[George Pazin]

...I think John's tie in to the St Louis arch is as on the money.

Call me crazy, but I'd guess by my one visit that the arch actually makes money.

Ken F, welcome to the new new economy... Red is the new black. For some.

[Jud_T]

- If a private investor/owner took the chance to build this facility and ran out of money, the project would be dead.  A government entity does it, they take money from one place to sustain the other.  Does this logic work for anyone? 

Ken,

Why do you think almost half your income goes to government? 

[Dick Kirkpatrick]

"The current seed mixture for Old Macdonald (and all the other turf areas here) is as follows: Bridgeport II Chewings fescue, 35%; Barswing Chewings fescue, 25%;  Barcrown Creeping Red fescue, 20%; (and seed coating 20%).  That mixture has changed slightly (I believe) since the first season's seeding, but I couldn't say exactly how.


I have never heard of the seed coating being part of the mixture. (It is not)

It is part of the pricing, but not part of the mixture.[/b]

[Tiger_Bernhardt]

As Don said it was never going to make money with that price tag up front. I too wonder how on earth they could spend 2.5 million a year on maintenance. That certainly makes it hard to even break even on cash out each year and forget paying off the bonds.  There was another issue here. that site was going to cost the County a large sum of money to deal with. champbers is doing just fine. The money is not ever going to look good.

[John Kirk]

I'm not convinced the $2.5M per year maintenance number is right.  Maybe total operation costs are $2.5M.  I was told several years ago maintenance was under a million, which was lean, given that the superintendent was using some of the money to establish the long fescues in the out-of-play areas.

The playing conditions certainly don't seem like $2.5M per year, do they?  There are some courses that spend that sort of dough; at least there were some that did a few years ago.  A couple in the Palm Springs area for instance.   

[Stewart Naugler]

I know of a few private 18 hole clubs that have a 2.5+ maintenance budget but I've never heard of a public/resort/muni 18 hole course with a 2.5 mil maintenance budget. At least not one that has cool season turf grasses!

They have to be figuring in the annual changes that have been made to the golf course.

[Dick Kirkpatrick]

I always advise my clients to follow the $10.00 rule, which is unofficially an accepted basis for determining green fees.

The general outline of the rule is that if you have debt of 70% of the cost of your course at an interest rate of 6%
that you need to charge $10.00 for each million dollars of cost.

In other words, if your course cost $10 million, your green fee should be $100.00 and my experience is that after all taxes and other operating expenses are paid, including interest, you should have a respectable return on investment. (ROI) (Profit)

If the demographics of your location do not support a green fee such as this, and you do not have the 30% for an equity position, my advice is  to my clients,  is to not proceed.

To use the cost of Chambers Bay, $210,000,000 at $10.00 per Million, the green fee should be $2100.00

I can't think of an area in the world that can support that business plan.

[Tom Yost]

I always advise my clients to follow the $10.00 rule, which is unofficially an accepted basis for determining green fees.

The general outline of the rule is that if you have debt of 70% of the cost of your course at an interest rate of 6%
that you need to charge $10.00 for each million dollars of cost.

In other words, if your course cost $10 million, your green fee should be $100.00 and my experience is that after all taxes and other operating expenses are paid, including interest, you should have a respectable return on investment. (ROI) (Profit)

If the demographics of your location do not support a green fee such as this, and you do not have the 30% for an equity position, my advice is  to my clients,  is to not proceed.

To use the cost of Chambers Bay, $210,000,000 at $10.00 per Million, the green fee should be $2100.00

I can't think of an area in the world that can support that business plan.

One too many zeros there.

[Dick Kirkpatrick]

Right you are, Tom.

Formula still works.

Green fee $210.00

I will be your guest.

[Matthew Essig]

Right you are, Tom.

Formula still works.

Green fee $210.00

I will be your guest.

And the green fees during the summer are $210. Nice formula! 

[Dick Kirkpatrick]

Oh well....................................

[David Lott]

Oh well....................................

It's a sticker price of $210. What's the real average price after discounts, comps, promotions, twilight, etc? And what is the utilization?

Are these revenue bonds or general obligation bonds? That makes a big difference for the future.

[John Kirk]

$21 million is an awful lot to spend building a golf course.  It probably includes the buildings and infrastructure, but the pro shop is still a temporary structure.

Nice course when it's in good shape.  A couple of awkward walks, and each nine begins along the same west - north - east path.  I like the front nine a little better, especially the 5-6-7 stretch.  12 is a cool driveable par four.

