A little OT: Is Change Coming for Open Space (read golf clubs) Tax Breaks?

[Steve Sayre]

The Boston Globe today:‘This is unjust and wrong’: State program slashes elite golf clubs’ property taxes

A little extract: "Amid economic uncertainty and high inflation, the struggles of even well-to-do communities such as Newton have sparked a reevaluation of the state program, called Chapter 61B, that reduces property taxes on eligible land used for open space or recreation by as much as 75 percent. Mayor Ruthanne Fuller of Newton said in a statement that she is encouraging the state “to reexamine the financial benefits” provided to recreational properties like golf courses.

The whole article: https://www.bostonglobe.com/2023/05/02/metro/this-is-unjust-wrong-amid-economic-downturn-state-program-slashes-elite-golf-clubs-property-taxes/?s_campaign=8315
Tedesco, Brae Burn, Charles River, Woodland and Belmont among those getting breaks. TCC does not ask for nor get a benefit.

[Charlie Goerges]

The Boston Globe today:‘This is unjust and wrong’: State program slashes elite golf clubs’ property taxes

A little extract: "Amid economic uncertainty and high inflation, the struggles of even well-to-do communities such as Newton have sparked a reevaluation of the state program, called Chapter 61B, that reduces property taxes on eligible land used for open space or recreation by as much as 75 percent. Mayor Ruthanne Fuller of Newton said in a statement that she is encouraging the state “to reexamine the financial benefits” provided to recreational properties like golf courses.

The whole article: https://www.bostonglobe.com/2023/05/02/metro/this-is-unjust-wrong-amid-economic-downturn-state-program-slashes-elite-golf-clubs-property-taxes/?s_campaign=8315
Tedesco, Brae Burn, Charles River, Woodland and Belmont among those getting breaks. TCC does not ask for nor get a benefit.

It's an interesting article, thanks for posting it, I'd never have seen it otherwise.


Taking a step back from this instance, I think golf is going to have more and more cases where issues of economic justice are going start to make themselves felt. And the game, industry, and golfers are going to need to be thinking about and addressing those issues.

[John Kavanaugh]

Funny thing, making golf more expensive makes it more exclusive. It’s a bizarro world of economics and politics.Tax the clubs where sales of Bud Light have dropped by more than 10%.

[Rob Marshall]

Public course in my town got tax breaks for a forever green agreement.

[Matt Schoolfield]

I'm new here, and I normally wouldn't want to rock the boat like this, but this is a bit of a hobby horse of mine and I think it's extremely important, even if much of golf culture doesn't want to hear it.

In many parts of the country right now, urban golf courses, especially urban private golf courses, need to offer the greater community something, anything, if we want our culture to survive this accelerating housing crisis. This is an ongoing series in my writing: 1 2, and I'm the guy on reddit prattling on whenever it comes up.

I'll try to keep this short. I was born on the first year of the millennials' generation, so I feel like I stand between the two worlds of the older generations and the younger generations, and the difference in access to wealth-building is stark. When the young people, who are now the largest voting bloc, see no path whatsoever to own a home in many regions (Newton, MA being chief among them) then they are going to change the system. It's happening right now in California, where we are fighting bills trying to pay cities to close municipal courses, and if you live in an area with a housing crisis, similar political fights are going to happen where you live.

Open space can be good for society if it's open space for native flora or fauna, but if you're trying argue that open space dedicated to Annual Bluegrass is somehow good for society, it's probably not going to fly anymore. A dubious "Audubon International" certificate, which is very much not issued by the National Audubon Society, probably isn't going to fly anymore. I really think the folks running urban golf courses need to start thinking about how to give the general public something to lose if the course goes away. Whether it's a popular dining facility, a venue where many couples in the city got married, an apiary operated by the local university, or a walking trail open to the public, there needs to be something, anything, for the general, non-golfing public to see as something they lose when the course they never use (an in many cases aren't allowed to use even if they wanted to) goes away.

