Another Commitment Not Kept

As an earlier article pointed out (See http://eastmanblog.blogspot.com/2014/08/commitments-not-kept.html) looking at how Eastman is actually managed, is information one should have before borrowing more money. Another contribution from a Blog Reader: 

In 2004 the Board received a Reserve Budget analysis, from Noblin & Associates.  The results were used to support a significant increase in the annual Capital Assessment.  The Board justified adopting increased assessments by showing that over the years the Reserve Capital Fund would grow to many millions of dollars, which would then be available when major repairs (to roads, buildings, etc.) or replacements (South Cove, etc.) were expected.  It seemed to the community to be a responsible approach to making sure that it would not be hit with a huge bill down the road. 

 Did the Board keep its promise to build a comfortable capital cushion?  You be the judge.  

The reserve fund balance was $775K in February 2004, but declined to $725K by March 2013.  In the same time span the annual capital assessment increased from $517 to $1151 (including $250 special assessment).  Not only did the fund fail to increase by $5-7 million, but in 2016 we’ll have to refinance $840,399 on The South Cove loan.  In the meantime the Board has added the $5,000 new owner Fee which in FY14 produced $347K!  Yet another opportunity lost to augment the Capital Reserve Fund, or at least pay down the loan on South Cove.

 The Board hasn’t kept their commitment to create a substantial capital fund to cushion major expenses.  So, what grade do you give the Board for managing Eastman’s Capital? 

Contributed by Guest Editor Phil Schaefer