November 3, 2017
The Board of Directors of the St. Francis Yacht Club would like to provide a comprehensive update on several timely topics, with input from Board members and certain Committee chairs. The key topics discussed herein are:
- Finances & Fiscal Responsibility
- Membership Dues and Capital Dues
- Tinsley Island Berm Repair and Lagoon Dredge
- Race and Junior Programs
- Labor Negotiations
Finances & Fiscal Responsibility
Dick Watts, Director, Chair of the Finance Committee
2017 Club finances are in good shape. Management has maintained tight control of expenses and, despite unforeseen costs, such as winter/spring flooding at Tinsley Island, the operating expenses year-to-date are 0.1% under budget. The 2.4% growth in expenses year-over-year is less than the CPI for the San Francisco Bay Area. Addressing the inevitable increases in yearly expenses is always our focus and the Board continues to encourage management to find more efficient ways to provide the members’ desired level of services, whether it’s by: evaluating event costs, managing food margins, monitoring the number and cost of regattas, or scrutinizing the hiring of new staff.
Club revenues are up 2.3% from last year and are 0.1% ahead of year-to-date budget. We are on track to meet our targeted contribution to capital of $129,000 by year-end. The biggest revenue growth is in member parties & catering, followed by club functions, both reflecting increased usage of club facilities.
In addition to overseeing operational performance, the Board carefully tracks cash reserves needed for capital purchases, whether routine (replacing worn-out equipment), or extraordinary, such as berm repair at Tinsley or a new roof for the San Francisco clubhouse. Reserves are managed strictly in accordance with a Board-approved investment policy that distinguishes between cash for routine expenses, capital reserves for extraordinary expenses, insurance reserves required by the insurance policy on the clubhouse, and several small endowment funds. The Club had a cash balance of $3.9M as of September 30, 2017, and we are on track to fund all 2018 capital expenses, including the cost of dredging at Tinsley, without any assessment on the membership. Operating expenses and capital requests are reviewed regularly to ensure they are within budget, and are processed appropriately through the Board. (For details, see Appendix A: 2017 Financial Summary through September 30.)
The Finance Committee routinely revisits a five-year long-range financial plan to develop strategies for prioritizing costs, building capital reserves and managing dues requirements.
Membership Dues and Capital Dues
Dick Watts, Director, Chair of the Finance Committee
To understand the current dues status, it’s helpful to review some short-term history of regular monthly dues and capital dues. Prior to 2013, annual increases in regular dues varied from 0% to 11%, and capital reserves came from profit from operations and new member initiation fees. Several years ago, finance committees adopted a strategy of normalizing dues increases at approximately 4% per year, which allowed a smoother management of club finances and a more consistent indexing of dues for the members.
In 2015, the Finance Committee began to explore the long-term effect of compounding dues increases, the potential for future revenue sources, the impact of escalating costs and the required capital reserves that would be necessary to support the club in years to come. Using these considerations, the Committee built an interactive financial model looking out five years that would help inform the Club’s financial decisions going forward.
During this process, it was noted that by increasing the dues a flat percentage each year, our highest paying regular members (R41+) would end up paying over $400/month within five years—a price point that would be unappealing to existing and prospective members alike. The 2015 Finance Committee elected to continue with the traditional 4% dues increase for 2016 and conveyed its concerns about compounding dues increases to the incoming 2016 Finance Committee. That committee, under the leadership of a new chairperson, continued the review and decided to recommend that the club slow the rate of increase of the R41+ category and to more equitably distribute operating costs among the other dues categories.
The committee recommended to shift from the flat percentage increase to a flat dollar increase of $8 for all membership categories, adjusted for certain reduced-dues categories. This meant the lower-paying dues categories saw a larger percentage increase than the higher dues-paying categories. The R41+ member paying $344.50 per month, for example, experienced a 2.32% increase, while a non-resident member paying $124 per month saw a 6.45% increase. Certain regular members who were paying between 19% and 52% less than the R41+ rate had their reduction percentage reset to between 16% and 47%. (A letter explaining the rationale was sent to effected members at that time.) Overall, the 2017 increases ranged from 2.32% to 12.39%, with the total dues revenue still at the traditional 4%; slightly smaller percentage increases are anticipated for 2018.