I'm planning on writing specificity about this topic, about LACC, in the run-up to the US Open. There is no more egregious tax-break gifts to the most wealthy among us than there are in northern Los Angeles, yet our golf culture showers accolades on many of these exclusive tax-dodgers, even while we sheepishly admit that things should probably change when directly challenged on it. I don't think the public will stand for it forever.

I care deeply about the game of golf, which is why I'm so concern about this. Our housing crisis is accelerating across the country, not abating.

[John Kavanaugh]

Beautifully said.

[Rob Marshall]

Matt,
What tax breaks are being given to LACC and how are they affecting the housing crisis? I couldn’t read the article attached.

[Charlie Goerges]

I agree with what you wrote Matt, good on you. You're up against a lot of competing points of view and other entrenched attitudes that will make your work difficult. There probably isn't a lot of assistance I can give, but let me know.


I want to play devil's advocate against your view a little if that's ok? I'll just give some bullet point thoughts as though I were opposed to your argument and perhaps you can go a little more in-depth, but feel free to ignore.

• Why is it golf's responsibility to alleviate the housing crisis?
• Golf's physical footprint is a drop in the bucket in a metro area, what difference could it really make?
• Golf's financial footprint is a drop in the bucket (tax wise)...same question?
• Environmentally golf is a far better use than agriculture or malls/parking lots/etc, why pick on golf?
• Why single out golf to make a contribution to the community above and beyond what anyone else makes?

[Charlie Goerges]

Matt,
What tax breaks are being given to LACC and how are they affecting the housing crisis? I couldn’t read the article attached.

LACC is essentially grandfathered in to extremely low property taxes because it has ostensibly never changed hands. It's being taxed at an artificially low rate because of a sort of Ship of Theseus legal argument that is specious at best. It's taught in philosophy 101 courses as the state of the art...of 400 B.C.

[Matt Schoolfield]

Matt,
What tax breaks are being given to LACC and how are they affecting the housing crisis? I couldn’t read the article attached.

There are two primary tax exemptions. The one being discussed here is similar to the 1960 CA Constitutional Amendment exempting  "non-profit golf courses" (read: 501(c)(7) Private Clubs) from being taxed at their "highest and best use." It was famously advocated for by Bob Hope. This means that the club property is taxed at it's value as a golf course, not the value of the property as a whole. This allowed the city to grow around the private clubs without creating a need for clubs to grow or pay higher dues.

More pernicious is the 1978 CA Prop 13. California basically locks in property taxes at a rate below inflation at the time of purchase until the property is sold (it's a bit more complex, but that nuance is effectively irrelevant). This alone is a massive tax exemption to any corporation, as they do not ever die or need to sell the property. However, beyond this, the most important exemption to this tax exemption that private clubs benefit from is commonly referred to as the Ship of Theseus exemption. When a corporation changes hands, the property it owns needs to be reassessed. However, in the case of a private club, the amount that changes hands is so small, it doesn't count as the 50%+1 needed to count as "changing hands" and the courts have ruled that even if 50%+1 of the corporation changes hands over time, unless it happens all at once, then it doesn't trigger a reassessment of property values. This means that a every single member of a club like LACC can sell their membership equity to the next generation of members, and the club never gets a property tax reassessment.

The worst part about this is these tax exemptions are compounding which means that a club like LACC effectively pays the property tax of a piece of land that can only be assessed as a golf course... in 1978.

It's insane.

I can do you one better, though. Because of these laws, I can tell you what LACC pays in property taxes.

According to officialdata.org:

10101 WILSHIRE BLVD - Yearly tax assessment: $159,370 AIN 4359-018-008

Which if you throw that assessment into a handy dandy property tax caluculator, they should be paying a whopping $1,307 in annual property taxes... (upon further inspection, I failed to account for 3 other parcels, the total is likely closer to $320,000 annually) for an entire golf course... on some of the best real estate, in one of the most expensive cities in America.

I pay more than that every month in rent, and I have roommates, and I am not a young man anymore. You can see why people like me are more than a little bit upset by this arrangement.

