The Pandemic Saved Oro Valley Municipal Golf

A call to broaden the use of the half percent sales tax subsidy

Wednesday, the the Oro Valley Town Council will discuss broadening the use of the existing half-percent sales tax subsidy. That subsidy was enacted in 2015 to subsidize the operations of 45 holes of golf; and to fund the conversion of a clubhouse into a community center.

The total amount of the subsidy tax now collected exceeds the targeted initial funding. It is expected that this will continue in the future. It is because of this that council will consider broadening the use of these tax dollars. In 2015, the town estimated that the subsidy would be $2 million annually. At that time, the sport of golf was in decline locally and nationally. The clubhouse was in disarray. A subsidy was the only way the town could maintain the property.

The pandemic saved Oro Valley municipal golf by making it financially sustainable

The pandemic did so in two ways. 

First, people returned to the links because golf was one of the few activities they could do and still maintain social distance.  Nationally, there are more that a half million more players in 2020 than in 2019.  This translated into a 14% increase in rounds played nationally, despite the fact that many of the nations' courses closed for at least some period of time. Oro Valley municipal golf rounds have also increased.  The result is that Oro Valley municipal golf revenues are expected to be $3.5 million this year. 

Second, local sales tax revenues increased. This was because residents could not spend dollars in stores outside Oro Valley. Stores were closed. Instead, residents shifted to online shopping. 

Everything purchased online by an Oro Valley resident includes an Oro Valley sales tax. Oro Valley would not have accrued this sales tax revenue had the resident travelled to and physically purchased these goods elsewhere, 

The financial result this year is that the town projects that the half percent sales tax subsidy will exceed $2.8 million. That’s 40% more than the original target of $2 million.

This year the town projects that municipal golf financial performance will be close to its subsidy target is 

When all factors are considered, municipal golf financial results are expected to be less than the $750,000 annual council-set sales tax subsidy target. Per the town’s February financial report: “The year-end sales tax support for golf operations is estimated to be $697,208. This figure includes a projected net [loss of] $(905,284) for contracted golf operations, [adjusted for] $125,000 in outside HOA contributions, and $83,076 in local sales taxes generated from golf related operations.” 

A trend or blip? Either way its worth celebrating

What will happen once the pandemic is over? Will those who jumped into golf lose interest? Will players lose the time to play once they are no longer working from home? Will people reduce their online purchases in favor of in-person retail store visits? What will golf operators do to keep the momentum going? 

Time will tell. 

In the meantime, it's good to celebrate even a “blip” when it comes to the financial results of Oro Valley Municipal Golf.

---

Sales Tax Golf Subsidy Promotes Irrational Decision on Golf and Tonight “They” Want More!

Green shirts to storm council
Tonight, the Oro Valley Town Council will consider going beyond the half cent sales tax levy to fund golf course improvements. It is not a question of whether to fund these improvements. It is a question of how to fund these improvements, either through borrowing or through the existing revenue stream..

Tonight, however, you will see, in council, the town owned golf course community flood the council chamber to convince council to borrow money to fix their course. Rather than being content with a victory that saw the town keep 36-holes of golf, they’ve chosen to keep pressing for everything.

They are so passionate about this, that one of them took out recall papers on the Mayor and Vice Mayor because both have said that they don't think that the town should borrow money for the refurbishments.

Like spoiled children, they are tethered to their beliefs without any consideration or caring to what yet added funding does to the rest of Oro Valley’s recreation. They may be good neighbors to each other, but they are most certainly not good neighbors to the rest of the community.

Oro Valley residents pay a dedicated half cent sales tax for golf
Oro Valley increased its sales tax by a half cent in 2015 to pay to operate its now municipal golf courses. This amounts to approximately $2.2 million annually. It is 20% of the Oro Valley local sales tax. It is the only recreational facility that has its own dedicated stream of income.

Oro Valley got this tax increase because a property tax was not an option
In conversations with LOVE In 2015, former Mayor Hiremath told LOVE that he wanted to purchase a community center and that the town needed added funds to pay for its operation. He told us that the options were a sales tax or a property tax. He said that he felt that the sales tax was the best way to go because people living out of Oro Valley would also pay for it.

Hiremath knew that residents would never approve a property tax to pay for his adventurous purchase from his major campaign contributor. So he circumvented public involvement by a 4-3 council vote.

Current Council never considered sales tax reduction
Lost in any discussion of the town's ownership and operation of 36 holes of golf a months ago was the fact that residents pay this dedicated half cent sales tax to support it. Lost was any consideration of whether is was fair for them to do so.  Only one council member, Vice Mayor Barrett, mentioned it during the six months of what seemed like endless and sometimes mindless discussion.

We asked Mayor Winfield how he thought people viewed paying this added sales tax. “It’s hard to say. Some people feel good about it. Some people don’t feel good about it. My interest is to reduce the tax subsidy. I would hope that we could get to point where we could reduce the sale tax or eliminate it.”

Apparently, the current council felt no need to even consider this factor in their deliberations at this time. After all, the tax is in place so why bother with it.

We wonder...
If these funds had not been in place, would not their decision have been different? That is, no half cent sales tax... perhaps 18 holes of golf at best, or, perhaps, no golf all. 

Proposal To Be Heard On Broadening The Use Of The Half Percent Sales Tax Levy

Enacted in 2015, revenues support municipal golf losses

The Oro Valley Town Council will hold a public hearing on the half percent Community Center/Municipal Golf sales tax. That tax was enacted by the Hiremath Council in 2015 to pay for the substantial losses that were projected from operating the community center on the golf courses. The estimated amount of the half percent sales tax was $2million.

Sales tax revenues more than anticipated

As LOVE has reported over time, golf and community center losses have been huge; but, recently the losses have narrowed because the pandemic has increased golf course use. In addition, sales tax revenues have increased over the six years to an estimated $2.5million. 

Municipal golf’s exclusive use of revenues at stake

The public hearing will be held at next week’s council meeting. The proposal is to broaden the use of these funds to pay for other parks and recreation facilities, amenities and operations.

What is at stake here is what appears to be in the minds of some members of council and residents a belief that the half percent revenue stream belongs to the golf courses. For example, during one council meeting Council Member Solomon said something like: “We have the money from the sales tax, so let’s just open the Pusch Ridge course.” Some residents in favor of the measure wondered why the course wasn't getting its "share" of the revenues. 

Expect a large turnout at the hearing

There are some who will be upset about any change in the use of this money. These are people who live along the golf course. They lobbied successfully last year to keep 36-holes of golf operating. They wore “green T-shirts” to the Council meetings, spoke in great numbers. It appeared to some that this high level of participation intimidated the some members of council.

