976 price

[Steve Gordon]

I have an idea.  It might sound complicated, but I'll just put it out there.

Let's run with the notion that founding members are acting as a bank.  If
one member fronts $5,000, that amount can be amortized over 10 years at say
8% interest.  The payment on such a loan would be about $60.66 per month.
If that member leaves the club before the end of 10 years, then the club
will not pay back the remainder of the $5,000 in one lump sum.  The club
would send the member a check for $60.66 per month for the remainder of the
loan and the club's monthly dues are reassessed (which will be the case
whenever membership grows or shrinks).  Alternatively, the member has the
right to sell his "note" to another member wishing to join the club.

This scheme would require two levels of membership - those who are lien
holders and those who are not.  Those who are lien holders would pay monthly
dues that are approximately $60.66 cheaper than those members who are not
lien holders.  In this way we can accommodate new members who did not
contribute to the upfront costs while being fair to those members who did
contribute.

Like I said, it's complicated.  However, it does give us a way to raise the
upfront costs while not making the group vulnerable to large special
assessments.

-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>
_______________________________________________
eefc-core mailing list
eefc-core at workingcode.com
https://www.workingcode.com/mailman/listinfo/eefc-core