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HomeMy WebLinkAboutIR 7690 INFORMAL REPORT TO CITY COUNCIL MEMBERS No. 7690 op", OR? To the Mayor and Members of the City Council March 2, 1993 0 Subject: GOLF FX17"RISE PROGRAM - MANAGEMENT 1#7 5 ALTERNATIVES Background On October 6, 1992, staff presented a comprehensive review of the golf enterprise program as requested by the City Council. The purpose of this review was to determine the feasibility of leasing one or all of the three (3) remaining golf courses operated by the City. Currently, two(2)courses, Rockwood and Z. Boaz, are operated by private management companies. Meadowbrook, Pecan Valley and Sycamore remain under City management. The October report concluded that the golf program fund is solvent, including a reasonable capital improvement program and retention of a 10% reserve fund. In addition, that profitability can be achieved by further leasing; however, some restrictions and/or exceptions to leasing were determined including: 1. Pecan Valley - Corps of Engineers requirement that all profits must be expended on the Benbrook Lake Project within five (5) years. op►. 2. Equipment subsidy - A total of $745,000 can be expected if management contracts were entered into for the three (3) courses or, if not, a lessening if base fee payments and/or capital improvements to the City could be expected. 3. Golf fees adjustments - To allow for profitable operation by the privates, scheduled fee increases are necessary. To do so raises the question of affordability and accessibility for citizen golfers. Also, given the same level of increases,the Golf Enterprise Fund can meet or exceed the performance of the privates. 4. Non-disposable costs - Senior and junior fee subsidies and debt service on the Sycamore Golf Course would lessen the impact of any additional revenues generated by leasing by a total of$251,000 per year and administration costs would add $307,282 per year. 5. Reserve resources/competition - Leasing of the 3 remaining courses would eliminate the competition model and the alternate resources necessary to operate a course and protect the infrastructure in the event of a default. Based upon the above findings, staff recommended that no further leasing occur. op", OFFICIAL RECORD CffY SECRETARY FT. WORTH, TEX. L ISSUED BY THE CITY MANAGER E*@ 9, TEXAS e INFORMAL REPORT TO CITY COUNCIL MEMBERS No. 7690 µtTPP 4Q440Ar,� To the Mayor and Members of the City Council March 2, 1993 �.4 Page 2 of 7 axP Subject: GOLF ENTERPRISE PROGRAM - MANAGEMENT 1079 ALTERNATIVES Operatins and Funding History A.) Since 1982, the golf program has operated as an enterprise fund. In 1990, Rockwood and Z. Boaz were leased to International Golf of Texas, Inc. and the American Golf Corporation,respectively. The following provides a performance summary of the five (5) courses from Fiscal Year 1987-88 through 1991-92. PECAN VALLEY 87-88 88-89 89-90 90-91 91-82 Revenues $1,441,616 $1,516,551 $1,453,714 $1,588,514 $1,679,047 Expenditures $988,657 $1,141,675 $1,301,578 $1,226,358 $1,138,476 Net $4552,959 $374,876 $152,136 $362,156 $540,071 Rounds 114,428 102,852 101,725 105,089 110,782 MEADOWBROOB Revenues $784,904 $939,376 $862,308 824,944 866,302 Expenditures 578,904 719,898 863,905 628,429 691,282 Net 206,000 219,478 (1,597) 196,515 175,020 Rounds 65,197 1 69,818J 59,188 55,068 53,595 SYCAMORE Revenues $79,844 $65,905 $101,895 $118,235 $51,303 Expenditures $112,061 $129,483 $186,290 $196,682 $338,074 Net $(32,217) $(63,578) $(84,395) $(78,447) $(286,771) Rounds 10,936 10,352 16,019 17,063 7,247* * Closed for renovation. ----- OFFICIAL RECORD 011"Ph, CITY SECRETARY FT. WORTH, TEX. ISSUED BY THE CITY MANAGER FORT WORTH, TEXAS INFORMAL REPORT TO CITY COUNCIL MEMBERS No. 7690 w,.P T t qf0 006 ��tFOrer� To the Mayor and Members of the City Council t4arch 2, 1993 p .~ 7a Page S of 7 v s T{x"y Subject: GULF ENTERPRISE PROGRAM -MANAGEMENT +f 73 ALTERNATIVES ROCKWOOD 87-88 88-89 89-90 90-91 91-92 (10 Months) Revenues $999,005 $993,440 $720,126 $250,000 $275,000 Expenditures $604,020 $701,676 $603,401 -0- -0- Net $394,985 $291,764 $116,725 $262,002 $275,000 Rounds 82,552 62,818 50,049 Z. BOAZ 87-88 88-89 89-90 90-91 91-92 (7 Months) Revenues $620,489 $622,697 $426,507 $150,000 $150,000 Expenditures $495,901 $612,915 $414,022 $-0- $-0- Net $124,588 $9,782 $(7,515) $150,000 $160,973 Rounds 52,341 43,378 25,896 B.) Capital Improvement expenditures for this same period are as follows: 1987-88: $80,585 including cart trails, HVAC, management study and turf equipment. 