[Garland Bayley]

...
Garland, comparing Rustic Canyon and Chambers Bay is apples and oranges.  One was built to shine, the other to provide daily play for daily fee players.  Perhaps your budget can allow you to play twice weekly at Chambers Bay, but most people cannot, but could at Rustic Canyon. ...

Unfortunately, last year at least, you were wrong about this. With their season pass last year, it may have been possible to golf twice weekly at Chambers Bay for less than twice weekly at Rustic Canyon. If you golf more than that it was all gravy.

I'm Rustic Canyon player kind of budget guy.

[Jim Nugent]

I always advise my clients to follow the $10.00 rule, which is unofficially an accepted basis for determining green fees.

Isn't the number of rounds played pretty important too?

[Jon Wiggett]

I always advise my clients to follow the $10.00 rule, which is unofficially an accepted basis for determining green fees.

Isn't the number of rounds played pretty important too?

No, not if you divide the cost of running the place and retrospectively charge all the GF players

[Tom_Doak]

The problem with all of those boilerplate formulas that everyone used for the past 20 years is that none of the pro formas understood one other golf course operations boilerplate formula: 

The average green fee received during the year will usually equate to about 2/3 of the "rack rate" high-season green fee, after discounting for off-season rounds, weekdays, seasonal memberships, etc.

That math fits well with the numbers published for Chambers Bay ... they are operating the place for $2.5 million and their shortfall is $800,000.  Q.E.D.     So, if you go back to the pro formas, they needed a rack rate of $300 green fees to make the numbers work after discounting.  If they'd understood that, they would have seen what they were up against.  But, they convinced themselves that people WOULD pay $210, and therefore that the pro forma was accurate.

If they can't increase the prices by 50%, what are the other possible solutions?  They are talking about increasing play, but according to the simple formula above, they would have to increase play BY 50%, at the current prices, in order to get to break-even.  Actually, come to think of it, the original RFP for the project was to build 27 holes ... I doubt they could have built as good a course if they'd tried to build 27, or charged as much -- and of course, the maintenance budget would also be higher then -- but if they could have, then the numbers would have worked.  They decided to go for the U.S. Open instead.


The subsidy from the sewer district would also be a bone of contention.  Under the circumstances, it would have been entirely fair to write off some of the $21 million construction cost toward what the sewer district would have had to pay to remediate the property and make it useful to the public.  If they had done so up front, instead of pretending that the golf course would successfully pay for it all, there would be no controversy now.  But now they are fudging the numbers internally, and that will always raise red flags.

Bottom line:  no one should spend $21 million building a public golf course.  And maybe someone should send this article down to the folks in Rio!

[Chris Johnston]

Chambers was build in the "Economic Heyday", just like a bunch of neat places that didn't or don't work today.  There is a probably a list somewhere of great courses who struggled, or failed, many of which have been discussed here.  Many came from the same era 2000-2007.  Then, reality set in.  Chambers is no different if looking through the rearview mirror.

Fact is, today, the golf course industry is incredibly challenging.  It was and always has been a "nickel and dime" business.   

[George Pazin]

Chris, your wise words ring true for most businesses, not just golf. I think golf just tends to draw more dreamers, at least when it comes down to the numbers.

[Scott Weersing]

Some may say that $21 million is too much to build a golf course but when you compare Chambers Bay to The Crossings in Carlsbad, then the officials of Pierce County are way ahead. To remind you, The Crossings cost approximately $55 million to build and players play it once.

Here is a recent story about The Crossings: http://www.nctimes.com/news/local/carlsbad-golf-course-may-set-cost-records/article_c1f457bd-e066-53ba-a6fb-5debb8eef9b0.html

While a clubhouse would get use at Chambers Bay, at least they are working to improve the course with improvements for the US Open.

[Sven Nilsen]

Seems that there's a consensus that golf course development is a bit of a gamble. 

For municipal courses, that gamble is being made with public funds.  The odds get a little longer when the choice is made to build a championship course, one that will necessitate high green fees and a high volume of play to justify the cost of development.

I would guess the tax-paying public might have preferred a plan with slightly safer odds of breaking even.  What else could the county be doing with the $800K its sinking into the course every year?

[Tom_Doak]

Seems that there's a consensus that golf course development is a bit of a gamble. 

