The Pellucid Perspective - July 2012 - (Page 5)

MUNICIPAL GOLF A victory for municipal golf By Harvey Silverman [Editor’s note: We apologize to those unfamiliar with the term for the use of “realpolitik” in the sub-head above, but its essential meaning is “politics based on practical and material factors rather than on theoretical or ethical objectives.” The case study in this story demonstrates the “3 R’s” in the sub-head and provided a winwin-win for the city, the golfing public and the golf course operator, and may be instructive for other municipal golf operations.] t is no secret that tough economic conditions have created pressure on municipal department heads and officials to cut costs and/or, if possible, increase revenues. Municipal golf operators are no exception, and in fact are often targeted because the service they provide is viewed in some quarters as non-essential as opposed to utilities, police and fire protection, tax collection, etc. The following is a look at one example where a reasoned and well-researched response, combined with some viable alternatives, produced a winning result for all the parties concerned. First, a little history. The San Mateo Municipal golf course, like so many others, was built during the Depression as a joint venture between the City and County of San Mateo, California. It opened in 1933, boasting “all green fairways”, weekday and weekend rates of 50 and 75 cents, and a monthly pass for $3. The course fulfilled the traditional role of municipal golf by offering no-frills, basic, entry-level golf. In 1945, the City of San Mateo purchased the County’s interest in the course and became the sole owner and operator. In the 1950’s, the City adopted an operating model that provided maintenance using City employees, and leased the golf shop to a Head Golf Professional who hired his own staff to manage the golf operations. This same operating model remains in place today, led by PGA Head Professional Dana Banke. By 1973, affordable and accessible golf still prevailed, with greens fees of $3.50 for weekdays and $5.00 on weekends. At this point the Golf Enterprise Fund was created, with the expectation that the golf operation would be self-sufficient and separate from the General Fund. It would be managed like a business, covering its expenses from fees collected and placing excess funds into a reserve fund dedicated to the golf course. Then, the triple whammy hit. The strategic plan was always to have the course be a self-sustaining enterprise. The passage of Proposition 13 in 1978 made this more difficult and forced the City to implement new strategies for self-sufficiency. The City began charging an Indirect Cost Fee as compensation for the use of various City department support services, adversely affecting the course’s bottom line. The recession of the early 1990’s caused more budget cuts at the City, which chose to charge the course a second fee, an In-lieu of Taxes Fee, under the premise that the www.PellucidcorP.com Reason, research and realpolitik carry the day for threatened muni I course was utilizing land that could otherwise be used to generate property tax. Finally, in the late 1990’s, NGF’s recommendation to build a course a day had affected (or infected) the market, and San Mateo found itself in the position of competing against new and shiny daily fee facilities. The worn but serviceable San Mateo Municipal Golf Course was forced to consider and implement upgrades while it hosted over 100,000 rounds a year. Faced with a dilapidated clubhouse, an obsolete and failing irrigation system, and the prospect of declining rounds and revenue, the decision was made to embark on a complete course renovation. Using $2 million for the clubhouse, which drained the golf reserve fund, and $10 million from the issuance of tax exempt bonds for the course renovation, the City re-opened the new facility in July 2000 as Poplar Creek Golf Course. Fast forward to the present and Golf Services Manager Tim Heck’s realization that one of the fears of the late 90’s had come true: Rounds and revenue had been declining for several years. Several factors were at play. First, the decline was market-wide, as golf ’s “bubble” began to wane. Second, both City and area demographics were changing in ways not particularly friendly to golf. Couple this with the City annually increasing the Indirect Costs and Rent In-Lieu fees, and Heck was under growing pressure to “make more money,” despite the fact he had reduced Operating and Capital Outlay expenses by 17% since fiscal year 2000-2001. On top of that, Pellucid’s weather impact analysis showed that the course operated at an annual rate of nearly 83% utilization. (Meaning that “back in the day” it operated at over 100% utilization), far above the 52% national average. But there were no reserves for future capital improvements. Every year since the course was renovated, it had generated sufficient revenue to cover its operating expenses, capital outlay, indirect costs, and debt service. It was not able, however, to consistently cover the entire amount of the contribution to the General Fund represented by the in-lieu of taxes payment. Heck and Director of Parks and Recreation Sheila Canzian sought to work with the City government and find an amenable, long term solution: They had to decide what the objective is for the golf course. Is it a public amenity, a revenue source, or both? Should it provide a reasonably subsidized recreational benefit to the community similar to other recreation programs or should it play a larger role? Given that the current operating structure was not a sustainable model in either the short or long term, four options were presented for consideration: 1. Consider maximizing revenue capacity through the devel- opment of a driving range plan (Poplar Creek currently does not have a range). The Pellucid PersPecTive 5 http://WWW.PELLUCIDCORP.COM

Table of Contents for the Digital Edition of The Pellucid Perspective - July 2012

The Pellucid Perspective - July 2012
Contents
More golfers say “good-bye” in 2011
A victory for municipal golf
Golf ’s new frontiers in faraway places
A range of possibilities
Weather impact, flat June closes out spectacular 1st half
Steel City or Iron City, Pittsburgh is a hard golf market
Lowe Enterprises joins Suncadia Resort ownership group
The First Tee: It’s not all about golf

The Pellucid Perspective - July 2012