Thursday, March 23, 2017

The Watchdog Report: It Runs Like A (Knockoff) Rolex

The Watchdog Report
by Mike Zinkin

 It runs like a (knockoff) Rolex.

The January Financials Report
We heard time and time again how Troon was "the Rolex" of management companies. After reading the following list, you might think that Oro Valley bought a knock-off Rolex as the January financials for the Oro Valley Community Center and Golf Courses continue to be disastrous and reveal continued fiscal irresponsibility from the mayor and council.
  • Troon losses for January were forecasted to be $34,161 but turned out to be $198,253. As usual Troon missed their forecast, this time by $164,092.
  • In January 2016, Troon lost $62,709. That means that the losses this year were $135,544 more than last year. 
  • The member dues in January 2016 were $77,475. In January 2017 the dues totaled only $59,719. That’s $17,756 less than last year.
  • When the fiscal year started on July 1, 2016, Troon forecasted total losses for FY 16/17 to be $1,534,505. They have now increased the forecasted losses to be $2,035,867.
  • The food and beverage portion, primarily the Overlook, was forecasted to make $10,230 in January, but actually lost $13,385, bringing the total losses to $96,034 so far in this fiscal year. 
  • The Community and Recreation fund finished January 2017 at $514,403 in the red. This takes into account the sales tax revenue total of $1,255,074 (from the first seven months of the fiscal year – July 2016 through January 2017).
  • The total number of rounds of outside play (non-member) was forecasted to be 2,410. The actual number of rounds played was 2,226. This is an average of 72 rounds per day. Compare this to Del Urich and Randolph (Tucson City courses), Crooked Tree (Pima County course), and The Haven (Green Valley) that all averaged over 200 rounds per day.
Is fiscal responsibility above their pay grade?

Mayor Hiremath and Councilmembers Hornat, Snider, and Waters are the ones who voted for this albatross. Newly-elected Councilmembers Pina, Rodman, and Solomon have not stepped up to even question this irresponsible drain of the People's monies.

The Town Finance Director earns $149,848.82 a year. The Interim Town Manager earns $189,371.84 a year. Individuals deemed worthy of earning such high salaries should be expected to combat waste and inefficiency in the budget yet they have not stepped forward to advise the mayor and council that continuing this financial drain is not wise. Are they afraid that advising against this debacle would put their jobs in jeopardy? Certainly our "award winning" financial staff can see that the business model for the Oro Valley Community Center and Golf Courses is not sustainable.

Odds and Ends
Revenue from the increased sales tax is performing well, in fact, it is above the Town's projection, yet it doesn’t come close to covering the expenses. Imagine the lighted ball fields that could have been built with that $1.2 million.

Additionally, the Town has no plans to make the Community Center ADA compliant as promised and as mandated by law. I wonder how that sits with the Justice Department.

Town using HURF Funds for Community Center Maintenance
In addition, although we were told that all Community Center and Golf Course maintenance would be paid by the Community and Recreation Center Fund (CRC Fund) the Town has admitted to me via emails that they have utilized HURF monies (Highway User Revenue Fund) to cut the grass at the Community Center entrance and to resurface the cart paths. This is in defiance of State Law which states that no HURF monies shall be used for anything “other than highway and street purposes.” Why are they using HURF funds, you ask? Because the CRC Fund is broke.

LOVE is doing all it can do to inform you of what is going on. People need to step forward and contact the Town Council and tell them what you think.
The Arizona Daily Independent publish this article last week.

Wednesday, March 22, 2017

Editorial: KVOA News interviews Mike Zinkin

Mike Zinkin was recently interviewed by Channel 4 News Investigator, Matthew Schwartz, regarding the financial status of the Oro Valley Community and Recreation Center. This is a link to a video of the interview.

The mayor and interim town manager both opted out of being interviewed for the segment. The mayor supplied a written statement instead which we have published below followed by Zinkin’s response:

Mayor Hiremath’s Statement
“The Oro Valley Community Center, which includes a fitness center, pools, classes, tennis and golf, continues to grow in popularity. Membership is rising, and daily use is higher year-over-year. In fact, the Town is installing a traffic signal this year to safely facilitate the increasing flow of traffic in and out of the property.