Council set target subsidy levels

The council decided, in 2020, to retain 36-holes of golf and to lease the Pusch Ridge facility. In doing so, they set a subsidy target level of $750,000 within four years. That would be beyond the sunset of Winfield council majority. If that subsidy level is achieved, $1.8 million in sales tax revenue from the half-cent levy would be available for other uses. So, it makes sense to either rescind these sales tax dollars or direct them to other use.

Change in use requires council resolution

The original resolution for the sales tax levy earmarked the funds specifically for the golf course community center. Thus any change in the use of those funds has to be approved through another revenue resolution of counsel. That’s the reason for the meeting.

Oro Valley “Resolves” To Reduce The Tax Subsidy Of Municipal Golf

The goal is the cut the losses
Several weeks ago, the Oro Valley Town Council approved a resolution to reduce the financial losses of its two municipal golf courses. Having lost approximately $10 million in four years, the golf courses were an issue in the 2018 election. The election pledge of now Mayor Winfield to resolve this problem was one of the two issues that won him the election. Winfield’s position differed from that of then Mayor Satish Hiremath, who did not publicly acknowledge that there was a financial problem.

The resolution is the result of a long process
Winfield orchestrated a laborious, six month community discussion. He led a number of public hearings on the matter. The hearings were attended primarily by those who live around or use the golf course. They were concerned that any change in land use would decrease their property value.

The resolution
The result of the process is the resolution LOVE published last Thursday and Friday. The resolution:

• Opens both courses for public play. Members of the courses will have access to tee times they choose. The public will have access to the rest; 
• Affirms the funding of course improvements through bonding, “pay as you go”, or any other funding sources suggested by Town Manager Jacobs; 
• Sets a target level of tax subsidy for golf course operations to be no more than $750,000 within three years. Mayor Winfield established this support level.
• Moves the Overlook restaurant to the first floor of the community center; makes it such that it is “consistent” with a municipal golf course; 
• Accepts approximately $100,000 annually from the Canada Hills Homeowners Association in support of course operations; and 
• Encourages outreach programs for youth to encourage the growth of the sport. 

Other options not discussed at this meeting
The Council did not discuss other options at this meeting, such as operating one course or rescinding the sales tax. Oro Valley’s sales tax is the highest in Southern Arizona, encouraging buyers to purchase big ticket items, like furniture, outside the town.

No change likely for three years
Council Member Rodman noted that the resolution does not include any action to be taken if target tax subsidy levels are not met. Thus, it is possible that the operation of both municipal courses will continue as is for at least the next three years.

Half  cent sales tax levy to continue
The half cent sales tax implemented to support these courses continues. This tax brings in approximately $2.4 annually.

Nationally, municipal golf support declining
Oro Valley’s support of municipal golf comes at time when municipal golf courses across the nation are closing as the sport declines in popularity.

Guest View: Dick Leonard ~ The utter mismanagement of the town-owned golf courses. Part 1.

Thanks to Mike Zinkin’s Watchdog Articles on the LOVE Blog, the mismanagement of the town-owned golf courses continues to be exposed. After the resounding defeat of the Town Council’s latest scheme to pass a $17 million dollar Naranja Park Bond, it’s easy to see why such information is suppressed by the Town. For example, how many citizens know that their sales tax dollars are being used to pay for two completely different types of golf courses?

The first type is a Traditional Municipal Golf Course
In this type, each golfer pays the same daily rate for each round played. This does not include any other amenities that may be available at that golf course. This management style is common to every Municipal facility throughout the country, and when operated efficiently, generally requires little or no public tax subsidies.

The second type is a Municipal Country Club operation
In this type, the golfer becomes a Member by paying an annual fee. This type entitles the golfer and/or family to unlimited and exclusive play on a dedicated course. This includes access to whatever amenities are offered (pools, tennis, fitness, food discounts, driving range, etc.); whereas the daily fee golfer pays extra for each amenity used.

Nationwide, this style is privately owned and the Members are responsible for the entire cost of operation. However, in Oro Valley, taxpayers are responsible for all costs over and above the income generated from membership dues. For the last two years, these losses have cost Oro Valley taxpayers over 5 million dollars.

Is this fair?
There are no objections to having additional country clubs in Oro Valley nor to having a true municipal golf facility. However, if the town chooses to operate a country club facility, it should not be funded by the public. Note that the Oro Valley Country Club and Stone Canyon Country Club do not receive any public support.

Does anyone (except the Town Council and Staff) think it’s fair to make working families and thousands of members of the non-golfing public pay to support the lifestyle of 242 country club golfers? Not only does this require the expense of having a separate dedicated 18-hole course, but it also grants free access to all amenities of the Community Center.

The Numbers from Fiscal Year 2016/17
Total Troon income (member golf fees, non-member golf fees, cart fees, food and beverage, merchandise, tennis, etc.) was $2.9 million in FY 2016/17.

The dedicated half-cent sales tax increase brought in another $2.2 million in revenue.

Despite a total of $5.1 million in revenue ($2.9 MM/Troon and $2.2 MM/sales tax), the Town suffered a $2.5 million dollar operating loss, which after the $2.2 million in sales tax revenue, caused the Community Center Fund to drop by $300,000.

The Community Center Golf Courses cost the Town (via the taxpayer), roughly $2.5 million per year for the 45 holes of golf. The combined income from the Public (daily fees) and the Private (country club) member dues is roughly $1.4 million. Hence the sales tax subsidy, which you pay, to make up the difference.

In fiscal year 2016/17, there were 42,679 total public and private rounds played for a total of $1,456,722 in revenue. (Member rounds were 19,777 and non-member rounds were 22,992). If all rounds played were played with a daily fee rate of $40.00, the revenue would have been $1,707,160.

If the course was only 18 holes, we eliminated memberships, and charged an average of $40.00 per round (and assuming the same amount of rounds were played) the total operating cost would be closer to $1.7 million and no taxpayer subsidy would be needed.

Another example: If the average golfer plays 3 times per week times 52 weeks, they would play roughly 150 rounds per year. A daily fee golfer would pay $40.00 per round or $6,000 per year.

Currently, a member pays only $4000 per year for unlimited rounds. This is a loss of $2000 per year which is why the tax subsidy is necessary. This is exactly why there are no Municipal Country Clubs anywhere in the country but here.

Part 2 will be published tomorrow and will discuss questions to consider and some options for solving the golf course problems.

