[arrl-odv:23718] Proposed Dues Increase Question
This is an inquiry preparatory to the upcoming teleconference on the 2015 ARRL Annual Plan. *Proposed Dues Increase* It appears that HQ management and the A&F Committee are recommending a $10 per year increase in dues. The justification appears to be a desire to keep the ARRL in the black in 2016, financially. In summary, the two major options are: 1) Keep the dues the same, $39 per year. 2) Raise the dues by $10 per year. At the end of 2015, a net loss of $23K and some unspecified loss of members is projected. At the end of 2016, a net gain of $551K and a loss of over 16,000 members is projected. *ARRL Asset History* The ARRL has an investment portfolio of nearly $22M. This is $9.3M more than it had at the end of 2008. The League's Total Net Assets, which are roughly the investment portfolio minus reserves for life and term memberships, are now nearly $15M greater than they were in 2008. The League does not have any overhanging risk from defined-benefit retirement plans any longer. The recent asset history table is at the end. *Teleconference Question * Is it to the benefit of the ARRL and/or Amateur Radio as a whole to lose over 16,000 members, and have $21.7 million instead of $21.15M in our investment account? If yes, please provide details, and comment on our survival with only $12.5M in 2008? 73, Dick Norton, N6AA Year Investments Total Net Assets 2005 $12,822,683 $5,293,245 2006 $13,985,195 $6,069,566 2007 $15,053,094 $6,950,616 2008 $12,471,562 -$409,378 2009 $14,909,196 $5,837,972 2010 $18,099,375 $9,318,932 2011 $18,819,971 $9,771,483 2012 $17,728,010 $10,938,945 2013 $21,157,076 $14,508,497 2014 $21,754,511
Dick, you have posed an interesting devil’s-advocate question. However, to say that the justification is “a desire to keep the ARRL in the black in 2016” is simply not accurate. The justification is to return the ARRL to break-even in 2016 after two years of deficits and to avoid the need for another dues increase as early as the 2017-18 time frame. We did somewhat better than planned in 2013. That allowed us to budget for a deficit in 2014, in order to celebrate the Centennial appropriately, with a clear conscience. We have again budgeted for a deficit in 2015. We can afford to do so, and the consequences of cutting expenses to achieve break-even in 2015 would undermine much of what we have achieved in the Centennial Year. Because dues income is recognized on an accrual rather than a cash basis, it takes the better part of a year for a dues increase to have a positive impact. It would be irresponsible to plan for continuing deficits in 2016 and subsequent years. For one thing, that would break faith with those who contributed to the Second Century Campaign on the understanding that their contribution would strengthen the organization to better face an uncertain future. We cannot use those funds in effect to subsidize the annual dues of current members. Neither would it be good stewardship for us to use the recent increase in the value of the investment portfolio for that purpose; the market goes down as well as up, as evidenced by 2008. In short, the decision should not be made only with 2016 in mind. 73, Dave Sumner, K1ZZ From: arrl-odv [mailto:arrl-odv-bounces@reflector.arrl.org] On Behalf Of Norton, Richard, N6AA Sent: Tuesday, January 06, 2015 3:22 PM To: arrl-odv Subject: [arrl-odv:23718] Proposed Dues Increase Question This is an inquiry preparatory to the upcoming teleconference on the 2015 ARRL Annual Plan. Proposed Dues Increase It appears that HQ management and the A&F Committee are recommending a $10 per year increase in dues. The justification appears to be a desire to keep the ARRL in the black in 2016, financially. In summary, the two major options are: 1) Keep the dues the same, $39 per year. 2) Raise the dues by $10 per year. At the end of 2015, a net loss of $23K and some unspecified loss of members is projected. At the end of 2016, a net gain of $551K and a loss of over 16,000 members is projected. ARRL Asset History The ARRL has an investment portfolio of nearly $22M. This is $9.3M more than it had at the end of 2008. The League's Total Net Assets, which are roughly the investment portfolio minus reserves for life and term memberships, are now nearly $15M greater than they were in 2008. The League does not have any overhanging risk from defined-benefit retirement plans any longer. The recent asset history table is at the end. Teleconference Question Is it to the benefit of the ARRL and/or Amateur Radio as a whole to lose over 16,000 members, and have $21.7 million instead of $21.15M in our investment account? If yes, please provide details, and comment on our survival with only $12.5M in 2008? 73, Dick Norton, N6AA Year Investments Total Net Assets 2005 $12,822,683 $5,293,245 2006 $13,985,195 $6,069,566 2007 $15,053,094 $6,950,616 2008 $12,471,562 -$409,378 2009 $14,909,196 $5,837,972 2010 $18,099,375 $9,318,932 2011 $18,819,971 $9,771,483 2012 $17,728,010 $10,938,945 2013 $21,157,076 $14,508,497 2014 $21,754,511
