Government owned golf courses are a real head scratcher. They serve no public interest that is not already served well by the private sector. Indeed, they are most often a nice subsidy for relatively wealthy golfers, paid for by all the non-golfing taxpayers. A lot of local governments are selling their golf courses, and more are at least hiring a private firm to run the golf course and stop it bleeding red ink.
I wrote two columns about the struggles of my hometown–Sarasota, FL–with its run-down, money-losing city-owned golf course when special interests in the form of golfers started lobbying for the city to spend millions of dollars to upgrade the course. By the way, I am a golfer and would never play the crappy city owned course when there are so many nice courses in the area that don’t cost much more to play. Anyway, in the first column, I point out the city has four opitions–pretty typical for local governments who own golf courses:
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).
I concluded that options 3 and 4 are clearly the best. But when the city stayed stuck on option 1 even as the price tag for improvements rose to $14.5 million, I wrote a second column digging deeper into option 2 and pointing out some great examples from other local governments:
In 2002, Chicago’s Cook County owned a golf course that for nearly a decade was losing money, had fewer players, deteriorating course conditions and rising customer complaints. Hmm. Sound familiar? The county brought in a private company to take over the golf course, which rebuilt and refurbished facilities and the course, brought in staff, replaced old equipment and carts, and turned the course around. The county went from losing $2 million per year on the course to an annual profit ranging between $800,000 to $1.5 million.
Two years ago, Phoenix approved a 30-year lease of the city-owned Maryvale Municipal Golf Course, which had run up millions of dollars in deficits over years, draining over $250,000 out of the general fund each year. Facilities had fallen into grave disrepair. Again, this sounds very familiar. The new private managers took on all operating costs and invested $8 million for course repairs and an upgraded clubhouse, and it will pay the city of Phoenix 10% of net revenues after it recoups its upfront investment. This arrangement worked so well Phoenix went on to privatize six other city-owned golf courses.
Way back in 1999 Reason published a how to guide for privatizing golf courses full of examples. It’s past time more governments took heed and get out of the golf course management business and maybe focus on some higher priorities.