The Watchdog Report: There are several ways to cut the losses at the Town-owned golf courses

Over the past 4 years, many people have asked me what I thought the alternative was to the current golf situation in Oro Valley. As a council member, I often answered, “It doesn’t matter what I think, it matters what the People think.” Since I am no longer on the dais, and after watching this situation unfold all these years, I will now share my complete opinion.

You already know that I was never a supporter of the El Con golf courses purchase from HSL. However, we now own it and we must figure out how to reduce the financial drain that this purchase has saddled on the community. My comments will only deal with an alternative to golf, as I have never been opposed to the Community Center part of the purchase.

Whether we like it or not, we own the acreage and need to decide what to do with it as the current model has a proven history of not being sustainable.

Path to Sustainability

I believe that we need to return to the original 18 holes of golf and become strictly a municipal facility. Stop all monthly deposits made from members and make all golfers pay for the driving range. Paying for the range can easily be accomplished by purchasing a vending machine that dispenses both a large and small bucket of balls. Tokens for this machine can be purchased from the pro shop.

For those existing members who currently own golf carts, the Town can offer the following: For the first 12 months after becoming a municipal course, offer a reduced green fee ($10.00 - $15.00) to all those individuals that currently own carts if they chose to utilize their own cart.

Being a public course doesn’t prevent the current members from starting a “Private Golf Club.” Many other courses currently foster their own clubs. Being a member of the club will allow you to play with the club on certain days and get prime tee times. For example, let’s say the club plays on Mondays and Thursdays. The club’s representative would contact the pro shop 2 weeks ahead of the day and have them set aside x number of tee times (for example 16 tee times). The El Con would reserve 4 tee times (4 golfers per tee time) during a peak time. (Times would change depending on the season).

Having only 18 holes of golf will drastically reduce the water usage, maintenance requirements, and equipment leases. Try this for 12-18 months and see if the Town can sustain the losses.

There are a few additional items that should be considered
The Management contract must be re-bid. Troon is not in the municipal golf course business. Find a “National” firm (as required by the purchase agreement) to manage the course.

Close the Overlook Restaurant. The Garden Café and the beverage carts can meet the food/beverage needs of the golfers.

The holes not included in the original 18 would still have to be maintained in a manner that would not reduce the property values for those citizens that live along the courses. They would not have to be “over-seeded” in the winter, thus saving water, and very little maintenance would be required as cutting the grass would not be necessary in the winter. The Town should continue to fertilize and mow the acreage during the warmer months.

There will be a monetary cost in re-purposing the remaining holes to rid them of the sand traps and greens. This can be accomplished with Town personnel.
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Editor’s Note: LOVE also received the following idea from one of our readers.

The answer to solve the money problem and keep all the neighbors happy is to simply lease one 18-hole course to the Men's club. They could set the annual dues to cover all the operating and capital improvements. In return, they have a private course with unlimited play and anytime access to tee times. Additionally, all property owners would continue to see a beautiful, well-manicured golf course. This could be a Win-Win for the Club, the adjacent homeowners, and the Town.

Guest View: Kim Krostue ~ Preserving 18 holes on the La Canada course is the best option

After the adjournment of last Wednesday’s standing room only Town Council meeting, the Council held a “listening session” with residents regarding the Community Center Golf Courses. Oro Valley resident, Kim Krostue, gave the following speech.

My name is Kim Krostue. I have owned a home on the tenth fairway of the Views golf course for 8 years.

I have reviewed the financials of the Town’s 45 holes of golf. Clearly the status quo is not financially sustainable. A change needs to be made.

First, the 9 holes need to be sent back to HSL.

Second, I have studied the National Golf Foundation’s 2018 report. There were 3 options discussed. The 18-hole option (Option C) is the correct one. However, the 18-hole configuration as outlined in the report seems artificial with a new 18-hole course carved out of the La Canada and El Conquistador courses, preserving holes on each course.

I would suggest changing this and just keeping the La Canada course as is. I would repurpose the El Conquistador course preserving the views of all current El Conquistador homeowners. By selecting the La Canada course, I believe the 4.2M conceptual reconfiguration cost outlined in the NGF report (Option C) could be reduced perhaps dramatically thereby leaving money for community center improvements. Plus the move to 18 holes could be done almost immediately with all required irrigation work being completed this summer.

