... new athletic field complex bond costs make selecting manager who can produce high revenue stream more important than ever
Incumbent manager Golf Management Corporation has operated Mount Hood course since 2002. Management team's Kevin Arndt, golf pro Mike Farrell and principals Phil and Tom Friel were the successful bidding team in 2007.
The Park Commission is planning to select a golf course manager by August 28 or 29. This is two and a half months earlier than the selection date in 2007 which was the last time a golf manager was awarded the five-year contract.
The late selection date in November, 2007, resulted in a number of lost events the course had expected to get when potential customers who were planning these events were facing deadlines to set a date. Uncertain as to who the golf manager at Mount Hood would be they selected other golf courses for their events.
Different, too, is the time the selection process will take. In 2007 the process started in April and finished on November 15. This year the Commission released the Request for Proposal on June 27. The reviewing process will be conducted entirely in August. Commission meetings set for August 6, 13, 21 and 28 will be used to review and evaluate the bids of the contenders. Included will be a review of the bidders’ financial proposals by the City’s Chief Financial Officer, Patrick Dello Russo.
Representatives from seven companies on June 27 picked up a Request for Proposal, universally referred to as “the RFP”, at the Mount Hood Clubhouse.
Potential bidders include international contender
The contenders this year are diverse in size and geographic location. Billy Casper Golf and KemperSports are large management companies that are multi-state operations managing over 100 courses each. Billy Casper manages over 130 golf facilities in 27 states, including four courses in Hawaii. Falmouth Country Club is the only course it manages in Massachusetts.
KemperSports, another large golf management company, operates in 26 states and internationally, according to its website.
The international bidder, Monaghan Golf Inc., is operated by PGA golf professionals in Canada. The two courses this company manages are in Vancouver and British Columbia in Canada.
Locally, potential bidder Sterling Golf Management Company in Newton manages the Norwood Country Club, Newton Commonwealth, and the Shattuck Golf Course all 18 holers and the 9-hole Chelmsford Country Club.
Golf Course Management, the incumbent Mount Hood manager, owns and operates seven courses in New Hampshire. Mount Hood is the only course that it operates as a management company.
One company which received an RFP is a food management company and is not expected to be in the final manager selection.
A representative from Johnson Golf Management Company also picked up an RFP. The email address provided no information.
Commission again retains legal counsel to help with selection
The Commission will retain the services of the law firm, Garrity & Kinsley. Bob Garrity, one of the firm’s principals, will be working with the Commission. Garrity was instrumental in developing the RFP bidding process used in 2007. This same format will be used this year with virtually no changes.
The RFP bidding process used five years earlier for 2002 ended up in a legal wrangle which cost the city $320,000 to settle. This amount was paid out of golf course revenues for three consecutive years.
The Commissioners, along with Garrity’s counsel, developed a bidding process in which the bidders were required to clarify claims about their manager qualifications. In addition each bidder was to provide a definitive statement as to the amount of money that it would accept to do the job.
To do this each bid was submitted in two envelopes. One envelope, contained the technical proposal. It listed the bidder’s qualifications to run the course. The second envelope, called the price proposal, contained the bidder’s response to the amounts the city said it would pay the manager to operate the golf course, the food operation and the pro shop.
Determining fact-based qualifications makes evaluation process effective
What has made the bid process effective is the ranking process developed to evaluate each bidder’s qualifications. The Commission had established eight requirements needed to successfully run the course and used the process to determine which bidder is best qualified. This fact-based evaluation highlighted the most experienced and successful candidates.
A bidder submitted his two envelopes at the same time, but the two envelopes were not to be opened at the same time. The Park Commissioners held all the price-proposal envelopes unopened until after they reviewed and compared the technical proposals to evaluate each bidder’s talent as a manager. After these evaluations a ranking of the bidders was determined.
Once the talent ranking was determined the Commissioners opened the price proposal envelopes and determined which bidder offered the best pricing. The Commissioners then compared a bidder’s management qualifications with its pricing program to determine which bidder offered the program that best benefits the city.
The price proposal states what the city will pay to the manager out of course revenues and what the manager will pay to the city from food and beverage sales and the pro shop.
City's financial proposal unchanged from 2002
Out of the first $1 million of golf revenues the city will pay $600,000 to the manager. On the next $200,000 of revenue the city will pay up to 50% to the manager. For revenues over $1,200,000 the city will pay up to 65% of this excess to the manager.
The city will accept a minimum of 15% of food and beverage sales and 8% of pro shop sales and services.
A bidder can improve its bid financially by taking a lower percentage of golf revenues over $1 million or by increasing the percentage it will pay from food and beverage and pro shop sales.
