Chambers Bay in Trouble?

[Garland Bayley]

calm down richard, it looks like you're personally defending BHO,, he can take care of himself..

and please don't try to speak for 1500 gca.com folks

...

So Steve, you're saying you want to turn this into a political "discussion" group?
Richard can speak for me in saying the political comments are out of line here.

[Brent Carlson]

Richard,

When I have been at Chambers the course has not been crowded.

The real question in - how do they increase revenue? 

Is it lowering the green fee?  Better advertising?  Memberships? etc. 

I would say that the course has helped Tacoma.  Just look at all the people at the park and walking / jogging on the east side.

[Jim Nugent]

Tom Doak,

Who owns Chambers Bay ?

Who operates Champbers Bay ?

Is a default or Chapter 11 an option ?

Patrick, CB is a true muni, owned by the Pierce County. It won't default because the county will cover the debt until the US Open payment is made. I was really wondering whether or not this is due to an inherently bad operational model or something else.

Maybe I'm simplistic, but it sounds pretty simple.  They paid top dollar at the height of an economic boom.  They made boom-like projections.  Now the boom is over, and their projections are not coming true.  Thousands less rounds are played than expected.  Maybe up to 10,000 less this year.  Average greens fee is lower, and so are the peripheral sales. 

Unless the economy bounces back, things may not improve.  If the economy gets worse, so could CB's revenues. 

What sort of financial shape is Pierce County in now? 

[cary lichtenstein]

Forget about the political comments, I'll refrain from them in the future, you guys are right, this is not the forum for that type of discussion..

My point is that massive debt kills any development, whether it be a golf course, condo, hotel, office building, shopping center, etc.

I think this is one of the reasons that financing is so difficult to come by today. Banks are scared to death of optimistic pro formas.

Most probably, the only solution in the long term for these losses unfortunately is a Chapter 11 proceeding, that clear out the debt and creates a sustainable model for going forward in the future.

[Kalen Braley]

I would think the biggest outcries will come locally from the non-golfing crowd.  I'm sure the public education card will be played and who can blame them, if this course was in my backyard I'd question the move and loss of public monies as well that could have been spent otherwise in schools.

For those in the know, is it possible this project could have been done cheaper than the $20 mill or so that it cost?  I'm not trying to imply anything, just geninuly wondering.

Kalen

[Tim Gerrish]

Kalen,

Agree..  I'm trying to imagine if they didn't get the open.  How much of hte $20 million was for "non-golf"related expenses like remediation of the site? 

[Tiger_Bernhardt]

There is a lot more to this story than meets the eye. Water issues, remediation, green space, Tacoma's future, but let the Tacoma guys speak up for they know the whole story better than my post 50 mind. I  have forgotten most of it. I have enjoyed the pleasure of meeting all the political and golf industry guys involved and I would be shocked to see any of them throw this deal under the bus. This is a good story in a sea  of horrible public expenditures. Even Pebble and Bandon on the private are having bad years. By bad I mean significant,over 30%, reductions in play and cash flow.

[Lou_Duran]

Jim Plzzz you know enough about governemnt and finance to know that simply throwing a number in the air means little.  We have an all knowing friend and local from Tacoma who rightly or wrongly knows that the Am and Open as well as the positive buzz from CB has done for Tacoma. It has improved the quality of life in that area too. The park/green space component of the course is not figured into the math either. See what it costs a city to maintain a thousand acre park.

I am not sure that Tiger's "all knowing friend and local from Tacoma who rightly or wrongly knows that the Am and Open as well as the positive buzz from CB has done for Tacoma" is the same one as mine, but the one I am thinking of, the very knowlegeable Cos, had very strong reservations about the site and the massive cost of the project.  If memory serves, he made his views/concerns known to the politicos and was assured that they (the concerns) were unfounded.  I would welcome his informed comments on this not-so-new development.