Guest View: Mike Zinkin ~ Why cut taxes when you can reallocate the additional funds instead?

 

The above question should not surprise anybody

After all, don’t all governments find a way to spend tax dollars, even when there is no longer a need for the original subsidy?

The history of the increased sales tax to fund the Community Center and Golf Courses
On March 1, 2015 Oro Valley initiated an increase of our sales tax from 2% to 2.5% with the additional .5% to be dedicated to the Community Center Fund. The Town had purchased the HSL properties to include golf, tennis, swimming, and a community center. The Town knew that it needed additional revenues to cover this investment.

According to the ordinance (O) 14-17, “an additional revenue source is necessary to subsidize the operating costs and fund the capital needs of the facility over time.” The tax was forecasted to “generate approximately $1.6 - $2 million annually in additional revenues.”

Some more background for the new residents in town
Immediately after the Town Council motion to purchase the HSL property, a PAC called TOOTH (Tee’d Off Over Tax Hike) was formed to gather signatures to invalidate the Council decision. TOOTH was a play on words as the mayor at that time was a dentist. They needed 1,148 signatures to get the referendum on the ballot.

Despite having to collect the signatures over the Christmas holidays (from 12/18/14 to 1/16/15), TOOTH collected 3,158 signatures (more than twice the required amount) only to have the Town Clerk void the petitions due to a minor clerical error. With one day left to gather the required signatures, another PAC was quickly formed and gathered over 1,100 signatures in just 5 hours. This was just shy of the 1,148 they needed to force a ballot issue. As such, the residents never had an opportunity to vote on whether they agreed with the tax increase to fund the Community Center, thus the purchase and accompanying tax became a reality.

Two Choices
In the current budget (FY 2020/21) which ends on June 30th, the dedicated sales tax is now forecasted to provide $2,492,960. So what does our government (Town Council) propose to do? Instead of reducing the tax, they find another reason to spend the additional revenue. Looking ahead to next year, the Town Manager’s Recommended Budget for FY 2021/22 forecasts the sales tax revenue to be $2,857,779.

The increased tax imposed on the People was to subsidize the Community Center Fund. Now that the revenues are well above the initial $1.6 - $2 million specified in the ordinance, the Council has two choices: (1) reduce the tax or, (2) find reasons to spend the additional revenue. They have chosen the latter and I believe that doing so is fiscally irresponsible.

This tax has forced the entire community of 44,000 residents to subsidize fewer than 300 “golf members.” The tax was wrong to begin with and will continue to be wrong if it is no longer going to be spent as originally proposed.

More tax history: The Utility Tax that never went away
Oro Valley already pulled a similar stunt when they passed a temporary 2% Utility Tax in 2006 to fund 18.5 new staff positions, mostly in the police department. The tax was supposed to sunset in 2009, but in 2009 the Loomis council voted to extend it at the 2% level with no sunset clause. Then, in 2010, the Hiremath council increased it to 4% and we have never gotten rid of this “temporary” tax.

Oro Valley should only tax for what it needs and nothing else.

- - -
Mike Zinkin and his wife have lived in Oro Valley since 1998. He served on the Oro Valley Development Review Board from 2005-2009, the Board of Adjustment from 2011-2012, and the Town Council from 2012-2016. He was named a Fellow for the National League of Cities. He was a member of the NLC Steering Committee for Community and Economic Development and a member of the Arizona League of Cities Budget and Economic Development Committee. He was an Air Traffic Controller for 30 years. Mike 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.

Clint Bolick Reports: "Oro Valley Subsidy Recipients Under-Perform By Millions"

Please read the following message from Clint Bolick, Director of The Goldwater Institute's Center for Constitutional Litigation. Clint is the lead attorney in the Goldwater lawsuit against Phoenix and their $100 million plus giveaway.
Art
**************************************************************************************
Oro Valley Subsidy Recipients Under-Perform By Millions

Clint Bolick

Goldwater Institute Daily Email
October 24, 2007

I'm Shocked, Shocked!

Oro Valley's recent decision to yield its status as Arizona's subsidy capital didn't come a moment too soon. The first report for two sales-tax rebate subsidies awarded for Oracle Crossings Center and Steam Pump Village are in, and the results are predictable.

The first project forecast sales of $106 million over the last two fiscal years, which would have generated $2.12 million in sales tax revenues; but instead produced $35.5 million in sales and only $441,000 in sales tax revenue. The second projected sales of over $26 million and tax revenue of $525,000, and instead produced sales of $2.1 million and tax revenues of $46,000. In both cases, nearly half of the sales tax revenue will revert to the developers.

Explanations for the revenue paucity include delayed construction and insufficient demand for retail space. Could it be that the market is telling the town something?

The Oro Valley experience is only the latest evidence that politicians are lousy investors. A few years back, Tucson gave Slim-Fast a big subsidy to build a plant; within a few years the plant went bust and the promised jobs disappeared-along with the taxpayers' money.

Arizona's founders had their own epiphany 100 years ago: subsidies lavished upon railroad companies that never managed to lay track. Determined never to repeat that error, they wrote into the Constitution the anti-gift clause, which absolutely prohibits gifts to individuals or corporations in the form of subsidies or otherwise.

Cities have ignored the constitutional constraint, engaging in a frenzied competition over who can bestow the most corporate welfare.

Clint Bolick is the director of the Goldwater Institute's Scharf-Norton Center for Constitutional Litigation

Oro Valley Weathers The Financial Storm.... So Far

Council discusses 2020 year end results tonight

Tonight, town council will hear the unaudited financial results of three of the towns funds for the year ended 2020: The General Fund, the community center fund and the Highway Fund. Results have been uncertain because of the unknown financial impact of the pandemic.  It appears the town has weathered the storm.

General Fund Balance Increased to $21.4 million

The general fund pays for all of the town's administrative functions and the police department. It is the fund that would be most impacted by the pandemic since sales tax collections are about half of total general fund revenues.  Year end balance is expected to increase by $1.8 million from the beginning of the year to $21.4 million.

(Click image to enlarge)

General Fund revenues 6% over budget

The town took measures early in March to slow spending and freeze hiring. The objective was to 
"hunker down" and be prepared for the worst. That game plan worked through the end of the year. The total estimated year end was 6% over budget, totaling $41.7 million.  Local sales tax revenues and interest income exceeded budget by $2.5 million. Inter-government funds and charges for services were $800,000 under budget.

General Fund spending 5% under budget

Total General Fund spending was $39.9 million. This was $2.1 (5%) million under budget. Spending in all departments except for legal were under budget. The Police and the Parks and Recreation Departments spent $1.2 million less than budget.