(Note: I may have calculated this wrong, but I doubt it, and if anyone can correct me on this I'll update it)

[Charlie Goerges]

It is a loophole par excellence.

[Matt Schoolfield]

Edit: note, here I'm not trying to actively advocate for these positions. I'm trying to give a good-faith response for what someone thinking seriously about them would give. Personally I would advocate against any open-space being used for housing, as it's a finite resource and the problem is trivially solved with dynamic upzoning, but for most younger people when that upzoning doesn't happen, the finite resource argument just not going to be a good enough. Sharp Park isn't just trying to survive from being redeveloped, it's trying to survive just being turned into open space, which is essentially what happened to San Geronimo golf course in Marin. Courses like Bennett Valley in Santa Rosa, CA, and Lions "Muny" in Austin, TX, have faced, and will likely continue to face calls for redevelopment due to the housing crisis.

• Why is it golf's responsibility to alleviate the housing crisis?

It's not, but that doesn't matter. The level of insanity that exists means that the people on the losing side of this property arrangement don't care anymore (I know I barely do). The irony is that golf courses could make themselves indispensable to the community, especially by advocating for the upzoning of the adjacent real estate (similar to Central Park), which would make these golf courses a value-add instead of existing as value-extraction. They just don't though, because the courses don't care, because this housing crisis is built on everyone who is an existing stakeholder benefiting from the established system.

• Golf's physical footprint is a drop in the bucket in a metro area, what difference could it really make?

This is not a serious objection. The issue is you upzone entire neighborhoods (with all the political squabbling that entails), or you close the municipal golf course and build high rises. This should explain why the politicians are literally trying to pay cities to close courses.

• Golf's financial footprint is a drop in the bucket (tax wise)...same question?

It's an issue of fairness. "I was here first" will be a tired and losing argument going forward.

• Environmentally golf is a far better use than agriculture or malls/parking lots/etc, why pick on golf?

Is it? I'm currently doing a non-trivial amount of research on this, and I think this argument works for suburban courses, but most older urban courses are usually, at best, an artificial facsimile of nature. This is why I roll my eyes at someone trying to tell me that fertilized, pesticided, and herbicided Bluegrass is somehow good for the environment. I know most of the newer courses are much more environmental friendly, but if you look at the archetypes (say, Augusta's overseeding and god knows what else), then you know that it matters what the GM is doing.

If you want to see how a golf course can coexist with nature, look to Sharp Park, which as become a habitat for two endangered species while still being a golf course, even if has completely given up the niceties of "well-maintained" conditions because of their environmental regulations.

To continue, most young people know the the biggest environmental concern we face is the result of suburban spawl. A little green spot of land is not going to somehow provide an environmental benefit that outweighs the reduction in sprawl that would come from the highrises that replace it.

This "but grass is green" argument is a tired and lazy cliche from the climate-denying 90's. If courses actually were wildlife refuges and native pollinator apiaries, I think this argument would have a modicum of weight to it.

• Why single out golf to make a contribution to the community above and beyond what anyone else makes?

First, golf isn't being singled out. Anyone who lives in one of these cities with a housing crisis knows that the crisis effects everyone. The question of efficient land use is one that effects single-family zoning as much as it does golf courses. Everyone thinks their the one being ganged up on (especially people who have grown to rely on public street-parking), but really the problem of inefficient land use just effects everyone. But also, urban golf singled itself out with the tax exemptions it has given itself over the last 100 years.

---

Again, I'm doing the best I can with these objections as a person who genuinely wants to preserve urban golf courses. I just know that the well-earned exclusionary reputation that golf has is not helping, and I hope we can do what it takes to change that (I'm looking at you exclusive club members), so that our municipal courses don't get the punishment for the sins of our well-heeled private neighbors.

