An Update of Current Events at SWC

Sent by The SWC Board (White, Michael) on 10/4/2014. This announcement was emailed to all users

Dear SWC Members,

Since our recent informational meeting regarding an offer to purchase the club, the SWC Board and some of our members have been evaluating the challenges associated with selling a non-profit corporation. The following is what we have learned thus far, our plan/next steps to address the offer from Traton homes, and a reminder of key club-by laws and our upcoming annual members meeting.

Georgia Law Regarding the Sale of Non-Profit Corporations

Per Georgia law, in order to distribute the proceeds generated by the dissolution/sale of a non-profit corporation, written notice must be submitted to the Georgia Attorney General stating intent to dissolve. Proceeds from the sale cannot be transferred to members until 30 days after written notice (explaining the rationale for selling the corporation) is submitted to the Attorney General. If the Attorney General decides to challenge the distribution, we would either have to try and contest it or abandon the sale and keep the property. 

Is $5M the fair market value?

An appraisal is needed to determine the club’s fair market value, including the cell tower. If the appraisal indicates that the current offer is significantly below fair market value, the board would attempt to negotiate a price that reasonably approximates fair market value. 

Rezoning Requirement

The sale is conditioned on the rezoning of the property to allow up to nine town homes per acre.  Traton Homes is seeking the same zoning as its current property adjacent to the club. We would require the buyer to be responsible for applying and paying for the rezoning. 

All or Nothing

The board has concluded that if members vote to pursue the sale, it will mean a complete dissolution of Spalding Woods Club with all proceeds distributed equally to the 109 full members. Georgia law does not permit partial distributions.  In other words, we will not entertain any kind of partial sale of the property or apply the financial proceeds to purchasing/building a new club elsewhere.

Taxes

The sale of the club would be a double taxation event – one applied to the corporation and one to the individual members. Given the fact that we do not plan to reinvest gains in another club/non-profit, SWC will be required to report the gain as taxable income and pay federal and state corporate taxes on the gain. When SWC dissolves and distributes its net assets to the membership, the members would be required to report the excess of the distribution they receive over the basis of their equity interest in the club as a capital gain. Members should consult their personal tax advisors regarding the specific tax implications of any distribution they might receive.

The Plan / Next Steps

One of the key attributes of our club is our budget. The board (especially our treasurer, John McCulla) run a very tight ship when it comes to the club’s finances. We plan ~$10-20K/year for club improvements and repairs, with enough put aside to accommodate any surprises (like the occasional tornado that decides to pay us a visit!).

The club is currently at its annual budget low-point, which changes with the upcoming membership renewals for 2015. Before we commit a substantial amount of our cash reserves towards fees related to the sale of the club, we are requesting an indication from the membership if this is the direction we want to pursue, as these additional costs limit the club's ability to operate and plan normally

At the moment, the group of members pushing hardest for the sale of the club are also those most vocal about the club being in need of major repairs costing $~100K. Assuming they are right, and members agree via vote....a lump sum tower payment and a singular tax event would net more than enough money to upgrade all the club's facilities for years to come. The club could easily operate on dues alone and in addition would not have to pay annual taxes on the tower rental income for years to come.

Your current SWC Board has made a conscious effort to keep things simple, perform all needed/required annual maintenance, and not burden membership with requests for additional funds. We have turned down multiple offers ($500K-$1M) to purchase the club’s tower lease (for ~20 yrs).  

If indeed $100K+ is needed to bring the club up to better standards, and members vote to purse such repairs, we have three options that would allow us to increase our cash position sufficiently to make the necessary capital expenditures:

1) Assess existing members. Per the club’s by-laws: “No assessment shall be levied against the members except by the affirmative vote of two-thirds of the members present or represented by proxy at any annual or special meeting”

2) Take out a loan

3) Pursue the sale of future tower rental income

Future repairs aside, before we start spending any money related to selling the club, we need a clear signal from membership on willingness to sell. To do that, we plan to conduct a non-binding, straw vote on whether to pursue the sale of Spalding Woods Club. If a simple majority indicate a willingness to sell, we will postpone improvement plans under our existing budget for 2015 and focus those resources on preparing to sell the club.

Once all due diligence has been conducted and documented, and we have a fair market offer on the table, we will hold a formal vote on whether to accept the buyer’s offer – which will translate into the dissolution and sale of the club. Our by-laws state that 75% of members must approve any dissolution/sale of SWC. We currently have 109 full members, which means 82 “yes” votes would be needed to approve a final sale.

If the straw poll indicates that the majority of members oppose the sale, and want to keep the club, we will focus club resources on getting our baby pool fixed or replaced, and make other needed upgrades/repairs to get ready for swim season 2015.  And most importantly, start actively marketing the club to bring in new members.

Our intention is to mail a card to each full membership address. There can only be one vote per membership/household. More details on the straw vote will be forthcoming.

Annual Meeting – Pertinent Club By-Laws

In December we will conduct the club’s annual member meeting. In light of that meeting and other current events, we wanted to remind members of club by-laws that will likely be guiding influences on upcoming club events, decisions, proposals, meetings, etc:

  • Board members serve a 3-year term, upon approval of the board, board members can elect to continue serving on the board (five of our seven board members have served 3+ yrs)
  • Any vacancy that occurs on the board, can be filled by majority Board vote (which is how most of current board members have been elected)
  • At least 30 days prior to the annual meeting, the Board shall appoint a Nominating Committee which shall propose members of the club for election to the Board. The Nominating Committee shall present its selection to the members at the annual meeting (any volunteers??). Other nominations may be made from the floor at the annual meeting.
  • In the event that Spalding Woods Clubs is approached, or someone attempts voluntarily to solicit the sale of the properties owned by SWC, a ballot of ¾’s of the active members is required for its approval
  • The officers of “the Corporation” shall be a President, a VP, a treasurer and Secretary (currently being performed by Dana Leshley), all of who shall be elected by the Board from its own membership at its annual meeting to be held between the third week of October and the end of November.
  • Amendments to the club by-laws shall be adopted by the affirmative vote of a majority of the members present, or represented by proxy, at a duly held general meeting; provided, that the text of such proposed amendments be mailed to the members ten days prior to the meeting.

 

One last note….regardless whether or not we decide to sell the club, we anticipate that the club/pool will be open next year. In December a letter will be mailed to members for 2015 dues (and an invitation to attend the club’s annual member meeting). Any full member that does not renew their dues by March 30, 2015 will no longer be considered an active member. Please let us know of any concerns/questions/suggestions.

Thank you!

Sincerely,

The Spalding Woods Club Board