The Reagan/Bush/Republican haters and dependents of Big Brother only wail when debt is incurred by their antagonists.  Cary is absolutely right about debt.  Its size and nature make all the difference in the world.  If it is small enough relative to production (or GDP) and fostering of economic activity (positive leverage), it can be a very good thing.

As his post indicates, Tiger is of the stripe that looks beyond financial results to justify public expenditures.  And who can argue against an improved quality of life and more green space?  Unfortunately, those intangible benefits, as subjective and difficult to quantify as they are, do have costs which are not.  The young family or elderly couple who may not play golf or particularly enjoy walking the rim of the property, probably representative of a no small majority, may have other priorities for the tax dollars (was there really a shortage of green space in Tacoma before CB?).

For someone who has commented so often about economic matters in excoriating the Right and justifying the Left, I must assume that Richard's question in starting this thread is mostly rhetorical.  It is really rather simple: it always comes down to revenue, expenses, and debt service;  miscalculate or misrepresent the first two, and the third one will always be a problem.

Wheter you are a private or a public investor, if you are the high cost producer, your level of risk is magnified.  If someone doesn't pull your product off the shelf in sufficient quantities and at a price where you can meet your costs and service your debt, you go out of business (at least until recently).  CB is a wonderful product in a market that has other lesser, but very acceptable substitues at much lower prices.  If it can't attract enough GCAers and tourists, it must price its product more competitively to make it feasible for the locals.  The USGA may be the wildcard.  Will the national exposure bring in more trade?  Given the direction of the country, I wouldn't bet the farm on it.   

       

[Richard Choi]

Lou and Cary, I think we can all agree that debt (most precisely, overleveraging) is indeed what kills many projects like this. Heck, that is the whole reason why entire Wall Steet went to hell in a hand basket.

The question I have now is this.

Do you believe hosting the US Am and US Open (and the related revenues from them) will be enough to make a big dent in the debt payment?

If not, what can they do to raise revenue? Will lowering the greens fee do it? It is not like they can have too much foot traffic with the delicate settings that they have.

Can a walking only golf course with fescue grass survive a $20 million debt?

[Tiger_Bernhardt]

Lou Cos can speak for himself when he choses. Yes, He has reservations but he also knows the story. The story is interesting and compelling, much like the Alabama golf trail story. That story changed Alabama in ways beyond anything we ever discuss on this site. Lou seriously this is not about politics. I would kill every public private partnership that I have been fortunate enough to know the details of. None and I mean none of them ever worked or will ever work. Unless work mean making a few people lots of money while telling everyone how the public will win big. Whether we like it or not it is the general will of the people is and always has been that a traditional government purpose is to provide public recreation and parks. I believe the vision and strength to carry something through of a few key people in Pierce County have help changed Tacoma and this was one part of it. Strength to carry something through is a rare quality in a public official. Especially when that means for the public good and does not involve making someone some money.

[Tiger_Bernhardt]

By the by the walking only and Fescue are legitimate long term issues. Kemper manages this course just like they do Bandon andnumerous others. The architectural team is there all the time. This is not a course that is being run by the county with no input from the outside world.

[Craig Van Egmond]

None of my former golfing buddies in the greater Seattle area have played Chambers Bay. They all cite the high cost and lack of carts, none of them are poor but some of them do have bad knees/backs etc.  None of them give a rats ass about architecture.

[Sean Leary]

None of my former golfing buddies in the greater Seattle area have played Chambers Bay. They all cite the high cost and lack of carts, none of them are poor but some of them do have bad knees/backs etc.  None of them give a rats ass about architecture.

I am not surprised Craig. It also has the reputation for being in poor condition, which isn't fair, but that is what Joe Q Golfer thinks...

[Dan Herrmann]

I visited Chambers Bay last month on a non-golf vacation.  I did the 4.5 mile trail that surrounds (and weaves into) the course, and spent about 20 minutes chatting with the folks in the pro shop. 

I was there on a cool and cloudy Tuesday, and the tee sheet was full for the day.  The shuttle vans from the pro shop to the practice area were running frequently.

