Florida Munis Lose Nearly $100 million over 5 years

[Cliff Hamm]

https://www.pnj.com/story/news/2018/04/19/florida-municipal-golf-courses-have-lost-nearly-100-m-over-past-five-years/530370002/

[Jon Wiggett]

Cliff,


thanks for posting this article. It was a very interesting read which showed to me the main reason for the losses being the feeling that the authorities want to spend their way into profit. Most perplexing in my opinion.


Jon

[Tom_Doak]

Once again, here is an article painting the picture in as bad a light as possible.


$100 million for how many courses? 


And that's the total for 5 years. 


And does that include the profits from courses that turned a profit, or are they taken out of the equation?


There is no doubt that many municipal facilities are badly run, and as the article says, some are just set up with the idea that they are a public amenity that doesn't necessarily pay for itself.  But this article makes it sound like all municipally-owned courses are in dire financial straits and need to be privatized now.

[Derek_Duncan]

Once again, here is an article painting the picture in as bad a light as possible.


$100 million for how many courses? 


And that's the total for 5 years. 


And does that include the profits from courses that turned a profit, or are they taken out of the equation?


There is no doubt that many municipal facilities are badly run, and as the article says, some are just set up with the idea that they are a public amenity that doesn't necessarily pay for itself.  But this article makes it sound like all municipally-owned courses are in dire financial straits and need to be privatized now.

Yes. There are many ways a municipal course can lose money -- mismanagement, high debt service, maintenance inefficiencies, upside down demographics, overall crappy product, etc. Without more details there's really not much to be learned from this article.

[Wade Whitehead]

How much did community swimming pools "lose?"

Tennis courts?

Parks and playgrounds?

Greenways?

Frisbee golf courses?

Soccer fields?

It's funny that municipal golf is supposed to turn a profit when localities spend money with zero return on so many other recreational facilities.

WW

[Tim_Cronin]

How much did community swimming pools "lose?"

Tennis courts?

Parks and playgrounds?

Greenways?

Frisbee golf courses?

Soccer fields?

It's funny that municipal golf is supposed to turn a profit when localities spend money with zero return on so many other recreational facilities.

WW

Often, park districts and elected officials look upon golf courses as a cash cow, since they bring in more revenue than pool fees, for instance, and think the course can help pay for other services. In many cases, it did work that way, and for years, but not today.

[Sean_A]

How much did community swimming pools "lose?"

Tennis courts?

Parks and playgrounds?

Greenways?

Frisbee golf courses?

Soccer fields?

It's funny that municipal golf is supposed to turn a profit when localities spend money with zero return on so many other recreational facilities.

WW

+1.  Why is it assumed or implied that a muni owned amenity is meant to generate a profit?  Since when is government "enterprise" a profit centre?  These questions get to the heart of the goverment's role in public and private life. I am not saying golf should be subsidized by tax-payer money, but it is interesting to know where the line of subsidy is for education, health care, physical and mental well being.  These are the age old questions that zero in on the relationship between capitalism and democracy.

Ciao

[Buck Wolter]

How much did community swimming pools "lose?"

Tennis courts?

Parks and playgrounds?

Greenways?

Frisbee golf courses?

Soccer fields?

It's funny that municipal golf is supposed to turn a profit when localities spend money with zero return on so many other recreational facilities.

WW

+1.  Why is it assumed or implied that a muni owned amenity is meant to generate a profit?  Since when is government "enterprise" a profit centre?  These questions get to the heart of the goverment's role in public and private life. I am not saying golf should be subsidized by tax-payer money, but it is interesting to know where the line of subsidy is for education, health care, physical and mental well being.  These are the age old questions that zero in on the relationship between capitalism and democracy.

Ciao

How many Municipalities know how to even compute a P&L? I'm guessing Golf Courses are handy places to dump other costs (pension costs)  and have lots of 'favors' to constituents dumped in as no-bid projects.