N6AA’s email prompted me to put down some additional observations and thoughts that Directors may want to consider as they wrestle with the dues decision. These are my observations and comments, and not A&F’s or anyone else’s. This email is the short-version. Summary comments if you will. I will send a longer version with underlying rationale and a couple of attachments that those of you who may have an interest in getting down into the weeds. As we evaluate the dues decision, the balance sheet equity (net assets) and investment portfolio should be considered, as N6AA points out. I suggest we also need to consider the income statement, particularly our revenue streams and the future viability of those revenue streams. We have six large revenue streams: dues ($5.8m), publications ($4.1m), advertising ($2.6m), contributions ($1m), Investment income ($0.5m), and all other ($1m). Total of a bit over $15m. Only the three smallest revenue streams have kept pace with inflation in the 13 years since our last dues increase. I am of the opinion that two of our biggest revenue streams – publications and advertising – will be under increased downward pressure over time, one stream (contributions) is likely to be flat, and the remaining two non-dues categories are not big enough to make up the difference. All that is in nominal dollars, not even inflation-adjusted dollars. Thus, without adjusting dues, revenue will decline and we will perennially have a loss from our business operations. If we do not cut services (something we, and most non-profits, have a hard time doing) then we need to dip into our investment portfolio. Yes, we do have $21+ million, but at least in part that is because we have had a number of years of good markets – in the last three years alone our total return has been $5.6 million. Markets are cyclical (just look at the last couple of days). At what point do we strangle the goose that laid the golden egg? We have to remember that the $21m is not an unfettered total. About $7m is for life memberships and another $3m+ is permanently restricted. Thus, a better number to use is roughly $11m. If we consider a 4% payout rate (a very reasonable long-term figure) that $11m pot will theoretically support an extra $440K per year. I would be opposed to hitting the portfolio by more than that amount on an ongoing basis. Note that $440K is about 2.8% of normal revenue. Not much margin for error. Two other things concern me about the “create a business loss and pull extra $ from the portfolio” approach. One is that we are making an affirmative election to run the business in a downward trajectory. We would, in effect, be managing ourselves out of existence and that becomes a risk not only for the organization but for the hobby as well. That whole approach just does not sit right with me. The second concern is that such an approach reduces future operational and fiscal flexibility. An advantage of having a small profit and having an investment portfolio is that we have options. When the profit turns to loss and the portfolio shrinks we start to run out of options. I would be glad to discuss next week, tonight, or sometime in between. Rick, K7GM Dr. Frederick (Rick) Niswander, Ph.D., CPA, CGMA Vice Chancellor for Administration and Finance Spilman 106 East Carolina University Greenville, NC 27858 252-328-6975 252-328-4835 (FAX) From: arrl-odv [mailto:arrl-odv-bounces@reflector.arrl.org] On Behalf Of Richard J Norton Sent: Tuesday, January 06, 2015 3:22 PM To: arrl-odv Subject: [arrl-odv:23718] Proposed Dues Increase Question This is an inquiry preparatory to the upcoming teleconference on the 2015 ARRL Annual Plan. Proposed Dues Increase It appears that HQ management and the A&F Committee are recommending a $10 per year increase in dues. The justification appears to be a desire to keep the ARRL in the black in 2016, financially. In summary, the two major options are: 1) Keep the dues the same, $39 per year. 2) Raise the dues by $10 per year. At the end of 2015, a net loss of $23K and some unspecified loss of members is projected. At the end of 2016, a net gain of $551K and a loss of over 16,000 members is projected. ARRL Asset History The ARRL has an investment portfolio of nearly $22M. This is $9.3M more than it had at the end of 2008. The League's Total Net Assets, which are roughly the investment portfolio minus reserves for life and term memberships, are now nearly $15M greater than they were in 2008. The League does not have any overhanging risk from defined-benefit retirement plans any longer. The recent asset history table is at the end. Teleconference Question Is it to the benefit of the ARRL and/or Amateur Radio as a whole to lose over 16,000 members, and have $21.7 million instead of $21.15M in our investment account? If yes, please provide details, and comment on our survival with only $12.5M in 2008? 73, Dick Norton, N6AA Year Investments Total Net Assets 2005 $12,822,683 $5,293,245 2006 $13,985,195 $6,069,566 2007 $15,053,094 $6,950,616 2008 $12,471,562 -$409,378 2009 $14,909,196 $5,837,972 2010 $18,099,375 $9,318,932 2011 $18,819,971 $9,771,483 2012 $17,728,010 $10,938,945 2013 $21,157,076 $14,508,497 2014 $21,754,511
participants (3)
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Niswander, Rick -
Richard J Norton -
Sumner, Dave, K1ZZ