We learned from Council Member Mike Zinkin that the Oro Valley golf course was, once again, woefully short of its revenue forecast in September.
LOVE projects September Oro Valley golf course losses at -$295,576
The town had budgeted a net loss of $241,566 in September. This budget assumed that there would be 4,351 rounds of golf played at an average revenue per round of $40.17. The actual result for the month of September was 3,762 rounds at an average revenue per round of $31.89, for total revenue of $119,970.18. The actual golf round revenues fell short of the budgeted golf round revenues by $54,010, or 31%. This lost revenue equates to added losses because there are virtually no costs that go away when a round of golf is not played. So, we project the actual loss for the month to be $295,576.
LOVE estimates total losses on golf since ownership began: -$1,619.350
We previously reported on September 14 that we had estimated losses on golf to be $1,323,864 for the first four months of club ownership (May through August, 2014.) We can now add to this our estimate of September's losses. So, as of September 30, we estimate losses be $1,619,350.
LOVE optimistic forecast of golf losses for first 14 months of ownership: -$3,100,667
The Oro Valley town budget includes $662,581 in budget golf course financial losses for the remainder of the town's fiscal year, October through June). The actual revenue from golf rounds has be 31% less than the town's budget for the first three months of this year. If this "underachievement" of revenues continues to occur, and we see no reason to assume otherwise, then an additional $818,436 will happen. A conservative projection of remainder of year loss would be -$1,481,347 in losses. Add this to loses to date and the total estimated loss for the year is $3,100,667.
LOVE conservative forecast of golf losses for first 14 months of ownership: -$3,500,000
We think that the $3.1 million loss estimate is optimistic. We say that because the town's budget appears to be based on a forecast of golf rounds and average revenue per rounds that increases dramatically for the month's of November through April. For example, budget actual revenue per round increases to $55.29 by next June. Golf in Oro Valley is very competitive. There is every reason to believe that local course golf pricing will keep a "lid" on Oro Valley's ability to raise prices. So, we've added another $400,000 in under performance to our optimistic estimate.
Is it possible that Oro Valley did not do sufficient diligence on its forecast of golf revenues?
Council Member Zinkin has requested information from Oro Valley town manager Greg Caton on the assumptions used to create the town budget for the golf course. Caton told Zinkin that it is too much work to get this information for him and that the council must vote to tell him to do so.
Zinkin was asking for a very simple thing. The assumptions used to prepare the golf budget. These should be readily available. They should require no effort to find.
We we do know is that the town's golf financial revenue budget is greater than the Hilton had planned in its final year of ownership: Greater by about 10%. One source of this is the average revenue per golf round. The town budgeted it at $44.60. Hilton achieved $38.15 in its final year of ownership. The difference is a 17% planned increase due to town ownership.
Majority-4 don't think there is a problem
Despite mounting losses in excess of budget, the Majority-4 do not foresee a problem.
According to Council Member Mary Snider: "We need a year's worth of" actual results before the town can decide what to do. "I will not support anything to do with reevaluating the golf projections."
"It is time to redo the numbers," according to council member Mike Zinkin. "We need to understand the financial impact of this."
Zinkin and the other two minority council members, Burns and Garner, asked that the town do just that at this past Wednesday's council meeting. Their idea was rejected by yet another 4-3 vote.
Watch the video of this discussion among the council members at last Wednesday's council meeting.
Want to learn more?
Learn about this from Council Member Burns. Listen, at the 60 minute mark, to his discussion of the seriousness of the situation with KNST morning show host Garrett Lewis this past Friday.
Read Tim Stellar's (Arizona Daily Star) report on this.
Read the Arizona Daily Independent report on this.