From a fiscal perspective, I urge the Board to tread very carefully with respect to changes in the Life Membership program. My concern applies to the current LM structure, or a revised structure which would be a reduced rate, or one that is actuarially-based. When we accept a life membership, especially an actuarially-based LM, we are taking on three risks. One risk is longevity risk. In effect, we assume that we will, at worst, “break even” with life expectancy of the member. If a LM is expected, on average, to live 20 years, our risk is if he or she lives longer. If the life is shorter, we benefit. Our challenge is that WE are accepting the actuarial risk. We are then acting as a life-insurance company. That is not our business. Another risk is investment risk. With a LM, we assume that we will invest the lump sum and get returns which will pay for the costs needed to service a member AND cover inflation. We have historically done reasonably well with that, particularly in the last 10 years or so. However, it is highly likely that investment returns in the next 10-20 years will be nothing close to the returns in the last 10-20 years. So, our assumption is highly likely to be not met. I cannot emphasize enough that it is highly likely that future returns will be materially lower than past returns. The final big risk in inflation risk. It is related to investment risk and return, but it is a bit different as well. With a LM we assume inflation in our cost structure will be offset by increases in the investment of the LM lump-sum. With our current pricing structure we implicitly assume we will earn 4% a year to cover the annual cost of a membership. Then you need to add a number for inflation which has recently been running in the 2% range. So, we need to earn 6% just to tread water. Any increase in that inflation rate will be problematic unless it is accompanied by a corresponding increase in the earnings rate. That does not always happen (think the Great Recession when inflation was 4-5% and returns were big negative or the early 1980s when inflation almost hit 15% in the midst of two back-to-back recessions). Again, we are the ones that will accept that risk by accepting a life membership. These risks cannot be eliminated. They can only be mitigated. To do so, the LM price needs to be increased, probably on the order of 50%+, which likely makes it uneconomic and unappealing. The greater the increase, the more mitigation. My final point is a reiteration of Howard’s comments related to the notion that dues do not cover the cost of member services. If we take actions to increase LM’s based on dues that are arguably low to begin with, we are just compounding our problem for years and years to come. Frederick (Rick) Niswander, PhD, CPA, CGMA Professor of Accounting Bate 3110 East Carolina University Greenville, NC 27858 From: arrl-odv <arrl-odv-bounces@reflector.arrl.org<mailto:arrl-odv-bounces@reflector.arrl.org>> On Behalf Of rjairam@gmail.com<mailto:rjairam@gmail.com> Sent: Monday, September 16, 2019 12:49 PM To: Bob Famiglio, K3RF <RBFamiglio@verizon.net<mailto:RBFamiglio@verizon.net>> Cc: arrl-odv <arrl-odv@arrl.org<mailto:arrl-odv@arrl.org>> Subject: [arrl-odv:28768] Re: Membership Stats I agree with that. In fact this report should currently be in front of the executive committee for reconsideration. 73 Ria, N2RJ On Mon, Sep 16, 2019 at 12:43 PM Bob Famiglio, K3RF <RBFamiglio@verizon.net<mailto:RBFamiglio@verizon.net>> wrote: Maintaining institutional memory is always a challenge in these situations. I believe the topic of special life memberships was studied by ex-vice-director Marty Woll, an expert in the field, who worked up a proposal to create a Life Membership with an actuarially based premium for older members with age brackets determining the dues multiple to be paid. It was viewed with favor by the board I understand, but not the CFO and then president for unknown reasons. It was back in 2013 or something like that. The bottom line was favorable to the League on both income and member retention. It may be time to review that information again if you are not aware of it Howard. Bob Famiglio, K3RF Vice Director - ARRL Atlantic Division 610-359-7300 [cid:image001.png@01D56D4E.686761A0] www.QRZ.com/db/K3RF<http://www.QRZ.com/db/K3RF> From: arrl-odv On Behalf Of Michel, Howard, WB2ITX (CEO) Sent: Saturday, September 14, 2019 3:39 PM To: Jairam, Ria, N2RJ, (Dir, HD) <rjairam@gmail.com<mailto:rjairam@gmail.com>>; k5ur@aol.com<mailto:k5ur@aol.com> Cc: arrl-odv <arrl-odv@arrl.org<mailto:arrl-odv@arrl.org>> Subject: [arrl-odv:28764] Re: Membership Stats Hi Ria, Rick, Thanks for your thoughts. We would all like to find ways of reducing the cost of membership, but unfortunately this is not the time. Staff has looked at several options. Ria is right, advertisers don't value digital media. If we reduce the number of print copies of QST, it will negatively impact adverting revenue. And a digital-only magazine might not let us reduce the dues by very much. Currently, dues do not cover the cost of member benefits provided. Member benefits are subsidized by books sales, awards, etc. The facts are that we need to grow