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