[Tommy Williamsen]

There is a larger issue. I live in and am on the board of directors of a little ski/golf resort. Skiing revenue is the cash cow. Without it the resort goes down. Golf loses are about $200,000 a year. Over that past five years we have lost about a million dollars. Non-golfing members are always irritated. Ten years ago golf broke even. Not now. We are always looking for ways to decrease costs and increase outside play, but it is tough in this market.

[Jim Nugent]

Tommy, what changed to go from breakeven a decade ago to big losses now? 

[Lou_Duran]

Tommy,

Explain to your fellow members that you are following the same model that USPS uses in its undisclosed relationship with Bezos and Amazon.  As long as you are more than covering variable costs in your golf operations and contributing to the resort's overall fixed costs, it makes sense in the short and near term.   Hopefully, your total annual budget is sufficient to cover capital reserves and improvements needed to remain viable as a going concern.  It may be useful to consider a scenario where the golf course is closed and its effect on overall revenues, expenses, and real estate prices.  If the golf course has some upsides, leasing it to a private company for a nominal amount might be an option.   

[Tommy Williamsen]

Tommy, what changed to go from breakeven a decade ago to big losses now?

The number of of rounds went from 22,000 to 15,000. It has remained at 15,000 for the last three years. There are a number of reasons for the fewer visits. The course remains in decent condition and we all realize that our home values are tied to the viability of the entire resort, including golf. We hired an outside firm to manage golf operations but it didn't make a difference. Membership remains strong but for most it is a weekend place, We are reluctant to raise dues for golfers but it may have to come to that. We end up in the black every year but skiers grumble.

[archie_struthers]

 




Here we go again , but surely we've been inured to governmental excess since we broached this subject many years ago here on GCA.  Millions and millions have been poured into many dubious ventures , with the response generally being let's have more of the same. Witness the phenomenon that was Bernie Sanders.


My thoughts remain as then , that municipal golf has a place , but it's for minimalist facilities that promote walking and not more governmental overreach .  Nine holes , carry your own is perfect !

[Dave Doxey]

Municipal accounting can make a course look profitable or like a money loser.  Depends upon how costs are measured and split with other municipal departments & accounts.    The only way to get a clear picture is to see what a private management firm will pay or charge the city to run the course.


There's also the question of a municipality being in the golf business.  If I owned a course, I'd not be happy competing with a municipal course that paid no taxes and was perhaps subsidized by the taxpayer.


Times are indeed tough. There's a local homeowners association that got a bankrupt 27-hole course for $1, yet cannot find a management company to run it on a $0 lease.


Having supply & demand market economics sort it out is the best answer.

[SB]

The headline was "$100M loss" then proceeded to say it was really $64.5.  That's quite a stretch to round up by 50%.

thanks for posting this article. It was a very interesting read which showed to me the main reason for the losses being the feeling that the authorities want to spend their way into profit. Most perplexing in my opinion.

I didn't see where that was the case.  It did mention a few cases where municipalities had recently invested in courses, but it didn't say if those investments had paid off or not.  Most muni courses do need capital investment.  Probably not millions and millions of dollars worth, but certainly hundreds of thousands, which is hard to come by for a city.  In some ways it's easier to get millions for a full renovation than it is to get a couple hundred grand to fix bunkers.  The excel spreadsheet looks a lot better if you project thousands of new rounds and a $10 jump in greens fee.

It may be useful to consider a scenario where the golf course is closed and its effect on overall revenues, expenses, and real estate prices.  If the golf course has some upsides, leasing it to a private company for a nominal amount might be an option.   

There's no question that homes around a closed golf course will significantly decline in value.  But that's not the municipality's problem, that's the homeowners.  I'm always surprised that homeowners refuse to support their club then seem surprised when the course closes. 


Leasing courses is pretty much dead.  American Golf is not doing any new deals, and the only other group doing it on a regional basis was Integrity, and they went out of business, and handed back all of their courses.  Even Atlanta put out an RFP to lease their courses and didn't get a single proposal.  Too much risk, not enough reward, and nobody wants to put up the money for the capex.

