2008-01-02 5-D Power PointOperational Review
& Recommendations
For City of Alameda
Golf Operations
December 18, 2007
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Operational Review and
Recommendations
For City of Alameda
Golf Operations
Presented By:
Ed Getherall • NGF Consulting • (561) 354-1650
Richard Singer • NGF Consulting • (561) 354-1642
egetherall@ngf.org; rsinger@ngf.org
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National Golf Foundation
• Research Organization Founded in 1930s
• Information Clearinghouse for Golf Industry
• NGF Consulting
• Purpose of Study
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NGF Activities
1. Market Analysis -supply/demand dynamics
2. Facility analysis and inspection by agronomist
3. Meetings with stakeholders
4. Survey of Chuck Corica customers
5. Comprehensive operations review
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Chuck Corica Golf Complex
• Rich in tradition and history
• Two unique 18-hole layouts
^ Earl Fry Course -classic design that dates to 1920s
^ Jack Clark -William P. Bell and son from 1950s
• Mif Albright - 9-hole par 3
• Largely local clientele
• Very active clubs
• Premier Junior program
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Facilities Review
• The goal of improvements was to strengthen golf
course asset.
• In past, improvements have largely been made on
piecemeal basis.
• NGF Consulting identified approximately $10 million
in recommended improvements.
• Must first create a global Master Plan for the facility.
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The Alameda/East Bay Market
• 3.3+ million people living within 20 miles of Chuck Corica
• Demographic profile generally predictive of high golf
demand.
• Recent troubles in high-tech and housing industries have
reduced discretionary time and income.
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Competitive Golf Market
National
• National and regional rounds played have declined since
2000.
• In 2006, 146 18-hole equivalents closed and 119.5
opened.
• Municipal golf systems facing challenges nationwide.
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Competitive Golf Market (cont'd)
Bay Area
• Bay Area is in the top 10% of all markets in U.S. for
number ofstandard public golf courses.
• In the 9-county Bay Area, 27 new golf facilities, including
21 public, opened between 1997 and 2006.
• Fight for market share -per-course rounds down about
25% to 30% since the late 1990s.
• Green fees flat, making it difficult to grow revenue.
• Other East Bay golf courses have undergone major
capital improvements in recent years.
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Chuck Corica Golf Operations
Operational Issues
NGF Consulting has made a series of
recommendations related to issues such as:
• Fees
• Staffing/Training
• Customer service
• Pace-of-play
• Course marshaling
• Marketing
• Complimentary play
• Clubhouse replacement
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Chuck Corica Golf Operations (cont'd)
Rounds and Revenues FY 01-02 - FY 05-06
• Paid rounds decreased by more than 75,000, a
decline of 37.6%. (At the same time, `Complimentary'
rounds increased by 2,527, or 38%).
• Rounds for Earl Fry decreased by 25.8%, for Jack
Clark by 33.4%, for Mif Albright by 57.6%.
• Total receipts decreased by $1.35 million, or by
25.3%.
• Rounds decline cannot be attributed to the weather,
as average paid rounds played per good weather day
fell by 28% between FY02 and FY06.
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Chuck Corica Golf Operations (cont'd)
Rounds
300, 000
250, 000
200, 000
150, 000
100, 000
50, 000
0
Peak Late
1990s +/-
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2001-02 2002-03
2003-04 2004-05 2005-06
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Chuck Corica Golf Operations (cont'd)
Revenues
$5,500,000
$5,000,000
$4, 500, 000
$4,000,000
$3, 500, 000
$3,000,000
2001-02 2002-03 2003-04 2004-05 2005-06
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Chuck Corica Golf Operations (cont'd)
Expenses FY 01-02 - FY 05-06
• Wages and Benefits alone increased by $502,000, or
27.7%.
• Total non-labor operating expenses, excluding
transfers and surcharges, decreased by $213,720, or
10.9%.
• Labor costs, the largest single expense item for
Chuck Corica, increased by 97.1 %. Wages and
benefits per revenue dollar have increased by 70.6%.
• Labor costs as a percentage of total operating
expenses (excluding depreciation, debt, and
transfers) have increased from 53.2% to 62.5%
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Chuck Corica Golf Operations (cont'd)
Wages & Benefits
$2,500,000
$2,250,000
~z,ooo,ooo
$1,750,000
$1,500,000
2001-02 2002-03 2003-04 2004-05 2005-06
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Chuck Corica Golf Operations (cont'd)
Expenses FY 01-02 - FY 05-06 (cont'd)
• Total expense per round (including depreciation,
debt, and annual transfers) increased by 64% to
$38.67 per round. This latter figure is essentially the
cost of producing a round of golf at Chuck Corica.