I believe moving from 45 holes of golf to 18 is the best option to preserve the property values of all homeowners living on every golf course in Oro Valley and will also allow the La Canada course to operate in the black.

Mr. Krostue also submitted the following comments on Take Back OV (Facebook Page):
If you weren't there, take the time to watch. The attitude in the room demonstrated why Hiremath and crew were crushed in the election. The golf club members led the charge for a continued free lunch. No other way to say it. I do not remember anyone in the “keep 36 holes group” arguing that golf should operate financially in the black. The NGF study captured this group’s attitude in the 2017 study and nothing has changed.

I learned something significant at the meeting. The deed restrictions in the HSL contract apply to the La Canada course and the 9 holes, not to the El Conquistador course. It appears that the town manager (staff) did not understand what the deed restrictions actually were until after last month’s study session. Think about that for a second.
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Editor’s Note: Mr. Krostue’s comment, “The NGF study captured this group’s attitude in the 2017 study and nothing has changed” was in reference to a comment by the National Golf Foundation after a 2017 meeting with El Con golf members and residents living along the golf courses.

“The feedback from these groups showed very little tolerance for change and lack of concern for the troubled facility economics." ~ Summary statement, Page 4, National Golf Foundation Study

The Watchdog Report: When high expectations meet cold hard reality

The end of Fiscal Year 2017/18 numbers are in and they remain disappointing.

Golf Memberships
Golf membership is down to 226. The fiscal year began with 240 members in July 2017 and reached a high of 249 in January 2018. As a reminder, Troon was hoping for 318 members by December of 2015. They are still off by 92 memberships.

Also of note is that of the existing 226 members, only 216 of them are actually paying dues. This is because six members are over 90 and four members are on medical leave.

Rounds Played
How do non-member rounds at the town-owned golf courses compared to another public course within 5 miles of the town?

                               El Con Golf Rounds             Public Golf Course Rounds

July                                    976                                            2782
August                             1410                                            2669
Sept                                 1662                                            1970
October                            2018                                            1837
Nov                                  1883                                             3751
Dec                                  1663                                             3471
January                            1839                                             3963
Feb                                   3459                                             3949
March                               4293                                             5305
April                                  3067                                             3908
May                                  1614                                             3201
June                                 1468                                             2588

TOTAL ROUNDS            25,352                                           39,394

(In order to obtain the public golf course stats, I agreed not to publish the name of the course.)

As you can see, during FY 2017/18, the public course within 5 miles of the town courses played 14,042 more rounds.

Admittedly, this isn’t comparing apples to apples since the town courses consist of 45 holes of golf for about 6 months, and 36 holes of golf for the remaining 6 months. The other public course used in the comparison is an 18-hole course. Nevertheless, the monthly rounds reveal that the other course is often seeing double (and in one case, triple) the number of rounds being played at the El Con courses.

If the average fee per round was $40.00, then the Town-owned (Troon-managed) courses would have generated $1,014,080 in revenue and the public course (not managed by Troon) would have generated $1,575,760. This means that the other course most likely generated approximately $561,680 MORE in revenue. So much for the belief that people flock to Troon-managed golf courses.

What is the Town’s plan?
According to a recent communication from the Town, they intend to re-open the Pusch Ridge course on November 1st. This will make another 9 losing holes of golf available while increasing our expenditures.

The Town also admits that they do not intend to fulfill the capital outlay proposed in the FY 2017/18 budget, AND they expect the Community Center Fund to start FY 2018/19 with a NEGATIVE BALANCE.

Had enough?
Due to their refusal to admit that they made a mistake in purchasing these golf courses and due to their desire to cater to the golf members, Town officials are refusing to acknowledge what is happening around them. However, you will have an opportunity to replace them in the August 28th Town Council election.

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Mike Zinkin has a Bachelor’s degree in history and government from the University of Arizona and a Master’s degree in Social and Philosophical Foundations of Education from California State University, Northridge. He was a commissioned ensign in the United States Navy Reserve. He was an Air Traffic Controller for 30 years. He and his wife moved to Oro Valley in 1998. Mike served on the Oro Valley Development Review Board from 2005-2009 and the Board of Adjustment from 2011-2012. He served on the Town Council from 2012-2016 during which time he was named a Fellow for the National League of Cities University, he was a member of the National League of Cities Steering Committee for Community and Economic Development, and a member of the Arizona League of Cities Budget and Economic Development Committee.