When we look specifically at Troon operations, which includes golf, tennis and food and beverage, we are pleased to see that the Town is trending in a positive direction. Our net losses compared to last year are trending lower, while our dedicated sales tax revenue is trending higher. Last year’s overall net operating loss for Troon operations was $2.6 million, with $2 million in revenue generated from the dedicated half-cent sales tax. This year—our second year of ownership—that operating loss dropped to $2 million, and the sales tax revenue increased to $2.2 million.

In May, we will begin our third year of ownership, and we are on trend for our five-year plan. Council is committed to evaluating and assessing ALL town facilities and operations. The Town does not plan on selling the golf courses; rather, we are currently in the RFP process for a consultant to discuss land use and turf reduction options so that we can carefully consider any and all opportunities to reduce costs while still providing quality amenities to our residents and visitors.”

The reporter supplied a copy of Hiremath’s statement to Zinkin who then sent the following reply to the reporter:

Mike Zinkin’s Response
“The Mayor is wrong.

First of all the fact that the Town's sales tax is trending above last year is not relevant to Troon's losses. If you go to the April 6, 2016 Council Meeting agenda, you can see the Financials through January 2016.

  • In December 2015, Troon's losses were $135,714. In December 2016 the losses were $171,848. 
  • In January 2016, the losses were $62,709. In January 2017, the losses were $198,253. 
  • The food and beverage portion of Troon showed losses of $4,681 in January 2015. In January 2016 the losses were $13,385.
This is hardly trending in a positive direction.

It is true that the Fitness portion might be stable or growing. I never said otherwise. However, golf membership is dropping and the losses are increasing. (All of these numbers can be found on the Town's website.)

If the trend for the 5-year plan is to continue to lose money, then they are on target. I don't think anybody mentioned selling the golf courses. To do so would require a vote of the People, not the Council.

I failed to mention to you that I know about an individual that has had a meeting with the Interim Town Manager, Finance Director, and Parks and Rec. Director to lease the food and beverage portion of the property. There has been no feedback from the Town.

The RFP mentioned is for a study of land use, such as turf reduction...there is no contracted option to GIVE UP GOLF.”
Editor’s Comments
By claiming to be “unavailable for comment” and releasing a prepared statement instead, both Mayor Hiremath and Interim Town Manager, Danny Sharp, dodged answering any tough questions on camera.

Also, it was unfair for the reporter to only interview a couple of people who have golf memberships. A more balanced report would have included interviews with two or three OV residents who are not members and are not benefiting from the Community Center acquisition.

More information on the mayor’s comment regarding the installation of a traffic signal at the entrance to the Community Center can be found here.

Watch the KVOA interview here.

Tuesday, March 21, 2017

Guest View: Dick Leonard ~ Our Community Golf Course. Should it be public or private? Should it be taxpayer subsidized? Part 2

Below is Part 2 of a letter sent to the Town Council by Oro Valley resident, Dick Leonard. Part 1 appeared yeserday. The letter has been re-formatted with sub-headings added to fit the LOVE's format.
Municipal Golf Course Subsidies
Again, if the City wishes to operate the course as a Municipal course, the issue of subsidies must also be addressed. According to the RFP, Exhibit B, the 6 month total cost for sales, operations and management fees requires approximately $2 million. The current 0.05% sales tax which accounts for $2.1 million would be only a half year solution not counting capital expense. The other half year subsidy could be financed by either raising the sales tax, or placing a special assessment on another service, such as on the water bill. Not having any data on the cost of other Community Center services or capital expenses, the total amount appears to be unpopular. Without substantial subsidies, this consideration would likely not be acceptable to the public.

Breaking down each course and using the 7979 total rounds played on the "daily fee" side (July 2016 to Dec. 2016 ) with revenue of $201,450, the yearly subsidy for this course is estimated at $600,000. This again would require that 40,000 Oro Valley residents subsidize a country club for only 162 memberships.

