May 29, 2013 update
We have been informed by Paul Clampitt, President of the Mill Creek Country Club’s Board of Directors, that the country club’s financial problems have eased.
Clampitt said via email, “The members overwhelmingly rejected the idea of selling the club and since then we have been able to restructure our debt in such a way as to give us at least 5 more years to build membership.”
More informaton on the Mill Creek Country Club's situation can be found in this May 20th, 2013 article.
Original May 2, 2013 article
The Mill Creek Country Club announced to its members this week that their financial difficulties might force a sale of the club to another golf group.
In an April 30, 2013 email to the club’s equity members Paul Clampett, Mill Creek Country Club Board of Trustees President, announced a May 13th Special Town Hall Meeting, “to review the financial status of our club. We will present options for dealing with our upcoming debt situation. These options include the possibility of selling the club to another golf group.”
In the same email Clampett said there have already been discussions with potential buyers, “As part of our work over the last year, the Board of Trustees has been researching a number of options, one of which would be to sell the club. We have hired a consultant to assist us in the process. As a result, we have had discussions with potential buyers.”
There will be another meeting on May 16th when potential buyers will present their plans for the club and the club’s board of trustees will present an option for members to retain the club subject to special assessments.
According to the April 30th email equity members will decide the fate of the club after the May 16th meeting, “At the conclusion of this meeting, Equity Members will be given the opportunity to vote for one of the options presented, including keeping the club as member owned through assessments.”
The Mill Creek Country Club’s Financial Situation
In 2007 a portion of the members of the Mill Creek Country Club purchased their club in a forced sale from Trajal USA, Inc. for about $4.5 million. They had to come up with an additional $800,000 to settle the club’s outstanding financial obligations.
A large percentage of club members purchased $25,000 Equity Memberships to support the purchase. As well, 17 club members plunked down $75,000 apiece to purchase Charter Equity Plus Memberships. The contract with these members said that they would be repaid $100,000 in July 2014 in compensation for their investment.
At the time the new owners were delighted that they were finally in the driver's seat, able to make their own decisions on how to run the club. They planned for growth as the economy was booming and new houses were springing up all around Mill Creek.
Unfortunately, the great recession came along in 2008 and club membership started dropping. In 2010 Rich Myhre of the Everett Herald reported the club’s revenue was dropping as well, “The dip in membership -- down to 260 from 320 in the last 18 months, according to club president Barney Dotson -- has produced obvious financial challenges. Private golf clubs operate on the monthly dues received from members and Mill Creek CC's decline has meant monthly revenue shortfalls of around $24,000, or close to $300,000 a year.”
Membership and revenue never picked up. The repayment of the Charter Equity Plus Memberships became a problem.
According to a May 1st email from the country club to non-equity members, “The Club has an obligation to repay these members (Charter Equity Plus Members) as early as July, 2014. The business plan at the time projected revenues based on a membership in excess of 300 golf members, which would have allowed the club to build a reserve to begin paying back these memberships after 7 years. Unfortunately, with the economic downturn immediately after the Club was purchased, membership numbers have fallen well below that level and today we have only about 250 golf members. As a result, the Club has operated at a loss for the past 6 years; it has not been possible to build a reserve fund and we are not in a position to deal with this financial obligation.”
Another May 1st email from the country club to equity members said the recent deaths of two Charter Equity Plus members prompted the club’s board of directors to act now, “In the last couple of months we were notified that two of the Charter Equity Plus Members passed away. These unfortunate events have made the debt situation more immediate. We have 90 days after notification from a deceased member's estate to refund their investment of $100,000 and as a result we will have the need to raise $200,00 to meet this obligation. Beyond that, in July, 2014, the remaining 15 Charter Equity Plus Members will be eligible to ask for repayment of their $100,00 investments. This is a financial obligation we will not be able to deal with."
The club had hoped to raise over a million dollars in capital from the sale of the tennis club to the tennant who operates the facility, Avanti Sports. The May 1st email to equity members explained why this wouldn’t make any difference, “The problem with selling the Tennis Club to solve our debt problem is that we have a pending debt of 1.7 million from our 17 Equity Plus members. If we sell the Tennis Club we would have tax consequences, we would be required by our bank to pay down our first mortgage, and we would lose about $84,000 in revenue that we currently get from the Tennis Club lease. This would not solve our problem and would create additional revenue issues that would need to be made up from other sources of income.”
What happens next?
The Mill Creek County Club’s equity members will vote to decide whether or not to sell the club. Voting opens after the May 16th meeting and closes May 18, 2013 at noon.
It seems that all options will cost equity members. If they decide to sell the club, the selling price will not be enough to repay the entire amount of their equity membership. If they decide to keep the club by approving a special assessment, they will pay $5,000 to $10,000 each according to the May 1st email to equity members.
The Mill Creek Country Club assured non-equity club members that in either case they would continue to be able to enjoy the club, “If and when the Club is sold to another golf organization, it will be up to you to decide whether you continue under their new membership plans. We are confident that the choices will be attractive to our existing members and we will continue to enjoy golf, etc., as we always had. Again, the Equity Members may decide to keep the Club and in that case there will be no change.”