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.