HomeMy WebLinkAbout12/07/1993, 4 - GOLF COURSE FUND RATE REVIEW IIIII��N►►►�IIIIII`III�IUIII f MEETING DATE:
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city 01" san pais oB�spo
COUNCIL AGENDA REPORT ITEM NUMBER:
FROM: Michael A. Maramonte, Recreation & Parks Director
Prepared by:
Paul Taylor, Golf Course Supervisor
Kathy Koop, Principal Recreation Supervisor
SUBJECT: GOLF COURSE FUND RATE REVIEW
CAO RECOMMENDATION
By resolution approve the following changes in golf course green fees:
A. Effective January 1, 1994:
1 . Eliminate the monthly single and couple cards. '
2. Establish three tier system for green fees of:
a. Senior Weekday fee of $ 3.75
b. Non-senior Weekday fee of $ 5.75
c. Weekend/Holiday fee of $ 6.50
B. Effective July 1, 1994 green fees will be:
a. Senior Weekday fee of $ 4.00
b. Non-senior Weekday fee of $ 6.00
c. Weekend/Holiday fee of $ 6.75
DISCUSSION
Background
I
Laguna Lake Golf Course, (LLGC) is the only public golfing facility in the city of San
Luis Obispo. It is a nine hole executive course which is accessible to golfers year
around. The course amenities include a driving range, complete proshop, lessons,
club and hand cart rentals and snack shop. Today golf is recognized as one of the
fastest growing sports in the United States, yet communities all over the country can
not keep up with the demand. The course draws golfers from throughout the county
and has become a tourist attraction for visitors to this city from all around California
and neighboring states.
This past year LLGC experienced 60,000 rounds and is fast developing the reputation
as the "best little golf course in California". A major factor for its popularity is the
high maintenance standards, efficiency of the facility staff and emphasis on positive
customer service. In order to continue to offer this same.quality facility and service,
meet the continuing growth in play and operate on a 100% cost recovery basis, the
department needs to have a fair and equitable revenue system. Today the course is
operating at 85% cost recovery. The recommendation before the council will provide
MEETING DATE:
ii�h��a►►i�uIIIIIIIIIP° II�III city of.san Luis osispo
STEM NUMBER:
COUNCIL AGENDA REPORT
the remaining 15% by eliminating the monthly card system, reducing the green fees
to seniors and increasing the green fees to all other players.
The following is a comparison of green fee structures with two other comparable nine
hole executive courses in the area, Pismo State Beach Golf Course and Sea Pines in
Los Osos:
Pismo
Laguna State Sea
Lake Beach Pines
current proposed
Monthly Card
Single $50. NA NA NA
Couple $75. NA NA NA
10 play cards NA NA NA $50.
Green Fee - weekday $5.50 $5.75 $5.75 $7.00
Green Fee - Sr. weekday $4.75 $3.75 $3.50(til 4pm) NA
Green Fee - weekend/holiday $6.25 $6.50 $6.50 $8.00
Note that the other courses do not provide monthly cards. The reason is that monthly
cards are purchased by a small nucleus of people which monopolize the prime starting
times and significantly reduce revenue to the course. At Laguna, for example, -an
average of 87 card holders are taking up 40% of the time on the course, yet only
generating 20% of the green fee revenues. Based on average use a monthly card
effectively reduces green fees to 52.50/round for a single and $1 .85 for a couple.
With Council approval of the 1993-95 Financial Plan, the LLGC was retumed to an
enterprise fund operation. General budget policies for enterprise fund fees and rates
stipulate that "fees are to fully cover the total direct and indirect operating costs for
capital outlay and debt service. The City will review and adjust enterprise fees and
rate structures in order to ensure that they remain appropriate."
i
This rate restructuring proposal is designed to meet the Council adopted goal for
100% recovery of all operating and capital costs for enterprise systems. Additionally,
staff based this fee proposal on a comparative analysis of similar executive length
courses which revealed the method used in determining the green fees was consistent
with others.