1988-89: $494,373 including renovation of sand traps, architectural services, general site improvements and turf equipment. 1989-90: $564,994 including water and sewer installation, micro-computer equipment, irrigation installation, building improvements, landscaping and turf equipment. 1990-91: $502,452 including engineering and architectural services, cart trails and turf equipment. 1991-92: $490,126 including construction of Sycamore Creek (debt service) and 0011, renovation of Meadowbrook Pro Shop. OFFICIAL RECORD CIZY SECRETARY ISSUED BY THE CITY MANAGER WHT4 JS -- INFORMAL REPORT TO CITY COUNCIL MEMBERS No. 7690 OW To the Mayor and Members of the City Council March 2, 1993 Page 4 of 7 C, Subject: GOLF ENTERPRISE PROGRAM - MANAGEMENT ALTERNATIWS Issues During the October 6, 1992 briefing, the City Council raised a number of questions and requested that staff conduct further research. Staff findings accompany each of the questions posed by the City Council. 1. The City should appeal the ruling of the Corps of Engineers which restricts the expenditure of profits at Pecan Valley to the Benbrook Lake Project. In response to a request made by the City Council Privatization Committee in February 1992, a request was submitted to the Corps of Engineers on March 19, 1992 and denied. On October 21, 1992, an appeal was made and the original disposition by the Corps of Engineers was upheld on December 15, 1992. 2. Should the Corps of Engineers uphold its position restricting expenditure of profits from Pecan Valley to the Benbrook Project, what improvements could be conducted and at what cost? 00W Based upon the assumption that lease fees would generate$10,000 per hole per year at Pecan Valley, the initial guaranteed minimum payment would be $360,000 per year. Presuming escalation of payments at $50,000 Every two (2)years for an eight (8)year period, a total of 3.5 million dollars in revenues could be realized. Less City expenses for contract administration and senior/junior fee subsidy, the total projected net profit for eight (8) years is estimated at $2.4 million. Given this amount, the following improvements could be conducted: Pecan Valley Park - Infrastructure, shelters, landscaping for a total of$868,000. Longhorn Park - Infrastructure, shelters, boat ramps for a total of$335,000. Rocky Creek Park - Phase I -Infrastructure, play areas, shelters, landscaping for a total of$1,050,000 Rock Creek Park - Phase II - Athletic Facilities for a total of$276,500 Funding for operational costs should be deducted from the net profits to underwrite maintenance of the improvements; however, with the five (5) year limitation for expenditure of the net profits, this "endowment" fund could only be guaranteed for the period for which retention of profits is allowed. OFRCW RECORD CM SECRETARY L ISSUED BY THE CITY MANAGER ARlwow w Rf 2t _#g_p"-!9---0�S INFORMAL REPORT TO CITY COUNCIL MEMBERS No. 7690 000, To the Mayor and Members of the City Council March 2, 1993 Page 5 of 7 Subject: GOLF ENTERPRISE PROGRAM - MANAGEMENT ALTERNATIVES 3. Did Rockwood and Z. Boaz realize a profit or operate at a deficit when operated by the City? During the last three full years of operation (FY 86-87 through 88-89) by the City, Z. Boaz posted an average profit in the amount of $72,703 and Rockwood posted an average profit of$336,019. 4. What is the Park Board's position on leasing? This item was presented to the Park Board on September 15, 1992. It was the consensus of the Board that no action would be taken on this issue given the fact that it was the Board's understanding that this issue would be decided upon at the City Council level. 