Tuesday, October 10, 2023

Town Council Requests Staff Report On Municipal Golf Operations

Council wants staff report on municipal golf operations 
Last week, the Oro Valley town Council voted unanimously that Town staff present a detailed report on municipal golf operations to include the financial results. The request is not in anyway to infer that operations are either good or bad. The council simply wants town staff to provide a single comprehensive source of information, accessible to the public. They didn’t specify a timeline for this report, but it is our opinion that it would be best issued together with the result to the recently commissioned external audit of municipal golf results.

The upcoming independent audit of municipal golf operating results is crucial
...because all reports on municipal golf operations have come from the municipal golf course operator, Indigo Golf, and are not considered the town’s accounting. It is our opinion that the Indigo reports are not prepared  in conformance with recognized accounting principles, so we anticipate changes in reported results to ensure such. In addition, Council member Bohen has raised valid concerns about reported revenues, prompting the audit to include a review of point-of-sale data for revenue verification. Agreement on the revenue number is critical for future decision making regarding the courses.

The decision for this report emerged through a somewhat indirect process 
Councilmember Solomon initiated the motion that would provide information to the homeowners association (HOA) that subsidize municipal golf operations. Vice Mayor Barrett stressed the importance of disseminating information to everyone, leading to unanimous agreement on that.

Council emotions "all over the place" regarding "Everything Municipal Golf"
The council members have different views regarding municipal golf's profitability and the need for continue HOA financial support. 

Council member Solomon questions why the Town is taking money from five HOAs to support municipal golf if municipal golf operations are profitable. The subsidy agreements is with five HOAs who provide $160,000 annually in financial support. Solomon points out that the Indigo Golf reported financial results show that municipal golf is now making a profit. He observes that the municipal golf is making a substantial profit when you include all of the revenues designated for g municipal golf, which includes sales tax revenue and the subsidy from the HOAs. 

Solomon also believes that things have changed.  One of the HOAs committed a subsidy at a time when the entire half-cent sales tax, approved by the 2015 council, was designated to support both municipal golf and the community center. Following that agreement, the Winfield council decided to redirect half of that sales tax revenue to the town’s other recreational activities. Consequently, Solomon contends that the town is indirectly using HOA funds to sustain non municipal golf recreational activities.

Despite this, Solomon never made a motion to cancel the HOA subsidies. Instead, he opted for the motion on reporting that council approved with minor modification.

Vice Mayor Barrett observed that the town has dedicated millions of dollars to municipal golf, factoring in the substantial operating losses experienced during Mayor Hiremath's administration and the significant costs associated with the replacement of the irrigation on the municipal golf courses. 

Council Member Bohen believes that the HOA contributions are trivial in comparison to these substantial expenditures and says that he would have voted against the subsidy had he been on council at the time of the agreement.  

Council Member Nicolson, on the other hand, thinks that it is reasonable for the HOAs to contribute to the municipal golf, stating, "It's worth the $50 a month... It's a reasonable amount." 

Mayor Winfield bleives that "...we are in a better place now that we are all collaborating. We've made substantial investments in these municipal golf courses."

Fuzzy numbers at heart of the issue
The town staff incorporated the panel (shown above right) into the council packet. The operational and budget figures are sourced from Indigo Golf, while the capital investment figures are supplied by the town staff. As previously noted, there is an ongoing debate regarding the appropriate methodology for calculating municipal golf profit. Questions have arisen as to whether it should encompass depreciation and amortization, rely on cash inflows and outflows, or be determined based on revenue earned versus expenses incurred. We anticipate that the forthcoming audit will shed light on these matters and more, bringing clarity to the situation.

Until then, further discussions about municipal golf's financial results are meaningless.