An annual fee review will be conducted. Dependant on expenditures, CIP and general
government costs green fees may be adjusted at the beginning of each fiscal year by
4-7%. In order to meet costs and develop sufficient fund balance fees will be
increased in July, 1994.
°Y'02
lllu^I�Illl�lllllnll �y I II V7 MEETING DATE:
W NMI IIII Ilf 111
I {IIII C� o san �a�s o��spo ITEM NUMBER:
COUNCIL AGENDA REPORT
Golf Course Rate Review Objectives
With the Council's adoption of the 1993-95 Financial Plan, the LLGC is to recover
100% of its costs including operations, maintenance, general government and capital
projects. The approval of this rate restructuring proposal will comply with budget
policy and is designed to accomplish the following objectives:
♦ Ensure revenue adequacy for continued operation and development of a high
standard facility
♦ Generate funds to address on going capital improvement needs
♦ Establish a rate structure consistent with similar executive length courses
♦ Create increased opportunities for more residents to experience golf
♦ Provide for ongoing review in order to facilitate rate stability
♦ Incorporate a fee schedule that is equitable to all course users
Preparation of this fund review has been accomplished with the above listed
objectives in mind. Provided in Exhibit 1 is a summary of revenues, expenditures and
other source funding through fiscal year 1996-97. Exhibit 2 depicts assumptions used
to calculate proposed fees and projections of green fees through FY 1996-97.
Rate Setting Methodology
The following methodology was used in determining golf course rates necessary to
meet revenue requirements for course operation:
Step 1 : Determine Golf Course revenue requirements for:
Operations and maintenance
Capital improvements and replacements
Enterprise operation overhead
Step 2: Identify opportunities to increase revenue
40% of available rounds result from monthly card play
Elimination of monthly card play yields $34,800 increased green fees
Step 3: Determine sources of revenue:
80% of Golf Course.Revenues are derived from green fees
20% of Golf Course Revenues are derived from lessons, pro-shop
sales and concessions
Step 4: Determine new green fee structure
Designed to utilize a portion of existing fees and expand play
opportunities
--3
lllll^I�IIII�IIIIIIIII I^�I^IIII IIIIII vJ o san tuts oBispo MEETING DATE:
II 'I�UIN�I C� ITEM NUMBER:
COUNCIL AGENDA REPORT
FISCAL IMPACT
Current sales of monthly cards generate 560,000/year and account for 24,000 rounds
of golf. Monthly card sales consist of 90% Seniors, (21,600 rounds) and 10% non-
seniors, (2,400 rounds). Elimination of monthly card rounds and adopting proposed
three tier green fee schedule will increase revenues to $94,800.
Proposed: 21,600 rounds X $3.75 = $81,000
2,400 rounds X $5.75 = $13,800
TOTAL: $94,800
Current: Monthly Cards:
90% Seniors 21,600 rounds, 10% other 2,400 rounds
TOTAL: $60,000
Additionally, eliminating monthly cards, expands the availability of tee times to more
golfers, eliminates the unusually low priced rounds and eliminates the monopoly
enjoyed by monthly card holders.
SUMMARY
i
i
The recommended changes to the Laguna Lake Golf Course rate structure will
continue to be guided by the concept embodied in the City's Mission Statement,
"...Quality with Vision". It does so because the goals and objectives adopted by the
Council in their 1993-95 Financial Plan will be met even under the enterprise system,
namely:
t rate structures will be "appropriate and equitable". (pg. 13-9),
• provide "relatively low" fees to seniors (13-7),
i "maintain fund balances of at least 20%" (13-13) and,
` obtain full cost recovery (pg B-8)
There will undoubtedly be some long time golfers at the course who will be opposed
to any changes, however, the Recreation and Parks Department staff and the
Recreation and Parks Commission, after long and considerate review, believe this is
a "Win-Win" proposal and is in the best interests of all citizens of San Luis Obispo.
Staff provided LLGC users and the public with an opportunity to review this proposal
on Monday, November 22, 1993. Approximately 20 were in attendance. There was
no indication of support or opposition of the proposal indicated at the meeting.
