... Contract with golf course manager makes a dollar-per-round increase of little value to city.
In the money for 2014.
A considered increase of $1 per round received little discussion among the Park Commissioners before it was voted down at their January 2014 meeting at the Mount Hood club house.
The considered increase, although modest in appearance, could have produced a nice revenue bump. Forty thousand rounds, give or take, are played at Mount Hood annually and an extra $1 per round would mean $40,000 in additional revenue.
The only change in green fees in the last five years had been a decrease in the yearly membership rates for junior golfers; down $20 for residents, down $30 for non residents.
But a question remained. If Mount Hood revenues exceed the costs of running it, why was it necessary for any increase at all? Golf revenues already exceed the costs of running the course by over $400,000 per year.
The city has already committed those $400,000-plus excess to pay for bonds to finance the new athletic fields and repairing the Big Dig dumping damage to the course. A problem comes when the $400,000 plus is not adequate to cover the bond payments.
Thr real crunch will come next year when the bond payments will be $492,000 according to a draft of the course budgetfor 2013.
Why a price increase?
Whether that was the reason for the proposed $1 increase is not certain. But why else would the city be looking for the increase?
Terrible weather delayed the course opening in March of this year. A long string of rainy days followed in July. The result was a decrease of $100,000 in golf revenues from the previous year.
Additional pain was caused by the new contract the city signed with the golf course manager. The contract calls for a share of revenues over $1.2 million. The contract is effective through 2017. There is a change from the old contract that was effective through 2012. The new contract reduces the city's share of revenue over $1.2 from 35% to 25%.
Going into 2014 the city is faced with two things. Not only were 2013 golf revenues down but its share of the revenues were down. The revenue will bounce back but the city's share of it wont. The problem is that the city committed to the bond costs in 2010 when its share of the amount over $1.2 was 35%. Now, and for the next four yearsthe share will be 25%. The city has less money to pay for its bond obligations because of the new contract.
The news gets worse.
Thereís another consequence of the golf contract. This one would involve any attempt to increase golf course revenues by increasing the greens fees to the players. Leaving out, for the moment, that any increase quite likely violates the conditions of the Enterprise Fund under which Mount Hood operates.
A modest increase of $1 per round would produce an additional revenue of $40,000. (40,000 rounds x $1 per round.) History says the course's yearly revenue will exceed $1.2 million. This means that a $40,000 increase would be added to the amount that's already over $1.2 million and the new contract says the citygets only 25% of the $40,000 increase.
What we have now is a formula. For the city to realize an additional $1 greens fees increase it must increase green fees to the golfer by $4 per round. An increase like this is self defeating. It reduces the number of people who will pay this price. The $4 increase pushes players to other cheaper courses. The move doesnít increase revenue it reduces it.
If the city canít increase revenue by increasing golf fees how will it make up for a revenue shortfall?
Short changing the golf course as a way to get more money.
Another way to get the money to pay for the bonds is to decrease what is spent on improving the golf course. This happened before when Mayor Dolan insisted that the golf course budget provide $62,000 for a bond payment associated with engineering costs for the new athletic field.
The problem was that only part of this amount was available in the golf course budget. A budgeted item, Professional Consulting services, was cut from $105,000 to $35,000 to accommodate the bond payment.
It is not known if cutting expenses is part of the plan this year but this is the first time in five years that the Park Commission's letter announcing the greens fees and policies does not include a segment titled GROUNDS AND CLUBHOUSE IMPROVEMENTS which shows a list of the capital improvements for the upcoming year.
Situation improves in 2017
The financial pressure on the course is caused by the athletic field bonds and the Big Dig damage bond payments. This pressure should abate in 2017 when the Big Dig bond is paid off.
This wonít mean much if itís replaced by another project whose costs will be dumped on the golfers. If it follows the procedure of the athletic field complex Melrose citizens wonít know anything about the project until the day the Board of Aldermen vote to approve it.
Whatever the project, it should be expected that the plan will be developed by an obscure committee. The minutes of its meetings will never be available for public viewing. The city government will conceal the plan and misrepresent any approvals needed to get it to the Aldermen for a vote. The plan quite likely will benefit a particular group. That's what happened with the athletic field complex.
The old reliable.
What the city relies on is the attitude of most Mount Hood golfers that says so long as they have a nice course to play on they don't care what the city does with the money they pay to play. What effects this complacency is when the course is not maintained. Eventually the realization sets in that they are not getting what they're paying for and that the revenues they provide are being skimmed to pay for something else.
The result is not a golfer uprising demanding fair treatment. Something else happens, the golfers stop paying to play on a lousy golf course and spend their money on a good course instead.
Joe Sullivan holds a Senior Membership at the Mount Hood Golf Course
February 7, 2014