In parallel with the 2015 dues study, the Long Range Planning Committee (LRP) presented its research on the future capital replacement requirements of the club. The cost of those projects was well beyond the club’s current capital reserves (which came from operational profits and new member initiation fees) and necessitated some other form of financing. The committee explored various financing options, from debt to assessments, and deliberated extensively, speaking with the membership and reviewing preferences expressed in a membership survey. Eventually the committee recommended, and the Board approved, a $10/month capital dues for all members. This allowed the club to begin steadily building reserves without unduly burdening the membership with assessments or debt payments. Because each member category has access to all club facilities, the capital dues were applied to all members equally.
The 2016 LRP Committee, in the course of reviewing future capital needs, projected that the recommended engineering solutions to the dredge and berm projects on Tinsley Island necessitated further capital funds above and beyond what was already scheduled. Again, after considering multiple financing options, including debt and assessments, the committee concluded that an increase in capital dues of $15/month was required for 2017—bringing the total capital dues to $25/month per member. Because Tinsley is a major asset of the club, the Board approved applying that increase across all membership categories equally, with some adjustment for juniors, even though this meant a larger percentage impact for the lower-paying dues categories.
The Board continues to monitor our dues structure carefully and works to balance membership experience versus cost of membership, whether those costs are in the form of dues or the price of the services the club offers. No increase in capital dues is contemplated for 2018.
Race and Junior Programs
Paul Heineken, Rear Commodore
StFYC Race and Junior programs have had remarkable success in 2017. The Executive Race Committee hosted events nearly every weekend from March into November. Meanwhile, our sailors represented the Club extremely well around the country and around the world. Highlights include the following:
- Two of our members won the 2016 Rolex Yachtswoman and Yachtsmen of the Year Awards. These were awarded at the New York Yacht Club in early 2017.
- We hired a Race Director, filling out one of the best race offices in the country.
- Rolex Big Boat Series was a huge success and helped pave the way to discussions on a new long-term Rolex sponsorship agreement.
- The StFYC Challenge Team improved its organization and planning such that more sailors represented the Club in a wider variety of prestigious events than ever. We won the Hinman Masters, US Sailing Team Racing Championship and San Francisco Cup.
- A special adult Women’s Tinsley camp was a tremendous success
- The J/22 fleet was more actively used than during any previous year, with two sold-out series, two women’s sailing programs and a flurry of junior, match race and team race practice.
- The junior program continued its successful run.
o The spring and fall high school programs were fully subscribed.
o Tinsley summer camps were sold out.
o In conjunction with US Sailing, the Club hosted successful high-performance clinics, leading to a few of our juniors making the US Sailing Olympic Development Team.
o A major reorganization of junior sailing will change the 2018 spring high school season from FJ sailing to a variety of new activities including keelboats, seamanship and high-performance racing on catamarans and kiteboards.
Elizabeth Little, Officer, Chair of the Membership Committee and Medea Bern, Director
Member engagement continues to be strong, as reflected by increased food and beverage activity, significant participation in club events and regattas, and continued sponsorship of new members.
As of October, there have been 97 new members and 84 resignations this year. There are another 21 members scheduled to join by February 2018, and 45 applications lined up after that. We expect to end the year with more new members joining than resigning. We are on track to meet or exceed our budgeted member initiation fees.
We currently have 2,385 dues-paying members, which is in harmony with the member count of the past decade (ranging from 2,201 in 2010 to 2,432 in 2015). Though there remains room and reason for growth, this number brings reassurance, considering increased competition of social clubs in the area, declining membership trends across yacht and golf clubs, and no local America’s Cup activity to incent. With the addition of a dedicated Membership Director in July 2017, and with continued member commitment to sponsor new members into our club, we are confident we will continue to strengthen and enrich our membership base, together.
