Memo. Hot Springs Village Property Owners Association Board of Directors Report

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1 Hot Springs Village Property Owners Association Board of Directors Report Memo To: David Twiggs, COO, and HSV Board of Directors From: Lesley Nalley, CFO LAN Date: June 15, 2016 Re: May 2016 Financial Report Attached please find the following financial package documents: Executive Summary Financial Dashboard Property Dashboard Golf Rounds and Revenue Analysis Statement of Financial Position Statement of Revenue and Expenses Statement of Capital Additions

2 Hot Springs Village POA Executive Summary % Operating Budget Spent YTD 38% % Capital Budget Spent YTD 38% % Net Revenue Earned vs. Budgeted YTD 36% Properties/Units in Good Standing 24,276; 70%; 383 > April FINANCIAL DASHBOARD Year to date, $1.78mil more in assessments have been received over last year. $1.2mil more has been billed. Operational revenues and expenses are 10.5% and 9.85% higher, respectively, than Administration, Public Safety, and Recreation are tracking near budget, with Public Safety & Recreation also tracking ahead of last year. While golf is tracking ahead of last year, the operation is tracking behind budget as described in golf rounds and revenue analysis. The $10.5mil in year to date operational expenses is split as follows: Administration 17.7%, Public Safety 17.5%, Public Works/Public Utilities 24.87%, P&I 1.2%, Food & Beverage 1.6%, Golf 27.6%, and Recreation 9.3%. Expenses in all departments, besides Public Safety and Food & Beverage, are tracking near budget and prior year activities. Public Safety is tracking ahead of budget due to timing of retirement turn back funds expected towards the end of the year and additional workers compensation expense. The Food & Beverage variance relates to DeSoto Club budgeting, which amounts to a net expense of $174,300, and additional insurance proceeds received during % of the Association s year to date revenue came from billed assessments. The service and amenity usage of those assessment dollars is as follows: Administration 37%, Public Safety 33%, Planning & Inspection 2%, Golf 17%, and Recreation 11%. PROPERTY DASHBOARD New home permits and listed homes are tracking behind the preceding 4 years, while home sales are tracking close to or ahead of the same time period. There are 8,730 improved lots and 25,422 unimproved lots in the Village. Additionally, there are 99 time share units and 195 assisted living units. The POA owns 2,534 lots. 98% of improved lots, 67% of unimproved lots not owned by the POA, and 100% of the timeshare and assisted living units are currently in good standing. Currently, there are 7,503 unimproved lots and 136 improved lots considered not in good standing, meaning they have assessment balances greater than 60 days outstanding. 697 more properties came into good standing between December 2015 and this month.

3 In the most recent bi-monthly utility billing, there were 9,075 water meters and 7,973 sanitation customers billed. GOLF ROUNDS & REVENUE ANALYSIS YTD, there have been 239 more playable days than the same period of The average revenue per playable day this year is currently $1,946 vs. $2,183 for the same period last year. This change reflects the introduction of flex pricing, which is expected to increase revenues during peak season. According, we are tracking behind 2015 s revenue per round and behind budgeted revenue per round. While it s currently difficult to glean too much information from this variance, monitoring the expected flex pricing bell curve during peak months will provide useful insight for any budget amendments needed for winter months. While this level of detail is generally best suited for management and committee discussion, it is currently being provided to spark discussion and analysis of the golf operation that considers price level mix, course specific pricing, subsidization, and industry or regional benchmarking, as we approach the 2017 budget process and measure the effectiveness of pricing changes and visitor impact. In comparing year over year results, 15,673 more rounds of golf have been played and $263k more revenue has been earned during STATEMENT OF FINANCIAL POSITION CASH: HSVPOA ended the month with $6.8mil of cash/cash equivalents. $1.3m is currently being held in escrow, pending the Supreme Court decision. According to the published 2016 Budget Summary, escrowed funds correlated to HSV s ability to fully fund planned capital purchases. Note on the Statement of Capital Additions that $3.8mil of the 2016 capital budget remains unspent, while we await the decision. ASSESSMENTS RECEIVABLE: $18.2mil of assessments is currently outstanding. There are currently 10,173 properties considered unproductive or not in good standing. LONG TERM DEBT: $4.8mil of long term debt is currently outstanding. The current debt ratios, cash balance, and projected operating results demonstrate HSV s ability to meet the related debt service obligations for No new long term debt should be considered, unless operating results exceed budgeted expectations, and such activities are balanced with restoring reserves. NET WORTH: HSV s current net worth is $69.5mil, compared to $70.8mil in STATEMENT OF REVENUE AND EXPENSE NET REVENUE: Total net revenue is 36% of budget and $1.6mil (2) higher than This year over year increase reflects the additional assessments on improved properties (approx. $240k more per month), receipt of final DeSoto insurance payout, marina sales, and overall golf results. These increases were offset by decreases related to lost town house sanitation business, permitting activity, and member decal program.