Community Center essentially on budget

Community Center revenue was $175,000 less than budget. Spending was $285,000 less than plan. The center received sales tax subsidy of $2.9 million. This amount is far more than the $750,000 sales tax subsidy target that was set by the town council last November. That subsidy level is to be achieved by 2023.  Golf revenues and membership fees were 9% over budget. Most other revenue sources were under budget because the Community Center has been closed since March.

Highway Fund slightly over budget
"In the Highway Fund, total actual revenues for the year came in over budget by approximately $272,000 or 7.2%. Expenditures for the year were under budget by roughly $12,000 or 0.3%. Overall, the Highway Fund ended the year with a decrease in fund balance of $53,343 (note that the planned budgeted decrease in fund balance was $337,241) (source)

---

The Watchdog Report: Golf Revenue is Decreasing

First quarter golf revenues are down
The September 2019 financials have been posted. Despite the accolades from the Town Manager and the minority-3 council members, golf is still losing money and is now generating less revenue compared with the same time period in 2017 and 2018. First quarter revenues (July 1 through September 30) have shown:

• Through September 2017, golf revenues were $174,990
• Through September 2018, golf revenues were $219,812.
• Through September 2019, golf revenues are $168,451.

The factual numbers show that the golf revenues were $51,361 less than the prior year and $6,539 less than two years ago. If golf is doing so well, how can this happen?

In September 2019, there were 1,487 non-member rounds of golf. This compares with 1,529 rounds played at a public course within 5 miles of the El Con. Through September 30th, there were 239 various golf memberships. Troon’s goal for memberships was 319 but has been reduced to 275. If golf is doing so well, why have the membership expectations been lowered?

As an aside, the Overlook Restaurant lost $5,225, bringing the total losses through September to $35,706.

The Community Center is doing very well
As of September 30, 2019, the Town has made $8,926. Through September 2019, our sales tax subsidy is $556,520. Fiscal year 2018/19 that ended on June 30th, showed that the Town’s portion of this investment was a positive $57,747. Add to that the sales tax subsidy of $2,463,034 and you have over $2.5 million ($2,520,781).

Imagine there’s no golf
Imagine if all we had to worry about was the Community Center and not golf. With the Town support, coupled with the sales tax subsidy, we could make all the needed capital improvements to the Community Center including making it ADA compliant.

It is the golf portion of the investment that is the troll and it is this part of the investment that is dividing the Town.

In summary, golf revenues for the first quarter of this fiscal year are less than they were in 2018 and 2017. This should not surprise anybody. We have a 5-year history of this in Oro Valley.

According to the Town Manager we need to withdraw another $1.9 million from the General Fund and bond for an additional $3.2 million to provide for the needs of golf and the community center building. We cannot fund with “pay as you go” as long as we continue to maintain 36 holes of golf. This has been empirically evident by the history of the last five years.

The development scare tactic
The fear of development occurring if we don’t continue with 36 holes is a scare tactic. The HSL/Oro Valley purchase agreement states on page 5 that, “the Resort Course (Pusch Ridge) and the La Canada Course shall be deed restricted so that such courses are only used as golf courses, open space, or recreational amenities…” The Town cannot sell the property because State law mandates that any Town asset over $500,000 cannot be sold without a vote of the citizens.

18 holes won’t require additional funding
It’s true that if we decide to go with an 18-hole option (utilizing the Conquistador Course) we will lose about $900,000 in member dues and $100,000 in HOA contributions. However, this loss in revenue will be offset by the lower water needs, not to mention a reduced need for personnel, cart leases, and equipment. The water savings alone is over $400,000 and the Town currently budgets over $5 million for personnel, operations and maintenance, and equipment leases.

The Town has already withdrawn over $1.5 million from the General Fund and has bonded for energy efficiencies (a new irrigation pump on Conquistador and a new HVAC system at the Community Center). We do not need to borrow more money or withdraw more money when 18 holes can do a better job of sustaining without additional funding. If we are going to bond or borrow money from the General Fund, we should do it to pay our Public Service Retirement debt (ASPRS), or improve Steam Pump Ranch, or improve our parks, our Little League fields and our soccer fields. Let’s fulfill the needs of all our Citizens. It is not equitable to place so much focus on one particular group of citizens.
...
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.

The Watchdog Report: The $750,000 Dollar Question

 

Who remembers the letter to the Council from the Town Manager dated September 4, 2019?
Yes, this is a loaded question because I seriously doubt if any of the council members would remember it since it was communicated almost six months ago. Additionally, neither Council members Greene nor Bohen were on Council when the above communication was written.

However, this is an important document because it offers the Town Manager’s forecast with the important caveat that the Mayor stipulated -- that the 36-hole option would require no more than a $750,000 tax subsidy.

Ms. Jacobs’ report was full of prerequisites that had to be fulfilled before the maximum subsidy of $750,000 could be accomplished. One of the requirements was that “The irrigation replacement and general refurbishment of both 18-hole courses was completed.” This had not even been started and the costs for just the irrigation improvements for the Conquistador course alone are over $1 million. This money is to come from the existing Community Center Fund, when, and if, it becomes available.

The forecasted target dates
In her report Ms. Jacobs states:

“By adding in the sales taxes collected by Troon for golf ($46,500), the utility sales tax for the water ($40,400), and the projected additional revenue from opening up the member course to day-play ($175,000), the subsidy is projected to meet the $750,000 target by FY 22/23. If the HOA contribution discussed below is factored into the pro forma, the subsidy is projected to meet the $750,000 target by FY 21/22.”

Jacobs goes on to say:

“According to the pro formas attached, the $750,000 tax subsidy target is achievable by FY 21/22 and possibly sooner if revenue collections remain strong. The potential action plan and accompanying pro formas included in this memorandum more fully demonstrate the financial viability.”

You can read the entire report HERE.  

Since this communication was written almost six months ago, nothing has been accomplished toward improving the courses because the money is not there. Currently available financials from the first 5 months of FY 2020/21 (July-Nov) reveal that the tax subsidy is already over $1 million.

The current formula is not working

How many communications are going to be written, and forgotten, before the Council understands that the 36-hole formula is not working and will not work?

The Mayor and 3 Council members ran on a platform to do something about the golf financial drain. The meetings and abuse they took from the “Green Shirts” are over.

Although golf is up 30% nationwide due to the pandemic, losses continue for Oro Valley due to the fact that our golfing population cannot support one entity owning 36 holes. The Town could possibly support the losses with just 18 holes.

