Loveland City Council Study Session August 8, Golf Enterprise Fund Discussion

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1 Loveland City Council Study Session August 8, 2017 Golf Enterprise Fund Discussion 1

2 Question to address with City Council Will City Council support eliminating PILT (a 3% revenue fee) charged to the Golf Division to protect course maintenance and address future capital needs? 2

3 Agenda Section 1 - Background Information Section 2 - Supply and Demand at the City Courses Section 3 - Golf Advisory Board Recommendation Section 4 - Clubhouse Options as an Unfunded Capital Need Section 5 - Questions 3

4 Section 1 Background Information 4

5 What has Changed Current Dilemma External Forces 2-Year Budget Impact 2017 & 2018 State Mandated Increase to the Minimum Wage 2016 ($8.31) ($10.20) a 22.7% Increase Golf Division Impact (Conservatively used 12% for calculation) $75,820 Internal Transfers Increase total $188,414 to 2018 budget of $262,847 $74,433 Facilities Maint. $156,128, HR $23,168, Finance $36,686, City Clerk $9,601, City Manager $4,870, IT $32,394 Expense Increase from the Colorado Minimum Wage Law and Internal Transfers $150,253 5

6 Seasonal Labor in the Golf Division in 2016 was $631, % Increase 8.8% Increase 6

7 Golf is a capital intensive industry Maintain Aging Infrastructure 2018 Mariana Parking Lot Walkway

8 Mariana Putting Green Location 2022 Mariana Pump Station Olde Course Bunker Renovation

9 10-year planning in the Golf Division Includes life cycles of all assets Realistic forecasting of revenue and expenses 9

10 Clubhouse at The Olde Course Clubhouse constructed in 1965 Pro shop addition in 1973 Patio expansion in 1981 New roof and 2 nd patio extension in 1993 Replacement Currently Unfunded 10

11 How do our facilities compare At The Olde Course? 11

12 Maintenance Building at The Olde Course 12

13 Irrigation Water for Mariana Butte Mariana Butte opened in 1992 Firm Raw Water Yield Needed 330 acre feet Current acre feet owned 0 Renting excess water from Water and Power 13

14 Section 2 Supply and Demand at the City Golf Courses 14

15 Regional Rounds Played 18 holes Golf Course 18 Hole Rounds Played The Olde Course 37,856 Mariana Butte 33,458 Collindale (Fort Collins) 31,063 Ute Creek (Longmont) 30,506 Southridge (Fort Collins) 29,895 Boomerang (Greeley) 23,619 Highland Hills (Greeley) 23,398 We are not trying to fix this problem! 15

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17 Annual 9 and 18 Hole Rounds Played Analysis The Olde Course Mariana Butte Cattail Creek SNAG 17

18 Changing Supply - New Competition in 2018 TPC - Tournament Players Course Destination golf course Licensed as a TPC course; part of a chain of public or private courses licensed or operated by the PGA tour 18

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21 Rounds Played Forecast with New TPC Course in Berthoud 21

22 Options for Increasing Revenue per Round? Increase 3 course and 2 course annual pass fees. Demand drop of $24,132 in 2017 Prime Time annual pass user fees and daily green fees were introduced in Fee increase of $3, results to be determined. Consider increasing daily green fees. When benchmarked with other municipalities in Northern Colorado Current greens fees and cart fees are at the top of benchmarked courses. Loveland does not offer senior fees at OC or MB like most of our competitors. Fee increases would likely result in fewer rounds played. 22

23 Options for Increasing Revenue per Round? Increase 3 course and 2 course annual pass fees. Demand drop of $24,132 in 2017 Prime Time annual pass user fees and daily green fees were introduced in Fee increase of $3, results to be determined. Consider increasing daily green fees. When benchmarked with other municipalities in Northern Colorado Current greens fees and cart fees are at the top of benchmarked courses. Loveland does not offer senior fees at OC or MB like most of our competitors. Fee increases would likely result in fewer rounds played. 23

24 NoCo Fee Benchmarking Course/Fee Type 9 Holes Green Fee with Cart 18 Holes Green Fee with Cart Mariana Butte - Loveland Weekday $33 $60 Weekend $34 $62 The Olde Course - Loveland Weekday $29 $50 Weekend $30 $52 Collindale Fort Collins Weekday $29 $50 Weekend $31 $53 Southridge Fort Collins Weekday $29 $50 Weekend $31 $53 Ute Creek - Longmont Weekday $33 $54 Weekend $40 $59 24