Operating without subsidies
If, however, the Town operates the golf course as a Municipal Golf course, there are ways to operate at little or no subsidy from Town residents:

  • Reduce course configuration to 18 holes, with 9 holes on each side
  • Place all remaining fairways in Parks Dept. control and financing
  • Install fee-based ball dispensers to provide continuous daily income
  • Develop a local golf identity with convenient on-line booking and customer service
  • Provide individual 6 and 12 month annual resident cards which retain and reward repeat golf customers
  • Provide a variety of daily fee rates to match age groups and time-of-day, plus seasonal play 
  • Install vending machine areas to provide continuous revenue without reducing pace of play
  • Use a portion of the sales tax subsidy for the 18 hole course and cart path improvements
  • Eliminate food service discounts and reduce prices to all customers, or lease food service to independent operators

National trends
In addition, recognize the national trends in shrinking golf play and the increase of fitness participation, along with the many promotions of shorter courses and less time consuming play (i.e. 9 hole courses), which indicates the need to expand and improve all fitness related activity and the increased revenue source.

In summary
I believe the needed financial changes are only possible if the Town administration concludes that Oro Valley is in the business of MUNICIPAL GOLF, and that the facility must be operated as such. There are many examples of such golf courses in Arizona and all operate with the same basic goal of providing an affordable golf experience to all residents, without requiring burdensome subsidies. A contact with any one of the many municipal golf facilities across the United States will provide the results sought in the RFP and once implemented, will benefit our City residents for years to come.

Monday, March 20, 2017

Guest View-Dick Leonard: Our Community Golf Course. Should It Be Public Or Private? Should It Be Taxpayer Subsidized? Part 1

The following is a recent letter sent to the Town Council by Oro Valley resident, Dick Leonard. The letter has been re-formatted with sub-headings added to fit the LOVE's posting format.
The Municipal Golf Model vs. Oro Valley’s Golf Model
I have been a resident of Oro Valley for almost 20 years and until 2015, I was a member at El Conquistador Country Club. During the same period, I was on the staff of the Braemar Municipal Golf Complex in Edina, Minnesota. (Note: Braemar is regarded as one of the highest golf rounds played and successful golf operations in the state). As such, I value this golf club and the town of Oro Valley, and for that reason I feel compelled to write to the Council regarding the City's Request for Proposal (RFP #17003) regarding Consulting Services for Oro Valley El Conquistador Golf Course Operation.

The questions that need to be asked
I have read the RFP and believe it does not accurately define the purpose of the study. I believe the study could be better addressed by answering these two questions:

1.  How do we reconfigure the present golf property, for equal access and cost efficiency, which will offer the best municipal golf experience to all the residents of Oro Valley?
The RFP focuses on land use planning and analysis of food and beverage services. Within the land use planning, there are four options presented for consideration.

  • Option 1: Maintain existing 45 holes of golf. 
  • Option 2: Reduce the number of holes from 45 to 36.
  • Option 3: Reduce the number of holes from 45 to 27.
  • Option 4: Reduce the number of holes from 45 to 18.

In all options, the RFP asks for ideas as to how to enhance revenue while either maintaining or reducing the number of holes. However, in order to fully address any of these options, there is a question that needs to be addressed first, which the RFP fails to include.

2. Should the Golf Club be a Municipal or Private Operation?  
The current situation seems to be a combination of both.

How most municipal golf courses operate
The challenge and duty of Municipal Golf Management is to maximize usage and revenue sources, either as an "Enterprise" or as "Part" of another City Department, in order to function as "cost-neutral" to the municipality it serves. This is typical with Muny's throughout the country. If the course will be "Municipal" there are several factors that should be addressed. Some of these factors include:

1. Calculation of Inventory.
The total individual player tee times available during a specific time period. For example, one 18 hole course offering both 18 hole plus 9 hole rounds, will have approx. 260 individual tee times per day or 7800 available tee times per month.
2. Utilizing Revenue Sources that are commonly available for Municipal Golf Operations, such as:
  • Daily Green Fee
  • Cart rental
  • Driving range balls
  • Merchandise
  • Food Service
  • Instruction
  • Events

Inventory, Pricing, and Course Configuration
Any of the four options presented in the RFP should take into consideration the issue of inventory, pricing, and course configuration. For example, there are currently 45 golf holes, which relate to an inventory of roughly 19,500 available tee times per month. If this is compared to the total average rounds played per month, (period July '16 to Dec. 16), which averaged 3054 rounds, the usage was only 16%. If the course size was reduced to 36 holes, as Option 2 suggests, the usage is still only 20%. And, if only one course of 18 holes is utilized, as in Option 4, the course usage would still be only 40%. This means the usage could more than double during high volume months, and still have tee times open.