4 EXPENSE: Total operational expense (3) is 38% of budget and currently $947k more than Public Safety s year over year increase of $152k, reflects the Allied Barton contract, additional insurance, and workers comp expenditures. Administration s year over year increase of $323k, while within budget, reflects additional spending in building maintenance, IT, marketing, and development. NET OPERATING RESULTS: Net excess before depreciation and capital was $1.2mil (1), as compared to a $579k for the same period last year. Peak golf season results will predominately determine whether we can achieve the budgeted $5,037,033 net operating profit. Doing so means we are able to fund the budgeted 2016 deferred maintenance spending. As previously discussed, we would need to exceed that net result to have additional funds for saving/reserves. The goal of the 2016 budget was to aggressively address deferred maintenance. CAPITAL: Capital spending totals $807k of the $4.6mil budgeted for 2016 and $1.6mil in carried over DeSoto Club spending, for total ytd spending of $2.4mil.

5 Hot Springs Village POA Financial Dashboard At a Glance Comparison of Select Financial Data 2015 YTD 2016 YTD Inc/(Decr) %Change $ 4,774,750 $ 6,563,023 Assessments Received $ 1,788, % $ 6,009,540 $ 7,219,582 Assessments Billed $ 1,210, % $ 4,858,250 $ 5,368,532 Operational Revenue $ 510, % $ 9,624,633 $ 10,572,373 Operating Expenses $ 947, % $ 776,568 $ 2,493,525 Capital Spending $ 1,716, % $ 5,635,511 $ 6,853,819 Cash and Cash Equivalents $ 1,218, % Viability Ratio Debt Service Coverage Ratio 32.00% 28.00% 24.00% 20.00% 16.00% 12.00% 8.00% 4.00% 0.00% 17.76% 17.57% 17.46% 17.72% 16.15% 15.18% 24.87% 24.27% % Expense to Total 25.89% Administration Public Safety Public Works Planning & Inspection 27.62% 4.55% 1.21% 1.63% 1.13% 1.33% 1.43% Food & Beverage Budgeted % 2016 YTD Actual 2015 YTD Actual 27.65% 27.56% 9.79% 9.91% 9.32% Golf Recreation Recreation, 4% Golf, 16% Actual YTD Revenue % to Total Food & Bev, 2% P&I, 0% Assessment, 59% Public Works, 16% Public Safety, 2% Administration, 1%

6 ,503 8,090 7,639 8,336 Hot Springs Village POA Property Dashboard SALES & CONSTRUCTION ACTIVITY YTD YTD YTD YTD YTD Home Sales New Home Permits Homes Listed PROPERTIES OUTSTANDING MORE THAN 60 DAYS YR END 2015 YTD 2016 UNIMPROVED IMPROVED TOTAL Improved Lots % GOOD STANDING 98% Water Meters Billed: Sanitation Billed: Residential 8,765 Res-House 492 Commercial 209 Res-Curb 7,361 Sprinkler 77 Commercial 120 Construction 24 No Sanitation 1,059 Unimproved Lots - Non POA 67% Total 9,075 Total 9,032 0% 20% 40% 60% 80% 100% 120% Population Estimate: 14,024