[Jon Wiggett]

SBusch,


if a course is losing a lot of money then I wonder how investing $10M+ on the clubhouse is going to make it profitable. It may increase the revenue but you have just saddled the facility with a serious amount of extra debt which it is not realistically going to be able to pay off.


That was my point but if you can explain in real terms how it will work I am all ears.


Jon

[Jeff_Brauer]

Jon,


NGF did a study on DFW public golf courses five years ago.  It showed (from memory, but close) 15 of 16 courses that renovated increased revenues, no word on profitability. I think they mentioned what is mentioned here, that the differences in how muni's finance and account for courses varies too much.


As you might expect, the courses that spent $4M and over to rebrand had the highest revenue gains, while the courses with more targeted renovations (often, greens resurface or green and tees only) for under $4M and

way less

revenue increases, but  had higher ROI.  In other words, it doesn't take a total remake to interest golfers again.  Better greens often does it.  And, duh, the less you spend (to a degree) the better, presuming you fix your most glaring problems.

[SB]

SBusch,


if a course is losing a lot of money then I wonder how investing $10M+ on the clubhouse is going to make it profitable. It may increase the revenue but you have just saddled the facility with a serious amount of extra debt which it is not realistically going to be able to pay off.


That was my point but if you can explain in real terms how it will work I am all ears.


Jon

Sorry if I was unclear, it doesn't work.  Lots of munis need about a million of investment, but Jeff Brauer is very handsome and persuasive and talks them into spending 10.   


There is no way a muni can justify a $10M investment of any kind, golf course, clubhouse or otherwise.  Oh wait, Bobby Jones here in Atlanta just spent 20M+ to shrink from 18 to 9 holes.  I'm sure that was a great idea.   

[Edward Glidewell]

There is no way a muni can justify a $10M investment of any kind, golf course, clubhouse or otherwise.  Oh wait, Bobby Jones here in Atlanta just spent 20M+ to shrink from 18 to 9 holes.  I'm sure that was a great idea.   

They definitely spent WAY too much, but I do think it's going to be a much better facility and probably create more revenue than it did in the past. The short course for juniors and especially the driving range should get quite a lot of use -- there are very few public driving ranges anywhere near the city.


I'm assuming a significant amount of that money went towards the new "architecturally significant" clubhouse with a hall of fame and offices for the GSGA etc., but I haven't seen a cost breakdown. All of that is very unnecessary.

[Mike_Young]

SBusch,


if a course is losing a lot of money then I wonder how investing $10M+ on the clubhouse is going to make it profitable. It may increase the revenue but you have just saddled the facility with a serious amount of extra debt which it is not realistically going to be able to pay off.


That was my point but if you can explain in real terms how it will work I am all ears.


Jon

Sorry if I was unclear, it doesn't work.  Lots of munis need about a million of investment, but Jeff Brauer is very handsome and persuasive and talks them into spending 10.   


There is no way a muni can justify a $10M investment of any kind, golf course, clubhouse or otherwise.  Oh wait, Bobby Jones here in Atlanta just spent 20M+ to shrink from 18 to 9 holes.  I'm sure that was a great idea.   

The ATL project is a classic example of an association which should be representing its membership decides it is something else and creates a "golf house", new 9 hole"reversible" and a new practice area.  All will be good but the money would have been better spent helping their member clubs promote golf.  However that does not garner the hype the people in charge look for.  And now the same golf car companies and equipment companies are being asked to basically "donate" equipment etc so they can compete with their members at a rate higher than most of them can charge....it's a fiasco...Coca Cola, a Family foundation and possibly even ANGC donated up to 20 mill for this....glad they could donate but why not give it to promoting golf and not offices for the associations who would not exist without the  courses that are their own membership....GSGA has over twice the employees of surrounding states and their magazine has over 12 pages last month promoting golf outside of the state....explain that one...

[Jon Wiggett]

Thanks for the answers gentlemen. It was what I thought.