Mr. Lopez and HSL want nothing to do with golf as witnessed by their refusal to take on the 9-hole Pusch Ridge course. This is further evidence that golf does not make good business sense.

Oro Valley is made up of more neighborhoods than Canada Hills and the Villages. In fact, the vast majority of Oro Valley residents live outside those communities. What it is going to take for the council to represent the entire Town, and not just one faction?

---
Mike Zinkin and his wife have lived in Oro Valley since 1998. He served on the Oro Valley Development Review Board from 2005-2009, the Board of Adjustment from 2011-2012, and the Town Council from 2012-2016. He was named a Fellow for the National League of Cities. He was a member of the NLC Steering Committee for Community and Economic Development and a member of the Arizona League of Cities Budget and Economic Development Committee. He was an Air Traffic Controller for 30 years. Mike 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.

Bohen Questions Accounting Of The Community Center Fund

Generally has a steady balance

For years, the Community Center Fund has languished because of losses incurred in golf. The golf course financial results had performed so badly over the years that it’s earnings plus its sales tax subsidy could not support needed irrigation improvements; improvements in mobility accessibility; an upgrade to the tennis courts; and an upgrade, perhaps revitalization, of the building itself. Indeed, it took the issuance of a bond last fall to make a dent in getting some of these improvements done.

Balance has grown rapidly this year
The fund balance grew from $2.3 million at the end of last August to $4 million, at the end of September. The latest report which is as of February has the balance at $5.4 million. “But how is this even possible?’ asks councilmember Tim Bohen in an email to LOVE, “The Community Center and golf course would need to be quite profitable as a standalone business with no sales tax subsidy to produce this result.”

According to Bohen, once the $25million in parks and recreation bonds were issued, the Community Center Fund began to grow. Councilmember Tim Bowen has been following this. It seems to be an anomaly. 

Staff "stonewalls" Council

Bohen has tried to get an explanation from town staff on why this is the case. Indeed, as you will read in Mike Zinkin’s “Watchdog Report” tomorrow, golf rounds have increased but not among nonmembers. Non member rounds have decreased. It is the nonmember rounds that actually generate additional revenue.

So where is all this good fortune coming from? 

Bohen doesn’t know and, according to him, town staff has not been forthcoming with the answer. What he’s does know is that the town has failed to transfer to the General Fund $120,000 that is due each year to repay (without interest) the initial funding of the Community Center Fund. He also knows that payments for some of the debt service [and eventual repayment] of the parks and recreation bond will be due from the Community Center Fund at a future date.

We are not sure... but we think its all in the "accounting" for transfers out of the fund

We have had not verified what we been provided by councilmember Bohen. What we do know is that, as of February this year, the Community Center Fund was budgeted to have a deficit of $391,000 for the entire year. As of February, it has as a surplus of $2.2 million. That is a swing of $1.8 million. Most of this are funds that were planned to have been transferred out of the Community Center Fund which have not yet been transferred.  So, maybe its all just accounting.

It is no wonder that councilmember Bohen ask questions about this, though. The accounting for this fund is indeed confusing.

- - -

The Community Center Fund is...

The Community Center Fund is one of the accounting buckets the town maintains. Previously, we’ve written about the General Fund, That’s the fund that is use to run the town. That fund includes funding for all Parks and Recreation programs and facilities except the Community Center. The Community Center is financed using its own fund. That is funded by a half percent sales tax. The fund and the sales tax were established when the town bought the golf courses in the clubhouse, which is now called the “Community Center” from HSL properties in 2015.

The Watchdog Report: Methods for financing the Community Center keep changing

 

A recent political ad
In a political ad in a recent publication, Mayor Winfield states: “The Town’s two golf courses are now projected to require no Town tax subsidy for operations in 2021/2022 fiscal year.”

However, the most recent financial report covers the current fiscal year through February, which is 66% of the way through the year. The statement shows that the contracted expenses overshadowed the revenues by $1,079,143. Mr. Mayor this is a loss. The fiscal year ends on June 30, 2022. The Town closed the Pusch Ridge and Conquistador courses in May so that should limit the losses, BUT the golf courses will still see a loss and will require the tax subsidy.

NOTE: LOVE reached out to Mayor Winfield who informed us that the Town updated the golf subsidy projection after he submitted his political ad, and that, “The most recent golf subsidy projection for this fiscal year is now $78,000.”

The Golf Courses: How does FY 2022/23 look?
Page 7 of the Town Manager’s Recommended Budget shows that the 2023 Community Center Fund (CCF) budget is forecasted to lose over $2.1 million. The Council borrowed/bonded for $25 million, half of which is to go to the Community Center. This bond has indebted the Town for 20 years for over $2 million/year.

The Town’s two golf courses are going to cost us over $8 million for irrigation improvements, $276,000 for cart path improvements, $105,000 for bunker and turf reduction, and $159,000 for golf maintenance equipment replacement all in FY 2022/23.

If the tax subsidy is no longer required, just where is all this money going to come from?

Answer: The Capital Fund is picking up the slack
The mayor tells us that the money is coming from the Capital Fund. However, the CCF was set up to support all the needs of the community center (golf/tennis/fitness/Overlook restaurant, recreation). Because there is not enough money in the CCF to support these needs, the money is now coming from a different fund.

NOTE: The mayor provided the following information to LOVE regarding the $8 million in golf irrigation improvements that will be taken from the Capital Fund rather than the Community Center Fund:

FY 2022/23
Golf Course Irrigation (Conquistador Course) - $4,630,000
Golf Course Irrigation (La Canada Course) - $2,350,000

FY 2023/24
Golf Course Irrigation (La Canada Course) - $2,000,000

The Bottom Line
The half-cent sales tax subsidy ($2 million annually), the HOA subsidies ($125,000 annually), and the $25 million bond are not enough, so additional money is needed which is now coming out of the Capital Fund.

- - -
Mike Zinkin and his wife have lived in Oro Valley since 1998. He served on the Oro Valley Development Review Board from 2005-2009, the Board of Adjustment from 2011-2012, and the Town Council from 2012-2016. He was named a Fellow for the National League of Cities. He was a member of the NLC Steering Committee for Community and Economic Development and a member of the Arizona League of Cities Budget and Economic Development Committee. He was an Air Traffic Controller for 30 years. Mike 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.

