HISID audit figures are clarified

Friday, June 15, 2012

HOLIDAY ISLAND -- The Holiday Island Suburban Improvement District's reported net operating income loss for 2011 of $446,996 was actually largely caused by a one-time write-off of assessments, officials clarified this week after a recent report in Carroll County News.

The figures were released in the district's audit report for 2010-2011, presented by Beall, Barclay & Co. at the May 29 business meeting.

The written-off assessments, in the amount of $437,570, were on Capital Source, the financing company for development corporation National Recreational Properties, Inc., explained HISID Office Manager Marilyn Clave and District Manager John Kennedy.

After NRPI defaulted on its 2008 assessments for hundreds of lots it had purchased both from the developer and individual lot owners, Capital Source paid the district $229,000 in assessments, penalties and interest in 2009. It did not, however, pay them for 2009 or 2010.

"Assessments are considered income, even if you don't have them," Clave said. "We will have another group of Capital Source write-offs this year."

Another figure impacting the bottom line is depreciation on the wastewater treatment plant upgrade, which kicked in when the plant went online in late 2010. It added $128,000 to the 2010 figure of $894,876, for a 2011 depreciation total of $1.02 million.

"Depreciation is not a monetary loss," Clave said.

Taking those two figures out of the equation and looking at the cash flow sheet, Clave said, shows the district left with $566,000 more in restricted cash and equivalents in 2011 over 2010, for a total of $1.825 million.

What also remains uncertain, however, in addition to the coming additional assessment write-offs, is that the district is looking at a $1.9 million lawsuit brought against it by Table Rock Landing timeshares. As of December 2011, the audit notes, the district was owed $125,000 in assessments, which TRL is disputing.

"Management has not allowed for any of the amount due as it believes the case has no merit and all assessments will be paid once a judgment has been rendered," the report states.

The district filed a motion to dismiss in December. The audit notes the district has no insurance to cover the loss should a judgment be found against it, but may have insurance for legal fees.

"While the District believes it has a strong case and intends to contest the case vigorously, it is unsure of the outcome and is unable to estimate any potential range of of loss at this time. Accordingly, no provision for any potential loss has been made in the accompanying general-purpose financial statements."

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