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Michael Koob's Columns
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Michael Koob
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Golf Course Restructuring Proposal
I’ve been meaning to call attention to a Madelia Golf Course restructuring proposal written by City Administrator Dan Madsen for some time. I believe it is of note because he sees the issues surrounding the golf course through clear eyes, without the bias that sometimes interferes with the judgement of long-time residents.
Note: This proposal was written during the fall of 2010, prior to the clubhouse roof colapse.
Madsen's Proposal:
Introduction
The Madelia Golf Course is a frequent topic of conversation and debate in our community. Supporters of the course believe it to be one of the crown jewels of our city and one of very few marketable amenities we have. Some citizens, however, are frustrated that substantial tax dollars are being used to support a recreation they take no part in. Some perceive the course as the playground of the few, paid for by the many.
Over the past two years the City Council and the Golf Board have wrestled with these competing views and have attempted to define a clear policy or objective regarding the golf course. Ultimately, the City Council will need to determine what their priorities are regarding the future of the course. The recent floods, while providing a substantial source of concern, have also provided an unprecedented opportunity. We anticipate receiving funding from our insurance carriers and the Federal Government to rebuild or replace damaged buildings and contents throughout our golf and park system. While the amount of funding we will receive is unknown, it is reasonable to expect funding at or above the $200,000 mark prior to the beginning of the next golf season. I will note that we have already received a check from one insurance agency for just over $106,000.
In an effort to address the concerns of the community and take full advantage of the opportunity presented from the flood insurance proceeds, I have prepared the following thoughts as topics for conversation. I do not ask that the Golf Board or City Council take direct action based upon the following suggestions; I merely ask that the Golf Board and City Council consider and discuss these as potentially viable options – either independently or collectively – to resolve the problems facing the Golf Course and receive the most benefit possible from our golf course.
Golf Course Policy – profitability versus public amenity
One of the first areas in need of clarification is what the specific financial expectations are for the golf course. Is the golf course expected to generate enough revenues from operation to cover the expenses of operation? Or, is it acceptable to publicly finance financial deficits generated by the operation and maintenance of the course; and if so, to what extent?
While this may seem like an overly broad question to answer, the answer to the question will provide insight and direction into the repairs of the damages to the course and clubhouse; and will also frame the discussion for staffing levels, scheduling, marketing and procedures for the coming golf season.
Along those lines, a clear distinction of duties for golf and park employees should be established. I have met with Golf Course Superintendent Shawn Swenson numerous times over the past two years. In light of those conversations, there are two questions that immediately come to mind: What are the expectations of Shawn regarding the golf course, parks and pool; and, have we given him the tools necessary to succeed?
Do we expect Shawn to focus his time primarily on the appearance, maintenance and play of the golf course? Or, do we expect Shawn to focus his time primarily on generating profits for the course, selling tournaments, advertising and marketing the course? When we hire part-time staff, are we bringing in people who are skilled or trained in marketing, sales, advertising and publication? Or, are we bringing in people who focus on mowing, appearance and play of the golf course? These questions are not intended to be loaded questions. They are, however, questions which, once answered, will guide our overall direction regarding our golf course.
Problems and potential solutions
I have heard during budget time that the City Council is willing to accept some form of financial subsidy to support the golf course. I have also heard an expectation that the course will not exceed that amount of subsidy; which has been suggested to be $20,000 per year. If that approach is taken and the golf course had an incredibly bad year of revenues, the course would need to close early, lay off staff or otherwise account for the additional amount of deficit. This understanding should be discussed and made clear by the Council and the Board to avoid any future misunderstandings. It may also be beneficial to establish procedures to be taken in the event of such a deficit to avoid closing the course early.
I mention this subsidy issue because it directly relates to the opinions I have heard expressed by the public regarding tax dollars and the golf course. It also impacts our operations at the course and what our expectations are for management. In light of all of these, I provide the following suggestions as initial discussion points in an effort to guide the conversation and arrive at a workable understanding that will result in ultimate benefit for our course.
1) I suggest the City set expectations for the golf course that the revenues generated will cover all operating expenses. I feel this approach will satisfy the frustration about public financing of our golf course and will also satisfy those who wish to highlight the course as a tool for economic development, marketing, advertising and general overall enjoyment. I feel that the City could leave $20,000 in some form as a line item in case it takes a few years to balance the golf course budget; but that the budget should be balanced starting in 2011. If the Board and the Council ultimately determine that subsidizing the golf course in the amount of $20,000 - $40,000 a year is acceptable, the majority of the following suggestions would not be necessary.
2) In order to achieve this end, I suggest the following specific opportunities which I believe will increase revenues or decrease expenses sufficient to balance the golf course budget.
• I suggest we focus on generating business and revenues through greens fees, and not through memberships. According to the research provided by Shawn regarding 9 hole golf course fees from other courses in our area, our greens fees are equal to – or higher – than those other courses in our area. If we lower greens fees we will be in a better position to attract people from out of the area or local non-member golfers to visit our course. This should provide increased traffic at our course and should generate revenues from other sales beyond that which we currently experience. If marketed correctly, this decrease in greens fees rates should be easily paid off by increased traffic to our course. Any deficiency in this area would otherwise be easily covered by the increase in revenues generated from raising our membership fees.
