IN THE JULY column 1 explained the likelihood of a dues increase and the elements leading the members of the Executive Council (EC) to that conclusion. We received many responses from the membership, the vast majority of which were positive. We would all prefer not to have to raise dues, but the reality is that we need to increase income if we are to continue to provide services. The reasons for this situation are many, and the combination of these factors left us little choice to increase income. Most of the factors relate to insurance, which is the core of why most people join AMA. On July 14, your EC labored long and hard for the better part of a 12-hour day to establish the dues and fee structure for 2003. I will be up front with you; we wrestled with an increase in adult dues of $7 to $10. and we ended up deciding on the $10 figure. It is my responsibility to explain the reasons for this decision. I can only relate the feelings expressed, and I don't profess to be able to read the minds of the rest of the EC. (That would be a scary thought!) First we approached the part of the issue I will call the fee structure. This includes items such as charter fees, insurance certificates, sanctions, application fees. etc. We adjusted these to better reflect their relative cost to the association, but in many instances other elements of the structure influenced those adjustments. For example, the fee for a Contest Director (CD) application has long been $20, yet the fee for a Leader Member application is $1. Why shouldn't those be the same? I think the Leader Member fee was in place back when Jim Walker was first demonstrating this newfangled thing called U-control! Okay, CDs can earn membership credits, so how about $10 for the Leader Member application? A consensus was reached, and on we went. This type of thing will have little effect on the bottom line, but it will make things more equitable. We all know that it costs us more than either of those two amounts to process the paperwork, but we do not want to discourage people from becoming CDs or Leader Members. When we came to charters, we raised the basic charter fee very little but increased the cost of a site-owner insurance certificate substantially. Most of our exposure in this area is centered on the flying site, and those certificates are for primary coverage and are valid for the entire year. Sanction fees were increased a small amount. The cost for insurance certificates that cover events and are only valid for a specific date—typically two or three days—will remain the same. Those were the easy parts. Next up was the "free" (we prefer the term "earned") memberships afforded to CDs. officers. Contest Board members, etc. Many members had commented that these should be eliminated entirely, including many CDs themselves; yet many were just as strongly in the camp that said these memberships were a pittance compared to the efforts put forth by those people for modelers. The result was a compromise—a 50% credit, limited to one credit per person for the next year's renewal. Then came the really tough topic: your dues. All of the preceding will only account for a small part of the needed revenue; obviously, most of the revenues need to be generated from dues. Before going into this, I will try to outline the factors that played into our decision. For the last few years we have been fortunate enough to ride the wave of optimism in the financial markets, and we have generated substantial income for the association through conservative investments. This has kept your dues down. Unfortunately the bubble has burst, and the income generated from interest and investments has dropped significantly. For example, in 2002 we budgeted for $350.000 and it looks like we will realize only $82.000. In past years, we generated significantly more than $350.000. This isn't unlike the situation most of us are experiencing in our retirement accounts. Inflation is a fact of life, but a good return on our investments was offsetting most of it. That is no longer the case. We have also had depreciation expenses, which are noncash expenses that helped avoid increases. We really need to fund that depreciation and use it to enhance maintenance, replacing items that are depreciating in value and usefulness. Those items need to be addressed in this structure, but the real issue is the insurance plan. I discussed insurance extensively in the previous column, so you should have a casual knowledge of where we are, but I need to bring you up to date. We had a difficult time with the last insurance renewal, and the numbers I gave you then assumed that the next renewal would be at a similar rate. In the final analysis, a $7 increase in dues would suffice only if we could make that assumption. Given the current situation, we did not think we could. Since the previous column I mentioned, there has been another fatal accident within the hobby. I do not think it will affect our current insurance in terms of a claim, but the fact that it occurred will certainly be a factor in our next renewal, whether we are able to renew with the current company or particularly if we need to find a new carrier. I would feel better if our current carrier had not shown significant claims in the overall sense, but it has. and our coverage has contributed to that problem for them. Another factor is that the reinsurance company, which underwrites part of the risk, was hit hard by the September 1 I losses, and its capacity has been significantly diminished. As if that is not enough, the nosedive in the stock market has insurance companies raising premiums to make up for income not being derived from investments. The bottom line is that no one on the EC believes we will be able to renew the coverage next year at the same rate as this year. We may be lucky to get an insurance quote at all! The situation is similar to that in 1986. when in a hard market (although not as serious as the one we face now), we had to create a self-funded program. We used it through 1993, when it became more efficient to go back to conventional insurance. We simply do not know what this next renewal or new policy will bring. We need to seek out alternatives, including being prepared to fund a self-funded policy if that is the only choice. Given these unknowns, the decision was to increase the dues by $10 and hope that it is enough. If we ignore the factors that indicate a significant increase in insurance costs, we could find ourselves in big trouble. The greatest disservice to the membership would be to put ourselves in a position of not being able to provide insurance coverage. In view of what we do know, limiting the increase to $7, which is projected on the basis of a renewal of our insurance coverage at the same rate as this year, would severely limit our options in seeking insurance coverage for members, clubs, and site owners. That would be foolhardy and could jeopardize our sport. On page 154 is the complete summary of the 2003 dues structure, so I won't repeat it here. I can assure you that your officers worked long and hard on this, and it is our best collective judgment.