In August 2017, we completed an analysis of the 77 members who had resigned thus far in the year to learn more about their club experience and reason for leaving. Of the resigned members, 23 were Non-resident, 21 were Regular and 14 were 65+; the balance were evenly distributed among the other membership categories. The most common reasons for resignations were: distance from the club, lack of use (including cost of membership given lack of use), and age.
Retaining members is critical to growing our membership base. To ensure that each member feels welcome and engaged, we have begun work on reinstating a new-member orientation program. In addition to a print program, this live orientation will address every aspect of getting involved, from joining a committee to getting on the water. To ensure its endurance, we expect to build a program that will eventually run through Club management, with continuing input from Membership and Membership Development. In addition, we are discussing methods for identifying members who may not be using the Club as often as they once did, with the goal of re-engaging those members.
Tinsley Island Berm Repair and Lagoon Dredge
Lee Leonard, Director and Damir Priskich, Chair of the Berm Sub-Committee
Tinsley Island is one of our most prized possessions. Its long-term survivability is of paramount interest to the Board. We have been diligently proceeding with what the engineers feel is a permanent fix to the berm and levee issues.
The “hot spot” in the berm was repaired in 2010/2011. The fix was a $540,000 Rock Revetment placed over the berm. In 2015/2016 the Rock Revetment was not holding and several of our members on the long-range planning committee with experience in this field reviewed an engineered sheet pile solution along with a new Rock Crest fix. The Board decided to again repair the hot spot with a new Rock Crest. In preparing for the fix, the engineers discovered that the initial Rock Revetment had already been repaired once previously in 2013 and that the sink rate was much faster than originally measured. The implications were profound in that we could no longer rely on the less expensive Rock Crest fix as a long-term solution to the hot spot. Consequently, the Board, with advice from outside professionals, selected the sheet pile fix as the best alternative to a long-term solution.
Beginning in 2017 and in parallel to the above berm work, we were also completing the necessary tasks required to obtain a dredge permit. It was made clear to us through our many interactions with the Army Corps and other regulatory agencies that we would need to submit a Master Plan for all in-water projects even if permits were to be applied for separately. Surveys of the levees showed that certain locations were perilously low already (as validated with the extensive flooding of the island in the spring of 2017) and that the entire levee should be raised approximately 18 inches. With this backdrop, and under the supervision of two of our members, we began the work described below:
All of the following dredge-related tasks have been completed:
- Develop Master Plan including Levees, Maintenance Dredging, Berm Repair (hot spot), Berm Maintenance (see below), Dock Replacement
- Survey levees surrounding entire island
- Conduct a detailed bathymetric mapping of the entire lagoon and approaches
- Complete a rough design of the dredge taking into careful consideration the slope requirements so as not to imperil the fragile berm or levee
- Complete a detailed design with input from the harbormaster and others providing optimal depths for the various docks and surrounding areas
- Calculate the approximate volume of material to be removed
- Develop and submit a sampling and analysis plan (SAP) to characterize the biological, chemical, and structural properties of the material to be removed
- Complete a draft Environmental Impact Report (DEIR)
- Receive regulatory approval of SAP
- Complete the core sampling and analysis (additional core samples were taken inside and outside the lagoon as well as near the berm and on various locations around the island to support long-range planning efforts)
- Contact representatives from all of the surrounding islands to evaluate for potential disposal sites for the dredge
- Evaluate and validate (Geotech analysis) on-island placement site (limited volume)
- File Notice of Intent with Regional Water Quality Control Board (Water Board) for Dredge
- Receive verbal approval from Water Board pending final decision on sediment placement
Additionally, the following berm-related tasks have been completed:
- Complete aerial, terrestrial, geotechnical and biological surveys
- Conduct ongoing systematic visual observations on entire berm
- Study wave and wake action
- Deploy short-term (4–6 year) mitigation measures at hot spot: installed a barge to attenuate wave action, added Envirolock bags to add elevation
- Develop long-term (50 year) sheet-pile solution for hot spot—sufficient for construction estimates
- Compile preliminary construction estimates
- Complete preliminary Draft Environmental Report (DEIR) for permit applications
- Develop long-term sheet-pile solution for remainder of main channel berm
- Pursue Thin Film Application solution in hopes that no additional sheet-pile will ever be required
All of the following dock-related tasks have been completed:
- Complete survey of existing docks
- Draft designs for replacement docks including possible additional NW dock
- Redesign Main Dock for ADA ramp and additional dockage capacity
- Investigate pre-fab dock systems ideally suited for Toiler construction
All of the following levee-related tasks have been completed:
- Conduct aerial, terrestrial, geotechnical and biological surveys
- Establish basis point (land mass heights and water levels in 3-dimensional space)
- Identify critical low spots
- Install automated water-level monitoring system on Mail Dock
- Produce preliminary DEIR for 18-inch levee-height increase
The cost of these projects has been approximately $700,000 over the last four years. We continue to move forward with incidental discussions while we wait for our EIR report to be approved. Thus far we have invested approximately $10,000 (2014), $200,000 (2015), $400,000 (2016) and $90,000 (2017). Over 85% of these funds went directly to project-work that will be required for any permitting or construction; the other 15% went to research, professional consultation, legal counsel to coordinate with various governmental entities and other supporting activities. Dredging is expected to begin in Fall 2018 and Berm repair in 2022.
