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By Forrest Quinn former SCA Board treasurer
THE YORKTOWN GRILL’S PROJECTED COST IS PUSHING $4 MILLION OVER FIVE YEARS.
A year ago, when four SCA Board members voted to reopen the restaurant, they did so without estimating the financial burden of their decision. The “Yorktown Grill Financial Overview” in April’s Spirit Magazine continues Management’s practice of misleading residents about the restaurant’s total cost.
I previously noted how Management used the Board candidate vetting process to protect incumbent candidates. Refusing to report Yorktown Grill’s total costs is another way for Management to protect the three Board incumbents from the voter’s wrath.
CLAIMS THAT YORKTOWN GRILL WILL MAKE A PROFIT ARE FLIM-FLAM ACCOUNTING.
Below are my estimated Yorktown Grill five-year costs. A forecast like this should have been prepared by Management a year ago.
YORKTOWN GRILL’S STARTUP COST IS ABOUT $1.4 MILLION, NOT $1 MILLION.
The Spirit article implies the restaurant’s startup costs are slightly over $1 million. But the startup costs are $1.4 million. The article omitted the $250,000 of startup/organization expenses (legal fees, design costs, etc.) and the $140,000 pre-opening phase payment to WGH.
YORKTOWN GRILL’S FIVE-YEAR FORECAST WAS NOT UPDATED TO INCLUDE RECENT INFLATION.
The article featuring the Yorktown Grill’s five-year financial forecast was prepared in the fall of 2021. These financial estimates will be nearly two years old when the restaurant begins operations. It’s insulting that Management didn’t even bother to update the financial forecast to account for the highest inflation in 40 years. For example, if the meal prices are now 15% higher than originally projected, will the projected demand for meals drop by 10%?
BASED ON A DUBIOUSLY HIGH SALES FORECAST, SCA PAYS $466,000 IN YORKTOWN OPERATING LOSSES
The restaurant’s revenues start high and then increase by 44% over five years. However, over that time period payroll costs only increased by 13%, and operating expenses DECREASE by 22%. There is no explanation of how these contradictions are possible.
The first year’s “covers” are 71,500, or 200 per day. This is about twice the traffic the last restaurant achieved. By the fifth year, covers increase to 105,000, or 290 covers per day. On average, this means that SCA’s 12,000 residents must patronize the Yorktown Grill six times per year in the first year and about nine times in the fifth year.
Using the 80/20 rule, where 80% of sales are from 20% of the customers: 2,400 residents must patronize the restaurant 24 times in the first year and 35 times in the fifth year. I believe that is unrealistic. If projected sales drop just 10%, the 5-year cost to SCA jumps from $466,000 to $990,000.
THE YORKTOWN GRILL ARTICLE DOESN’T DISCLOSE THAT SCA WILL PAY ABOUT $2 MILLION IN OVERHEAD COSTS OVER FIVE YEARS
Evidently, to justify concealing the restaurant’s actual cost, SCA’s Treasurer makes this false statement: “In HOA accounting practices, the payroll/benefits and legal fees are never allocated to specific amenities (such as fitness, swimming….).” Yet, sun City Summerlin makes this amenity allocation, and they don’t even have a highfalutin Chief Financial Officer (CFO) preparing their books. Also, SCA’s income statement does include line items for Fitness payroll/ benefits. Likewise, legal fees are part of startup/organization costs that should be capitalized and amortized over 15 years. This amortization amount should be allocated to the Yorktown Grill.
Below are my estimates of Yorktown Grill’s overhead costs. In order to make an informed decision, Management should have prepared a table like this over a year ago.
Forrest
You are not yet banned on Berman’s blog. And he outright lied to his readers in support of Treasurer Greg Swenson’s Spirit Article. I would urge you to post your complete analysis as rebuttal so that his followers get your perspective. Odds are he bans you too and if not his readers will be better informed.
RobertForrest
As I said earlier Berman openly lied about the classification of the restaurant property taxes as the SCA financials clearly identify them as a 2022 restaurant expense. Mr. Berman’s art form of mixing fact with disinformation has really harmed the community because many are duped by his pet project spending propaganda.But that raises a couple questions.
1. Because the restaurant wasn’t active could the $20,000+ property taxes have been avoided by filing paperwork? Did SCA pay unnecessarily?
2. And if the space had been converted permanently from being a restaurant would those property taxes have gone away permanently?Thanks for any insight.
Robert
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