7 Hot Springs Village POA Golf Rounds and Revenue Analysis YTD PLAYABLE DAYS & REVENUE/DAY Variance YTD Playable Days 1, Revenue/Day $ 1,946 $ 2,183 $ (237.35) 2016 GOLF RESULTS 2016 Actual Revenue/Round 2016 Budgeted Revenue/Round 2016 Rounds 2016 Revenue Balboa 9, , Coronado 6, , Cortez 11, , DeSoto 11, , Granada 11, , Isabella 14, , Magellan 10, , Ponce de Leon 10, , ,355 2,074,605 Admin & Miscellaneous 44,587 Total 2,119, GOLF RESULTS 2015 Rounds 2015 Revenue 2015 Revenue/Round Balboa 6, , Coronado 4, , Cortez 10, , DeSoto 9, , Granada 10, , Isabella 13, , Magellan 8, , Ponce de Leon 8, , ,682 1,814,957 Admin & Miscellaneous 40,892 Total 1,855, ,000 9,000 8,000 7,000 6,000 5,000 4,000 3, Budget vs Actual Revenue/Round Balboa Coronado Cortez DeSoto Granada Isabella Magellan Ponce de Leon 2016 Actual Revenue/Round 2016 Budgeted Revenue/Round 2016 vs 2015 YTD Rounds Comparison Balboa Coronado Cortez DeSoto Granada Isabella Magellan Ponce de Leon 2016 Rounds 2015 Rounds VARIANCE 15,673 $ 263, $ (1.63)

8 HOT SPRINGS VILLAGE POA Comparative Statement of Financial Position ASSETS CASH AND CASH EQUIVALENTS $ 6,853,819 $ 5,635,511 MEMBERSHIP ASSESSMENT RECEIVABLE GROSS ASSESSMENTS BILLED 18,227,455 15,218,709 LESS ALLOWANCE FOR DOUBTFUL ACCOUNTS (17,621,791) (14,869,865) NET MEMBERSHIP ASSESSMENT RECEIVABLE 605, ,844 OTHER MEMBERSHIP RECEIVABLES 190, ,302 OTHER RECEIVABLES 37,192 2,594 INVENTORIES 1,243, ,990 PREPAID EXPENSES 295, ,014 REAL ESTATE HELD FOR SALE, NET REALIZABLE VALUE 1,901,842 1,808,696 RECOVERABLE ELECTRIC COSTS 3,990,550 4,000,000 PROPERTY AND EQUIPMENT, Net of Accumulated Depr. 66,032,349 65,571,046 TOTAL ASSETS $ 81,150,338 $ 78,428,997 LIABILITIES AND MEMBERSHIP EQUITY LIABILITIES ACCOUNTS PAYABLE $ 370,079 $ 539,906 ACCRUED EXPENSES 2,842,643 2,166,554 PREPAID ASSESSMENTS AND FEES 2,911,697 2,409,504 SECURITY DEPOSITS & OTHER DEPOSITS 609, ,608 ARVEST LOAN - DESOTO 1,408,093 - LINE OF CREDIT - - BONDS PAYABLE 3,429,398 1,815,000 TOTAL LIABILITIES 11,571,056 7,619,572 MEMBERSHIP EQUITY UNDESIGNATED 69,223,786 69,090,745 DESIGNATED FOR FUTURE REPAIRS & REPLACEMENT 355,496 1,718,681 TOTAL MEMBERSHIP EQUITY 69,579,282 70,809,426 TOTAL LIABILITIES AND MEMBERSHIP EQUITY $ 81,150,338 $ 78,428,997

