Golf is good for Tucsonby tcguestblogger on Apr. 01, 2013, under Uncategorized
By Terry Finefrock
I am writing in response to your article that Tucson Should Get Out of the Golf Business and to engage you in communicating some actions that might improve returns to the taxpayer for their constantly increasing investments in government. Your article contains many factual errors that may incite conduct that will generate additional taxpayer burden.
Generally I agree that ‘Tucson’ should probably get out of the golf business but disagree that Municipal Golf should be disbanded.
I and many others found your casual dismissal and description of Golf advocates as… ”a few die hard duffers”… to be disrespectful, short-sighted, and not factual. Those duffers include knowledgeable and successful businessmen, loyal community members for many decades. You and the Citizen owe them an apology.
Your statement that …”taxpayers have had to pay $1M per year to make up for shortfalls” is false and demonstrates your unprofessional lack of research. Taxpayers have paid nothing; Golf uses the City’s credit line and pays interest on all debt. To eliminate the distraction regarding Golf debt, Golf advocates met with the City Manager and Finance Director and suggested that Golf transfer its Civano property assets to the City, those assets after RTA Houghton road are completed, rezoned and sold for commercial value are worth much more than the $12M of debt at that time. On October 23, 2012, the City Manager recommended and the Council approved the transfer, however they credited Golf with just $4M. Now there’s a good story you should pursue…”Fore! More Theft By City”. Does that appear to be the act of an organization that’s trying to “help”? Perhaps we should ask the Arizona State Auditor or Attorney General to investigate? They are already very (unfavorably) impressed with our City’s Management of Rio Nuevo. Although we questioned several Council members none has provided any explanation for the reduced value. We chalk this up as simply another way that the City is going to try and balance its fiscal irresponsibility and crises on the backs of Golfers.
Your article failed to identify and you chose to not communicate and credit golf for all of the financial benefits it provides. 50%, about $3M/year, of Golf revenues are used to subsidize and pay for City jobs, Administration and Pro Shop (30%), and Reclaimed Water (20%) purchased from Tucson Water; Golf subsidizes about $50,000 of the Parks & Recreation Director’s salary; that Golf provides about $25M per year of economic benefits to Tucson(ASU study $4.30 for every $1 of revenue; sporting goods, restaurants, hotel, tourist related jobs, sales; excludes consequent tax revenues). Your article failed to provide Golf credit for the use of their facilities to provide their employees with discounted tee time benefits, to host nationally televised professional Golf tournaments that provided national branding and the associated local economic benefits (hotel, restaurant, tourist sales and tax revenues) at the courses with the highest revenues resulting in loss of use and enterprise revenues for 1/12th of the revenue year. And $1M of the Golf debt that you reference was to build a new restaurant demanded by the LPGA, who left a couple of years later; the cheeseburgers taste the same and the former restaurant facility sets idle and Golf is expected to pay the costs for both facilities.
Golfers paid literally millions over the decade you reference for effective management; Council hired the Management and failed to properly manage them, year after year they accepted failed budgets and initiated no effective corrective actions, and hired Piper Jaffray Consultant to “augment” City/Golf management competency who determined that Golf was indeed viable if strategy, staff competencies and actions were changed, yet Council and senior City management failed to do so.
Your article also failed to consider that Pima County’s Golf course during that same decade of time, managed by a private sector company, Wildcat Golf, was able to compete, acquire enough customers to cover their operating costs and make more than $4M of improvements to the County’s property which included partnering with other reclaimed water customers to pay for common conveyance infrastructure to reduce their costs. Salient point being that although the recession had some impact on the number of customers available (market share) there was always enough customers for City Golf to be profitable if they had employed an active and customer centric retail marketing culture, managed their quality, cost and prices, to provide competitive value to Customers.
A significant difference in performance is that Wildcat Golf management understands how to manage revenues and costs, employ a Customer centric perspective and experience personal consequences for suboptimal financial performance. They employ the appropriate mix of skills needed to manage and market a business, pay market based salaries and benefits, actively monitor the economy, competition and set prices that are competitive and affordable. Conversely, City Golf does not employ the required skills, pays above market salaries and benefits, allowed the value and quality of their offerings to decline, and implemented multiple price increases during a time when the discretionary income of their market decreased. Now City Golf is selling only 40% of their tee times, the product used to get the customer to the store, then sell them other higher margin products; Food/Beverage, Carts, Driving range, Pro shop, Lessons, etc.). Customers walked and took their wallets elsewhere but City Golf wasn’t listening. And no consequences for the well compensated City & Golf Management that allowed that to happen; the consequences and penalties are being charged to Golfers and taxpayers.