The obvious conclusion is that a single 18 hole configuration is a logical financial solution, and that it be arranged such that 9 holes operate on the East course, and 9 holes on the West. As such, rounds can be started on each 9 hole course, which allows a full shotgun start, as well as allowing 9 hole play whenever space is open and also meets the preference of many daily fee golfers. This design is common to every municipal golf course in this area. In fact, it may be difficult, if not impossible, to find a 36 or 45 hole municipal golf facility anywhere in the United States.

Our present mode of operation
Considering the subject of a Common Pricing Policy, presently one course is used for "Daily Fee" golfers, while the other remains as essentially a country club operation with "Membership Play.” The memberships are further separated into several categories with separate monthly fees and cart pricing. All such membership categories include amenities normally associated with a country club, such as unlimited golf, unlimited driving range, unlimited fitness and pool, racquet sports, and include additional discounts on merchandise and food service. At year end, the membership was listed at 229, however, if the various categories are adjusted to match the cost basis of the Category 1 (Conqueror), the adjusted membership would be approximately only 162 memberships, which includes 321 individuals.

To review the actual golf revenues, note that daily fee rates do not include any amenities, (except cart rental and driving range), therefore all income, estimated at $50 per round, is strictly golf revenue. However, to accurately discuss the membership golf revenue, the amenity costs must be moved to the appropriate Community Center function. With this adjustment, each membership represents a golf revenue contribution of approximately $300 per month (for two people). If a cart fee of $100 per month is added, the total of $400 per month would relate to only 8 rounds per month at the comparable $50 daily fee rate. If this is expanded to a typical 30 rounds per month for two people, this equates to golf revenues of less than $15 per round.

The above discussions only serve to illustrate why unlimited play memberships are limited to country club operations, and seldom if ever, included in municipal golf pricing. Without significant subsidies from remote sources, this form of revenue source is not sustainable, as witnessed by the loss forecasts.

[NOTE: Since inception in 1963, Braemar is recognized as a premier municipal golf course, complete with 27 holes of regulation golf, plus two executive courses, a winter golf dome, 40 driving range boxes, putting and pitching greens, clubhouse with reception and grille areas, plus a teaching staff of five PGA certified instructors. Recognizing the trends in golf play, the City of Edina will spend over $10 million to shut down in 2016 for a two-year renovation project which will increase the driving range to 67 boxes, eliminate one exec course, expand the reception rooms, lease the grille to an outside vendor, and rebuild and reduce the regulation course to 18 holes with 7 tee boxes to match all handicap levels.]
Part 2 will be published tomorrow.

Wednesday, March 15, 2017

Oro Valley Resident Appeals to Councilmembers Rodman and Pina “Think like a taxpayer.”

On February 28th, Councilmembers Bill Rodman and Rhonda Pina attended the Sun City Board of Directors Meeting to discuss current events in Oro Valley. Rodman discussed a recent Town Council meeting where at least 100 residents attended. About a half dozen parents and children spoke regarding their concern that Oro Valley does not have enough ball fields to meet the growing number of teams playing. The children must go to Catalina for ball games. They requested the construction of more ball fields. After the meeting, Oro Valley resident, Susan Ross, sent them the following e-mail:
Bill and Rhonda,

It is like I said at the last BOD meeting at Sun City:  It is time to cut your losses and to set your foolish pride aside.  We all make mistakes.  We all wish from time to time that we could have a do-over.  However, as we all know, usually a do-over is not possible.  What we can do is to right the wrongs -- especially when we are spending the taxpayers' money.

A tax increase -- another one -- to bail out the golf and restaurant follies is not going to fly.  That half-cent sales tax increase could go to building a community center, ball fields, and whatever else is needed to make this ever-changing family-oriented community the kind of place where people want to come to raise their families.

I was a school teacher for 26 years.  How you could sit there at a town council meeting and not be affected by the speeches that those young people wrote and presented to you is far beyond me.  I would have had those hemorrhaging golf courses and restaurant on the market the next day.  But then I was raised by a father who made it clear: “You got yourself into this mess. Now you are going to have to unmess.”  Not once did my dad bail my brother or me out of a mess.  It was our mess.  We owned it.