• I suggest we raise the fees for memberships at our golf course. The comparison with all other 9 hole golf courses provided by Shawn show that we are around $250 to $300 below what every other course charges – across the board – for memberships. There will be some concern that members will not renew if we substantially raise membership rates. There will be other concerns that members are already not getting what they pay for with flooding and the occasionally abbreviated golf season. I would respond to those arguments by stating that each year for the last three years we have seen a steady decrease in members at the golf course. This could be from the economy, it could be from other courses offering better rates, or it could simply be from the condition or play of our course. I would add that we should create benefits – such as preferential tee times, members only tournaments and other special benefits – that would make being a member a privilege and worth the additional expense. I do not believe we can operate from a position of fear; that no one will sign up as members again. I also think those that do not will return after a year of non-renewal. Ultimately, those people who do not renew will pay greens fees to play our course which will generate revenues that way. The golf course had approximately 100 members last year – excluding punch cards and schools. An increase of $200 would generate an additional $20,000. It should be noted that the golf course is subsidized by approximately $30,000 each year in tax payer dollars. This raise in membership rates would satisfy the majority of the deficit in the golf course by its self.
I understand that this will not be a popular suggestion with many members at the course, including members on the City Council and the Golf Board. While you ultimately do not need to enact every – or any – suggestion I may make, I would not be doing my job if I did not identify areas which I believe could balance the golf budget.
• I suggest we greatly reduce the amount of memberships we offer and end the sale of punch cards. I think we have overcomplicated things at the golf course, and I do not see many – if any – other courses having that many different payment options or plans. I think we have created as many categories as we can to allow for the most equitable access to the course for our citizens, but I also think by doing this we have reduced a lot of areas of profitability.
• I suggest we enforce our posted rule prohibiting outside beverages on our golf course. I have spoken with Shawn and members of the golf board about this over the past year, and there is great resistance to this idea. I have heard that enforcement of this rule would have people golfing at other courses and that people would be frustrated. While I understand there will be some – maybe a lot of frustration, I question how many other courses allow outside beverages on their course. I also question why we have rules that we are not enforcing. Those who have come to know me understand my character flaw that if we have a rule or law, we need to follow it. If we don’t like it, we can change it. We cannot, however, simply ignore laws or rules we have established because they are inconvenient. Last year, the golf course brought in approximately $8,500 in revenues from beer sales. People were openly allowed to bring in their own beer. I expect that if we were to enforce this rule, we would substantially increase our profits.
There has been talk of adding a bar and serving strong beer. While I am not opposed to this idea I would strongly recommend we do not go this route if we are openly allowing people to bring in outside beverages to our clubhouse. If we strictly exclude outside beverages it may make some sense to move to strong beer and alcohol which could increase the sales of both and keep people at the course longer.
• I suggest we use whatever insurance money is necessary to repair and renovate the clubhouse, but that we do not completely remove and rebuild the clubhouse. Outside of tournaments, and possibly men’s league, I am unaware of any time the clubhouse fills up. I think we should look at making the clubhouse more comfortable – especially if we intend to sell alcohol or strong beer - to increase sales. I suggest we limit all other nonessential retail and structure the clubhouse such that one person can easily handle operations during any shift.
• I recommend we use whatever insurance money we can save to pay off the Textron lease on our mower. We are currently paying 4.6% interest, and have payments in 2011 and 2010 of approximately $9,300 each year. By paying off the lease early with insurance money, we would save $979.49. That is what they quoted as a savings when I spoke with them today. Paying this off in advance would also decrease our expenses next year and every year after by $9,300. That would bring us that much closer to balancing the golf course budget.
• I suggest the Board and Council work with Shawn to review the hiring procedures at the golf course and limit the number of staff hired. Labor expense is a large portion of the golf budget. Establishing a weekly and daily list of duties may assist in minimizing hours and limiting expenses at the course. I also suggest that the Board and Council specify what is expected of Shawn in terms of management, marketing and advertising, and course maintenance. If Shawn’s talents and time best lie with caretaking of the course, a part-time hire should be brought in to specialize in marketing, advertising and booking tournaments. My understanding is that no one is currently doing these things. If Shawn is expected to be doing these things, then we should work with Shawn to identify areas of strength and provide training to provide the tools for him to succeed in those areas.
Conclusion
This proposal is intended to provide potential solutions to various problems we face at the golf course, and also to start a discussion about where the course is and where we would like it to be. I am sure we will identify many more areas of opportunity for change to benefit the course. I also understand we may not want to enact the suggestions provided herein.
Again, the suggestions laid out above should balance the golf course budget for 2011 and eliminate the need for any tax dollars to subsidize the golf course. At its inception, the golf course was established as an enterprise fund – meaning it was expected to generate enough revenues to pay for operation of the course. As I understand it, the Auditors moved the golf course into the general fund after many years of failing to break even. While some of the above suggestions may not be popular, I do feel that these changes – and others yet to be identified – will bring the golf course out of the general fund and have the course generating a profit.
Michael Koob
PPI Publisher
publisher@prairiepublishingmn.com
More of Michael's blogs can be found in the Archives.
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