Guest View: Love Contributor ~ When saving face takes precedence over a solvent golf strategy

Today's article compares Oro Valley's financial golf strategy to USGA recommendations.

In an effort to offset the decrease in Municipal Golf participation throughout the country, the United States Golf Association (USGA) has determined two major causes for this decline and they are promoting solutions to save this sport.

(1) Time Constraints
The major factor is simply TIME. With today's busy family dynamics, young children have many sports to chose from, families have multiple daily activities, working hours have increased, single parenting creates transportation issues, and seniors must balance cost and energy against available time. A four or five hour activity becomes extremely difficult for almost every age group.

USGA Solution: Encourage 9-hole golf
As such, the USGA began a nationwide promotion of PLAY NINE. In addition to national advertising, local and state chapters are asking all Municipal Courses to encourage their golfers to play only nine holes. This, along with encouraging "Play Forward,” has increased the number of rounds played significantly in the past few years. In addition, 9-hole golf creates more rounds played with an increase in revenue and opens the potential golfer base significantly.

(2) Local Government is inept at managing golf
The second factor is that Municipal Golf, (when local government owns the golf course property), involves local government being involved with management. Since many such bodies do not have the skills nor staff to operate a golf business, they often hire specialized golf management companies to actively run the business. (In the case of Oro Valley, Troon was hired to manage golf.) Where this concept falls apart, is when the Town Staff or Town Council continues to dictate policies to satisfy special interest groups, certain voting blocs, or campaign contributors, rather than allowing the management company to use their resources and talents to meet the needs of the local golfers and the financial goals of the Town.

USGA Solution: Performance-based Compensation
According to golf course data studies, municipal golf courses have now reached a low of some 1350 locations within the United States, (Arizona now has less than 25). The USGA recommends that management company compensation be based on performance, not on fixed fees which eliminate the incentive to balance revenue with expenses.

How does Oro Valley Municipal Golf relate to USGA recommendations?

The Town is not encouraging 9-hole golf. Both of the two existing 18-hole courses are based on an obsolete and inefficient design whereby a golfer must play the entire 18-hole course before returning to the clubhouse. This eliminates any 9-hole play, eliminates that additional revenue, and closes the door to the USGA Nine Hole promotions.

The Oro Valley Town Council continues to pour money into these antiquated courses, instead of modifying the course to satisfy the needs of the golfing community. As an aside, at a time when the Council will do anything to promote more (and smaller) housing units to increase the sales tax base, they turn their backs on the 9-hole golfers, some of whom will move into those homes. Is this good management?

The Town is not employing Performance-Based Compensation. We are all aware that the Town Council employs Troon to manage the golf and food service business and that Troon is a nationally recognized golf course authority. The Town Council pays Troon $12,000 per month, regardless of whether they create a profit or lose millions, as is the history.

What Would Troon Do?
Regarding outside management, considering the Troon reputation, experience and staff, does anyone doubt their ability to operate a golf course to at least break even financially?

• Would Troon maintain 45 holes of golf knowing that the past usage barely supports only an 18-hole course?

• Would Troon allow a monthly fee that provides unlimited golf that isn’t covering their costs?

• Would Troon not immediately modify the course design to double the potential golfing base and use the efficiency of a 9-hole course to increase revenue?

• Would Troon continue to provide a free driving range, knowing that this is the single most profitable revenue course in a municipal golf facility?

Is there any doubt that Troon could resolve these financial issues within a matter of months, if they were given the charter to make the changes necessary to make El Conquistador Golf a true Municipal Golf Course?

The problem lies with the current mayor and council
It should be apparent to all taxpayers that the mismanagement of Oro Valley Golf lies with the Town Council and the Town Staff, not Troon. For some unknown reason, our Council and Staff can not understand the concept of municipal golf. Nor do they consider who actually pays the price for their errors including single parents trying to make ends meet and seniors living on fixed incomes. Most of these people will never even see the golf course, let alone play golf.

The practice of using money forcibly taken from the public is unforgivable. Not one penny of our sales tax should ever be used to hide the losses of the golf courses, just to protect the lifestyle of those who can well-afford the cost.

How do we stop this madness?
The solution is obvious and that is to vote for people who will represent the needs of the entire community, not just the chosen few. Let us all keep this in mind when selecting a new mayor and council in August.