[Jeff Segol]

In Santa Clara County, where I live, most of the public courses are in situations where they're probably not conducive to redevelopment. They are:


In an airport flight path (Baylands, Poplar Creek, Sunnyvale)
Crossed by high-tension power lines (Santa Teresa)
Built on landfill that emits methane (Shoreline)


About the only course that could probably just be bulldozed for housing is San Jose Muni. The other San Jose City course is built around a creek that has significant wildlife habitat, as is Callippe Preserve in Pleasanton. That's probably the best argument for preserving golf courses against redevelopment. I would also note that there have been several privately owned public courses over the years that were in fact bulldozed for houses, such as the one off Cottle Road near the Kaiser hospital. Public golf here has generally ended up with pieces of land that couldn't be used for anything else, and the designer had to then make do with what he was given.

[Bruce Katona]

Matt:

While there are exceptions, here back east what happens more times than not is the land associated with the actual golf course and maintenance facility is assessed at what amounts to a farmland tax rate. The clubhouse (which is typically argued to be a commercial structure, whether the course is public or private) is taxed at a commercial real estate business rate.  What results is a blended tax rate that is higher than a private operator wants but is manageable.  Municipally & county run facilities can exempt themselves from property tax and (at least in NJ) issue themselves a liquor license for clubhouse operations (which is worth $1,000,000 to acquire on the open market).


The argument that a golf course can help alleviate the self-inflicted wound California has brought upon itself by ignoring affordable/workforce/market rate housing simply because it has available, potentially developable land is not quite accurate.  If a Seller (the golf club) agrees to sell to a Purchaser to develop land either as zoned or rezoned is a market decision by private parties. They need to agree on price and terms.


Now lets use your LACC example.  Imagine a few of us here on GCA (there are a few of us that do various types of development work) managed to get LACC under contract, ran the numbers and determined some type of housing project was environmentally & economically viable. 


Now comes time to go to the public planning hearing process to present an as-zoned plan asking for not zoning, planning or environmental relief. The well-to-do neighbors of LACC all sent lawyers and consultants to these public meetings to refute professional testimony presented by our experts, then there is a vote - YEAH or NEIGH.  The losing side will appeal to courts for a reason and the application will drag out for years.  Even if all are on boards, the forward thinking California Coastal Commission or another state agency will be involved to further muck up the works.


to my knowledge, California does not have in it's constitution the ability to argue an individuals rights have been impacted if affordable housing is not available in a portion of every community, like some states do. That is a very large carrot which could be used to solve some of California's housing issues. 


Recently, state mandated high density zoning development adjacent to public transportation hubs (BART stations, train stops, large park & ride facilities) stalled in the implementation process.  There is even large pushback to permit accessory dwellings (convert the garage to an apt.) as-a-right.


All said, while your idea is novel I'm not sure golf course and housing are the correct avenue.  Perhaps consider adaptive re-use or underutilized sites like old warehouses, C- commercial space, etc., which can be demolished and new housing built.  The infrastructure is already in place at these sites and most are well located in communities.

[Charlie Goerges]

Thanks for that Matt, I admire the effort you’ve put in to learning and thinking on these matters. You dealt well with the obtuseness of the questions. Sorry/notsorry about that .


I really liked the idea of golf supporting the up zoning of surrounding land. I’ve not heard that before. Really good, I look forward to learning more.

[Kalen Braley]

Matt,

As much as I agree with your cause and efforts here, I tend to agree with Charlie in that its barely even a drop in the bucket compared to the current situation we find ourselves in due to the 2018 Tax Cuts for the uber rich and corporations with the spiraling consequences since then. The impact in the aggregate of that is well into the trillions and counting....

[John Handley]

One idea to help the housing crisis in SF, LA, BOS, NYC and other urban centers is to convert many of the buildings that are no longer being used for office space since many people work from home.  Just a thought. Interestingly enough, here in Texas, there is no push (like in CA or MA) to go after golf clubs because of property taxes.

[Cal Carlisle]

Two private clubs here in Cleveland went belly up after the Great Recession. One sat on prime real estate (Acacia CC, D. Ross) while the other straddled two municipalities (Oakwood CC, a mutt of a golf course).