The winning bidder’s contract will be for a five-year period with the reservation that the city can terminate without cause after three years. There will also be two one-year renewals, one at the end of year three and one at the end of year four. The renewals are a change from the previous contract.
Bidders commit big money as security for proposals
The bidding process is a not a for-peanuts arrangement. As a form of bid security each proposal will be submitted with a certified check for $10,000 made out to the Park Commission. Each check will be returned after the Commission selects the manager.
Each bidder will be presented with the opportunity to make a formal presentation of its talents to the Park Commissioners. This also provides an opportunity for the Commissioners to ask questions about the bidders proposal. It is after these presentations that the Commissioners will open the envelopes containing the bids and make their evaluation and selection. After a review of the bids by the CFO Dello Russo, the Park Commission will announce the winner of the bid.
Current Mount Hood manager bids to continue through its 15th year
One of the bidders, Golf Management Corporation, is completing its tenth year as manager of Mount Hood Golf Course. First awarded the bid for the five-year contract in 2002, it was again declared the bid winner in 2007.
It has been highly successful in delivering revenues that exceed the expenses of running the course. This is meaningful, because the city added the cost of paying for the damage resulting from the ill-fated Big Dig dumping fiasco to the expenses of operating the golf course.
The course management company has consistently delivered total revenues from the golf course that have exceeded $2 million a year. These revenues not only covered the golf course costs they also resulted in left-over revenues that many times exceeded $200,000 per year. These instances occurred even after the city had taken amounts of $100,000 for “indirect costs” and used the course’s Payment in Lieu of Taxes account to finance projects that had nothing to do with running the golf course, such as paying to fix the lights at Morelli Field.
Special Legislation makes high course revenues vital
Ability to deliver high golf course revenues has taken on a new significance with the new special legislation that, at the Mayor’s request, the Board of Aldermen voted to approve in October 2010 and was later approved by the State Legislature.
In the special legislation the Board of Aldermen voted to take away the limitation established by state law that money earned at Mount Hood must be spent at Mount Hood. The city is now entitled to take the “excess revenue” produced by the golf course to pay for park-related projects. It plans to use this money to pay off the bonds associated with the new athletic field complex and running track at Pine Banks.
The new athletic field complex, which includes extensively renovated ball fields at the high school and a new running track at Pine Banks, will cost over $5.2 million. This money is to be paid from the “excess revenues” from the Mount Hood golf course. The projects will require bonds to be paid off over the next 25 years.
There are problems. The amounts required to pay the yearly bond payments exceed the expected “excess revenues” which will be produced by the golf course.
Additionally, there seems to be a problem with the Pine Banks running track. Originally scheduled to be completed in June of this year it is now targeted for completion in mid-November. The delay was caused when in the fall of 2011 contractors discovered solid waste under an area where the track is to be built. Building over this could result in the ground eventually settling and resulting in an unstable surface for a running track.
Material has been brought in to fill the unstable area and has been piled in a large mound in the track area. A problem, according City Planner Denise Gaffey, is that the engineers’ assessments didn’t indicate the solid waste before the project started.
Will fixing the running track problems cost more?
Reason says that correcting the track’s solid-waste problem is going to increase the cost of the project. Who pays? If there is an additional cost, will this amount, too, be expected to come out of Mount Hood’s “excess revenues”? Possibly the who-pays question for the running track is not an issue, but work was at a dead stop in late July.
At a meeting in the Mayor’s City hall Conference room at City Hall in which the Park Commission members were discussing Mount Hood budget projections with the city’s CFO Dello Russo and Treasurer Flavin it was mentioned that Mount Hood will be expected to pay for the athletic field’s bond costs to the best it can. Amounts that the course are unable to pay will be the responsibility of the city.
What does 'responsibility of the city' mean?
Dello Russo was asked by the Melrose Mirror reporter how the city plans to fill this responsibility? When the cost of the Big Dig damage to the course and public park at Mount Hood was known, the Board of Aldermen voted to place the entire cost on the golf course. The price to play golf was increased.
The city fulfilled its obligation by placing the cost on the golfing community. It is still paying for the cost which will continue through 2015. Should the same action be expected if the course revenue is not adequate to cover the cost of the athletic field bonds?
Both Dello Russo and Flavin emphatically declared this will not happen.
They were also asked if any shortfalls could be taken from the Mount Hood Reserve Fund which is approximately $500,000? They agreed this was a possibility. Whether the city will do this is another issue.
With the Mount Hood golf operation expected to pay for the costs of the new ball fields and running track there will be more heat than ever on the Park Commission to select a golf course manager that can deliver the revenue necessary to meet this challenge.
Given the way the projects costs are expanding maybe such a manager doesn’t exist.
August 3, 2012