Municipal Golf Operations Exceeding Financial Targets But Challenges Remain

Results for July and August better than budget
Oro Valley Municipal Golf exceeded budget targets in the first two months of fiscal year 2022. Golf operations lost $156K less than budget. Total losses were $166K. Key revenue drives, total rounds played, greens fees and monthly dues were comparable to budget; while food and beverage revenue far exceeded budget. Spending was under budget primarily due to lower utilities maintenance cost. According to Wendy Gomez of the town’s finance department, it is too soon in the fiscal year to project any change from annual budgeted financial result.

Challenge ahead regarding high cost of irrigation replacement

The town has committed to replacing the irrigation on its two 18-hole courses. The initial town estimate of this cost was $4 million. The latest bid for this is now almost $7.8 million. This doubling of cost is indicative of a national economy of shortages and rampant inflation.

The funding for the irrigation improvement is designated to come from the $25 million bond the council approved last month. Half of that bond money is committed to completing Naranja Park. This leaves $12.5 million for other projects identified for bond funds use by council in July. The golf course irrigation replacement is one of these.

If indeed, the council commits $7.8 million of bond funds for golf course irrigation, only about $4.2 million remain for two council designated bond fund projects:  A community center parking lot improvement and a replacement of tennis and pickleball courts. These are costly projects, perhaps in excess of the $ 4 million that would be available.

Is there a "One Course" irrigation replacement option?

It may well be that the “wisest course” is to complete the irrigation on 18 holes of golf using bond funds, freeing $4 million for these other planned uses. Then, complete the irrigation on the other 18 holes using pay-as-you-go. One of our readers pointed this out to Mayor Winfield in an email: “The Town does not own the property south of Lambert (5 holes) yet the Town is watering and maintaining the property.” This is part of the Canada course. Why invest in changing the irrigation of these these holes?

Is there a "wait till inflation abates" option?

There is an option of waiting to do any of these improvements until prices "come down".  At some point the world will get back to normal. There will be surpluses rather than shortages. Businesses will once again become competitive. Prices will come down in businesses such as those that install irrigation because competition will increase. The problem is that this may be 3-5 years from now, beyond the spending horizon of the bond funds. The town is required to spend the bond funds within three years of the issuance of the bond, per the bond indenture.

Challenge regarding the financial impact of the Pusch Course opening and its use of drinking water for irrigation

The 9-hole Pusch Ridge Course is opening on November 1. This course has always presented an economic challenge to the town. How it will fare and its impact on golf economics is yet to be seen. Fortunately, that course has a resident group, "Friends of Pusch Ridge Golf", who are committed to its financial success; and who understand that use of drinking water for irrigating the course must be alleviated in the near term and eliminated in the long term.

Nothing is simple when it comes to Oro Valley municipal golf financing and operations. In terms of challenges, it is “The gift that keeps giving.”