Monday, December 15, 2014

Controversy Stirs Over Oro Valley El Con Purchase (Part 1)

Wednesday, the Oro Valley Town Council will consider increasing the sales tax by a half cent to finance the operation of a community center and recreation facility. The operation includes several golf courses, two swimming pools, and 31 tennis courts. The town will create this facility from The El Conquistador Golf and Tennis Resort, which it will purchase from HSL Properties for $1 million.  HSL is purchasing it from Met Life.

The Town Of Oro Valley is presenting the following "case" for purchasing this property and converting it to a community center and recreation facility:
  • The community has identified a need for a community center in a 2013 survey.    The survey was statistically valid, according to the town.
  • Respondents to a recent survey stated that constructing a multi-use community center with facilities for indoor recreation/fitness programs was at least somewhat important to them.
  • The cost of purchasing The El Conquistador Golf and Tennis Resort of $1 million is far less than the cost of building a comparable facility, which is estimated to be $20 million
  • The town will pay the purchase price in three equal payments over three years.
  • The purchase price will be paid from the town's contingency fund.  There will be no need to issue debt.
  • The ongoing cost of operating the facility will be paid by an increase of one half cent in the sales tax.  This will generate $2 million annually. The sales tax will be designated solely for the proposed Community and Recreation Center and related amenities.
  • The operation of the property will breakeven in approximately 5 years.
  • The opportunity to purchase this property has a short window. "The aggressive timeline set forth by these two parties has also placed the Town on an accelerated timeline."
         (Source: Town Of Oro Valley media release)

The town has done the following "due diligence" effort in evaluating this opportunity:
  • "Town of Oro Valley Building Official Chuck King completed the initial inspections on the buildings.
  • We then utilized the services of Swaim Associates Architecture for the building proper (analyzing Chuck’s inspection list). They provided a complete review as well as adding suggestions to turn these facilities from a private country club to a public community center.
  • Aqua Design International analyzed the condition of the pools (Aqua Design was our designer who engineered all the pools and water features of our present Aquatic Center). They also supplied the estimate to remediate the pools to an acceptable operation condition as well as meet current code and health standards.
  • Arizona Restaurant Supply (ARS) analyzed the kitchen components and provided an estimate to bring the kitchen facilities up to current code and health standards.
  • Compusult Construction Cost Consulting gathered all the information and provided a detailed cost breakdown of all the elements discovered by Town Staff, Swaim, Aqua Design and ARS.
  • Environmental Strategies Inc. analyzed and tested the facility for asbestos-laden materials, particularly in the fire retardant areas as well as insulation. We are still waiting for final testing results, but so far, information received has been clear.
  • Inspections/analysis of the golf courses were completed by Troon representatives, with some participation from Town staff on certain elements of the analysis." (Source:  Misti Nowak, Oro Valley Communications Administration Director)
In addition, according to Nowak, the town estimates that a new facility built from the ground up would cost approximately $20 million:
  • As a point of reference, the cost of the Northwest YMCA was $222 per square foot in 2002 for construction costs, which included the pool. (The NWYMCA is approx. 32,000 square feet.)
  • If we assume a 2% escalation of construction costs over 5 years (discounting the 7 years of the recession), the present day cost would be $240 per square foot.
  • This cost did not include the land acquisition and sports fields costs associated with the project. The NWYMCA land was donated by the Nanini family, and Pima County picked up the costs for the sports fields.
  • Based on the NWYMCA construction costs, if the Town were to build something comparable to the Hilton Country Club, the breakdown of costs would be as follows:
         Building, Shell, Pools: 40,000sf x $240/sf                                                 = $9,600,000
        16 asphalt tennis courts: $20,000/court x 16 courts                                         = $320,000
        15 concrete tennis courts $1,300,000 (surface) + $10,000/court x 15 courts = $1,450,000
        Grounds and parking30 Acres    (low estimate)                                          $5,000,000 
        Total                                                                                 $16,370,000
  • This total does not include any field development, so we would need to factor in approximately $800,000 per field, based on current Naranja Park costs.
  • In addition, with the addition of the golf courses, the Town would be picking up the remainder of the land for about $12,500 per acre (based on $4,000,000 for 320 acres), to balance the total project cost at $20,000,000."
We posted Mayor Hiremath's view last week.  The Mayor believes that this transaction satisfies a stated community need and that it makes good business sense.

Council Member Joe Hornat seems to share that view.  Joe, as you know, has a way of simplifying the complex:
"This is an opportunity to get a Community Center...that is the primary goal. The amenities like the pool, tennis courts, property etc make this even more attractive and fill some gaps in our Parks program.
Yes the golf course is a risk, but a manageable risk with the right management company such as Troon, and some investment to bring this course (and the building) up to standards we would all expect. Marketing will be done by Troon and Visit Tucson and that will be a great boost. The potential for offering a "Troon" card to members allowing them to play other Troon courses at a discount should be a great draw also. 
Will it make money day one? business will. It is an investment in the future of Oro Valley. I don't like taxes any more than any rational person, but there has to be a way to support this investment until it turns itself around and it will do that."
Hornat also observed that "...for profit companies are buying golf courses, Mickelson at Stone Canyon (they are building a new country club building besides)...the folks who bought OV Country Club and none of them did it to lose money."
Wednesday, we will present a list of concerns shared to us by our readers.

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