The Oro Valley Town Council held a rare study session to discuss the conclusions of the $50,000 study they contracted from the National Golf Federation and the WLB Group. The purpose of the study was to recommend options to consider regarding the horrendous decision to purchase the 45 holes of golf from HSL.
The promise from the Mayor and the Council majority, was that the increased sales tax revenues were to cover all expenses, including capital improvements. However, this investment has cost the people of Oro Valley about $7 million, so far.
The National Golf Foundation (NGF) Study found:
(1) “The overriding trends in the golf industry will present challenges to the Town of Oro Valley in continuing golf course operations. The total number of “core” golfers is declining and total spending on golf is declining along with them… NGF has also documented rapid inflation in expenses to operate golf facilities in this market, especially related to the cost of water for irrigation.” (Page 24)
(2) “The City of Tucson’s public golf courses are down 25% in rounds and 19% in revenue since 2008, and other public golf courses report similar reductions… Hotel facilities are an important factor for feeding golfers to the ECGT [El Con Golf and Tennis] and ECGT will have to do more to accommodate hotel operators in the hopes of attracting a greater share of play.” (Page 24)
(3) “As a whole, the ECGT and Pusch Ridge golf facilities combined to produce total top-line revenue of just over $2.9 million in 2016, the vast majority of which comes from golf fees, member dues and Food and Beverage sales. The on-site operating expenses at the facility totaled around $5.2 million…resulting in a roughly (-$2.3 million) loss on operations (excluding other necessary costs such as capital upgrades and new investment in infrastructure). (Page 25)
(4) “The Current financial condition is worse than most public sector golf operations in the U.S, where 67% of municipal golf course operations are able to cover on-site expenses, but not able to cover both on-site expenses and capital improvement costs (only about 33% can cover both).” (Page 25)
The Study provides three options to the Town outside of completely closing the entire golf operation. I will focus on Option B and the Pusch Ridge conversion since this option is what the study recommends: “…the NGF sees a 27-hole facility at El Con Golf and a modified par-3 golf course (possibly 12 holes) at Pusch Ridge as a much better option for Oro Valley to provide a more sustainable golf facility for the longer term going forward.”
I expect that the Mayor and Council will go along with this since they never think for themselves and they will simply say, “We paid for this study so we should follow the recommendations.”
Option B:
- This involves a reconfiguration of the 36 holes at the Conquistador and Canada Courses. This would be reduced to 27 holes (three 9-hole courses). The cost of this modification is estimated to be $4,639,115 (Page 102)
- All the holes south of Lambert would be removed causing a shock to the residents of “The Villages HOA” as they will now be totally responsible for the future of this acreage.
Pusch Ridge:
- The cost to convert the 9-hole Pusch Ridge course to a 12-hole, par-3 course, called the “Dirty Dozen,” is estimated to be $3,013,120. (Page 109)
- The study mentions how the Pusch Ridge conversion would be an enhancement for the Hilton El Conquistador Resort. Do you think Humberto Lopez/HSL Properties is going to participate in the cost of this conversion?
The study states that:
“HSL has indicated strong enthusiasm for the Dirty Dozen concept as a way to transform the existing course into something the resort can leverage as a must-play golf experience that will take less time, provide a truly unique one-of-a-kind golf experience in the region, and will fit a model where less resources and turf coverage are required to sustain the golf operation.” (Page 64)
Double Trouble?
With these two options in place, after spending $7,652,235, the study predicts that after another 5 years, the facility will still lose $1,050,600. (Page 81). Although this loss will be offset by the $2,000,000+ in sales tax, keep in mind that there is NO discussion about the Community Center, other than the recommendation to contract the food and beverage operation. This is important to note because there will still be costs for continued capital improvements to the Community Center.
If these options are approved, despite spending $7 million in conversion expenses (and unknown expenses in upgrading and maintaining the Community Center) there is still no prediction of breaking even after 5 more years. (From the 5-year projections chart on Page 81).
How about a Going-out-of-Business Sale?
The report states that closing the entire golf operation will cost $80,000 to eliminate the Pusch Ridge course (Page 68), and about $3 million to close the remaining 36 holes (Page 67). In other words, by spending about $3.1 million, the Town can be out of the golf business. There would be a drastic reduction in employee costs, no need for cart leases, no more management fees, and utility expenses would be dramatically reduced.
The Town would still water, fertilize, and maintain the acreage in the summer, or they could just let the property return to its natural state. The $2+ million in sales tax revenue would more than cover this and the surplus dollars can go to improving the Community Center.
What do you think the odds are that this 7-member congregation will consider something reasonable, like cutting the Town’s losses (your losses) and moving on?