Although Golf management have great cause and are willing to do so, and eventually changes in the reclaimed water rate policy will be required, they are prohibited from negotiating equitable water costs that would be beneficial to all parties; a political sacred cow. Here’s another good story that would benefit all. Are you aware that Tucson Water charges $800 per ccft. of reclaimed water yet Phoenix charges $300? Why after many years, as conveyance infrastructure costs paid, don’t Golf water costs decrease (Perhaps those pesky higher than market salaries/wages again, no requirement to earn them via productivity/cost reduction?) As for-profit reclaimed water customers conserve or go bankrupt, won’t that result in an increase in rates to remaining customers to recover fixed costs, cause more to conserve or go bankrupt, support an imminent death spiral cycle? And an eventual shift of the costs to agencies (general fund taxpayers), University and potable water customers? Are you aware that if Tucson Water “shifted” $800,000 of Golf water charges to potable water customers that the impact on monthly bills would be less than 40 cents/month? None would even notice unless you told them. That would allow Golf to use those funds for capital improvements to acquire more play, sustain itself, and continue to provide the $25-30M of annual benefits to our community. Seems like a small investment and great return…I haven’t seen any investments like that from City Leadership…folly cars, greyhounds off steroids, use of police to supervise gun buyback programs, and admonishing college apartment owners to fund speed bumps are getting more attention on their agendas.
If you close Golf, how will Tucson government recover the recover the reclaimed water fixed costs and replace all of the other benefits? Their solution is to turn the Golf assets into COST-ONLY parks; 85% of the cost of the Parks & recreation department, swimming, tennis and parks is paid for by taxpayers, the general fund, not by the Users that benefit. If need revenues, why not raise those ‘use” fees? And when compared to other municipalities Tucson has ranked #1 or 2 in the number of parks; we have plenty for now. (We need higher wage jobs, not more leisure time). You state that “Pouring more money onto golf courses is politically untenable”….that’s the problem, politics; we need competent and accomplished business managers not career politicians or wannabes….”pouring more money onto parks is FINANCIALLY untenable and is irresponsible”.
I don’t agree that City Management has done anything substantial to help Golf. I speculate that’s where you received most of your critical and inaccurate premises. Even the RFP for Golf Management Services has been manipulated to hinder the sustainability of Golf; the Parks & Recreation Department is making the Services Contractor pay for the free reclaimed water provided to City by Pima County that was previously used by Golf. Be sure to consider that when they explain the results of the RFP.
Recently published golf statistics indicate that Arizona play increased 6%; Phoenix area no increase; which means that Southern Arizona increased greater than 6%. There are many professional and prominent Golf management businesses participating in the City’s RFP. That should provide you with a clear positive indication regarding the potential of Golf to be financially viable and sustainable. It would be good if we could employ locals, like Wildcat Golf, perhaps a non-profit, to optimize retention of revenues in Golf, reduce prices, and enable more of our community to participate, a fundamental objective of Municipal Golf. If you employ effective Management that are enabled & compelled to work to reduce costs and improve play, Golf will prosper and continue to provide great benefit to our community. They are not a liability but a great asset if managed properly. That the City declines to do so does not mean that Golf assets and potential benefits should be abandoned.
The same root causes that caused the current Golf “crises” remain embedded in the City’s government culture. We need competent business professionals to run our City business, not politicians that promote special vs. common interests. I’d like you to support a change to include a Pay for Performance policy in the City Charter, to define fundamental quantifiable performance metrics; goals, monthly publication of goals vs. actuals with root cause analysis and corrective actions. Apply to all leadership/senior management; Council, Mayor and all employees earning more than $100,000/year. Pay half of the salaries based on achievement of the metrics goals, tangible delivery of value. If chronic failure to achieve the goals, initiate formal disciplinary and corrective action process, including termination if not corrected. These changes will provide the personal consequences and rewards required to assure we attract and employ persons competent to deliver value not explain the failures; are proven tactics utilized by successful businesses.
For example, include a metric for: “Increase average resident discretionary income by 10%/year” where discretionary income equals average income less average cost of living; count unemployed persons. This will focus actions to create higher wage jobs, reduce resident costs, which will incite population growth, increased property values, economic stimulus and tax revenues; will also allow us to retain our University graduates, homegrown intellectual property, necessary to sustain a prosperous community. This will foster a “continuous improvement” culture and focus actions for Staff to earn their generous salaries and benefits via productivity improvements, costs reductions, reduce the cost of living for the average resident.
Terry Finefrock,CPIM is Tucson-area Resident since 1956; a UA graduate; Former Corporate Operating Director for Global Manufacturing Companies and a Golf Advocate