For municipal courses, that gamble is being made with public funds.  The odds get a little longer when the choice is made to build a championship course, one that will necessitate high green fees and a high volume of play to justify the cost of development.

I would guess the tax-paying public might have preferred a plan with slightly safer odds of breaking even.  What else could the county be doing with the $800K its sinking into the course every year?

Sven:

Are you assuming that the course ought to turn a profit?

As John Kavanaugh hinted much earlier in this thread, should we not see this as part of a bigger picture?  Hardly anything that government does "breaks even", the question is whether the cost is justified by the public good that the project brings about.  This is a much larger question than strictly whether local businesses will profit from the generation of visitor traffic to Tacoma, or from the holding of the U.S. Open.  The real question is whether the construction of the golf course has improved the quality of life in the community -- and if it has, what is that worth?

I believe that part of the vision of Chambers Bay was the early success of Bandon Dunes, and the county commissioners' idea that if so many people from NW Washington were happy to drive to Bandon, they would be happier yet to play a similar course close to home.  Bandon Dunes, of course, was not publicly developed, and it is ultimately up to Mike Keiser to decide whether the expense was worth it to him ... but I think that even if the course had not been profitable, his answer would be that it was STILL worth doing, because of the joy it has brought to so many people, himself included.

It's sad that we as a community are not entitled to think the same way.

[Jim Nugent]

Tom, you touched on the key issue, though I take a different view of it.  If a public course does not pay its way, the people must subsidize it.  Whether or not they want to, they are paying so a small (probably tiny) percentage of people can enjoy themselves.  It's not clear to me why others should be forced to pay for your or my pastime.   

You said it's sad we as a community are not allowed to think that way.  One question there is, who is the "we"?  Is it the golfers?  The people who live in the city or county?  Whoever they are, how do you decide how they think?  Have a vote?  Does majority win? 

If Keiser wants to spend his money for what he thinks is the greater good, more power to him.  But if you want to spend other people's money for what you think is the greater good -- without their permission/agreement -- I can't agree. 

[Sven Nilsen]

Tom:

I'm suggesting that when public funds are used to build a golf course, taking the gamble on the high-fee model may not be the best use of taxpayers' money.

They probably could have built a very nice golf course on that site for a lot less up front that would have provided a good deal of benefit to the community.  Perhaps the benefit wouldn't be as great as what Chambers Bay provides today, but the cost would not have been either.

The comparison to Bandon is apt.  From a risk perspective, the financial burden of failure at Bandon would have fallen on Keiser (and his investors/backers).  The fact that Chambers operates in the red means money in the county budget that could have been allocated to other uses is being used to keep the project alive. 

I think there's a tremendous public value in courses developed and maintained by municipalities.  But when the financial risks are high and the plan does not work out, I question the gamble.  Living in Illinois and reading the almost daily accounts of mismanaged government spending leads one to be a bit cynical on how politicians decide to allocate tax revenue.

Maybe $800K is a drop in the bucket for the county.  Maybe not. 

Maybe hosting the open will have a beneficial impact on the community.  Maybe not.

What can't be debated is that they built a great golf course.  I hope it makes it.  But I hope making it isn't at the expense of some real life concerns that won't be addressed.

[Tom_Doak]

Tom, you touched on the key issue, though I take a different view of it.  If a public course does not pay its way, the people must subsidize it.  Whether or not they want to, they are paying so a small (probably tiny) percentage of people can enjoy themselves.  It's not clear to me why others should be forced to pay for your or my pastime.   

You said it's sad we as a community are not allowed to think that way.  One question there is, who is the "we"?  Is it the golfers?  The people who live in the city or county?  Whoever they are, how do you decide how they think?  Have a vote?  Does majority win? 

If Keiser wants to spend his money for what he thinks is the greater good, more power to him.  But if you want to spend other people's money for what you think is the greater good -- without their permission/agreement -- I can't agree. 

Jim:

I'm not advocating that communities start building golf courses en masse ... believe me, I'm much happier with clients like Mike Keiser than I would be trying to deal with committees and governments running things on behalf of a town!  And, as you say, the majority of people in a town are never going to support the idea of a public golf course, even if it does add much to the quality of life.  Although, if we support softball fields and parks and other things with public funds, I don't really see why golf has to be excluded.

I was just lamenting that people in America can't even think of themselves as a community anymore, or decide what is worthwhile.  All anyone thinks about is what's in it for them.  It's all about politics and extremes here now.

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