Guest View: Dick Leonard ~ Our Community Golf Course. Should it be public or private? Should it be taxpayer subsidized? Part 2

Below is Part 2 of a letter sent to the Town Council by Oro Valley resident, Dick Leonard. Part 1 appeared yeserday. The letter has been re-formatted with sub-headings added to fit the LOVE's format.
---
Municipal Golf Course Subsidies
Again, if the City wishes to operate the course as a Municipal course, the issue of subsidies must also be addressed. According to the RFP, Exhibit B, the 6 month total cost for sales, operations and management fees requires approximately $2 million. The current 0.05% sales tax which accounts for $2.1 million would be only a half year solution not counting capital expense. The other half year subsidy could be financed by either raising the sales tax, or placing a special assessment on another service, such as on the water bill. Not having any data on the cost of other Community Center services or capital expenses, the total amount appears to be unpopular. Without substantial subsidies, this consideration would likely not be acceptable to the public.

Breaking down each course and using the 7979 total rounds played on the "daily fee" side (July 2016 to Dec. 2016 ) with revenue of $201,450, the yearly subsidy for this course is estimated at $600,000. This again would require that 40,000 Oro Valley residents subsidize a country club for only 162 memberships.

Operating without subsidies
If, however, the Town operates the golf course as a Municipal Golf course, there are ways to operate at little or no subsidy from Town residents:

• Reduce course configuration to 18 holes, with 9 holes on each side
• Place all remaining fairways in Parks Dept. control and financing
• Install fee-based ball dispensers to provide continuous daily income
• Develop a local golf identity with convenient on-line booking and customer service
• Provide individual 6 and 12 month annual resident cards which retain and reward repeat golf customers
• Provide a variety of daily fee rates to match age groups and time-of-day, plus seasonal play 
• Install vending machine areas to provide continuous revenue without reducing pace of play
• Use a portion of the sales tax subsidy for the 18 hole course and cart path improvements
• Eliminate food service discounts and reduce prices to all customers, or lease food service to independent operators

National trends
In addition, recognize the national trends in shrinking golf play and the increase of fitness participation, along with the many promotions of shorter courses and less time consuming play (i.e. 9 hole courses), which indicates the need to expand and improve all fitness related activity and the increased revenue source.

In summary
I believe the needed financial changes are only possible if the Town administration concludes that Oro Valley is in the business of MUNICIPAL GOLF, and that the facility must be operated as such. There are many examples of such golf courses in Arizona and all operate with the same basic goal of providing an affordable golf experience to all residents, without requiring burdensome subsidies. A contact with any one of the many municipal golf facilities across the United States will provide the results sought in the RFP and once implemented, will benefit our City residents for years to come.

Council Planning To Add $43Million In Debt To Oro Valley In 2022

Two measures: $43 million

The Oro Valley Town Council has passed two measures in the past month that, if approved in the 202-22 budget, will add $43 million in debt to the town. One is the previously reported issuance of $17million in debt to pay down the town's police pension (“PSPRS”) unfunded liability. The other is the incurrence of up to $25million in debt to finance what was to be a ten-year parks and recreation master plan.This is a plan that council has not publicly heard or approved.

“Pay as you go” is out… debt is in

Approval of bonding for the parks plan will abandon this council’s stated position to use “pay as you go” for parks and recreation facilities. This is the position the council affirmed last year when it approved a five year plan to reduce the annual subsidy of municipal golf to no more than $750,000 within five years. Currently, improvements to that facility as to all facilities was to be paid from current fund proceeds. This has been the town’s practice since its inception in 1974.

Cheap interest rates drive both debt decisions

One stated justification for doing this measure is the same was used for supporting the PSPRS debt: “Interest rates are cheap.” The town has estimated that it will be able to issue bonds with a less than 3% interest rate. They may well be able to do so as there is currently a dearth of new municipal bond issues in the market. But, this level of borrowing is a lot for a town of our size. It could reduce the town’s credit rating unless it pledges the sales tax money as collateral on the loan.

Recent reduced golf losses and increased sales tax revenues also drove decision to borrow to fund parks and recreation facilities

In addition to cheap interest rates, there was added rationale given for borrowing to fund the parks: Losses on municipal golf are down because the new golf operator has done a better job of operating the course than the last golf operator; and half-percent sales tax receipts are up. The council expects that both of these events will continue indefinitely.

Measure “shares the wealth” generated by the half-percent sales tax 

The measure was proposed by Mayor Winfield and Vice Mayor Barrett. One of their stated objectives is to bring unity to the town by “sharing the wealth” through use of the half-percent golf sales tax. Barrett observed in her remarks during the meeting that the sales tax is paid by everyone and that, therefore, it should be used for the benefit of everyone. The language of the resolution (included in the panel above) does just that, proposing that bond funds be used to complete Naranja Park and improving other key parks facilities.  You can watch the Vice Mayor’s comments here.

Pending 2021-22 Budget Adoption

The bonding and the use of bond proceeds are included in the town’s tentative budget. Town residents will have the opportunity to opine on any item in the tentative budget in two upcoming town hearings. The bondings will happen in the late summer if they are included in the final budget.

Guest View: Tim Bohen ~ What the heck happened?

When the Town stated at the May 16 Council Meeting that outside golf revenues were way up through March 2018, this really caught my attention. Maybe the long promised outside play (non-member) golfers have finally arrived to save El Con golf. Per Staff, the Community Center fund is projected show a small surplus in 2017-18 mainly due to rising non-member golf revenues.

The March 2018 Troon cash flow statement (available for review on the Town website) reveals that March 2018 was the best ever month for outside play since the Town purchased the courses.

Several questions are raised
1. Did you see backed up foursomes on every hole all afternoon every afternoon in March?

2. After this great result at El Con, how did nearby Vistoso Golf Club see the need to close their doors just two months later? Did the Community Center steal its golfers? What the heck happened?

3A. Per Troon projections for FY 2017/18 (available on the Town website) El Con would have 318 members and would generate $1,793,000 in member revenue and $5,940,719 in total golf revenue.

3B. Per Town projections for FY 2017/18, the Town projected about 225 members, forecasted $811,811 in member revenue and forecasted $3,455,214 in total golf revenue. But somehow Troon is two years ahead of their 5-year plan. What the heck happened?

4. The NGF Study said the courses were in trouble and significant changes need to be made. A year later with no changes made we find ourselves two years ahead of schedule with respect to breaking even in the Community Center Fund. What the heck happened?

It’s all in the details
Absent any other source, you simply have to trust the Staff report made at Council. Needless to say, we should not trust it without seeing all of the supporting data, most importantly the outside golf receipts for March. We’re all paying for it with our sales tax. Show us the receipts!

It's a Community Center bought for the Community and paid for by the Community. Where is the detail that supports the newfound success? If I were the Town Council, I would gleefully share the details.