Personally, I loved the place, and want them to succeed beyond their expectations.

Not related to the economics, but some observations:
- The area is great - the Puget Sound adds greatly to the experience
- There is more elevation change than suggested by photos
- I love the railroad traffic down between the Sound and the golf course.
- There are remnants of the old (cement?) plant along the south side of the golf course.  I love how they left them standing.
- The trail was very busy, even in 63F weather with no sun
- Hole #12 (I think) seems like a big time climb.  Take a walking stick
- The course still needs a little grow-in, which is A-OK with me (heck - it's NEW)
- Thank goodness they don't have faux Scotland crap there - attendants in plus-fours and beanies.  It's a classy operation (thanks, Kemper!)
- The course looks very natural.
- The bunkers have a dull grey color.
- The Tree is alive and well after it was attacked last year. 
- The Tree isn't even on the golf course - it's back between the golf course and the railroad tracks.
- There are a lot of blackberries on the trail - mmmm good!
- There are a lot of lavender plants on the trail.  Sure smells good.
- Chambers Bay is pretty darn tricky to get to.  I have no idea how they'll shuttle in fans for the US Open.  The transportation logistics may make Merion look like kids play.

I'll post some pictures soon - hopefully to give a sense of the place beyond what you've seen in magazines.

[Michael Dugger]

This little discussion about CB could probably suffice for hundreds of courses across the country currently.

Thankfully, we've got Cary and Lou to remind us how debt kills.  Thanks for the input guys!!!

[Tim Leahy]

Maybe they need to allow carts after 12 noon like I read that Kiawah Island does? Is this possible without cart paths? Does Kiawah have cart paths?

[Garland Bayley]

...
- Chambers Bay is pretty darn tricky to get to.  I have no idea how they'll shuttle in fans for the US Open.  The transportation logistics may make Merion look like kids play.
...

When the built the place they arranged with Amtrak for a temporary stop at the course (or maybe just south of the course where the "village' will be). I believe the plan is to run trains back and forth between Olympia and Seattle to haul in spectators.

[Sean Leary]

...
- Chambers Bay is pretty darn tricky to get to.  I have no idea how they'll shuttle in fans for the US Open.  The transportation logistics may make Merion look like kids play.
...

When the built the place they arranged with Amtrak for a temporary stop at the course (or maybe just south of the course where the "village' will be). I believe the plan is to run trains back and forth between Olympia and Seattle to haul in spectators.

Pebble Beach isn't easy to get people in and out of either....

[Tony Weiler]

Does the course get USGA revenue prior to the Open?  As the executive states, that will really help. 

[Jason McNamara]

Does the course get USGA revenue prior to the Open?  As the executive states, that will really help. 

You'd have to think they'd jump in early if necessary.  The USGA understandably wants (a) no discussion of the course's financial situation and (b) a great display of public golf.

[Richard Choi]

Here is a related question.

Does this mean that it is almost impossible build a new truly public course that is capable of hosting US Open anymore?

US Open needs to be fairly close to a major city. Any land around a metropolitan area is not going to be cheap and any course built on it will cost a bunch of money which means piling debt.

Unless you have a big sugar daddy (i.e. Kohler or Lang) who is willing to eat millions for a chance to host a US Open, is it possible to build a US Open ready course?

[Lou_Duran]

Lou and Cary, I think we can all agree that debt (most precisely, overleveraging) is indeed what kills many projects like this. Heck, that is the whole reason why entire Wall Steet went to hell in a hand basket.

The question I have now is this.

Do you believe hosting the US Am and US Open (and the related revenues from them) will be enough to make a big dent in the debt payment?

If not, what can they do to raise revenue? Will lowering the greens fee do it? It is not like they can have too much foot traffic with the delicate settings that they have.

Can a walking only golf course with fescue grass survive a $20 million debt?

I am not privy to the financing and the indentures.  If the USGA monies are for infrastructure and maintenance improvements to conduct its two events, then I don't think that the locals can use this largess for debt service.

