... the 2013 Operating Budget for Mount Hood shows its excess revenues won't cover the
upcoming bond costs for the athletic field complex.
Golfers tearin' it up at the Mount Hood Golf Course.
The last item on the Park Commissionís March 5 meeting agenda was the 2013 Operating
Budget for the Mount Hood Golf Course. This budget shows the expected income and
expenses for the golf course in 2013. The budget sheet showed something else, too.
What the bond costs for the athletic field complex will be, not only in 2013, but in
2014, 2015 and 2016.
Given the expected revenues the course is expected to produce in 2013, anyone would
have to wonder where the money is going to come from to cover the skyrocketing bond
costs that will occur through 2016.
Costs of the athletic field are to be paid from the excess revenue generated by the
golf course. Excess revenue is the amount left over after all the golf course's
operating costs are subtracted from its revenue.
The budget included the bond costs the course is expected to pay in 2013. These
bonds fall into two categories. One is the bond cost for the damage bond caused by
the Big Dig dumping calamity; the other is for the bond costs to finance the new
athletic field complex.
Together these bond payments will total $237,400 for 2013, an amount the excess
revenues from the golf course should easily cover. As a percentage of the budgeted
golf course total revenue the payments amount to 15.7%
Huge increases in bond costs for athletic field complex after 2013
In 2015 the bond costs escalate to $492,000. Included in this number will be the
last payment ($92,000) for the damage bond plus a $400,000 payment for the athletic
field complex bond.
No one knows what the total golf course revenue will be in 2015, but if the $492,000
bond cost were compared to the budgeted revenue expected in 2013, it would amount to
32.6% of the total.
With the damage bond paid off the bond costs will drop back to $400,000 in 2016. Why
would anyone expect the golf course to generate the revenue necessary to pay for
this extraordinary increase?
Adding to the consternation is that the bonds must be paid only out of the excess
revenues generated by Mount Hood. The excess revenue, the amount left over after all
operating costs are subtracted, is the only amount that can be used to pay for the
bonds. Taking this excess money was made possible by the special Legislation which
passed first by the city in October 2010, and then by the state legislature and
governor in 2011.
In his October 2010 press conference announcing the building of the athletic field
complex Mayor Rob Dolan said that the Mount Hood golf course revenue would pay for
According to the Mayor, Mount Hood will pay for the fields. According to the special
legislation, only excess revenue from Mount Hood can be used to pay for the fields.
City will add athletic field cost directly to golf course's operating budget,
A clue as to what the city might be looking to do may be a statement made by the
city's CFO Patrick Dello Russo during a January 2011 Aldermanic committe meeting
when $245,814 was being transferred from the city's free cash account to the Mount
Hood Reserve Fund. This money was the excess that Mount Hood had produced in 2009.
The Reserve Fund is an accumulation of the excess revenues produced by the golf
course in previous years.
According to a January 2011 story about the committee meeting by Dan DeMania in
MelrosePatch, Ward 3 Alderman Frank Wright asked CFO Dell Russo if the transfer had
anything to do with the city's plans to build new athletic fields at Melrose High
School and Pine Banks.
CFO Dello Russo responded that paying off any bonds or costs associated with the new
playing fields would be built into Mount Hood's annual operating budget and come
from the Mount Hood Reserve Fund.
The 2013 Mount Hood Operating Budget that was distributed at the Park Commission
meeting described earlier is an example of the athletic field bond costs appearing
as part of the course's operating budget.
Golf Course is run as an Enterprise Fund.
The financial procedures used to run the golf course are carried out under
regulations set down by an Enterprise Fund. These regulations have been established
by the Massachusetts Department of Internal Revenue. What an Enterprise Fund does is
to keep the finances of an entity like the golf course separate from the city's
A benefit is that it keeps costs that are not actually incurred by the course from
being tacked on to its operating budget. The Enterprise Fund regulations are very
specific about what the city is entitled to add as a cost to an operation run by an
The document issued by the State Department of Revenue which describes Enterprise
Funds provides a specific example.
"Can a legislative body vote to use enterprise funds for purposes
not related to the enterprise?"
Answer: "No. The enterprise-enabling statute provides that the enterprise
revenues may only be used for enterprise-related expenses."
Since the athletic field bond costs are not an expense of operating the golf course,
it's hard to to understand how the city justifies listing them as one of the
If the bonds are to be paid only by excess revenue, adding the cost of the bonds to
the golf course's expenses makes what is supposed to be excess revenue into an
expense of operating the golf course. This is clearly a perversion of the Enterprise
Making the bond costs part of the Hood's Operating Budget results in another
distinct disadvantage to running the course. The bond costs put downward pressure on
expenditures designated for betterment of the course. These expenditures are cut to
accommodate an expense that has nothing to do with running the course.
City has cut funds designated for golf course to accomadate athletic field
An example occurred in March 2011 when the Mayor sent a letter to the Park
Commissioners demanding a $62,349 charge be included in the course's budget. To do
this the Commissioners voted to reduce an expense planned for the golf course. The
reduction resulted in an excess in the budget which was big enough to accommodate
the $62,349 charge. The charge was for a bond payment associated with the athletic
Course excess revenues inadequate to cover upcoming athletic field bond costs.
The Mount Hood Golf Course has produced some healthy excesses over the years. Even
while the course was paying for the Big Dig damage bond, its revenue exceeded its
costs of operation by more than $200,000.
This will not be the case when the Big Dig bond costs are replaced by the athletic
field bond costs which are more than twice their size. The golf course operation
itself will still be producing an excess, but the excess wonít be large enough to
cover the athletic field bond costs. When the golf course operation is budgeting a
loss, the Enterprise Fund regulations state how this loss must be shown.
The loss requires a budgeted subsidy. In other words, if the Operating Budget is
forecasting a loss the budget must show how it will be covered.
The Mount Hood Reserve Fund, as stated previously, is an accumulation of all the
excesses produced by the golf course over the past years. It must be close to $1
million or more. It would be hoped that this would be the source that would provide
the subsidy to cover the loss. Covering the loss, or part of the loss, by increasing
the rates that golfers pay to play golf would be reprehensible. The golfers would be
charged more to play when the course itself was producing an excess.
Itís not known what the city plans to do when this budget shortfall happens. Thatís
not very comforting news for a Mount Hood golfer.
Joe Sullivan has a senior membership at the Mount Hood Golf Course.
April 6, 2012