The Pellucid Perspective - November 2012 - (Page 9)

MUNICIPAL OPERATIONS Tucson municipal courses at risk City considering privatization... or closure By Jim Dunlap he city of Tucson, Ariz. is the latest significant sized US municipality to seriously contemplate getting out of the golf business. According to a resolution recently adopted by the Tucson City Council, at least one of the city’s five courses, the venerable Fred Enke Golf Course, is on the clock for potential conversion to a “passive park,” and the future of the other four courses may depend on whether or not a private operator steps forward to take over all five courses. After many years of generally satisfactory financial performance, with the city courses even able to build up a surplus in their golf enterprise fund, warning lights began flashing four years or so ago. The combination of some much-needed capital improvements and the onset of the country’s economic woes helped to nudge the municipal golf operations into the red. The golf fund was able to make up the operating deficit from surplus for three of those years, but the golf fund had to turn to the city for help last year. The golf operation is currently approximately $7.5 million in debt, which the city’s deputy parks director for golf operations, Mike Hayes, said is primarily due to the capital improvement projects on the courses which course revenues haven’t been able to cover. “The debt service left on the golf enterprise fund is primarily left from capital improvement projects in 2004 through 2006,” Hayes said. The need for golf to tap into the city’s general fund came at a particularly bad time for Tucson, with the city looking at substantial expenditures to fund police and fire services pensions and the city’s streetcar operations in the next few years. City councilwoman Regina Romero told the Arizona Star newspaper that, ““For far too many years, the greens committee and the golf administrators were hoping and praying the situation would resolve itself, but hoping and praying and not doing anything to change the financial picture of golf is not going to work anymore.” The city has operated its courses since 2000, after many years of allowing the courses’ golf professionals to operate them on a contract basis. The city will now be putting together an RFP sometime in the near future to privatize the muni courses’ op- T eration. The proposal will be for all five or none, Hayes said, with private managers not allowed to “cherry-pick” the one or two they might want. In some ways, the situation facing Tucson municipal golf is similar to issues facing golf course operators throughout the US, whether they are municipalities, privately owned public courses or private clubs. Tucson was no exception to the wave of new golf course development during the 1990s. (See the Market Focus look at Tucson following this article), although at least the Sunbelt population growth as the Baby Boomers aged and moved to the sun kept the supply-demand imbalance from getting totally out of whack. (Unfortunately for Tucson golf, much of that growth has come from the Hispanic demographic with its relatively low golf participation rate, which as of the 2010 Census comprised 37.1 percent of the Tucson DMA population, an increase of nearly 6 percent since 2000). As Hayes noted, the majority of the new courses built, in Tucson as elsewhere, were real estate plays to sell homes, rather than a true response to golfer demand. Those courses, many of which have now been sold to private operators, are creating pressure on older municipal facilities like Tucson’s as they discount their rates. “This area, and all of Arizona, is considerably overbuilt [for golf ], and they’re almost all housing developments,” Hayes said. “Places like The Gallery, the Ritz-Carlton, Oro Valley – there are a lot of formerly private or resort courses that are now open to the public, and they’re discounting their rates to get play, which makes it hard for us to compete.” The city’s Fred Enke course is not the only one targeted for changes, and in fact it will require permission from the National Parks Service to close the course and convert it to a park or other open space. Several other of the city’s courses may be targeted to sell off portions of their acreage, reduce courses from 18 to 9 holes, or closed entirely. Tucson courses not the only ones with issues As Hayes noted, Tucson is not the only Arizona municipality with problems involving their golf operations. Phoenix, notably, has struggled with the bottom line for its municipal The need for golf to tap into the city’s general fund came at a particularly bad time for Tucson, with the city looking at substantial expenditures to fund police and fire services pensions and the city’s streetcar operations in the next few years. www.PellucidcorP.com The Pellucid PersPecTive 9 http://WWW.PELLUCIDCORP.COM

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

The Pellucid Perspective - November 2012
Table of Contents
Are you missing your calling?
A tale of two cities
Debit or credit? Save either way
Tucson municipal courses at risk
Economy, discounting pressure challenge Tucson market
October golf weather impact: Giving back some of our season gains
TopGolf proposal for takeover of El Segundo range operation encounters opposition
4 more years – wither goeth golf?

The Pellucid Perspective - November 2012

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