Capital expenditures shall be made only on the projects, and only in the amounts for each project, set forth in annual capital budgets that have been recommended by the Finance Committee and approved by the Board. Once adopted, the capital budget may be modified (for example, to authorize an additional project) by a Board resolution.
Sections 1 through 3 below are a summary. For further details, please read the complete policy which follows.
1. Budget-Making Process. Each fall, a 5-year plan of capital projects, including a capital budget for the subsequent year, shall be approved by the Board, following the process described in Part D below. As a general summary:
(i) Staff and committees propose prioritized and categorized 5-year plans for their areas, with recommended projects;
(ii) Controller aggregates and Finance Committee reviews proposals, and Finance Committee (or its Chair) proposes a preliminary capital budget for the coming year;
(iii) Capital Budget All-Hands Review is held, attended by the Finance Committee, other committee chairs and staff, at which the Finance Committee determines and votes on its final recommended capital budget for the upcoming year along with its recommended 5-year capital plan;
(iv) Board approves a final capital budget and 5-year capital plan.
2. Use of Contingency and Unallocated Funds. A contingency shall be included in each annual capital budget. Amounts budgeted for specific projects and not used shall be transferred to "unallocated funds." The General Manager may approve a use of the contingency (but not unallocated funds) for an existing or a new project, up to a limit of $5,000 per project (or, if greater: 10% of the original amount budgeted for an existing project, but not more than $20,000). In an emergency, a larger use of the contingency, or a use of unallocated funds, may be approved by two of the following: the Chair of the Finance Committee, the Treasurer and the President.
Other uses of the contingency or unallocated funds require Board approval.
3. Special Capital Projects require member input and special approval as described in the complete policy below at Part F. A project is special if it:
(i) is not necessary as defined below in E.5 and
(ii) either (1) costs more than $250,000 or (2) makes a readily apparent change in the appearance of an area of the Club that is generally used by members, or in the way in which such an area is used.
The Board of Trustees shall not have the authority and right … to make or
enter into any contract for a major addition to or a major reconstruction of any
of the Club’s principal facilities until such … addition or reconstruction has
been first approved by a majority vote of the Active members.
Article IV, Section 6(b)
5/23/19 (regarding 2019-21 Pool remodeling and reconstruction): Board determined that the pool is not one of the Club's principal facilities, and thus its reconstruction does not require membership approval pursuant to the Bylaws unless the project is over 50% of annual operating revenue in the preceding year. As noted below, when the budget for this project later exceeded the 50% threshold, member approval was obtained on 10/8/20.
Whenever the Board of Trustees adopts any plans for the expenditure of funds
of the Club for capital improvement in an amount exceeding fifty percent (50%)
of the annual operating revenue as stated on the preceding year’s audited
financial statement or takes any action requiring the imposition of an
assessment upon the membership, such action shall not be effective until the
Board of Trustees submits such plan or such assessment to a vote of the Active
members and receives a majority approval of the Active members. Any capital
improvement expenditure in a sum less than fifty percent (50%) of the annual
operating revenue as stated on the preceding year’s audited financial statement
shall not require a vote of the members
pursuant to this subsection (c) unless it requires the imposition of an assessment.
Article IV, Section 6(c)
In 2019, the annual operating revenue referred to above was $11,881,199, so the threhold for member approval in 2020 was $5,940,600.
In 2022, the annual operating revenue was $12,292,436, so the threshold in 2023 is $6,146,218.
Questions requiring membership approval shall be submitted to the membership at an annual meeting or
a special meeting called for that purpose.
Article IV, Section 6(d)
Projects for which membership approval was previously obtained in recent years:
12/30/24: 2025-26 Remodeling of the food and beverage facilities, approved.
10/8/20: 2019-21 Pool remodeling and reconstruction, when it exceeded the 50% of annual operating income threshold, approved.
10/24/12: 2013 Pro shop and north lawn project, approved; discussion meeting held 9/20/12.
6/19/07: 2007 Parking lot and indoor court building project, approved.
10/16/03: 2004 Gym and sprinkler project, approved.
10/9/96, 7/15/97 & 3/17/99: 1998-99 "Big remodel" of the entire clubhouse and some of the grounds, approved; two increases in budget approved
4. Clay Courts (2024-25). The Board assures the members there will be no material change to the clay courts until there is a member vote.
4/25/24: Board adopted MSP regarding clay courts.
1. Committee Proposals. Each year – generally by the end of September – a 5-year plan of capital projects shall be compiled and/or updated by each department head and committee for the relevant area of the Club, and must be approved by that committee. The committee shall rank each project by priority and place each project in one of the following four categories: (i) replace existing/end of life; (ii) refresh/enhancement; (iii) efficiency/return on investment; (iv) regulatory compliance. The General Manager and Controller shall review all proposals.