The Watchdog Report: Save the Community Center by Eliminating El Con Golf Operations

I suspect that the town officials who needed to read the contracted report on the golf operations probably put little effort into doing so. The mayor once said, "I don't need to know the Codes, that is why I have staff." Following the same logic, one might assume that, “We don't need to read the report, the contractor will advise us what to do.”

Below are direct quotes from the report:

Pages 1-4 discuss the current financial condition and the necessary upgrades/improvements.
"As a whole, the El Conquistador Golf and Tennis (ECGT) and Pusch Ridge golf facilities combined to produce total top-line revenue of just over $2.9 million in 2016, the vast majority of which comes from golf fees, member dues and Food and Beverage (F&B) sales. The on-site operating expenses at the facility totaled around $5.2 million resulting in a roughly (-$2.3 million) loss on operations (excluding other necessary costs such as capital upgrades and new investment in infrastructure).”

“The current financial condition is worse than most public sector golf operations in the U.S. where 67% of municipal golf course operations are able to cover on-site expenses, but not able to cover both onsite expenses and capital improvement costs (only about 33% can cover both)."

"Factors such as the recent recession, the declining interest in golf, growth in the number of competing golf courses and even ECGT conditions have all contributed to the recent decline."

"The National Golf Foundation (NGF) has estimated a total of $5.1 million in required repairs over the next few years, in addition to the $6.0 million estimated by the Town for clubhouse and community center improvements. This investment also includes upwards of $170,000+/- in annual recurring items."

"While losses on operations are common in municipal golf, the depth of this loss is less common."

"The overall demand/supply balance for golf in the greater Tucson market is very unfavorable to golf courses."

Page 6 summarizes the cost to implement each of the options presented.

Option A - Stay with 36 holes - Total investment = $5,115,775
Option B - Reduce to 27 holes - Total investment = $4,639,115
Option C - Reduce to 18 holes - Total investment = $4,200,795

Additional to all above options is to convert the Pusch Ridge course from a 9-hole course to a 12-hole, Par 3 course called The Dirty Dozen. Total investment = $3,013,120

The consultants recommended Option B. To go with Option B and the Pusch Ridge conversion will take an additional investment of $7,652,235.

Page 7 mentions outright closure of all golf courses.
"Outright closure, although perhaps the most economically beneficial decision, is not necessarily a “cheap” option, as there are costs to prepare the property appropriately and there may be additional contemporaneous impacts that have to be considered (property values, tax base, resort relations, etc.). Further study is recommended."

Pages 67-68 summarize closing all golf operations.
"Full closure of the El Conquistador 36-hole operation would involve significant costs to remove managed turf areas and, at minimum, plant and establish revegetation desert varieties to the areas removed from turf.”

“Based on 146± acres of existing managed turf, we estimate approximately $2.5 million for turf conversion and establishment at El Conquistador using a per-acre cost of $17,000 (slightly less per acre than shown for specific options A, B and C; based on volume). Added to this cost would be approximately 20% for soft costs (design, engineering, etc.) and a reasonable contingency. Our opinion of probable cost is approximately $3 million.”

Page 68 discusses closing the Pusch Ridge course.
"In order to fully close the Pusch Ridge facility, we estimate that an average cost of $20,000 per acre be applied to calculate removal of existing managed turf with re-establishment to native desert vegetation. This slightly higher amount per acre is recommended due to significant slopes involved in the Pusch Ridge terrain combined with more intricate access than at El Conquistador.”

“Based on a total turf footprint of 40± acres, we estimate full conversion of existing turf areas to be approximately $800,000 plus soft costs and contingency of about 20%, rendering an estimated probable cost of near $1.0 million. Additional costs to fully close the Pusch Ridge facility would need to account for razing the existing (old, now abandoned) maintenance facility (estimated at $40,000) and disposition of the existing irrigation storage pond, which has not been estimated."

As I understand it, it would cost $1,040,000 to close Pusch Ridge, and $3 million to close the remaining 36 holes.

Going back to Page 7, the NGF states:
"Continued operation with rounds at or near current levels (under 50,000 total) will not lead to profitability for ECGT, and severe losses will continue, but become more manageable for the Town under any of the renovation options presented."

The most cost-effective option.
The report states that no matter what option the Town Council chooses, golf will continue to lose money. It doesn’t take a CPA to see that investing $4 million to repurpose 45 holes and END GOLF is a more cost-effective option than spending $7.6 million in upgrades to continue golf despite no guarantees of breaking even in another 5 years.