The Pellucid Perspective - September 2017 - 6

MUNICIPAL GOLF

Municipal golf remains in the crosshairs:
From Tucson AZ to Buffalo Grove IL
By Jim Koppenhaver

I

t's kind of hard to not get shot when you don't even know
from which direction the bullets are likely to come. Such is
the instance in two stories that recently crossed my desk for
the above municipalities. They both outline very difficult discussions underway that call into question the subsidy level for their
golf operations and how long they could feasibly sustain that
investment before budgetary constraints would swamp their
boat. Recall that in this publication back in June I highlighted a different kind of municipal folly when the Lake Villa, IL
Township Board decided they wanted to spend the reserve fund
to buy the Antioch Golf Club from a private owner, only to be
soundly drubbed in a required voter referendum that resulted in
a 716-128 nay/yea outcome (ouch!). To prove that as a municipal golf entity you can get shot at from multiple directions, let's
look at the latest two poster children for the perils of being in
this line of work in the current golf industry environment.
In Tucson AZ, in one of the late 2016 meetings between
the Mayor and City Council, a request was made of the City
Manager regarding the "direction we are headed" as it related
to the city's golf operations. The City Manager, I suspect being
politically astute, deferred until he could collect more information and present a position on the larger subject of golf 's role
vs. just the metrics of the courses individually and as a portfolio.
The laudable goal by the City has been to "attempt" to run the
golf operations as an Enterprise Fund and be self-sustaining
but, as we'll see below, that's been an elusive goal. They currently own five 18 hole equivalents (El Rio, Fred Enke, Randolph
Golf Complex (36 holes) and Silverbell) with Randolph being

Facility

the crown jewel and El Rio being the ugly duckling with the
others in between. One of the luxuries of having a portfolio in
an Enterprise fund-like environment is that you can potentially
lose money on the majority as long as the portfolio breaks even.
The table below, part of a 10-page memo from City Manager
Michael Ortega (in the public domain) shows the portfolio's
Operating Revenue picture for the past 3 Fiscal Years (see table
at bottom).
A couple of observations here. They're making progress,
some might say within shouting distance of making the portfolio break even (if they could repeat FY '17 performance they'll
be close to breakeven for the 4-year period and could possibly
"sell" against that). This however is highly dependent on Randolph continuing to shoulder the burden for the entire portfolio's profitability. Reasonable people would immediately see
that by paring back 1 or more of the unprofitable facilities, the
portfolio would actually make money and have a better than
50/50 chance at ongoing sustainability. Adding to that, here's
the hidden "kicker" which we see playing out extensively across
muni-golf land in our conversations: the deferred maintenance
for each of the unprofitable courses is estimated at El Rio
$1.1M, Fred Enke $1.4M, Silverbell $1.1M! So, in addition to
not making money, their ship is taking on water at a pace that
means they'll be an even bigger albatross for the city 3-5 years
hence. So the unenviable task for the City Council and the City
Manager will be to figure out how to de-risk their golf portfolio
while not unduly angering the local golfers (and politicians) and
amidst the various zoning restrictions and covenants. The only

FY '15
($Ks)

FY '16
($Ks)

FY '17
($Ks)

Total ($Ks)

Randolph

+$609.2

+$1,011.2

+$924.1

+$2,544.5

Silverbell

-$78.9

-$111.4

-$106.7

-$297.0

Fred Enke

-$428.8

-$469.5

-$316.4

-$1,214.7

El Rio

-$506.9

-$468.5

-$305.5

-$1,280.9

Total

-$405.4

-$38.2

+$195.5

-$248.1

6 The Pellucid PersPecTive

September 2017
Table of Contents for the Digital Edition of The Pellucid Perspective - September 2017
