With the Toqua Clubhouse replacement and the Kahite Community Center well under construction, some property owners may be wondering how we plan to pay for these facilities in a fiscally responsible manner.
With a combined cost exceeding $3 million, this is the most ambitious expansion of new amenities since the Wellness Center was constructed in 2007. The key to achieving this attractive expansion of our facilities, without breaking the bank, is planning.
Planning for the Toqua Clubhouse replacement dates to 2006, when the Property Owners Association board created a committee to develop a plan to replace a clubhouse that was believed to be old and outdated. At that time, the board decided to proceed with construction of the Wellness Center in 2007, with the Toqua project next in line. However, the recession of 2008 and beyond put all new amenity projects on hold.
The consideration of a new clubhouse went through several starts and stops but began in earnest again in 2017 with the formation of an ad hoc committee to evaluate the possibility. Those efforts resulted in the Toqua project being included in the 2019 capital plan. Funding for the project, based on firm construction bids, was approved in December 2018.
Likewise, the Kahite Community Center was many years in the making. The temporary facility was purchased and installed in 2008. A master plan developed for the Kahite neighborhood in 2014 included a new community center and portico. The 2017 budget and five-year plan included capital for design of both the Toqua Clubhouse replacement and the Kahite Community Center projects in 2018, with construction scheduled for 2019.
In the years leading up to these projects, previous boards recognized the need for additional funding to be saved through the Amenity Reserve Fund. The allocation of assessment dollars going into the amenity reserve was increased from 2.5 percent in 2017 to 4.5 percent in 2018 and 2019. At the beginning of 2019, we had almost $1.6 million in the reserve, with another $420,000 to be added in 2019.
An element that was considered along the way in planning for significant capital additions was our debt level and payoff schedules. The Wellness Center and facilities loan of $2.13 million that was borrowed when the Wellness Center was built will be paid off in August 2020. Debt service on that note will drop off a few months after the principal and interest payments on the Toqua Clubhouse bank financing will begin.
The overall financing planned for the two projects is as follows:
- $636,000 — Amenity Reserve Fund
- $148,000 — Private Funding for the Portico
- $784,000 — Total Project
- $1.2 million — Amenity Reserve Fund
- $1.2 million — Bank Financing
- $2.4 million — Total Project
- $1.84 million — Amenity Reserve Fund
- $148,000 — Private Funding
- $1.2 million — Bank Financing
- $3.19 million — Total Both Projects
The two projects will first be funded with cash from the amenity reserve and private funding. A private funding contribution of $148,000 was made in December 2018 and was immediately placed in the amenity reserve to be held until needed.
Bank financing on the Toqua project will be used last to keep interest expense to a minimum. The loan is structured as a construction line of credit, with interest only paid during the first 12 months of the term through March 2020. Thereafter, it becomes a fully amortized loan over 15 years, with the interest rate fixed for the first five years.
The principal and interest on the $1.2 million loan are almost half the principal and interest that we were paying on the Wellness Center note. This means that beyond August 2020, our debt service will be about $100,000 per year lower than we have been paying for the Wellness Center.
The financing plan for these two projects evolved over time, just like the projects. They are funded from a combination of amenity reserve funds saved up over many years, private funding from the Kahite neighborhood community and bank financing provided by United Community Bank, who has been our banking partner for many years and provided financing for the Wellness Center when others turned us down.
In a sense, these projects are being paid for by current and former residents who enjoyed the use of the original Toqua Clubhouse, and by current and future residents who will benefit from the expanded and improved Toqua Clubhouse. All will enjoy the new Kahite Community Center with expanded outdoor dining and activities, with appreciation to those property owners who provided private funding for the portico.
Finally, the public works division will benefit from the use of the Kahite double-wide when it is relocated to their facilities to provide much-needed meeting space and offices.
To all who had a hand in developing these projects from conception to construction, Tellico Village owes you tremendous gratitude. It is an exciting time to be a part of these new additions that will keep Tellico Village fresh and appealing both to current residents and potential new neighbors for many years to come.