The fomer was a highly sought after piece of land that the politicians tried in every possible way to get into the hands of developers. In the end the membership didn't want to see it bulldozed. It didn't hurt that the Conservation Fund pretty much paid market price for the land ($14 million), a win-win for the membership.


https://www.cleveland.com/business/2012/09/acacia_country_club_approves_s.html


The latter received a fraction of what Acacia did. A developer bought most of the land and turned the most stout portion of it into a Walmart. The other part (a thin ribbon of land) was supposed to be turned into some type of park with some development around the old clubhouse and tennis facility. In the 10+ years its been sitting there, nothing (to my knowledge) has been done to create the park. The gold seems to have been extracted, and the rest is just sitting there breeding ticks.


https://www.cleveland.com/business/2010/12/oakwood_country_club_sold_to_c.html


The Acacia plot was turned over to Cleveland Metroparks. Could it one day be turned into a public course again? I guess it could, they haven't really changed a whole lot in terms of what used to be golf corridors. With a mandate for creative shared use, it would be packed considering the track record the Metroparks have had with the stewardship of their other golf courses they run. Or......it could just remain a park. Either way you look at it, the Acacia outcome was much better than Oakwood's.


I'm curious as to why you think "newer courses are more environmentally friendly" while older courses are "at best" an artificial facsimile of nature? Seems to me, construction technology at the beginning of the 20th century pretty much forced golf courses to stay much truer to the natural topography than many modern coursed did, or do. Modern or Classic, chemical inputs can be the same. When I think of an "artifical facsimile of nature" I think of something like Shadow Creek, not LACC.

[John Kavanaugh]

Tax formula should be (Total Yards - 6400) x Stimp/10.


Longer and faster pays the piper. Anything under 6400yds gets a tax credit. Greens stimping under 10 earns a credit. A tech rollback will soon follow. Taxes work.

[Alex Miller]

Great insights Matt - I know Malcolm Gladwell feels the same.


Quickly taking the example of LACC - no doubt the value of that land could be assessed at $2B, resulting in $40M tax/year. Similar could be said of other clubs but I would want to know the net effect when taking surrounding property values and taxes into account. Is there a $40M gap in public funding or would it actually be a $10M one? Or is there one at all? If the course could not sustain itself (and the question of whether LACC members in particular could afford an extra $100k per year aside) then what is the optimal path for a city?

While the tax breaks for the golf courses do seem substantial I would be curious at a larger scale what the effect on surrounding neighborhood property values and taxes is. I'm sure with NIMBYs in CA and the other issues that contribute to the housing crisis that this is a contributing factor in a vacuum, but personally I  understand that there are solutions out there from rezoning and multi-family homes rather than go for golf first (whether they can actually happen is perhaps another story). Also agree that advocating for rezoning options would be something for clubs to take up.

[Cal Carlisle]

Tax formula should be (Total Yards - 6400) x Stimp/10.


Longer and faster pays the piper. Anything under 6400yds gets a tax credit. Greens stimping under 10 earns a credit. A tech rollback will soon follow. Taxes work.

That made me laugh, John.

[Matt Schoolfield]

Great insights Matt - I know Malcolm Gladwell feels the same.

Unfortunately, I think Gladwell poisoned the well in his fairly flip arguments. He hates golf, I love it. He’d be more than happy to see these courses disappear. I’m bringing up these issue because I’m trying to find a way forward that preserves them.


I don’t harp on this topic because I think these courses shouldn’t exist, I bring it up because, without a good look in the mirror and some reevaluation by those in this community, I don’t think they will survive. My point here is people need to understand the level of tax breaks for urban golf courses, and understand that they aren’t written in stone.


When it gets to the point that the electorate is ready to take obscure tax-exemptions away, the time for bargaining is long past. The best time to create a course that has something to offer to the community was when it was built, the second best time is now.

[Alex Miller]

https://www.theceshop.com/agent-essentials/blog/how-do-golf-courses-impact-the-value-of-a-residential-property


Google says 7% and up to 25-30% for homes on the golf course. Seems about right.