new and existing sources of revenue first. Part of that growth-plan is to provide more value in membership. As I mentioned in the Board meeting, we will roll out On the Air (OTA) magazine in January. This will be available as a member benefit, not as a paid subscription like QEX or NCJ. Every member will be able to get both QST and OTA in digital form as part of their membership dues. Members will have the option of receiving either QST or OTA in paper form. OTA, plus lifelong learning, new marketing capabilities with the Personify AMS, and other very-early initiatives we are pursuing that should help bring in more revenue. We will be heavily "selling" these benefits as part of an aggressive membership campaign. Why is more revenue critical? In addition to dues not currently covering member benefits, as I stated in my reports to the Board, income from operations does not cover the cost of operations. We balance the budget with donations and investment return. This is not a healthy situation. This problem has grown over many years, and will take years to reverse. Some have suggested that we use a portion of our reserves to provide more member benefits. While I am not opposed to spending reserves as an investment to grow ARRL (and I will be using this philosophy when I present the 2020-2021 Plan to the Board), spending reserves to balance operations is a very bad idea. For every $1 million we take out of reserves (equivalent to a $6.00 member benefit or dues reduction) , we will have (on average) $50,000 less to spend to balance operations. This is the equivalent of one head count. And speaking of reserves, yes we are looking at a reduced rate for life members. But I need to remind the Board, as our auditor reported, the single biggest liability ARRL has on our books is the reserves we need to maintain to provide services to life members. If I remember correctly, it is 20%-25% of our reserves. That is money we can not spend, and increasing the number of life members will only increase the amount we need to maintain. That is money we cannot use to invest in ARRL. Instead of the Board entertaining ideas of reducing dues, the Board should debate the value of an annual dues increase. Since the Board made the last dues increase, the cost of living has reduced the cost of dues by almost 10%. This is also a 10% reduction in income vs expenses that we have to work with. 73, Howard, WB2ITX On 9/14/2019 7:18 AM, rjairam@gmail.com<mailto:rjairam@gmail.com> wrote: I see Hudson Division is the worst performing at -3.1%. Ouch! I do suspect that’s because of out-migration. We’ve been steadily losing population here, particularly among retirees. Our hamfests here have also been getting smaller and smaller as hams either move to warmer, more tax friendly locales or die off. As far as dues go I am consistently told by members and ex members (as recently as last night at a club meeting) that they want some sort of tiered membership with an option for a digital magazine instead of print. While I do get that we have to balance this with advertisers, it may be a good time to look at this idea. 73 Ria, N2RJ On Sat, Sep 14, 2019 at 1:46 AM Roderick, Rick, K5UR via arrl-odv <arrl-odv@reflector.arrl.org<mailto:arrl-odv@reflector.arrl.org>> wrote: Hi all: Here’s something to think about as you kick back for the weekend. Listed below are the membership stats for August. Only 3 Divisions had a positive number compared to one year ago, and the overall total was -0.9%. Statistically, the percentages may be small in many instances, but they’re still negative. Congratulations to the Northwestern, Roanoke, and Rocky Mountain Divisions for having positive numbers! Our numbers have been suffering since the dues increase in 2016 and the recovery has been similar to the dues increase 15 years before it, but that should be no excuse. We need to turn this around. Please, give this effort priority and let’s make these numbers positive in every Division. You may recall that A&F is studying the feasibility of having a layered or tiered-style Life Membership. Also, I’ve asked A&F to consider having a general membership drive in conjunction with any changes we make to the Life Membership. Seems like that would be an opportune time to launch an aggressive membership campaign. If you have any ideas that might work for such a campaign, please let A&F know. 73, Rick – K5UR ............................. August 2019 vs 2018 Atlantic -0.7% Central -0.6 Dakota -0.8 Delta -0.9 Foreign -5.0 Great Lakes -0.9 Hudson -3.1 Midwest -1.5 New England -1.7 Northwestern 0.5 * Pacific -1.1 Roanoke 0.2 * Rocky Mountain 0.4 * Southeastern -0.2 Southwestern -0.2 West Gulf -0.4 Total -0.9% _______________________________________________ arrl-odv mailing list arrl-odv@reflector.arrl.org<mailto:arrl-odv@reflector.arrl.org> https://reflector.arrl.org/mailman/listinfo/arrl-odv -- Howard E. Michel, WB2ITX Chief Executive Officer ARRL, The National Association for Amateur Radio® 225 Main Street, Newington, CT 06111<https://www.google.com/maps/search/225+Main+Street,+Newington,+CT+06111?entry=gmail&source=g>-1494 USA Telephone: +1 860-594-0404 email: hmichel@arrl.org<mailto:hmichel@arrl.org>
