Capital Planning – Lump Sum or Monthly Payments?

Making the Case for Two Perspectives on Capital Assessments

By David Dew, CCM, CCE – VP of Club Consulting, Christian Clerc, AIA – VP of Club Consulting and Bill McMahon Sr., AIA, OAA – Founder

We’ve noticed something interesting lately—more clubs are choosing lump-sum capital assessments over installment plans when determining how to ask members to help fund capital projects. It’s not yet a wholesale shift in thinking, but it’s been enough to catch our attention. 

The decision matters more than you might think. So we asked two of our consultants to weigh in on what they feel are the primary advantages offered by each approach—and then to discuss how clubs may be able to benefit by combining the best of both worlds. 

 

The Case for: Lump-Sum Assessments

Christian Clerc, AIA – VP of Club Consulting

Let me be direct: If your club needs capital now, lump-sum assessments deliver it with a certainty that installment plans simply cannot match.

The appeal is straightforward. If your club has maxed out its borrowing capacity but still needs to renovate the clubhouse or rebuild the pool, a lump-sum assessment gives you access to capital without adding debt to the balance sheet. And let’s be honest—many memberships don’t like debt. They view it as poor stewardship, and a lump-sum assessment honors that philosophy while still getting the work done.

But the certainty that comes with lump-sum assessments is the real advantage. When you collect all the money upfront, you eliminate the risk of members not paying during an economic downturn or resigning before they’ve completed their payments. You’ve got the cash in hand, and you can move forward with confidence. In times of economic uncertainty, that’s worth something substantial.

There’s also the administrative simplicity. One payment, one accounting entry—done. No tracking individual payment schedules, managing delinquencies for years, or consuming staff time with collection efforts that never achieve a 100% success rate.

My colleague David Dew will tell you about liquidity issues—and yes, that’s a consideration. But here’s what I see: Clubs that clearly communicate the case for a lump-sum assessment can get through the process successfully by providing adequate notice and offering short-term bridge-financing options for members who need it. Members figure it out. They’re resourceful people.

The lump-sum approach forces clarity. Either the membership truly supports the project, or it doesn’t. You find out quickly, and you move forward decisively.

 

The Case for: Monthly Installment Plans

David Dew, CCM, CCE – VP of Club Consulting

While I respect the position stated by my colleague Christian Clerc, I’ve watched too many clubs damage their membership base with poorly timed lump-sum assessments to let his argument stand unchallenged.

Monthly installment plans shine because they work for everyone across the age spectrum—and that matters because your membership isn’t homogeneous.

Younger members in the 35- to 50-year-old range typically have strong incomes and promising careers—but they’re also managing mortgages, childcare costs, college savings, and all the competing financial demands of raising a family. A $300 monthly assessment over four years? They usually can work that into their budget. But cutting a $14,400 check may be a different conversation at the kitchen table—and one that too often ends with a resignation letter.

Senior members present a different challenge. While they may have substantial net worth, we find they are often on fixed retirement incomes and emotionally resistant to large discretionary outlays late in life. They may not want to write a $25,000 check at age 83—but if they’re given a $400/month payment option over the next six years, that may feel manageable. It doesn’t force decisions about estate planning or trigger an emotional reaction about whether to stay in the club at all.

Let me also address an “elephant” we find in most every boardroom: Boards need to remember that wealth and liquidity aren’t the same thing, and their average member may not necessarily be as passionate about the club’s next project, because they doesn’t always have large discretionary amounts sitting in their checking accounts. To make a lump-sum payment, they may need to adjust investments at an undesirable time or disrupt their retirement strategies.  This pressure can trigger an emotional response that inevitably leads to resignations.  While this may be less of a concern for clubs that have waitlists, it’s can still lead to added tensions within the club culture.  

Then there is the case of new members, who can get hit especially hard.  Soon after the they just wrote checks for substantial initiation fees, the club is now asking for another major payment. To some members, this process may even feel punitive. In soft or highly competitive markets, it can also create real membership-recruiting problems. A club with a history of large, one-time assessments becomes much less attractive than competing clubs where that hasn’t been the case.

