred maintenance or unexpected assessments—is rarely cheaper in the long run.
A Surplus Isn’t a Bad Thing
It can be tempting to think the ideal club budget should come out exactly even at year-end. In practice, that isn’t necessarily good financial management.
A reasonable operating surplus provides a cushion against unexpected expenses, strengthens our cash position, and gives the Club flexibility in addressing future needs.
The goal isn’t to accumulate money simply for the sake of accumulating it. It’s to maintain an appropriate financial margin so one unexpected event doesn’t require an equally unexpected financial response.
And That Brings Us Back to Dues
Nobody enjoys an increase in dues, and every increase deserves careful scrutiny.
But keeping dues artificially low can be more expensive in the long run. If current revenues aren’t sufficient to maintain our assets and provide the services members expect, the difference eventually appears somewhere else—in deferred maintenance, declining service, depleted reserves, or future assessments.
So, the question shouldn’t simply be: “How much are dues going up?”
It should also be: “What value are we receiving for what we pay?”
Heritage Palms isn’t trying to be every kind of country club to every person. We are a large, active community built around golf, racquet sports, recreation, dining, social activities and, perhaps most importantly, the friendships that develop around them. Our financial priorities should reflect who we are.
Value Is the Bottom Line
As another season begins, we’ll have plenty to talk about—the courses, restaurant menus, pickleball, tennis, tee times, events, the weather, and probably a few things none of us has thought of yet. That’s part of life at Heritage Palms.
Behind all of it, however, is a budget that must accomplish three things:
• Provide the experience members expect today.
• Maintain the assets members have invested in.
• Leave Heritage Palms financially strong for tomorrow.
That requires discipline. Management must challenge expenses. The Board must ask difficult questions. Long-term needs must compete with short-term wants. And occasionally, we have to decide that something we’d like simply isn’t worth what it would cost.
The goal isn’t to have the lowest dues in SW FL, nor is it to spend the most.
The goal is to deliver the greatest possible value to our members while protecting the long-term financial strength of Heritage Palms.
Which brings us back to Warren Buffett: “Price is what you pay. Value is what you get.”
If the courses are busy, the courts are full, the restaurants are lively, the facilities are well cared for, and members are happy to be back with friends, we’re probably doing something right. And if we can accomplish all of that while keeping Heritage Palms financially strong for the future, that’s not just a good budget. That’s a pretty good return on our investment.
Welcome back—and here’s to a great season.
