City-Owned Golf Courses Should Be Sold or Privatized

The Bobby Jones Golf Course in Sarasota shows why government shouldn't be in the golf course business

How do you solve a problem like the Bobby Jones Golf Course?

Once again, the city of Sarasota is wrestling with what to do about the Bobby Jones Golf Course, a perennial albatross around the city’s neck.

City documents show the golf course lost $228,000 in 2013 and was expected to lose about $875,000 in 2014 and another $700,000 in 2015.

Twice – in 2008 and 2014 – the city hired the National Golf Foundation to review operations and the club and recommend how to improve things. Both times, it came back with an overall recommendation that the city sink a lot of money into the golf courses, clubhouse, etc.

The latest move by the city was to create a committee to, again, examine the club and recommend what the city should do. So far, that committee has said it needs a lot of time and money to do the job.

It’s past time city leaders cut the cord.

Spending more on more studies that recommend spending more money won’t solve anything. Providing a golf course is not a core competency of city government. The area has no shortage of affordable golf courses that are open to the public. The only real question is what the city should do with the money-losing course.

Option 1: Sell to developers

The course is located at Fruitville and Beneva – prime real estate for development, and even better, for infill development. Letting a developer build on this land would provide many new homes and help alleviate the city’s affordable housing problem. It would allow the creation of many new neighborhood amenities, such as parks and paths. And it would be much closer to downtown than most proposed new developments – and right on one of the city’s planned mobility corridors.

In addition to meeting so many of the goals of city planners, housing development on this land would turn an annual loss of revenue into a handsome flow of new property taxes and other revenues.

Then, there is the sale value of the land itself. The city has significant debts, especially a massive debt for the public safety workers’ pension systems. The millions of dollars the city could receive for this land could take a big bite out of that problem. It’s a win-win.

Option 2: Privatize It

As of 2010, the National Golf Foundation reported that the private sector owns about 80% of the U.S. golf courses that are open to the public (not counting private country clubs, etc.) Government-owned golf courses are a minor and unnecessary part of the market and often lose money. So it’s no surprise that privatizing golf courses is a popular option.

Let’s look at some examples just from last year:

  • In February, Phoenix privatized five city-owned golf courses that had been losing the city $2.4 million per year. The privatization was so successful that by the end of the year, the city privatized a sixth course.
  • Neighboring Tucson, Ariz. also privatized five city-owned golf courses in January to help address the city’s $8 million annual budget shortfall.
  • Last January, St. Paul, Minn., privatized two city-owned golf courses that had racked up $7 million in losses over two years and were on the brink of being closed. The new private operator will pay the city $400,000 per year for five years while operating the courses.
  • And in Morris County, N.J., city leaders saw the savings and success of a golf course they privatized in 2012 and last year privatized the other three city-owned courses.

Cities privatize golf courses for many reasons, most of which would apply to privatizing Bobby Jones:

  • 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. Private contractors have the capital to invest in the course to improve its quality.
  • Risk minimization. Selling a golf course means no more deficits eating into city budgets.

Let’s just do some crude math comparisons of what the city might get from various options:

  1. Current operations: Lose $200,000 or more per year; try to find money to fund improvements.
  2. Privatize operations of the course based on fees paid elsewhere: $200,000 to $400,000 per year in revenue to the city.
  3. Sell the golf course to a private golf course operator – based on average U.S. sales price for 18-hole golf courses of $4.25 million, about $10 million in sales revenue plus another $200,000-$400,000 per year in new taxes paid by the private owner.
  4. Sell the land – a conservative estimate of $300 million in sales revenue for the 325-acre complex, plus around $2 million per year in new property tax revenue (based on 1,500 units at about $1,300 per unit per year).

It is hard to see how choosing the first option can be justified. It makes no sense and serves no significant purpose for Sarasota to stay in the golf business.

The city should sell the course, either to a private developer or a golf-management company, get the best deal it can, use the money that comes in to pay down pension debt and enjoy future budgets without having to backfill losses at the course.

Adrian Moore is vice president of the Reason Foundation and lives in Sarasota. This column first appeared in the Sarasota Observer.