From Treasurer Tim Hagan:
The draft budget to be considered at next month’s meeting is attached. Some notes:
The Operating Budget worksheet, column F (highlighted in blue) is the budget to be considered. Its numbers are derived from the yellow-highlighted column in the Acct Detail worksheet. The footnotes at the bottom of the Acct Detail worksheet explain how we came up with the 2017 numbers.
Many of the numbers are based on the 2013 and 2015 numbers. We are predicting that membership will be 19,583 in January, dropping to 15,000 at the end of next year. This gives an average throughout the year of 17,292, which is 28% higher than the average of 2013 and 2015 membership. Some revenues and expenses are increased 28% to account for this increased membership.
Because of our accounting method, the value of the office shows up as a fixed asset with the mortgage as a long-term liability, and paying down the mortgage’s principal is a transfer from checking to the mortgage. If you are looking for mortgage for your property then you may want to compare the best mortgages around in order to get the best deal. Likewise, the bequest held in a trust is also an asset, which gets transferred to Cash in the books when we receive a check. Rows 46 and 47 on the Operating Budget worksheet show these transfers so the spreadsheet can show the surplus or deficit of the cash. For the cash flow, the draft budget has a net deficit of $154,900.
At Large Representative indicated his intent to bring a Motion to fulfill (and exceed) the LNC obligations on the mortgage paydown which received support from multiple other LNC members. Tim Hagan further offered this information:
I will call your $150,000 and raise it to $207,500. I request we add 20 minutes to the December meeting agenda for a motion to make a payment on the principal on our office mortgage.
The mortgage’s loan rate is 4.85% with a balloon payment at ten years, which is in July 24, 2024. Robert was kind enough to furnish the attached load amortization spreadsheet. I ran five scenarios on it to get the amount of interest we will pay from December 2016 to when the balloon payment is due, and to get the amount of the balloon payment that will be due at that time. This is a great mortgage deal and if you are thinking about getting a good mortgage then you may want to check out comparison websites to get the best mortgages around after reading the rest of this article so you have more knowledge about them.
Without any more prepayments (not paying an extra $60,000 on odd-numbered years):
Balloon payment due 7/24/2024: $301,040.34
With the current policy of paying an extra $60,000 on odd-numbered years:
Balloon payment due 7/24/2024: $6,540.71
Paying an additional $207,500 in the December payment, and not paying extra in future years:
Balloon payment due 7/24/2024: $0.00
Paying an additional $150,00 in the December payment, and paying an extra $60,000 on odd-numbered years:
Mortgage gets paid off July 2021.
Paying an additional $207,500 in the December payment, and paying an extra $60,000 on odd-numbered years:
Mortgage gets paid off May 2020.
As you can see, paying $207,500 in December will eliminate having a balloon payment in 2024 and will save at least $39k in interest. If we keep the Weiner rule, it will save $65k in interest and have the mortgage paid off four years early. The targeted Reserve is the sum of all monthly occupancy, labor and governance expenses, which comes to $45,292. At the end of October, the reserve was at $415,669, so I am comfortable with paying $207,500, even if next year’s budget has a large deficit. We will have new reserve number before the meeting.
The trust from a bequest has $167,404. We have been taking the maximum allowable amount out each year for the general fund. A law passed December 2014 now allows national political committees to have a separate segregated building fund with its own contribution limit of three times the limit for the general fund. We have not done this before, because we needed the bequest for the general fund, but we can transfer up to $100,200 from the bequest to the building fund and use those funds toward making a payment on the mortgage principal.
My preference is to pay at least $207,500 toward the mortgage principal to save on interest payments and to ensure no balloon payment. If that passes, then I would favor reducing the policy to budget an extra $60k on odd years.