Edition: Model Aviation - 2002/10
Page Numbers: 5, 47
Edition: Model Aviation - 2002/10
Page Numbers: 5, 47
IN THE JULY column 1 explained the likelihood of a dues increase and the elements leading the members of the Executive Council (EC) to that conclusion. We received many responses from the membership, the vast majority of which were positive. We would all prefer not to have to raise dues, but the reality is that we need to increase income if we are to continue to provide services. The reasons for this situation are many, and the combination of these factors left us little choice to increase income. Most of the factors relate to insurance, which is the core of why most people join AMA. On July 14, your EC labored long and hard for the better part of a 12-hour day to establish the dues and fee structure for 2003. I will be up front with you; we wrestled with an increase in adult dues of $7 to $10. and we ended up deciding on the $10 figure. It is my responsibility to explain the reasons for this decision. I can only relate the feelings expressed, and I don't profess to be able to read the minds of the rest of the EC. (That would be a scary thought!) First we approached the part of the issue I will call the fee structure. This includes items such as charter fees, insurance certificates, sanctions, application fees. etc. We adjusted these to better reflect their relative cost to the association, but in many instances other elements of the structure influenced those adjustments. For example, the fee for a Contest Director (CD) application has long been $20, yet the fee for a Leader Member application is $1. Why shouldn't those be the same? I think the Leader Member fee was in place back when Jim Walker was first demonstrating this newfangled thing called U-control! Okay, CDs can earn membership credits, so how about $10 for the Leader Member application? A consensus was reached, and on we went. This type of thing will have little effect on the bottom line, but it will make things more equitable. We all know that it costs us more than either of those two amounts to process the paperwork, but we do not want to discourage people from becoming CDs or Leader Members. When we came to charters, we raised the basic charter fee very little but increased the cost of a site-owner insurance certificate substantially. Most of our exposure in this area is centered on the flying site, and those certificates are for primary coverage and are valid for the entire year. Sanction fees were increased a small amount. The cost for insurance certificates that cover events and are only valid for a specific date—typically two or three days—will remain the same. Those were the easy parts. Next up was the "free" (we prefer the term "earned") memberships afforded to CDs. officers. Contest Board members, etc. Many members had commented that these should be eliminated entirely, including many CDs themselves; yet many were just as strongly in the camp that said these memberships were a pittance compared to the efforts put forth by those people for modelers. The result was a compromise—a 50% credit, limited to one credit per person for the next year's renewal. Then came the really tough topic: your dues. All of the preceding will only account for a small part of the needed revenue; obviously, most of the revenues need to be generated from dues. Before going into this, I will try to outline the factors that played into our decision. For the last few years we have been fortunate enough to ride the wave of optimism in the financial markets, and we have generated substantial income for the association through conservative investments. This has kept your dues down. Unfortunately the bubble has burst, and the income generated from interest and investments has dropped significantly. For example, in 2002 we budgeted for $350.000 and it looks like we will realize only $82.000. In past years, we generated significantly more than $350.000. This isn't unlike the situation most of us are experiencing in our retirement accounts. Inflation is a fact of life, but a good return on our investments was offsetting most of it. That is no longer the case. We have also had depreciation expenses, which are noncash expenses that helped avoid increases. We really need to fund that depreciation and use it to enhance maintenance, replacing items that are depreciating in value and usefulness. Those items need to be addressed in this structure, but the real issue is the insurance plan. I discussed insurance extensively in the previous column, so you should have a casual knowledge of where we are, but I need to bring you up to date. We had a difficult time with the last insurance renewal, and the numbers I gave you then assumed that the next renewal would be at a similar rate. In the final analysis, a $7 increase in dues would suffice only if we could make that assumption. Given the current situation, we did not think we could. Since the previous column I mentioned, there has been another fatal accident within the hobby. I do not think it will affect our current insurance in terms of a claim, but the fact that it occurred will certainly be a factor in our next renewal, whether we are able to renew with the current company or particularly if we need to find a new carrier. I would feel better if our current carrier had not shown significant claims in the overall sense, but it has. and our coverage has contributed to that problem for them. Another factor is that the reinsurance company, which underwrites part of the risk, was hit hard by the September 1 I losses, and its capacity has been significantly diminished. As if that is not enough, the nosedive in the stock market has insurance companies raising premiums to make up for income not being derived from investments. The bottom line is that no one on the EC believes we will be able to renew the coverage next year at the same rate as this year. We may be lucky to get an insurance quote at all! The situation is similar to that in 1986. when in a hard market (although not as serious as the one we face now), we had to create a self-funded program. We used it through 1993, when it became more efficient to go back to conventional insurance. We simply do not know what this next renewal or new policy will bring. We need to seek out alternatives, including being prepared to fund a self-funded policy if that is the only choice. Given these unknowns, the decision was to increase the dues by $10 and hope that it is enough. If we ignore the factors that indicate a significant increase in insurance costs, we could find ourselves in big trouble. The greatest disservice to the membership would be to put ourselves in a position of not being able to provide insurance coverage. In view of what we do know, limiting the increase to $7, which is projected on the basis of a renewal of our insurance coverage at the same rate as this year, would severely limit our options in seeking insurance coverage for members, clubs, and site owners. That would be foolhardy and could jeopardize our sport. On page 154 is the complete summary of the 2003 dues structure, so I won't repeat it here. I can assure you that your officers worked long and hard on this, and it is our best collective judgment.