9 HOT SPRINGS VILLAGE POA Comparative Statements of Revenue and Expenses Months ended May 31, 2016 and May 31, 2015 Actual YTD 2016 Over/(Under) Budget % Budget Budget Apr-16 Apr-15 Prior Year Remaining Earned/Spent Membership Assessment Revenue 17,375,000 7,305,042 6,009,541 Assessment Penalties & Other 443, , ,758 Provision for future Bad Debt (2,482,104) (1,194,354) (984,995) Net Assessment Revenue 15,335,896 6,442,277 5,346,304 1,095,972 8,893,619 Administration REVENUE 226,260 93, ,257 (83,357) 132,360 42% EXPENSE (4,875,116) (1,877,505) (1,554,187) 323,318 2,997,611 39% Net Administration (4,648,856) (1,783,605) (1,376,929) Public Safety REVENUE 755, , ,469 4, ,389 37% EXPENSE (4,239,572) (1,857,710) (1,705,391) 152,319 2,381,862 44% Net Public Safety (3,483,952) (1,581,479) (1,433,922) Public Works REVENUE 7,750,516 2,152,645 1,995, ,231 5,597,871 28% EXPENSE (5) (6,775,822) (2,629,580) (2,492,144) 137,436 4,146,242 39% Net Public Works 974,694 (476,935) (496,730) Planning & Inspection REVENUE 195,000 52,643 60,908 (8,265) 142,357 27% EXPENSE (314,810) (127,459) (127,840) (381) 187,351 40% Net Planning & Inspection (119,810) (74,816) (66,932) Food & Beverage REVENUE 950, ,989 85, , ,681 21% EXPENSE (1,269,748) (172,108) (138,090) 34,018 1,097,640 14% Net Food & Beverage (319,078) 29,881 (52,519) Golf REVENUE 6,544,247 2,119,192 1,855, ,343 4,425,055 32% EXPENSE (4) (7,711,221) (2,923,013) (2,652,738) 270,276 4,788,208 38% Net Golf (1,166,974) (803,822) (796,889) Recreation REVENUE 1,199, , ,782 60, ,767 39% EXPENSE (6) (2,734,587) (984,997) (954,243) 30,753 1,749,590 36% Net Recreation (1,534,887) (513,064) (542,462) Over/(Under) Prior Year Budget Remaining 16 Budget 16 Actual 15 Actual Gross Revenue $ 35,440,013 $ 13,005,163 $ 11,189,549 Bad Debt Expense (2,482,104) (1,194,354) (984,995) Net Revenue (2) 32,957,909 11,810,809 10,204,554 1,606,255 21,147,100 36% Operational Expense (3) (27,920,876) (10,572,373) (9,624,633) 947,740 17,348,503 38% Excess (Deficit) Before Depr.(1) $ 5,037,033 $ 1,238,436 $ 579,921 Depreciation $ (1,581,344) $ (1,500,125)

10 HOT SPRINGS VILLAGE POA Statement of Capital Additions 2016 Annual Budget Spending Budget Remaining Administration $ 315,606 $ 1,400,000 $ 1,084,394 Public Safety 192, ,000 25,987 Public Works 177,021 1,980,545 1,803,524 Club Services and Facilities 30,666 84,000 53,334 Golf 44, , ,232 Parks and Recreation 51, , ,759 Construction (3,383) 253, ,222 Current Yr Capital Additions $ 807,789 $ 4,679,240 $ 3,871,451 DeSoto Project Carryforward from 2015 $ 1,685,736 $ 1,932,673 $ 246,937 Total Year to Date Capital Additions $ 2,493,525 $ 6,611,913 $ 4,118,388

Memo. Hot Springs Village Property Owners Association Board of Directors Report

Memo. Hot Springs Village Property Owners Association Board of Directors Report Hot Springs Village Property Owners Association Board of Directors Report Memo To: David Twiggs, COO, and HSV Board of Directors From: Lesley Nalley, CFO LAN Date: November 16, 2016 Re: October 2016 Financial