Did having to unmess make us stronger?  Absolutely.  Did we learn from our mistakes?  Every time.  Both my brother and I ended up being public servants, as were both of our parents and many, many members of our family.  We learned to think like a taxpayer.

Get rid of the golf courses.  Get rid of the restaurant.  Admit that mistakes were made and that it is time to move on.  If we lose some money, life will go on.  The voting public will be forgiving. No one bats 1000.  No one.

Remember the Bay of Pigs?  What a fiasco for the United States in the eyes of world opinion. What did President Kennedy do?  He did not say that we would wait a couple of years to see if things change.  He did not pass the buck and lay blame on poor advising.  He stepped up to the mic and he owned it.  All of it.  He told the world that he alone executed the invasion of Cuba. He alone owned the debacle.  And guess what?  His opinion polls skyrocketed. Would he have been reelected had he not been assassinated?  By a landslide.

Now let us look at Nixon and Watergate.  Instead of admitting to the American public that he had surrounded himself with a bunch of narcissistic, self-serving idiots and immediately fired their asses and had them prosecuted to the fullest, he pig-piled in with the cover-up. Eventually in all of his paranoia, he fetaled up in the corner, hid from the press, and never took one shred of the blame for one of the worst disasters in the history of this country.  And we all know what happened to him.  In the aftermath of Watergate, the citizens of this country had no faith or trust in their own government.  And why should they?  They were betrayed.

So what is it going to be with the golf courses and the restaurant?  Bay of Pigs or Watergate?

Think like a taxpayer.

Monday, March 13, 2017

Editorial: Analyzing the Modus Operandi Behind The Main Streets Project

Is the real goal of the Main Streets project to plan for the future needs of Oro Valley residents or is this just a “make work project” to keep town staff employed for the next 20 years? Let’s look at both sides of this issue.

Development without the Main Streets Project
At some point, we will need to redevelop some of the older existing retail centers in southern Oro Valley, such as the Trader Joe’s Plaza which is approximately 35 years old. Also, if the Town continues to annex other areas into Oro Valley, we may need to revamp some of the existing retail centers that would be included in those annexations. Road will continue to be widened and more traffic lights will be installed.

But it’s doubtful that the above-mentioned projects would create enough work for the 77 full-time and 51 part-time employees in the Community Development and Public Works Department to keep them employed for the next 20 years. (This department was formerly known as “Development and Infrastructure.”)

Enter the Main Streets Project: 
    A veiled retirement plan?
Town staff has described this project as, “setting the stage for redevelopment.” So we wonder, with no land left to develop, is this redevelopment plan just a “make work” project to secure the employment of the planning staff, in some cases, right up until their retirement? It’s suspicious that this idea is entirely staff-initiated and staff-driven. It’s also suspicious that the Main Streets Project appeared right after the Town informed the residents that Oro Valley is 95% built out.

With no big projects left, how do they stay employed? Enter the Main Streets Project, which, from various accounts, is expected to last anywhere from 12-20 years. This begs the question, are they planning ahead for the citizens of the town or are they planning ahead for themselves? The timing is just too coincidental.

The Community vs. Developers
Whatever the case, for the Main Streets Project to be successful, you need actual retailers who are willing to locate to these areas and you need stores and restaurants that are actually desired by the surrounding community as opposed to just filling the commercial spaces with whatever stores and restaurants with whom the developer normally does business. That was the case with the $23 million tax-payer funded boondoggle known as Oro Valley Marketplace.

Remember that Vestar (the developer of OV Marketplace) promised us, that in return for our town sharing the sales tax revenue with Vestar, they would create a community gathering place that would be “unique and extraordinary.” With a Wal-Mart anchor and numerous Anywhere USA discount stores, we know that Vestar’s promises were as empty as the numerous storefronts that have lined OV Marketplace since it opened in the fall of 2008.

Promises, promises.
In the case of OV Marketplace, we didn’t get what we desired, nor what was promised. We got swindled. We got what was best for the developer and the end result is that it never became the popular shopping destination or community gathering place that Vestar and the Town promoted. What assurances do we have that Main Streets will be any different?

Friday, March 10, 2017

Guest View-Rosalie Roszak: What Makes a Main Street?