Fudging the numbers?
To those of us paying close attention, Community Center golf as managed by Troon is evolving into a financial scandal. Despite the fact that the sales tax subsidy has now risen to $2.3M (a $300K increase from FY 15/16) Troon and Staff still seem to feel the need to fudge the numbers to make it appear that the Community Center fund is turning a small surplus in FY 17/18.

The rising sales tax subsidy is the only good news regarding golf. And this has nothing to do with golf operations. A review of the Troon month-to-month numbers reveals no significant operational improvement in three years other than some hard-to-fathom outside play numbers for early 2018. But why?

Election year shenanigans?
Perhaps it is because we are in an election year and the Council is now seeking to justify major golf course upgrades to voters unfamiliar with the details. The bad news is out there. Golf courses are closing all over Arizona and nationwide. What is Troon doing right at El Con that others seem to be getting so wrong?

It’s the Management Contract, Stupid
Perhaps it is because the Troon management contract (which pays them $144K/year no matter what their results) is eligible for renewal in 2019 for 15 years unless the Town cancels the contract before March 30, 2019. Maybe some future revenues are being moved forward to the present to show a near term positive trend? Perhaps it’s, let’s keep the Troon gravy train going however we can?

Another way in which the Troon Management Contract may be terminated is per section 6.03 Financial Performance. In this case, if the facility does not earn 90% of the projected Gross Operating Profit (GOP), then the contract may be subject to cancellation. However the Purchase Agreement allows Troon to make up any shortfall within 30 days of being notified.

Imagine, if you will
Imagine a situation in which this shortfall is much less than $144K. In such situation, Troon may be motivated to simply pay the shortfall. The point is the amount to be paid to make up a shortfall, if any, is based upon Troon’s reported results. We as a Town should be monitoring Troon closely to ensure the fees we are paying are truly earned.

Thank you Oro Valley for making your residents need to learn about local golf course economics. That used to be a Troon issue. They are, after all, the experts. Now its a Town-wide issue and might remain so for at least 20 more years. Now that the Troon Management Contract renewal is coming up, we all need to be vigilant to ensure that Troon is reporting honestly and truly pulling their own weight.

-----

Tim Bohen grew up in Southern California and moved to Oro Valley in 2015. He has a Bachelors degree in Physics from UCI and an MBA from Loyola Marymount. He is employed as a Systems Engineer. He graduated from the Community Academy in 2016 and the Citizens Academy in 2017. He was recently appointed to the Oro Valley Historic Preservation Commission and is a volunteer mediator with the Arizona Attorney General’s office. His interests include aviation and history, with his greatest interest currently being frontier life and how the West was settled.

Guest View: Diane Peters ~ A Winfield-Solomon Showdown: Check and Mate.

The below conversation, regarding the Community Center budget “surplus,” took place during the March 20th Town Council meeting. Once again, Councilmember Solomon was disrespectful to the mayor, only to be outsmarted by Mayor Winfield who gracefully used Solomon’s own words against him.

A credibility problem and Solomon’s Freudian slip

Mayor Winfield: I understand that there’s differing opinions about this and I respectfully acknowledge that, but I believe the characterization of the reference to a surplus in this fund - I have an interest in wanting to gain credibility with the community and I believe that the continued reference to a surplus undermines that and I believe that it discredits us collectively. I’m talking about the staff and the council.

Councilmember Solomon: I completely disagree with that assessment. We have income and we have expenditures. Part of that income is the dedicated half-cent sales tax that was specifically dedicated to the Community Center and Golf Courses. There’s no dispute, look at the original resolution, it’s quite clear. And that is just part of the reality, so that is part of the income. None of us were involved in the purchase of the golf courses but it was obvious at that time that it would need a subsidy. Actually, all of our parks and recs are subsidized by taxes. So, no, I disagree. There is a surplus – the income vs. the expenditures.

Let’s look at the Aquatic Center, income vs. expenditures. There’s a $600,000 difference, so there is a $600,000 loss. You never seem to want to bring that fact up.

Winfield: Actually, I do. Thank you for bringing that up. (He turned to Finance Director, Stacey Lemos and asked the following question). Ms. Lemos...When we talk about a surplus, there’s a revenue side of all these different facilities and there’s an expenditures side. So let’s talk about the Aquatic Center for a moment. What is the revenue?

Stacey Lemos: The revenue from the operations of the Aquatic Center is approx. $600,000.

Winfield: And the expenditures for the Aquatic Center?

Lemos: I believe the expenditures are about $1.2 or $1.3 million dollars.

Winfield: And we refer to that difference as what?

Lemos: Because those operations are included in the General Fund, it’s a subsidy from the General Fund revenues.

Wait for it…

Winfield: Mr. Solomon referred to it as a loss. (Check and Mate).

(Lemos then began talking in circles, first stating that “subsidy” was used for the Aquatic Center because its losses are subsidized with General Fund revenues, but also stating that “subsidy” was “an accounting term” used for the CCF because it’s a separate fund entity.)

Winfield: Thank you and I’ll just add that…what was presented to the Town before the purchase and the half cent sales tax…the projections that were given at that particular time, and projections are projections, but I think we can all agree that they were significantly overly optimistic.

And so what that created was an expectation within the community that the half cent sales tax, yes, was going to provide a subsidy for I think the first two, possibly three years, but not $2.5 million year after year, or $2 million, but that that subsidy was going to be significantly less. The majority of those funds were going to go into capital investments. So that’s where we have this credibility problem - that what was presented to the community at that particular time just simply isn’t what has unfolded. I can accept that. Projections are projections and reality is reality. But to characterize this as a surplus undermines our credibility.

Solomon: My concern is the characterization that the council misrepresented the aspects of this fund and that it lost credibility with the residents of Oro Valley. That is not at all clear, that’s an opinion. There’s just as many people, or more so, who disagree with that opinion. So for the mayor to state that almost as a fact is what I find irresponsible and not fair.

(Then wouldn’t Solomon’s “opinion” about how many people agree or disagree also be “irresponsible and unfair” since he doesn’t know for sure how many people are in each category but he stated it as a fact?)

Solomon continued: We can discuss all we want about income vs. revenue…But I just think it’s inappropriate from the dais to state that council lost credibility, implying that something wasn't presented correctly or done correctly…If some people think there’s a loss of credibility, fine, but that’s certainly not a statement that you’re justified in making from the dais.