25 Section 3 Golf Advisory Board Recommendation 25

26 NOCO Survey of Municipal Golf Courses Enterprise Funds Loveland (3 courses) Fort Collins (3 courses) Longmont (3 courses) Greeley (2 courses) Does Golf Division Pay a PILT Fee or Rent to the City? YES Approx. $120,000 NO NO NO Fees for Internal Services $262,847 $218,664 $139,334 $27,425 $382,847 26

27 NOCO Survey of Municipal Golf Courses Enterprise Funds Loveland (3 courses) Fort Collins (3 courses) Longmont (3 courses) Greeley (2 courses) Does Golf Division Pay a PILT Fee or Rent to the City? YES Approx. $120,000 NO NO NO Fees for Internal Services $262,847 $218,664 $139,334 $27,425 $382,847 Protect Our Assets! Protect Our Golf Courses! 27

28 Golf Advisory Board Recommendation Eliminate PILT Payments Approximately $120,000 annually Golf to supply 100% of funds to cover operating expenses Golf to cover capital expenses and improvements 28

29 Section 4 Clubhouse Rebuild/Remodel Options One of the Unfunded Needs 29

30 Little clubhouses at public golf courses lose a little amount of money Big clubhouses at public golf courses lose a bigger amount of money Golf Profit Centers Golf Profit Centers Break Even Point Break Even Point Golf Cart Clubhouse Golf Cart Clubhouse 30

31 3 Clubhouse Options at The Olde Course 1. Replace flat roof, air conditioning, upgrade electrical approximately $250, Install higher ceiling, add (2) 12x16 storage rooms, air conditioning, new covered patio approximately $850, Complete demo and new construction of 4,200 sq. ft. clubhouse approximately $2.25 million 31

32 The Elimination of PILT Will Help to Cover the Needs of the Golf Division 32

33 The Elimination of PILT Will Help to Cover the Needs of the Golf Division Greens daily mowed at.115 inches 70 Acres of Fairways that are well maintained 10 Acres of Tees 145 Acres of maintained Rough 95 Sand Traps Well Functioning Irrigation System Equipment to maintain the course Staff to provide market leading playing conditions 33

34 Golf Division Recommendation Eliminate PILT 2017 Use golf revenue to support the NEEDS Measure the financial impacts of the increased Supply of Courses in NOCO and State Minimum Wage Currently Impact on rounds played and price is unknown. Impact of change in Minimum Wage can be predicted Design Clubhouse at OC or remodel based on known impacts 2020 Impact of State Minimum Wage Law and Impact of new TPC in Berthoud will be measurable Additional Funding may be required to construct buildings 34

35 Questions? 35

36 Supplemental Information

37 PILT Payment In Lieu of Tax 1982 Golf became an Enterprise Fund PILT was added to Golf Division 1995 PILT was eliminated City Council determined that the golf enterprise was not subject to PILT due to the recreational nature of the operation and that the fund was exclusively funded by volunteer users 2002 Golf advisory Board Chairperson, on behalf of the GAB, submits letter of strong opposition to the proposal to reinstate PILT 2003 Council reinstates a 3% PILT transfer for Golf Ent. Fund (Citywide budget shortfall) 2011 Golf PILT fees reviewed and continued 2017 Golf Advisory Board unanimously approves recommendation to City Council to eliminate PILT to ensure funds are available for the replacement of large capital items and proper course maintenance

38 Facilities Maintenance Review

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40 Financial Impact if Debt is Used Current Interest Rates Options: Revenue Bond 4.840% Certificate of Participation 3.780% Interdepartmental Loan approx. 2% Using an Interdepartment Loan at 2% - payment would be approximately $61,000 per $1 million borrowed on 20 year repayment schedule

41 Reported Revenue Per Round (highest to lowest) Course (City) 18 hole Green Fee / Round Mariana Butte $36.21 Southridge (Fort Collins) $30.72 Collindale (Fort Collins) $29.23 Ute Creek (Longmont) $29.18 Highland Hills (Greeley) $25.15 Boomerang (Greeley) $25.04 The Olde Course $24.37

42 The Olde Course USE PATTERNS Annual Pass Full Daily Fee Punch Pass

43 Mariana Butte USE PATTERNS Annual Pass Full Daily Fee Punch Pass

44 The Reality of Price Elasticity in Golf When fees are raised too high for the market, early morning and late afternoon times go unused. Unused tee times result in a negative elasticity equation or/and the introduction of new discounted times.

45 Annual Pass Revenue since $272, $260, $268, $243,882