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07-07-2010 VC B WS-MMINUTES OF THE BUDGET WORKSHOP SESSION • VILLAGE COUNCIL OF NORTH PALM BEACH, FLORIDA JULY 7, 2010 Present: William L. Manuel, Mayor Darryl C. Aubrey, Sc.D., Vice Mayor David B. Norris, President Pro Tem T.R. Hernacki, P.E., Councilman Robert A. Gebbia, Councilman Jimmy Knight, Village Manager Melissa Teal, CMC, Village Clerk ROLL CALL Mayor Manuel called the meeting to order at 7:00 p.m. All members of Council were present. All members of staff were present, except the Village Attorney. Finance Director Samia Janjua, Golf Operations Director Dave Kass, Food and Beverage Director Keith Riolino, Information Technology Director Michael Applegate, and Community Development Director Chuck Huff were present. The purpose of the meeting was to review the Country Club Budget for FY 2011. Mr. Knight distributed copies of the Country Club Budget Fiscal Year 2011 presentation, Country Club Budget line item detail, and the NPB Country Club Food & Beverage Business Plan. Mr. Knight noted the various publications in which the North Palm Beach Country Club received accolades this year, which included Golfweek's Best Municipal Courses 2009-2010 (ranked 1st in Florida and 27th nationally), Golf.com's Best Public Golf Courses in Florida (25th), and "Best You Can Piay That You've Never Heard Of' in Golf Magazine. CURRENT FINANCIAL CONDITIONS Mr. Knight reviewed golf course memberships and rounds played, as well as the year-to-date summary of revenues and expenses. Mr. Knight gave a comparison of the budgeted revenue versus revenue received as of 6/30/2010. Mr. Knight noted that although revenue from the driving range and resident memberships is down, revenue from non-resident memberships is at 92.40% o f the targeted amount. Mr. Knight reported that total expenses for FY 2010 comprise 69.44% of the budget as of 6/30/2010. Mr. Knight advised that expenses have been held down by deferring certain capital expenditures, such as artificial turf on the driving range and new trees, as well as leaving some vacant positions unfilled. Discussion ensued on the effect of postponing improvements. Mr. Knight detailed estimated start-up costs for the restaurant and the amount of Country Club contingency funds remaining. Mr. Knight estimated a possible $15,000 shortfall at year-end due to lost restaurant revenue and start-up costs, and decreased membership revenue. Mr. Knight reported $434,212 in undesignated reserves from prior years. • Mr. Knight stated the FY 2011 budget is based on the current number of memberships. Discussion took place regarding the amount of outstanding membership balances, cost for certain incentives, league play, and allocating memberships on a monthly basrs for accounting purposes. Minutes of Village Council Budget Workshop Session held July 7, 2010 Page 2 of 3 FOOD AND BEVERAGE BUSINESS PLAN • Mr. Knight reviewed the business plan for the food and beverage operation at the Country Club and noted that customer service is key. Mr. Knight discussed business objectives, strengths and challenges, services to be provided, marketing and financial plans, and personnel, in addition to other factors. It was suggested that turning a profit should be added to the list of business objectives on page 1. Discussion ensued on marketing as well as opportunities to increase business. Discussion took place regarding tracking the profitability of special events, day-to day restaurant operations, and all areas of the Country Club. Mr. Knight explained this is not possible using the current point-of--sale system, which is not designed for that purpose; however, the proposed budget provides for a new system that would have the ability to track all revenue streams individually. Mr. Knight noted that Finance maintains an itemized list of restaurant start-up costs detailing and justifying the necessary items. Mr. Knight explained the challenges in hiring and keeping personnel, particularly with regard to regulations for public entities. Mr. Knight detailed inventory control and security procedures. FY 2011 COUNTRY CLUB BUDGET Mr. Knight reported that the total budget is $4,061,972, an increase of 19% or $659,195 over the current year and includes projected food and beverage revenues of $1,000,000 and contingency (profit) of $198,622. Mr. Knight detailed expenses by department and function. Mr. Knight explained that the Enterprise Fund is comprised of the gold food and beverage, and administration departmental budgets. Mr. Knight reported the administration budget is down 18% or $195,848 due to moving salaries of various personnel to the golf and food and beverage budgets, as well