Robin Driscoll, Chairman of the Board
The Club continues to operate under the same Local 2 labor contract that was ratified in 2013 and expired in 2015. Club management is in regular contact with our union representatives, as union negotiations proceed with other clubs in the area. In the interim, we have increased our employees’ wages to maintain a strong working relationship with our valued staff. We are standing by and prepared to begin discussions. We understand we may be contacted by the union in mid-November or December. Further, it is our understanding that there will be a request for an increase in wages, and possibly a material increase in Health & Welfare contributions. We will keep you posted as more information is available.
Governance of the Club
Maurice Fitzgerald, Esq., Director
Questions have recently been asked as to whether the Board intended to eliminate the voting rights of regular members over the age of 65. The Board has not entertained any such idea, nor has any proposal regarding voting rights been raised, discussed or acted upon in any manner by the Board. The right to vote is established by the bylaws. Any changes in voting rights would thereby require a vote of the entire voting membership. There are no bylaw changes scheduled for a vote this year.
Jim Kiriakis, Commodore
In summary, your Board of Directors has effectively managed the 2017 budget. We are on track to finish the year with revenue and contribution to capital ahead of budget. We are also on track to fund all 2018 capital expenses, including the cost of dredging at Tinsley. We remain diligent of all financial aspects of the club, its infrastructure and our capital reserves.
Our member count is in harmony with trends of the last decade, with 2,385 dues-paying members. We will finish the year with more new member additions than resignations.
Our race program continues to be a leader in international yachting circles. We host more days on the water than any other Club and our sailors continue to deliver impressive accomplishments, including both 2016 Rolex Yachtsman and Yachtswoman of the Year Awards, the 2017 Hinman Masters Trophy and the 2017 US Sailing Team Racing Championship. We are leading the Bay Area in junior sailing development and are pioneering a program that will develop high-performing young sailors. Our members continue to cruise enthusiastically, with several Cruise Committee-led adventures in 2017 and one fantastic Commodore’s Cruise in Maine this past July.
Through all aspects, the success of the St. Francis Yacht Club derives from the hard work of professional staff and dedicated members working together to reinforce our position as one of the best clubs in the world. We are brought together by the Club’s mission statement:
"To serve as the inspirational center of boating activities regionally and a leader of yachting internationally. We honor camaraderie, sportsmanship, tradition and the maritime heritage of San Francisco in a premier yachting environment."
James Kiriakis, Commodore
Paul Heineken, Rear Commodore
Robin J. Driscoll, Chairman of the Board of Directors
Medea Isphording Bern, Director
James Fisher, Director
Maurice J. Fitzgerald, Jr., Director
Pamela Healy, Director
Lee C. Leonard, Director
Dick Watts, Director
Dave Wilson, Jr., Director
Elizabeth Little, Membership Committee Chair
Appendix A: 2017 Financial Summary through September 30