2. Leases; Professional Fees. For capital budgeting purposes, all leases (other than immaterial leases referred to in 220(D)(2)) shall be treated as a series of capital expenditures in each year of the lease in an amount equal to the rent payable in that year, rather than as a single capital expenditure in the first year of the lease.
A lease commencing on April 1 with a term of 5 years and rent of $1,000 per month ($60,000 total rent), for capital budgeting purposes would be treated as a capital expenditure of $9,000 in the first calendar year, $12,000 in each of the following four calendar years, and $3,000 in the last calendar year.
All capital projects should include, in the appropriate year’s capital budget, all professional fees and costs associated with bringing the project to fruition. All capital professional fees shall be allocated to a specific approved capital project.
4/25/24: Modified provision to refer to all leases, per Acccounting Standards Codification 842, but also removing immaterial leases from the capital expenditure budgeting process.
3. Finance Committee Review. The proposals approved by the responsible committee shall be compiled by the Controller, along with any other materials such as presentation slides or other supporting documents, and provided to the Finance Committee at its October meeting. The Finance Committee shall review a long-term cash flow projection, incorporating the trends in internal and external growth and the associated revenues, review the most recent information from the prior year’s capital 5-year projection and assess cash reserves. The Finance Committee shall use this projection to make a recommendation of the capital project budget for the upcoming year. The Finance Committee may direct further research into certain items to the department heads and/or committees to be considered in approving the preliminary capital budget referred to below.
4. Preliminary Capital Budget. The Finance Committee shall approve a preliminary capital budget for the upcoming year at least one week before the Capital Budget All-Hands Review referred to below. If the Finance Committee is unable to vote on a preliminary budget timely, the preliminary budget may be approved by the Finance Committee Chair. The preliminary budget shall list both the proposed projects that are included, as well as those that have been excluded, and may list a limited number of proposed projects with an indication that a decision remains to be made on whether to include or exclude that project.
5. Capital Budget All-Hands Review. The preliminary budget shall be presented at a Capital Budget All-Hands Review in the first half of November. The Controller shall provide to all committee chairs the preliminary capital budget referred to above, other meeting materials and Finance Committee input at least one week prior to the Capital Budget All-Hands Review.
The Finance Committee shall recommend a capital budget during the Capital Budget All-Hands Review (based on the preliminary capital budget, but with all proposed projects either included or excluded), along with a 5-year capital plan.
6. Board Approval. The Board shall consider the Finance Committee’s recommendation at its next meeting or, if necessary, at its January meeting at the latest. The Board may exclude or modify some of the projects recommended by the Finance Committee, and may add back proposals excluded by the Finance Committee. The Board should not increase the total amount of the upcoming year capital expenditure budget without consulting with the Finance Committee Chair.
7. One-Year Budget and Plan for Later Years. The upcoming year budget is set when the Board approves it, and the subsequent 4 years are considered advisory for long term cash flow planning purposes. The long-term cash flow projections shall be updated and distributed to the Finance Committee at their next scheduled meeting after the Board approves the capital plan.
1. Two Funds. The contingency shall be included in the annual budget as described above.
Monthly capital expenditure reports shall also list as a separate line item the balance of "unallocated funds," meaning the aggregate amount of funds budgeted for particular projects that will not be expended on those projects, less portions of "unallocated funds" allocated to other capital projects as described below. If a project included in the original capital budget is abandoned or postponed beyond the current year, or if the General Manager determines that the cost of that project is or will be less than the amount budgeted, the General Manager shall transfer to "unallocated funds" the excess of the amount budgeted for that project over its actual cost.
2. General Manager Approval of Small Uses of Contingency. The General Manager may approve a use of the contingency (but not unallocated funds) for an existing or a new project, up to a limit of $5,000 per project (or, if greater: 10% of the original amount budgeted for an existing project, but not more than $20,000). In the case of a lease (other than an immaterial lease referred to in 220(D)(2)), the foregoing limits apply to the entire rent payable over the term of the lease, rather than only the amount payable in the then-current year.
4/25/24: Added second sentence: clarifying change only.
This limit applies to the cumulative amount of all transfers made to a particular project over the course of the entire year. That is: if the General Manager approves the use of $4,500 of contingency for a particular project in January, he or she may not thereafter approve the use of more than $500 for that project.
3. Emergency Approval of Uses of Contingency or Unallocated Funds. In an emergency, a larger use of the contingency, or a use of unallocated funds, may be approved by two of the following: the Chair of the Finance Committee, the Treasurer and the President. An emergency exists as to a capital expenditure only if:
(i) the capital expenditure is necessary, as defined below, and
(ii) circumstances do not permit deferring it until the next regular meeting of the Board.
