Getting Greens in the Black

Golf course Privatization Trends and Practices

Executive Summary

From Los Angeles County, with 16 public golf courses operated by private firms, to New York City, with 13 privately operated public courses, local officials are increasingly likely to privatize what Governing magazine called “perhaps the most non-essential of the non-essential public services.”

Between 1987 and 1995, the number of cities contracting for golf-course services increased by 67 percent, bringing the total fraction of cities contracting for golf operations to around 25 percent.

Privatization of municipal golf facilities includes turning over the operation of whole facilities or particular services to a private vendor to operate in a commercial manner. The city benefits through the receipt of guaranteed revenues and efficient operation of the facility for public benefit and enjoyment.

Reasons why public officials are turning to golf-course privatization include:

  • Cost Savings. Government rules and practices can drive up costs. For example, golf-management firms typically enjoy discounts on everything from fertilizer to insurance, a concentrated buying power advantage that local governments do not usually possess.
  • Increased Revenues. From better advertising to programs that speed up play and allow more golfers to use the course, private operators often institute management practices that increase revenues.
  • Increased Quality. Most golf-course privatizations require the private contractor to make capital investments in the course to improve its quality.
  • Risk Minimization. In many golf-course privatizations the city gets a guaranteed rent even if the course revenues do not increase. This ensures that during the term of the contract, taxpayers will not be subsidizing the course.
  • Community Outreach. Most private operators can afford to expand a city’s community golf programs and are required to strategically plan these programs as part of the privatization contract.

A commonly asked question is how private contractors make a profit and deliver services at lower costs than the public sector. Profit is most often achieved through the following means:

  • Increasing the number of rounds played;
  • Cutting overhead costs;
  • Purchasing materials and supplies in volume;
  • Improving golf-course management techniques;
  • Improving course conditions;
  • Reinvesting revenues in capital improvements; and
  • Increasing productivity by applying industry best practices and efficiency.

While government-run golf courses can make these kinds of improvements, they face many competing demands for scarce government resources. In contrast, a private-management company is focused on generating revenue and has an incentive to actually reinvest in the quality of the golf course to attract more players, host more tournaments, sell more merchandise, and in general increase golf revenues.

Through a careful privatization process, including an evaluation of existing golf-course conditions, a wellwritten Request For Propsal (RFP), and a cautious and competitive bidding process with clear performance measures written into the privatization contract, communities can have access to affordable, quality municipal golf courses.

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