976 price

[Steve Gordon]

> That's just the nature of a club financing the purchase of a single
> plane, isn't it?  At some point, you get down to a too-small set of
> members.  In the extreme, you've just got one guy buying a plane for
> cash and calling it a "club of one."

Yes, that is true, but there is a reason I'm interested in a "club of many"
- because I aint got the dough to be a "club of one".

Let's just say we were able to acquire 80-90% financing on the plane.  In
that situation if a member leaves it is just a nominal increase in the
monthly dues - probably would barely be noticeable.  That's a far cry from
having to fork over $500 - $1,000 on a moment's notice.  The huge advantage
to being financed is that it buys us all time to replace a lost member
rather than having to shuffle large sums of money around.

You are right when you say that we are all "acting as the bank".  However,
the difference between a real bank and us acting as the bank is that any of
the lenders could call in their debt at any time.  It's as if my bank could
one day call me and say, "Too many people emptied their savings accounts
last month.  We're going to need you to make a one-time payment of $10,000
towards your mortgage to help us cover our losses."

-Steve

-----Original Message-----
From: eefc-core-bounces at workingcode.com
[mailto:eefc-core-bounces at workingcode.com] On Behalf Of James Carlson
Sent: Wednesday, April 15, 2009 2:05 PM
To: Eagle East Flying Club Core Team
Subject: RE: 976 price

Steve Gordon writes:
> The "finding another member" option would likely have to be the
> responsibility of the member who is leaving or else we probably would not
be
> able to use the new member's joining fee directly toward the old member's
> refund.  I would not want to be responsible for finding a new member to
> replace me if I wished to leave.

We have options available besides finding another member, so I think
that's just a "nice to have" item, and not something we can or should
necessarily demand out of anyone.

> I think we have established that we do not have the ability to borrow
money
> without a personal guarantee.

Yes.

> That leaves the special assessment.  Personally I don't like surprise
fees,
> especially if they are accompanied by an increase in regular dues.  I
> wouldn't feel comfortable knowing that I could be responsible for a
special
> assessment fee and a monthly fee increase at any time if any member
decides
> to leave.

Well, it's not a surprise if you know about it and plan for it in
advance.  ;-}

The monthly fee increase is inevitable, no matter _how_ we structure
things.  If members leave, and aren't replaced, the yearly costs of
maintaining the plane need to be amortized over fewer people.  There's
nothing we can do about that.

The extra assessment is simply due to the fact that we can't borrow
effectively.  If you look at the cash flow in detail, what's really
happening is that we're all "acting as the bank" for the club, and
we're paying part of our monthly assessment out of the lien we hold
against the club.

Avoiding that would likely mean having two kinds of members:
lien-holder members and non-holder members.  It's slightly more
complex, but it ends up with the lien-holder ones paying less monthly,
and the others (with little or no up-front cost or assessment) paying
more monthly plus interest.

It's just arithmetic ... and a matter of how complicated we want to
make things in order to accomodate each member's finances and
tolerance for risk.

> Selling the plane and shutting down would be extremely unfortunate.
> However, it could be a real possibility under the right circumstances.  It
> only takes a few members leaving in a relatively short period of time to
set
> us up for this.  I don't like being that vulnerable.

That's just the nature of a club financing the purchase of a single
plane, isn't it?  At some point, you get down to a too-small set of
members.  In the extreme, you've just got one guy buying a plane for
cash and calling it a "club of one."

-- 
James Carlson         42.703N 71.076W         <carlsonj at workingcode.com>
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