Some quick math of the surrounding neighborhood minus LACC (Beverly Glen to Rodeo and SM to Sunset) at the average price per square foot of Holmby Hills says there is some $25-$30B of Real Estate in the area. If it were to drop by 7% from LACC not being able to stay afloat (an example) then the city/state may end up losing out!


Now I'd agree that a number of urban clubs could afford an increase on the paltry tax rates, but I'd imagine that it may not be a risk worth taking for some very densely populated and expensive neighborhoods. If the club fails, the downside could certainly be greater than the upside.


The farm tax rate mentioned here is interesting, and I think there is probably a middle ground that would better serve everyone that is somewhere between where we are at today and taxing clubs at a rate which risks what is already being collected.

[Joe_Tucholski]

More pernicious is the 1978 CA Prop 13. California basically locks in property taxes at a rate below inflation at the time of purchase until the property is sold (it's a bit more complex, but that nuance is effectively irrelevant). This alone is a massive tax exemption to any corporation, as they do not ever die or need to sell the property.

My only problem with this is that golf clubs are being attacked when prop 13 is what should be attacked.  If policies allow it I try not to blame individuals/organizations who follow the rules. 

[Matt Schoolfield]

I'll try to respond to some more folks if this thread is continuing (totally understand if people aren't having it).

Jeff: Mariners Point was under threat as recently 2021 for housing. I don't know if your objections to the land use change are as rock-solid as they might appear. The housing mandates have cities scrambling to do anything they can to avoid changing their zoning.

Bruce: I don't mean to suggest that the state would turn LACC into housing, only that they could remove their exemptions. I honestly do not think the club could survive in it's current form if that were to happen. I also only use CA only to point to the levels of absurdity a state can get to. I certainly think exemptions for urban open space are in order, but my point is only that these exemptions can change. I think a reasonable balance is achievable, but I think if private courses were singled out on a ballot measure somehow, right now, I think it would win.

Kalen: I think a big issue is that the most prominent, celebrated clubs are the uber rich. This is a difficult political and unfair problem for the rest of the golf community to have to deal with, but here we are, celebrating LACC next month. ¯\_(ツ)_/¯

John H: I know the specific situation is extremely nuanced and complex, but the course I learned to play golf on, Lions in Austin, TX, is still slated to be redeveloped for (student) housing. The housing crisis is even affecting courses in high property tax states.

Cal: I'm talking about the types of changes that C&C did at Pinehurst #2. Switching from mostly non-native grasses to a mostly native landscape. We might not think of it as a major change, but the native fauna in the area probably do. Lord knows the endangered migratory butterflies prefer native milkweeds to wide Bermuda roughs.

John K: Ha!

Alex: Prop 13 applies to the adjacent houses as well, so even if property tax values plummeted, property tax revenues would mostly be unaffected. That said, I'm not saying that the club would be redeveloped, only that their tax exemptions might disappear.

Joe: I generally agree with you. The thing that is especially pernicious to Prop 13 is that it gets worst, and more inequitable, over time. When the damn breaks (and we've seen the cracks in the 2020 election). My concern is that when the it does break I think golf clubs will be the first thing to go, because of the dramatic inequity their excessively low rates symbolize to many. Even as a person who cares deeply about urban access to golf courses, I find the fact that LACC pays about $1000 (probably around $300,000) per year in property taxes is an affront reasonableness not reasonable for many. One can pay the taxes they owe, and do well by advocating they pay a more reasonable rate now, than arguing against an unreasonable one later.

---

San Geronimo, Sharp Park, Bennett Valley, Mariners Point, San Jose Muni, Los Lagos, Rancho del Pueblo, even the club I play at Gleneagles SF, all just in the bay area, have faced some form of redevelopment attempt, potential lease non-renewal, or other form of closing in the last decade (most in the last few years). Only one has shuttered, yes, but I'm not loving these trends.

Again, I hope I'm not being the absolute worst for talking about it. It's certainly a tough venue. I don't know if I'm more cassandra or chicken little, but I'm not sure what else I can do when it's already happening where I live. I think GCA is a place where I might reach the people with the power to change, or at least prepare, for what I presume will spread to other areas with housing shortages.