HomeMy WebLinkAbout08/16/1988, 4-A - GOLF COURES FEES CONT ����n►�►��Illll���lii � �' city osan 1Uis OBIspo
COUNCIL AGENDA REPORT
Golf Course Fees
Page 3
rounds but pay only about 23 percent of the green fees. In
1987-88 the average price per round with a monthly fee was
only $1.54 -- less than half of the standard fee. Also,
with no restrictions or limitations, those paying monthly
fees tend to play during periods with the highest demand.
c) Patrons paying 18-hole fees (and receiving a substantial
discount on the second 9 holes) tie up the course and
complicate scheduling. Because the course is only 9 holes
long, 18-hole players must be accommodated for the second
round instead of other players paying the regular fee for a
single 9-hole round.
d) Few patrons buy 10-play cards (which offer a substantial 17
percent discount for play during the week) because even
higher discounts are available by paying only $5.00 more
for unlimited, unrestricted play with a monthly fee.
e) Seniors take discounts on fees already discounted and play
during the most desirable hours. This results in heavy
subsidization of seniors by patrons paying standard fees
per round.
Page B-2 of the 1987-89 Financial Plan contains the City's current
policy on enterprise fund fees and rates:
The City will set fees and rates at levels which fully cover
the total direct and indirect costs, including debt service, of
the following enterprises:
a) Water Fund
b) Sewer Fund
c) Parking Fund
d) Golf Course Fund
The City's recent cost allocation study shows that current annual
indirect costs attributable to the golf course amount to about
$59,000, which is 27.8 percent of direct costs. (In comparison,
the city-wide indirect cost rate is 27. 3 percent. ) By existing
policy, over the next five years golf course revenues should cover
these indirect costs along with the following capital improvements
(listed on the next page) , which are intended to further refurbish
the course and correct safety problems:
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COUNCIL AGENDA REPORT
Golf Course Fees
Page 4
Driving Range Cage Repair (88-89) $ 7,500
Pro Shop Roof Replacement (88-89) 71,500
Tee No. 2 Bridge Replacement (88-89) 7,500
Mower Acquisitions (89-90) 40,000
Parking Lot Resurfacing (90-91) 17,000
Fairway No. 3 Safety Screen (90-91) 16,500
Irrigation Improvements (91-92) 75. 000
$171,000
Table A attached to this report projects golf course revenues and
outlays over the next five years from 1988-89 to 1992-93 without
any fee adjustments. These projections show that over those five
years, revenues from current fees would fall nearly $500, 000 short
of covering ordinary increases for direct costs (salaries,
materials and services) along with indirect costs and capital
improvements.
ALTERNATIVES:
Staff has prepared and analyzed four alternatives for covering the
full costs of the golf course program over the next five years.
While the list is not exhaustive, it does outline a broad range of
solutions. In all cases except one, fees would be increased
substantially in 1988-89 and then would be adjusted annually to
keep pace with changes in the Consumer Price Index. Annual CPI
adjustments are estimated to be 3.5 percent.
Alternative 1
Retain the current fee structure; raise fees to cover all program
outlays.
Under Alternative 1 the current fee structure would stay in effect
and fees would increase 53 percent across the board in 1988-89 to
cover all costs of the golf course program. With fees set
substantially higher than fees at similar 9-hole courses such as
Pismo State Beach and Sea Pines, patronage might slacken
considerably and defeat the purpose of the increases. But without
benchmarks to measure the inelasticity of demand at prices above
market level, the potential decline in patronage can't be
calculated.
Table B shows the projected effects of this alternative over five
years. Table F compares the fees under this alternative to
existing fees and to fees at similar courses. /