5. The proformas, report and assumptions made by staff should be sent to the privates requesting their comment. On November 10, 1992, a Request for Interest (RFI) was sent to eleven (11) golf operating companies specializing in municipal golf course operation. The RFI included a thirteen (13) item questionnaire relating to assumptions made by staff, description of facilities, eight (8) year financial and operational history, the briefing packet presented to the City Council in October and related supporting detail. A total of ten (10) companies responded to the RFI with seven (7) completing the questionnaire. Based on the responses to the questionnaire, the following was verified: 1. Estimated guaranteed minimum per hole per year.- City Assumption Survey Response $10,000 $9,053 2. Base term of contract/option term 8 years 11 years/6 years 3. What type system preferred for adjusting fees? OFIR-CIAL RECORO Alternate method to current Built in CITY r SECRITARY City Council request F I L WORTH, TEX, L ISSUED BY THE CITY MANAGER FORT WORTH, TEXAS INFORMAL REPORT TO CITY COUNCIL MEMBERS No. 7690 To the Mayor and Members of the City Council March 2, 1993. us Page 6 of 7 Subject: GOLF ENTERPRISE PROGRAM - MANAGEMENT #0 i3 ALTERNATIVES 4. What percentage preferred annually? 5% Consumer Price Index 5. Would proposal include assuming current City fleet? Yes Yes 6. Would you consider no fleet assumption? If so, would this impact your bid? Yes; Decrease guaranteed payments Yes; decrease payments or CIP 7. What Is the estimated dollar level of CEP/18 holes? $250,000 $167,876; negotiable 8. What is estimated dollar level on gross percentage of CIP in subsequent years? 5% of green fees per year 5%/Negotiable 9. Would a signing bonus be Included? If so, what would be the estimated amount/18 holes? None Negotiable 10. Would a signing bonus affect CIP or guaranteed minimum per year? Decrease payments Some impact on annual payments, CIP or fee schedule increases. 11. What types of programs would you offer to promote Junior Golf in the City of Fort Worth? Limited programs All would provide some level of programming. OFFICIAL RECORD C ITY SECRETARY F T. WORTH, TEX. -ISSUED BY THE CITY MANAGER FORT WORTH, TEXAS ~ INFORMAL REPORT TO CITY COUNCIL MEMBERS No. 7690 A SUP To the Mayor and Members of the City Council March 2, 1993 Page 7 of 7 Subject: GOLF ENTERPRISE PROGRAM - MANAGEMENT ALTERNATIVES 12. Would you encourage home course clubs? Yes All would promote home course golf 13. Would you assume responsibility for funding mandated Environmental Protection Agency and Americans with Disabilities Act Improvements? How would this impact your proposal? Yes, would impact guaranteed minimums Those responding "yes" would reduce and/or capital improvements annual CIP to fund improvements. Two responded "no" to EPA Conclusions ,ow Based upon the above findings, it can be concluded that leasing additional courses could be more profitable than City operation if the Enterprise Fund maintained its policy of recommending fee adjustments on an operational need basis only. However, if adjustments were made in line with the CPI or a predetermined incremental percentage, the profitability differential would be eliminated and additional capital improvements would be realized. Attached is a list of pros and cons regarding leasing which provide an additional basis of comparison. Issues regarding affordability, flexibility, etc. are noted and remain as policy issues which should be considered in determining the benefits of leasing versus non-leasing. Recommendation It is recommended that no additional leasing of golf courses occur given the findings of this OFFICIA1 REC]DRO o Terrell CITY SECRETARY 001& /City Manager X I LFT. WORTH, TEX. LISSUED BY THE CITY MANAGER FORT WORTH, TEXAS OBSERVATIONS PROS CONS CLEAR PERFORMANCE REQUIREMENTS REDUCED CONTROL CONTRACT MANAGEMENT PROFITABLE RETAIN COMPETITIVE MODEL OVER 50% PRIVATIZED STAFF EXPERTISE EXISTING STAFF EXPERTISE AND STABILITY _ FLEXIBILITY OF STAFFING CUSTOMER SERVICE IMPACT AFFIRMATIVE ACTION PROFIT MOTIVE IMPACT ON PUBLIC SERVICE (FEE INCREASE) CONTRACT FINANCING CONSISTANT FINANCIAL STABILITY RELIEVES ADMINISTRATION DEMANDS CONTRACT COMPLIANCE DEMANDS CAPITAL IMPROVEMENTS LEASE RESTRICTIONS BY COE QUALITY CONTROL SINGLE MISSION SPECIAL INTEREST POSITION EQUIPMENT SAVINGS $745,958 EQUIPMENT SUBSIDY REDUCTION IN STAFFING ALTERNATIVE RESOURCES TO ADDRESS DEFAULT OFFICIAL RECORD 000* CITY �CRETARY FT. WORT#, TEX.