Golfdom Files: Setting up depreciation reserves stabilizes dues structure
Everyone loves a shiny new piece of equipment, but unless it’s a lease, you’re expected to keep it running as long as possible. The February 1962 Golfdom included best practices to do that and also to prepare for the equipment’s replacement, with help from Jacobsen and Toro. Some of these prices are jarring; $250 for an engine overhaul? Take us back. To read the full article visit click here.
In the last ten years or so, country clubs generally have adopted a more businesslike attitude in their equipment depreciation and replacement policies, but there still is plenty of room for improvement where these vital things are involved.
Clubs that do not set up annual reserves for depreciation of equipment, as well as clubhouse furnishings and fixtures, pool renovations, deterioration of buildings, etc., are following a shortsighted policy. While it may show a profit for a period of perhaps two or three or four years, it ultimately ends in a kind of financial panic. This is especially true if the machinery breaks down in the same year that buildings start to fall apart and the clubhouse furniture begins to disintegrate.
Members have objections
So far as course machinery is concerned, Oscar Borgmeier, of George A. Davis, Inc., Chicago, points out that making large outlays for equipment in a single year may place unfair restraint on the greenkeeping department and result in inefficient maintenance.
“If it is seen that a large amount of money has to he spent in 1962 to replace worn out tractors and mowers,” says Borgmeier, “and there is absolutely nothing in the reserve fund, a board may balk at spending so much money at one time. It may decide to defer the purchase of some sorely needed equipment until next year, with the result that the superintendent is seriously handicapped. If the upkeep of the course visibly declines it is hardly necessary to mention who is made the scapegoat.”
Suggested depreciation schedule
Jacobsen Manufacturing Co. Vice President of Sales Charles A. Livesey made a special survey among superintendents and dealers for Golfdom to determine a depreciation schedule on the Model F tractor with wing- lift hydraulic system and 7-gang mower. Based on these things — average mowing time, good maintenance policy, average cutting conditions and an experienced operator — Livesey arrived at the following formula:
1-5 years — 30 to 50 percent
5-10 years — 50 to 70 percent
Frequency of repairs on the Model F tractor amounts to:
1-2 years — no major repairs; 2-5 years — overhaul (subject to use and care): $125
5-10 years — one complete engine overhaul, $250
Repair frequency for the wing lift and hydraulic system with 7-gang mowers is pegged at these figures:
1-2 years — mowers sharpened once each year, $18 per unit
3 years — replacement of bearings, grease seals, gaskets, etc., $15 per unit
7 or 8 years — replacement of mower reels, $50 per unit
Livesey points out that superintendents and dealers feel that disregarding depreciation schedules or formulas, the actual depreciation of tractors, mowers, etc., is largely contingent upon the treatment these units receive and how often they are checked and repaired.
Cites Finance Plan
According to J. M. Kaufman, sales promotion manager for Toro Manufacturing Corp., his company is presently engaged in a thorough study of repairs, salvage values and other factors pertaining to depreciation and replacement, but it will be some time before it is completed.
However, in 1960, when Toro was setting up its fleet financing plan that covers both purchases and leases, a payment and leasing term of from 36 to 40 months was decided upon. The reasoning behind this is that the best economical period of usage of grass-cutting machinery and allied units is three years. After this, the high cost of repairs to the units and their loss of efficiency generally make it unwise not to invest in replacement equipment.
Photos: Golfdom