Part 3: Oro Valley’s Main Streets Proposals

Main Streets Vision and Funding
Oro Valley’s Main Street Fact Sheet envisions Main Streets as a long term project with implementation between 2018 to 2030. It states that: “The Improvement Plan is a detailed blueprint to make Main Streets a reality. It includes designs, funding mechanisms and Town Code revisions.” It also states, “Main Streets will be achieved through public-private partnerships and various funding tools.”

The broader Draft C concept Plan mentions regional bonds and Town capital improvement programs as funding mechanisms. This type of verbiage makes a number of Town residents uneasy. What exactly does the Town mean by all this? How much will it cost area residents and taxpayers, and what will it achieve?

Main Streets workshop participants and Town planners discussed traditional Main Street areas wherein buildings are closer to sidewalks and therefore more visible, drawing pedestrians and shoppers into the centers. These types of designs would require revisions to the Town’s existing zoning and development codes. Typical suburban designs require larger building setbacks and parking areas such as we see in many of our existing retail centers.

Themes and Branding
Oro Valley’s existing retail and commercial development lacks a cohesive theme. Buildings were constructed with differing designs throughout the community, and many are not particularly attractive. The Town also acquired older commercial areas along Oracle Road to the south through annexation. Some of these will likely undergo renovations in the next decade.

Oro Valley could develop a theme or “Branding” for its commercial areas, particularly in the prime locales they are identifying as the focal points of their Main Streets Project.

Santa Barbara, Ca.
For instance, the well-known artist colony of Tubac has a recognizable entry arch, which acts as its theme. Other areas have also adopted unifying themes or “Branding” which help identify the community. Santa Barbara’s well known Spanish Mission style evolved from the major 1925 earthquake which destroyed many of the downtown buildings. When the city was being rebuilt, the Architectural Commission decided upon the Spanish Colonial Revival style for its downtown area, and that decision made the city famous. This in turn resulted in a strict architecture code, particularly in the central downtown area, which remains in effect today.

Oro Valley can resolve to adopt a “theme” or branding for its new development projects and for redevelopment of prior uses. Much of this can be incorporated through zoning and development codes, but the Town has neither the funds nor expertise to enact major developments on its own. The Town, however, can encourage private developers to carry out its theme in future developments.

Carmel, Ca.
Improving Pedestrian Access and Walkability
More than 3,000 Oro Valley residents live within a half-mile to one-mile walking vicinity of these centers. The Town could improve walkability to the centers and pedestrian access at the targeted intersection of LaCanada and Lambert as an initial step toward their “Main Street” concept. The Town could also provide some benches on LaCanada along the one mile stretch between Lambert and Naranja as an immediate enhancement towards walkability. Most successful downtown redevelopment areas include benches for people to rest on, sit and visit.

A mile is a long way to walk for many. A couple of benches along the route would encourage more residents to make that walk. Similarly, some benches and shade trees could be provided along Lambert Lane between LaCanada and Oracle Roads. Pedestrians will more likely frequent an area, if it is made easier and more inviting to do so. A signal controlled pedestrian walkway at Canada Hills Drive and LaCanada would improve access and safety for walkers heading to the commercial destinations at Lambert and LaCanada.

Transforming Vision into Reality
In summary, some of the Town’s proposed ideas for Main Streets appear doable if enough residents are interested to advance them. Other ideas seem less likely to achieve, such as narrowing the already busy LaCanada Drive to add street parking. The Main Streets Project as envisioned will need cooperation from multiple sources to include the citizens, Town Government, and the Development Community. The project will also need to address the viability of proposed funding, particularly if significant public monies are needed to implement some of the project proposals.
Rosalie Roszak is a 25 year resident of Oro Valley, moving here in 1992 with husband Rudy, in search of good air quality. She grew up in Flushing, New York and has resided in Washington, D.C., Santa Barbara and Los Angeles. She has a Master’s Degree in Urban Economics from University of California Santa Barbara, and worked for more than 40 years in the Commercial Real Estate Appraisal and Economic Consulting fields before recently retiring. 

Rudy Roszak also contributed to this article. Rudy was an Oro Valley Town Councilmember in 1995-1996. He has also resided in a number of urban communities, including 25 years in Oro Valley. Both Rudy and Rosalie may often be found walking in Oro Valley’s multi use trails and parks.