Dear USEA Members,
As you know, 2020 has been an extraordinary year for all of us. The arrival of the COVID-19 virus has brought numerous challenges to our personal lives and our businesses. Friends and family have fallen to this illness and businesses we frequent, or own, have suffered severely. We could not have imagined these things when we gathered in Boston at last year’s USEA Annual Meeting & Convention. As you may suspect, your eventing organization, USEA Inc. has not been spared the negative economic effects brought on by the pandemic.
The cancellation of many events in the first half of the year caused a severe shortfall in budgeted revenues from both competitions and membership renewals. As of September 2020, those revenue losses exceeded $800,000. Inc. Management and the USEA Board of Governors took immediate actions this spring to reduce or defer costs to close the revenue gap cutting over $400,000 from budgeted expenses and with additional cuts planned for the 2020 fiscal year, but those actions alone were not sufficient to ameliorate the negative financial effects caused by the pandemic to the Association over the balance of the year. Our savings have been largely depleted. As a temporary solution, we applied for a “PPP” loan from the federal government which was granted in the amount of $325,000. We expended those funds by September. We hope and are optimistic that the PPP loan will be forgiven since we believe we complied with the terms of loan forgiveness.
Through the pandemic, our small Association staff and volunteer leaders worked hard to make sure that our time was not misspent. It was imperative for our Association to support the sport even when there was no revenue supporting those efforts. Those efforts included:
The 2020 eventing season has been unprecedented, but we believe our Association has risen to these challenges. While these efforts have been effective, numerous additional events were canceled for the remainder of the year. As we look forward to year’s end and the start of our season next year, we see continued revenue shortfall that is essential to allow us to keep our doors open to support the membership.
We must continue to look ahead to yet another uncertain year and make adequate financial plans that we hope will see us through to the end of this virus afflicted economy. We are concerned that the very financial viability of the Association remains at risk.
Accordingly, the Board of Governors and management have determined to pursue additional financing that will help secure our future. We approached our sister organization, the USEA Foundation, to consider funding an additional loan to USEA Inc. We have provided the Foundation the terms of a loan (a secured COVID-19 revenue bond (the “Bond”) in an amount not to exceed $500,000) that the Board of Governors unanimously approved at its August 2020 Board meeting. The Foundation Board of Trustees unanimously approved granting the loan on September 1, 2020. The security for repayment of that loan obligation will be additional membership and starter fees. The loan will carry an interest rate of 3.25% and be repayable without penalty at any time. Under what we hope will prove to be conservative assumptions about competitions starting next year, we expect the loan can be fully amortized in less than four years.
Full annual membership fees will be increased by $5.00 per year starting with the October 2020 renewal cycle. Starter fees will be increased by $5.00 per start as of December 1, 2020. Such fee increases will be solely applied to the repayment of the revenue bond obligation. We anticipate closing and funding the financing on December 1, 2020, consistent with the start of the new fiscal year. The Board of Governors have also made it clear that their intention is to remove these fees as soon as the loan is repaid and the Association is on sounder financial footing. Our goal is to repay these loans early if the economy and the USEA budget recover ahead of our estimates.
The Board of Governors of the USEA Inc. believes it is in the best interest of the USEA membership and the USEA Inc. to effect this financing through the Foundation while the duration of the economic effects of COVID-19 negatively impairs USEA Inc.’s financial viability.
Again, we take these actions only reluctantly and after much deliberation. We thank our members, organizers, vendors, and patrons for all they do to make our great sport a reality. We have overcome many adversities in the past and we will overcome COVID-19 as well.
Finally, in closing, we would like to inform you that the members of the Board of Governors have been asked to make a contribution outside of their normal annual contribution to the first quarterly repayment of the bond.
Thank you and be safe.