• Annual transfers from Chuck Corica over the last five
years averaged:
- $191,259 for PILOT
- $143,961 in ROI
- $193,115 Surcharges
- $399,113 in Cost Allocation
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Chuck Corica Golf Operations (cont'd)
Net Results FY 01-02 - FY 05-06
• Operating Income/Loss, excluding surcharges and
ROI, went from positive $1.365 million to a negative
$280,000.
• Excluding Cost Allocation, transfers, and debt
service, Operating Income/Loss went from a positive
$1.57 million to a negative $70,627.
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Chuck Corica Golf Operations (cont'd)
Golf Budget Forecast
$1.500
N
~ $1.000
$0.500
$0.000
($0.500)
($1.000)
($1.500)
~p`L ~p"~ ~~b ~~~ X00 ~~'1 ~~cb y00 ~^o ~^^ ~^`L
F F F F F F F F F F F
Net Income/ (Loss)
- - Forecast Net Income/
(Loss)
- - -Forecast Net Income
without Surcharge
and ROI
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Management Options for Chuck Corica
• Continue ~~As Is" -City manages and maintains Chuck
Corica Golf Complex
- Retain control
- Capital improvements continue to be deferred
- Asset further deteriorates
- General Fund would likely have to subsidize golf
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Management Oations for Chuck Corica (cont'd
• Full Service Management Contract:
- City retains relatively high level of control
- Fixed fee plus incentive
- Expenses pass through to City, but should be
significantly reduced
- Burden of risk still with City
- City must stil l fund capital improvements
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Management Oations for Chuck Corica (cont'd
• Operating Lease:
- City loses some control over day-to-day operations
- Most municipal leases have provisions regarding:
• Green fee approval
• Standards and compliance procedures for golf course
maintenance
- Burden of operating risk shifted to private
operator
- Guaranteed income stream for municipality
- Private sources would be available to fund capital
improvements
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Projected Economic Performance
Based on our market and facility analysis, NGF
Consulting prepared afive-year financial pro forma
for three scenarios:
1. Operation continues "as is" (assumes continuation
of current market conditions, management,
maintenance, CIP policy, annual transfers, with no
implementation of NGFC findings). The only
change assumed under this "base" scenario is that
the stand-alone banquet center (capacity 300) is
built and operational by 2008-09.
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Projected Economic Performance (cont'd)
2 Continued self-management and maintenance by
City, but with implementation of NGF Consulting
operational recommendations (with exception of
abatement of ROI and Surcharge transfers, and
the closing of the Mif Albright). It is assumed that
capital improvements recommended in this report
cannot be funded, so the banquet center remains
the only new major facility improvement in this
scenario.
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Projected Economic Performance (cont'd)
3 Operation and maintenance by independent
lessee. Other than banquet center, no
recommended capital improvements are assumed
to be made, as funding for, and timing of, these
improvements will be a negotiation process
between the two parties.
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Results
Scenario 1 -Continued Self-operation:
• Cumulative net losses, after all operating expenses,
debt service, and transfers, will be more than $3.8
million over the next five years.
• These losses will result in continued depletion of the
operating reserve (unrestricted fund balance), and
preclude major facility improvements.
• This scenario will put Chuck Corica at a competitive
disadvantage as other regional golf courses continue
their CIP programs.
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Results (cont'd)
Scenario 2 -Continued Self-operation/Enacting NGF
Recommendations:
• Considering all preliminary expense estimates, debt
service payments, and annual transfers, cumulative
losses will still total more than $1.8 million over the
next five years.
• Enacting the recommendations made in this report will
result in an improved bottom line. However, the City
will have to continue depleting the operating reserve,
and major facility improvements will be deferred.
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Results (cont'd)
Scenario 3 -Operating Lease:
• Rent/lease payments to the City will total $3.38 million
over the first five years of operation, including
restaurant.
• After debt service payments and capital improvement
set aside, the City is projected to net about $1.78
million over the five years.
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Conclusion
• Study was commissioned with ultimate goal of protecting,
preserving, and enhancing the Chuck Corica Golf
Complex as a valuable community asset and to ensure its
financial viability into the future.
• NGF Consulting believes that City self-operation of Chuck
Corica will result in continued yearly operating losses.
• NGF Consulting cash flow models for Chuck Corica
indicate that continued self-operation is unlikely to
generate enough revenue to sustain operations for the
long term and fund necessary capital improvements.
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Conclusion (cont'd)
• NGF Consulting concludes that a lease agreement is the
best solution for the City if it wants to stem the financial
downturn, and preserve the golf facility asset for future
generations. NGF Consulting believes that City self-
operation of Chuck Corica will result in continued yearly
operating losses.
• The lease would shift the burden of risk to the private
operator, provide a guaranteed net cash flow to the City,
and provide a means to fund needed facility
improvements.
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