Vice-Mayor Barrett: I just want to add that in the previous year’s budget…there was also $6 million dollars budgeted for capital improvements to the Community Center and golf courses and that $6M was originally contemplated as being part of the CCF. So for that type of capital improvements to be budgeted separately and then to still say that the CCF is running a surplus when the original promise was that capital expenditures would be made from the CCF is I think where the difficulty with credibility that the mayor is referring to comes from and I think it’s appropriate for him to call that out if he feels that that’s something that’s important.

Losses? What Losses?
Lemos appeared uneasy when answering Winfield’s question regarding the difference between a loss, a subsidy, and a surplus. My impression was that she does not like to answer questions that haven’t been scripted in advance (as many people believe was the case during the Hiremath reign in order to paint the Community Center and Golf financials in a positive light.) Winfield was trying to point out that you don’t have a surplus when the expenses are higher than the revenues and she just wouldn’t say it.

But that’s OK because Steve Solomon inadvertently said it during his bi-weekly lecture series.  And Steve Solomon is always right.  Just ask him.

-----
Diane Peters has lived in Oro Valley since 2003, moving here to escape the humidity of the East Coast. She’s been involved in OV politics and development issues since 2006. In 2014, she organized a citizens group, Citizen Advocates of the Oro Valley General Plan, who over a 9-month period, successfully negotiated a controversial 200-acre development project. In her past life, she worked in medical research at various University Hospitals in New England. Her interests include reading, writing, nature photography, travel, art galleries, museums, and politics.

Oro Valley's Golf Course Presents Significant Financial Challenges

The Oro Valley 2015-16 budget includes a subsidy to pay for the losing operations of the Town Of Oro Valley golf courses. The subsidy is the half percent sales tax that the Majority-4 approved in March.

The sales tax increase finances golf course losses
According to a December Troon Golf ("Troon") financial forecast, the Oro Valley golf courses will generate $4.4 million in member fees and other revenues. Troon is under long-term contract to manage the golf courses and tennis facilities for Oro Valley. The golf courses will cost the town $6.2 million in Troon contract fees in 2016, according the the 2016 Oro Valley budget. The difference between projected revenue generated and Troon fees of $1.8 mil is a bit shy of the town's 2016 budget of $2mil in sales tax income from the half percent sales tax increase.

The Troon forecast projects golf course operating losses through FY 2018. The community center, on the other hand, is forecast to generate an operating profit of $317,000 in 2016. However, it is budgeted to receive a $1mil investment in the facility in 2016 so the net cash flow will be negative.

Troon's financial forecast included future years. These show that the town will lose money on golf operations through 2019.  These ongoing operating losses from the golf operation is of concern to many Oro Valley residents. They contend that the Troon revenue projections are optimistic, in light of a long term downturn in golf course operations and a nationwide decline in the popularity of the game of golf. While these operating losses are occurring, the town forecasts a spend of $6.4 million in capital outlays to upgrade golf operations from 2016 through 2025.

How will the Oro Valley pay for these investments?
That is the question Council Member Brendan Burns asked town manager Caton. We suspect that Burns asked the question because he has studied the numbers that the town has presented to him.

In a report to council, Caton provided 2 financing options. One option is to issue bonds in the amount of $2.5 million. That is not going to happen, according to a statement made at a council meeting. The other is to use town operating fund "reserves" of an equal amount.

This $2.5 million covers only 25% of the total golf course investment.  It covers the period from 2016 through 2019.

Where is the rest of the investment money going to come from in later years?

What if Troon's forecast of financial break even in a few years does not materialize?

This may be a question that a future council will have to answer.
---
About The Numbers

The Town of Oro Valley did not provide the financial analysis presented in this post nor has the town opined on their validity.

However, the financial numbers presented in this post are from the most up-to-date source documents from the Town Of Oro Valley.

These documents are the 2016 Town Manager Recommended Budget, the December 2015 Troon Management Forecast of Golf Revenues and Expenses, and a May memo to council by Town Manager Caton on the options to finance some of the expenditures for improving the golf course. We did confirm with Town Manager Caton that the Troon Forecast were the most recent financial numbers on the golf course.

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.

The Watchdog Report: July 2019 -- First month of the fiscal year

Below are the highlights of the Community Center financials for the first month of Fiscal Year 2019/20.

• The Community Center Fund lost $100,484 in July 2019.
• This is $65,148 more than it lost in July 2018.
• Troon lost $211,874.

• The golf membership dropped by two members from June 2019.
• July membership was down to 236.

• The total number of rounds played on the Town courses was 3,280 of which 253 were comped.

• The Overlook Restaurant lost $16,731.
• The good news is that the Community Center itself made $73,086.

The Community Center with its member dues, recreation programs, swim team/lessons, and rental income is making money. If the Community Center was all we had, we would not need the sales tax subsidy. If we were to continue with the sales tax subsidy and not worry about golf, we could make the capital improvements needed to update the 1980’s building and make it ADA accessible.

Although former councilmember Lou Waters continues to say, “I did not buy a golf course, I bought a community center,” the fact is that we continue to provide 45 holes of golf. And while the losses are less than in prior years, the losses continue, nonetheless.

In fact, Troon forecasts their losses to be $1,702,665 in FY 19/20. Oro Valley cannot and should not continue in this direction. Troon is forecasting member dues to reach $799,921 by the end of FY 19/20. This is $68,927 less than they forecasted in FY 18/19.
---
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.

Vestar Got Some Explaning To Do Tonight

David Malin and Vestar are on tonight's Town Council agenda, thanks to council person Bill Garner. They are to discuss the Oro Valley Marketplace. Some questions we'd like to see asked and answered:

1. Who are the tenants going to be in the Oro Valley Marketplace? When is each going to be opening?
2. What retailers is Vestar courting to fill the marketplace? When will they be in place?
3. Which of the retailers will provide the upscale shopping experience that the voters of Oro Valley were promised?
4. What's the financial projection, by year, regarding sales tax revenues from the Oro Valley Marketplace? In what year will Oro Valley's sales tax subsidy ("investment) of $23.3 million be paid out such that Oro Valley can collect full sales tax revenues?
5. What about all those ugly rooftop units, highly visible from Oracle Road? They are not masked and spread out as promised. (And why didn't Wal-Mart put in solar panels for a site that is going to have sunlight 340 days a years?[Wal-Mart is doing it elsewhere])

We'd like David Andrews, Town Manager, to discuss each and ever building code violation and we'd like Vestar to respond regarding what they plan to do about each and every one of them. (Click here to read "Vestar Has Disrespected Oro Valley"-a letter to the Explorer on this topic.)

Got some questions for Vestar? Post them as a comment to this posting.

Click here to read an Explorer article that previews the meeting.