There are also governance benefits to the monthly-payment approach. Members are likely to approve installment assessments (or an increase in capital dues) more readily because they don’t require an immediate financial disruption. Often, when using this method, a Board can dodge the heated political battles that fracture a membership and damage Board relationships for years.

Yes, depending on a club’s bylaws, monthly plans can bring small collection risks and added administrative complexities—but those are manageable problems with much less potential disruption to a club’s membership and culture. 

 

Where We Agree: The Hybrid Approach

Christian Clerc: David, I’ll concede that pure lump-sum assessments aren’t right for every club in every situation.

David Dew: And I’ll admit that spreading payments over too long a period can create real collection risks and administrative burdens.

I think we can both agree that the clubs that are having the most success aren’t choosing one approach exclusively. They’re using hybrid structures—maybe 30% upfront with the balance due over three years, or 40% due immediately with 24 monthly installments for the remainder.

This captures advantages from both models: immediate capital to start the project and reduced borrowing needs, but enough flexibility that allows members to manage the payments without financial crisis. You get some certainty while maintaining accessibility.

Christian Clerc: The key is understanding your membership. What’s their debt tolerance? What’s their liquidity situation?

David Dew:  Also, what’s their age distribution? And are you in a strong economic environment, or an uncertain one? All of those answers should drive your decision, and not what the club down the road is doing.

Christian Clerc: And here’s where we completely agree: The best assessment structures start with good member surveying. That’s what we do at McMahon Group. We survey clubs to understand the membership. We find out what members want, what they’re willing to pay for, and how they prefer to pay for it. 

Without that insight, you’re guessing. And guessing with six- and seven-figure projects is how clubs get into trouble.

David Dew:  The right structure isn’t a matter of ideology—it’s a matter of evidence. Clubs should model different scenarios based on real data from their members. Then choose the approach that fits your club’s specific circumstances. Because in the right circumstances, either approach can work. The question is: Which one works for your club, right now?

 

Why Capital Fundraising, in Any Form, Has Become More Critical 

Bill McMahon Sr., AIA, OAA – Founder

Remember that money does not grow on trees, and this applies doubly for private clubs. Golf courses, buildings and recreation facilities wear out and have changing needs. And while the ongoing replacement needs from just normal depreciation on capital assets are real, many clubs have relied on self-funding this depreciation out of normal, annual club-operating costs. 

This “solution,” however, has become increasingly harder to sustain—or justify. With demand surging for new recreation facilities like pickleball, expanding fitness options, and more year-round activities with golf simulators, etc., there is constant demand for bigger, better and newer club programs and facilities. And with more clubs today being full with waiting lists of potential members, initiation-fee revenue is more stagnant and unable to support major capital projects from existing operating revenues. 

Almost all clubs require new capital for needed major projects on at least a 10-year frequency.  The only real choice that most of today’s clubs have is to fund major projects by having members help pay the extra project funds through the “dreaded word”—assessments—or by raising additional capital dues. Or, perhaps most effectively, through a combination approach as discussed on pgs. 6-7 by Christian Clerc and David Dew.

Yes, some major, large-membership clubs with several thousand members and good cash flow-generation can put aside additional reserve dollars over and above their normal depreciation reserves—but this is never enough to keep most clubs in a position to fund needed projects for the future. It can also be a risky situation, where members lose control of millions of dollars sitting in reserve accounts that any Board can spend, no matter what restrictions are placed on it. 

Members by far prefer to authorize major projects and the money for them when they can vote to build them. It is also worth noting that we can raise more money for major projects when having members actually approve them, because they feel much more generous when they can actually see that the funds will be applied to what they want. 

Without a doubt, the best way to raise capital dollars is by asking members to help fund projects that they see will provide the most immediate value. When proposed projects are well-presented and wisely paid for, with feasible payment plans that are flexible to each member’s own circumstances, there will be a much better chance of gaining support for funding all or at least a good portion of them with members’ own capital.