I have no doubt that Kemper knows the business very well.  There is a real danger in discounting some green fees and cannabilizing the premium price rounds.  On the other hand, if it didn't have a $75 rate in the afternoon, I would not have played the course.   I know that the nearby Home course is much, much cheaper and the holes I played there before being rained out are very good.  I suspect that the number of rounds that CB can comfortably support from an agronomical standpoint is on the low side which makes aggressive pricing a non-starter.

I've only been to Tacoma a few times so any forecasts that I can make are suspect.  It seems that with access being difficult at best, the weather spotty (how many days does rain interrupt or cancel play?), and relatively low median household income, that a high green fee, relative low volume (# of rounds) operation won't do well.  Can the USGA's tournaments bring enough visitors to the course to make a difference?  I don't think so.  Does Sahalee earn a superior initiation fee and a full membership by virtue of the major professional tournaments it has hosted?  I don't think it does.

Perhaps Cos or someone with knowledge of the financing can opine on what might be done to reduce the debt load.  If CB offers the intangible benefits to the Tacoma area as Tiger suggests, perhaps they can off-load some of the debt to the general welfare and Parks & Rec sections of the budget.  Maybe some of the 2009 stimulus money being let loose in time for the 2010 elections can be procured to reduce the debt to manageable levels (I am assuming that the course can be operated to generate some NOI- net operating income, but if the greens continue to be a problem, that may not be the case).

This little discussion about CB could probably suffice for hundreds of courses across the country currently.

Thankfully, we've got Cary and Lou to remind us how debt kills.  Thanks for the input guys!!!

As with many generalities, particularly those made to ridicule, this one is off the mark in a very substantive way.  It is not debt that kills, but the people who use debt without fully understanding the consequences, or if they do, finding ways to transfer them (the bad consequences) to other parties.

In the case of a public official, the most that can happen is that he might not be re-elected.  If he is in the U.S. Congress, as Tiger explained over drinks one night, that outcome ain't too bad either: six and seven figure salaries for partime work lobbying his former colleagues.  And if he is a career bureaucrat, a half-sized (budget) quasi-CB was built by a city in a Texas with similar financial results and the city employee who headed the project was promoted to director.  Who was it that said there is no money in government service?

The shareholders of AIG, GM, Chrysler, Lehman Bros, etc. have had quite a different experience with improper levels and types of debt.  As with the private owners of those courses referred to by "This little discussion about CB could probably suffice for hundreds of courses across the country currently" (whatever that mearns), these folks are just wiped-out.

[Garland Bayley]

Lou,

At my home course with similar, but slightly colder, weather than Chambers Bay, we might average less than a week of unplayable course conditions per year, and perhaps 14 days of frost delayed start. And, we are not sand based like Chambers Bay is. The die hards can play Chambers Bay almost any day of the year.

[Garland Bayley]

Here is a related question.

Does this mean that it is almost impossible build a new truly public course that is capable of hosting US Open anymore?
...

If the public owns the land, and it is very suitable for golf, then it could easily be done.
Chambers Bay cost so much, because they did so much "remediation". As I recall, they removed almost all the soil from the surface, hauled it to an onsite location where they screened out all the undesirable stuff, and returned it to the course.

Portland has the largest public park in the US. Presumably if they found a portion that would make a good golf course, they could bring in a minimalist and create a possible US Open site for 1/10 of the cost of Chambers Bay. More likely though the environmentalists would manange to prevent them from doing it. It is in Oregon after all.

[Tim Leahy]

Here is a related question.

Does this mean that it is almost impossible build a new truly public course that is capable of hosting US Open anymore?

US Open needs to be fairly close to a major city. Any land around a metropolitan area is not going to be cheap and any course built on it will cost a bunch of money which means piling debt.

Unless you have a big sugar daddy (i.e. Kohler or Lang) who is willing to eat millions for a chance to host a US Open, is it possible to build a US Open ready course?

I really think the course would be booming if it allowed carts. Carts are a huge money maker for the club.