The Really Big Facility Question – How Much Will Members Pay?

It is relatively easy to see what facility improvements are needed at any club. But it is difficult to crystal-ball the ability or members’ willingness to help pay for them. There are many factors that go into the development of a funding program, especially when the construction costs have increased as they recently have. Fortunately, thanks to Club Benchmarking, most clubs have now begun to take care of their depreciation liabilities, so they don’t fall into major facility-maintenance deficits. But capital-replacement dues don’t fund the future capital dues required to keep clubs viable with cutting-edge facilities.

At McMahon, with our 41 years of survey research and capital-planning experience for over 1,500 clubs, raising over $3.5 billion, we know that clubs normally do major capital projects in ten-year cycles. These projects are the necessary new features that clubs must add or improve to stay viable in their marketplaces. These projects almost always require new capital-funding requirements, as they must be developed for club and marketplace conditions ten years in the future. Some clubs try to estimate their future capital needs ten years out and set aside annual funds for them. However, this rarely works, as today’s members don’t want to pay for future improvements that will be of more benefit to future members. Likewise, the temptation for future Boards to tap big reserve funds that are sitting idle is just too tempting for favorite Board projects. 

THE SOLUTION

For clubs, it is best to raise capital for future projects on ten-year cycles when a club needs them and can justify them with members. The best way to test club fundraising is by surveying a club’s membership to learn:

• First, their satisfaction or dissatisfaction with existing facilities;
• Second, what new facilities they want, and
• Third, how much they are willing to pay for new, improved facilities. 

A comprehensive membership survey at the beginning of a facility-planning program provides the answers to these three questions. With the answers gained through the survey, a club can develop its major capital-improvement funding strategies not only knowing what to build, but also how much members will pay to achieve them. You also learn how to best communicate about the projects to get the most votes. 

MAJOR WAYS TO FUND MAJOR PROJECTS

In today’s fundraising world, there are three basic strategies for financing facility-improvement projects beyond using cash on hand. They are:

Option One: Upfront assessments with very short payment periods of one to two years. 

Option Two: Monthly capital payment programs that support bank loans for time periods of 5, 10 or 15 years. Such payment plans expire upon a member leaving a club prior to the loan’s length of years. This forgiveness of payments is feasible because all new members usually pay an increased initiation fee when joining. 

Option Three: This is a combination of some upfront assessment and a monthly capital payment; in effect, a combination of options one and two. In reality, Option Three is the best funding option. 

Some simple lessons learned in McMahon’s 41 years of project planning and approvals are as follows:

1. Make sure the Facility Plan is a part of the club’s Strategic Plan. If you don’t have a Strategic Plan, develop one. 
2. Make sure the Facility Plan is the members’ plan based on a member presentation survey. 
3. Make sure there are no other major club controversies occurring at the same time. 
4. Be aggressive when proposing facilities with scope, cost and financing. You can always lower costs, but you can’t raise them once presented.
5. Have the first presentations of a project include a straw-poll survey before a final vote is taken. This is the best way to assure project approval.

So, if your club needs to make capital improvements, do it the right way and achieve maximum success the first time. A little investment at the beginning assures success at the end.