The Pellucid Perspective - June 2015 - (Page 5)

Golf Course taxation Municipal golf property tax exemption affirmed by Ohio Supreme Court Court rules that Cincinnati entitled to exemption despite for-profit golf management By Jim Dunlap C ities whose golf courses are operated by a for-profit third party management entity dodged an expensive bullet late last month when the Ohio Supreme Court unanimously ruled that the city of Cincinnati is entitled to a property tax exemption for the six municipal golf courses under the auspices of the Cincinnati Recreation Commission (CRC). The ruling ended an administrative and legal debate of over six years stemming from a tax complaint filed with the Ohio Tax Commissioner by private golf course owner-operator Paul Macke. Macke's complaint claimed that CRC's outsourcing of the city's course operations to for-profit operator Billy Casper Golf not only invalidated the traditional property tax exemption for the courses enjoyed by the city, but also put private operators like Macke who must pay property taxes at a competitive disadvantage in the golf marketplace. The Supreme Court decision effectively resolved a 1-1 tie in the dispute in the city's favor, following an initial ruling by the Ohio Tax Commissioner cancelling the property tax exemption and a subsequent ruling by the state's Board of Tax Appeals (BTA) overturning the commissioner's decision. The decision was a major financial windfall for the CRC and the city of Cincinnati. The city had been making property tax payments during the four-plus years since the initial Tax Commissioner ruling cancelling the property tax exemption for the courses. In addition to being freed from that obligation going forward, CRC Superintendent of Administrative Services Steve Pacella said that the city is now owed $2.6 Million in rebates for those payments. Macke, whose family owns and operates several other courses in the area in addition to the Hillview Golf Course that he runs, was obviously disappointed with the Supreme Court decision, calling the ruling "a political decision." Ironically, in the sense that the ruling gave considerable weight to city government's responsibility to its citizens, the CRC's Pacella was in rare agreement with Macke. "If there's one takeaway," Pacella said, "it's an encouragement and an expectation that public entities will provide the best services possible to their citizens. We are not professional golf course or food and beverage operators, and the Casper people are." Pacella was quick to emphasize, however, that while Billy Casper Golf operates the courses, the city makes the final decisions on critical issues such as rates, operating hours and course policies. That was a critical aspect of the Supreme Court's review, reinforcing the Casper group's position as an agent of the city being paid for services rendered rather than an independent lessee. Additionally, the Court found that the lowered greens fees at the city's courses that were a major point of contention in Macke's complaints were actually in accordance with "the public purpose of Cincinnati's golf courses." Macke had contended that without the onus of property taxes, Casper had lowered rates in order to increase traffic at the courses' pro shops and F&B venues, where Casper retains the majority of the revenue. Ironically, the length of the dispute ended up working to the city's benefit, not only in the final ruling but also in the sense that the golf management contract with Casper was renewed in 2012, giving the city the opportunity to not only introduce some city control-oriented language in the agreement but also to negotiate a larger city share of the F&B and merchandise revenues and a lower management fee to Casper. The city's attorneys also introduced testimony that Casper's management team had actually recommended an increase in greens fees, but the city insisted on keeping the rates at the lower price. Both Macke and Pacella cited the golf industry's ebbs and flows as factors in the dispute. Macke cited the "saturation" of the greater Cincinnati area with golf courses at the end of the last century as one cause of cutthroat competition today, while Pacella pointed out that during golf 's boom years, newer and pricier competitors paid little attention to what the more pedestrian municipal courses were doing. Today's declining participation figures, coming on the heels of a tough economic period, have created more competition for less players and in many cases forced newer and pricier layouts to resort to discounting to remain competitive. "When we were just the $25 guy chugging along, nobody cared, but when the industry turned, all those $65 golf courses had to lower their fees and we became the bad guys all of a sudden," Pacella said. Bloodied but unbowed, Macke is retreating to regroup, but the city may not have heard the last of him. "Obviously I'm disappointed, but I've rattled their cages for six years," he said, "and I'd do it all again in a second." n The Pellucid PersPecTive 5

Table of Contents for the Digital Edition of The Pellucid Perspective - June 2015

PGA Tour/EZLinks-backed site challenges GolfNow
Municipal golf property tax exemption affirmed by Ohio Supreme Court
California course owners adapt to new water cutbacks
Reinventing vs. Reinvesting
Golf participation in 2020: Two “educated guesses,” you pick
What’s right with golf?
May golf weather impact: Starting the full season in “neutral”
Dallas: Room for improvement in Big D P&L
NGCOA facing a critical leadership decision

The Pellucid Perspective - June 2015