as a reduction in debt service. Mr. Knight reported the golf budget is up 0.64% or $14,257. Mr. Knight advised that there is no increase in costs for the contract with IGM. Mr. Knight reviewed the food and beverage budget, which totals $914,626. Mr. Knight reported that the overall budget increased $695,968 over the current year due to the provision of food and beverage service at the Club. PERSONNEL AND COMPENSATION Mr. Knight noted there are only seven full time employees for this four million dollar operation. Compensation of Village employees was discussed. Mr. Knight advised that zero market adjustment or cost-of-living allowance was included; however, an average merit increase of 3.75% was budgeted. Discussion took place concerning merit pay. Mr. Knight explained that part-time employees do not receive benefits but may receive an evaluation and merit increase. It was noted that many residents have seen a reduction in wages and a suggestion was made to implement a maximum 2% merit increase for exceptional performance or promotions. Mr. Knight explained merit pay is a negotiable benefit that is specified in the Village's collective bargaining agreements. Mr. Knight reported the 20% Village contribution to the defined benefit pension plan is comprised of a required 15.78% contribution and a 4.22% catch-up provision to increase solvency of the plan. Mr. Knight recommended including acatch-up provision annually until the plan is 80% funded as opposed to its current level of 74%. • Mr. Knight detailed health insurance costs, which total $1.4 million annuall ,and noted that in Y order to incur only a 4% increase for renewal, the Village must change its providers for medical and dental insurance. Minutes of Village Council Budget Workshop Session held July 7, 2010 Page 3 of 3 CAPITAL EXPENDITURES • Mr. Knight detailed major operating costs and reported $2,444,339 in operating costs for FY 2011. Mr. Knight reviewed proposed capital expenditures, which include additional trees on the golf course, purchase of a used beverage cart, and overlay of the parking lot. Mr. Knight noted the total cost of the parking lot overlay would be split 60/40 with the General Fund paying 40%. It was recommended that Public Works survey the condition of lighting conduit and irrigation pipes that pass under the parking lotto ensure any needed repairs are made prior to repaving. DEBT SERVICE Mr. Knight reported that final payment on the 10-year loan for renovation of the restaurant would be made in November 2010, after which the only remaining debt service would be the golf course renovation loan. Mr. Knight advised that Country Club debt service for FY 2011 is $424,901 total. REVENUES Mr. Knight detailed budgeted revenues of $4,061.972. Mr. Knight noted the top two sources of revenue are cart rentaUwalking fees and food and beverage. Mr. Knight reviewed member privileges, a proposed list of additional benefits and discounts for golf members. Mr. Knight discussed the new "Guest of Members Play Policy." It was noted that special events, such as member-guest events do not count toward the one time per month limit for guest of member play. Mr. Knight reviewed proposed membership categories and fees for FY2011. Discussion ensued on the "early pay" rate and due date for membership payment in order to receive the reduced rate. Council consensus was that the due date be changed from September lst to October lst. Additionally, with regard to memberships that expire on other dates, consensus was to apply the reduced rate if membership is renewed 30 days in advance. Mr. Knight advised that revenues for corporate memberships and "all inclusive" memberships were not included in the budget, as the potential number of these memberships is to be determined. Mr. Knight described the proposed time periods or "seasons" during which greens fees would change, and noted that the published fee schedule incorporates both greens fee and cart rental. Mr. Knight advised the projected revenue for walk-in play is $784,000 for FY 2011, which is based on actual play in 2009-2010. Mr. Knight noted there is no change in the cart rental or walking fees. Mr. Knight reviewed driving range revenue, which is based on an average of revenue received in the last three years. Mr. Knight discussed projected revenue for the food and beverage operation, as well as the projected cost for alcohol and food. CONSENSUS ITEMS • membership rates approved as proposed, except that members with paid renewal by October 1st or 30 days in advance receive FY 2010 rate ADJOURNMENT With no further business to come before the Council, the meeting adjourned at 9:55 p.m. • Melissa Teal, CMC, Village Clerk