The Pellucid Perspective - June 2018 - 6

GOLF COURSE
OPERATIONS

ey, the USA Today article reported that Martin County is (seriously) considering a $10M+ clubhouse build and course redesign
while Fort Myers reportedly spent nearly $8M for improvements
for their courses. While we've seen some number of non-municipal owner/operators investing 7-figures in improvements behind breakeven financial performance, we haven't yet seen many
of them throwing good money after bad at these extremes of the
spectrum. As evidence that no good deed goes unpunished, this
brings us to the burning question for a number of municipal golf
operations based on our recent engagements: "What's my deferred CapEx liability going to be in 5-10 years and what is the
size of that 'balloon expense' that I'm going to need to cover?"
The answers we're coming up with are scaring people but no
one is panicking yet (which is good). The answer is generally
ranging from $3-$5M per course which means, for larger municipal enterprises with multiple facilities, the bill coming due/
cash we have to raise/reserve for is topping $10M. Pause for
effect... That effectively means that, in addition to trying to figure out how to break even in the 3-5 year term, in order to be
financially responsible stewards of the public recreational money
and the golf assets they manage, they should be putting away
roughly $80K per year for the next 5 years to be able to cover
those inevitable replacement costs to maintain the quality of their
golf assets (or even keep them functioning in some cases). For

6 The Pellucid PersPecTive

the clients we've been working with to determine the size and
timing of this "bubble," none have yet been able to come up with
a workable plan to close the gap (we've only been working on it
a few months though so cut us some slack), but at least they've
quantified and qualified it and are working on initial communications to the various governing bodies regarding the challenge and
the prognosis.
It may be that this CapEx monster under the bed for municipalities (not limited to them, I'm sure there are a number of
private owner/operators in the same situation; some who see this
coming but likely more who do not) is the catalyst for yet another
round of soul-searching regarding what the emotional, financial
and political tolerance is for subsidizing municipal golf. Don't
get me wrong, I have a strong sense of loyalty to muni golf and
the fact that it makes our sport affordable and accessible to the
masses. (Point of reference, I play the bulk of my annual rounds
here in the NW Chicago suburbs on various local muni courses).
But, as an analyst and putting on my green eye shade, the numbers on many of these are becoming increasingly insurmountable.
We'll see where the path leads but I sense that the market for
course renovation is going to be either really good in 5 years, or
really poor. I don't see much in between but, in the immortal
words of Yogi Berra, "It's tough to make predictions, especially
about the future."
n

June 2018
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Table of Contents for the Digital Edition of The Pellucid Perspective - June 2018