4. Other Uses. Other uses of the contingency or unallocated funds require Board approval.
5. "Necessary," as to a capital expenditure, is used in this policy in a narrow sense. A project should be considered necessary only if it must be undertaken in order to (a) comply with law, (b) to prevent either material damage to property or a material risk of immediate injury or (c) to repair or replace a capital asset so that it continues to function as originally intended, where the failure of that function would have a material adverse effect on members’ experience in using the Club. For example, if the city building inspector advises that exit signs need to be installed in a room to comply with the fire code, that would be a necessary project. On the other hand, building a ramp to comply with the ADA would not be necessary in the absence of a determination that the Club is required to comply with the ADA. Replacing a concrete patio to fix cracks that have been present for several years because somebody might someday trip over them would not be necessary. Replacing a stack that an engineer has advised is in imminent danger of collapse would be necessary. Repairing and replacing components of the clubhouse HVAC system would be necessary to the extent they must be undertaken to allow the system to continue to regulate the temperature of the clubhouse as originally intended. A particular project may be necessary only in part.
9/28/23: Definition of "necessary" updated to include repair and replacement of capital assets as described in clause (c).
1. Definition. A project is a special capital project if it:
(i) is not necessary, as defined at E.5 above, or is only partly necessary; and
(ii) either (1) costs more than $250,000, over its entire term (whether or not it extends beyond a single year) or (2) makes a readily apparent change in the appearance of an area of the Club that is generally used by members, or in the way in which such an area is used.
9/28/23: "Special" capital expenditure threshold increased to $250,000 from original 1996 figure of $100,000.
An incomplete list of projects previously treated as special capital projects:
2007: remodel of men’s locker room;
2003: remodel of Pro Shop and waiting area;
1996: conversion of tennis courts 13, 14 and 15 to "soft courts."
2. Four-Month Member Review of Special Capital Projects. After a special capital project is first approved by the relevant committee, it shall be made available for membership review and comment for a period of at least four months.
Members must have a real opportunity to review and comment. At a minimum, a short description of the proposed special capital project shall be published in the newsletter, with a note that members can get detailed information concerning the proposal at the front desk. If possible, architects’ drawings and other information shall be posted on boards in the areas to be affected or other main areas of the clubhouse. Copies of the complete description of the proposal, with architects’ or designers’ drawings and the like, and supporting information, may be made available for check out at the front desk.
3. Final Approval by Relevant Committee. After the four-month member review, each special capital project must be finally approved by a vote of at least two-thirds of all members (whether or not present at the meeting) of the responsible committee. The responsible committee shall review and take into account member comments. Instead of finally approving the proposal, the responsible committee may reject it, defer it for later consideration or modify it. Significant modifications must again be made available for membership review and comment before being finally approved by the responsible committee.
4. Note. The period from initial proposal to final approval of special capital projects may in many cases be longer than a year. While this may be viewed as a problem by advocates of such projects, it has the advantage of ensuring that there will be some change in the makeup of the responsible committee between initial and final approval.
5. Delegation. The Board shall expressly delegate the execution of each special project to management, a hired project manager, a special committee formed for that purpose or a standing committee, and shall define the limits of that delegation and what decisions require Board approval. The Board may modify the details of that delegation in the course of a special project. Management shall refer to the terms of this delegation to ensure proper approval prior to releasing any funds related to special projects.
In 1995, the Finance Committee was asked to review selected comments made by members on a recent major membership survey. The Committee made the following comments and recommended adoption of a formal capital expenditure policy:
One area in which there appears to be a material level of membership dissatisfaction is capital expenditure decisions. Some comments addressed the process by which capital project decisions are made (for example, that rooms are redecorated, then redecorated again a few years later) and others the advisability of the decisions themselves (many of these were directed at the recent lawn project). While there is no way to determine exactly how widely these views are held, similar comments were made by a number of members. At the very least, there is a perception among some members that there is problem, which is in itself a problem.
The Finance Committee believes that the following problems, or perceived problems, should be addressed:
capital projects are proposed and undertaken on the basis that they are "necessary," without any systematic process for evaluating their necessity;
other projects (such as remodeling and redecoration) that are not necessary are undertaken because they are championed by a small number of interested members, but without any broad agreement that they are advisable;
projects are approved with a sense of urgency and without time for careful contemplation, when they could just as easily be deferred for later consideration;
there is no process for gathering the information necessary to prioritize various projects that are competing for the same funds;
there are currently certain procedures for approving capital expenditures that are generally understood by committee and Board members, but that are not expressly set forth anywhere, with the result that they are sometimes inadvertently or purposefully circumvented.
The Finance Committee believes that the procedure by which capital expenditure projects are proposed and approved should be both (i) made more systematic and (ii) expressly set forth so that is fully understood and will be less likely to be inadvertently or purposefully circumvented.
–
1/26/96: Original capital expenditure policy approved; 10/28/21: New revision of Chapter 221 completed; 7/28/22: Revised Chapter 221 formally approved by the Board.