CONCURRENCES:
Recreation and Parks Commission - (Though the commission fully supports the
recommendation, they suggested that if the Council were reluctant to proceed as
recommended, they might wish to consider a one or two year phasing into the full
cost recovery enterprise system). Staff has serious reservations regarding phasing.
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N O C U (7 v [ CC N N N N tq N O N N N O
RESOLUTION N0. (1993 SERIES)
A RESOLUTION OF THE COUNCIL OF THE CITY OF SAN LUIS OBISPO
ESTABLISHING GOLF COURSE RATES
WHEREAS, it is the policy of the City of San Luis Obispo to review enterprise
fund fees and rates on an ongoing basis and to adjust them as required to ensure that
they remain equitable and adequate to fully cover the cost of providing services; and
WHEREAS, a comprehensive analysis of the Golf Course Fund operating and
capital needs has been performed for fiscal years 1993-94 through 1996-97.
NOW THEREFORE BE IT RESOLVED by the Council of the City of San Luis
Obispo as follows:
SECTION 1. Resolution No. 6495 (1988 series) is hereby rescinded.
SECTION 2. The following green fees shall be as follows:
January 1, 1994 July 1, 1994
Senior Weekday Fee $3.75 $4.00
Non-senior Weekday Fee $5.75 $6.00
Weekend/Holiday Fee $6.50 $6.75
SECTION 3. The fees for the driving range, wholesale goods and lessons shall
be set by the Recreation & Parks Director and Golf Course Supervisor.
On motion of , seconded by
and on the following roll call vote:
AYES:
NOES:
ABSENT:
The foregoing Resolution was adopted on this day of 1993.
Mayor Peg Pinard
ATTEST:
City Clerk Diane Gladwell
APPROVED AS T FORM:
i tt opKey, ff r g e n s o n
TING AGENDA
WE Q: 3 ITEM #�
Comments by C.W. Vrooman on Agenda item 4 December 7, 1993
COUNCIL ❑ CDD DIR
PAGE 1 CAO ❑ RN DIR
ACAO ❑ RRECHIEF
Play in 92/93 was 60000 rounds ATTORNEY ❑ MY DIR
CLERKJMG ❑ POLICE CHF
BUT MGMTTEAM AREC DIR
Play in 91/92 was 62840 rounds ❑ C MADFLE o UTIL DIR
Fees were increased in 92/93 ❑ PERSDIR
PAGE 2 187 cardholders taking up 40% of time on course'
24000 rounds by cardholders 24000/60000 = 40%
BUT
There are 87360 or more tee times during a year .
24.000/87360 = 27% of time available on course
AND
$60000/$239700 = 25% of green fees in 92/93 paid by
cardholders
PAGE 3 Objectives
Create increased opportunities for more residents to
experience golf.
IS THIS ACHIEVED BY RAISING COSTS ?
Step 2
Elimination of card play adds $34800
TOTALLY SPECIOUS REASONING. Examine the calculation on
Page 4. It assumes that present cardholders will play
at same rate with the new fee structure. Does golf have
a demand curve that is absolutely vertical? Quite
unusual I think.
A few quick notations on the GOLF FUND on page 4-5
NOTE 1
Retail sales have been decreasing steadily
BUT
Now are expected to increase 57% in one year
NOTE 2
Green fee receipts to increase 25% in one year
BUT
Green fee receipts went' down last year after a fee
increase
AND
For five months of 93/94 has increased only 78
NOTE 3
If operation and maintenance costs are deducted from
total receipts the following numbers result:
90/91 +$50300
91/92 +$36000
92/93 +$38000
93/94 +$1001900
NOW THAT IS A SWITCH 111
ARE THERE ALTERNATIVES ? YES11 INCREASE PLAY. HOW?
MERCHANDISING 1111
Junior fees, Family fees, Poly & Cuesta specials, Sunday PM
specials, Tournament groups, Driving range specials, Clubs, bags
and ball specials, Coke specials (sell for less) . Cut operating
costs not increase them $15700. Incidentally, why is there a
$35000 charge for facilities use?
My Doctor says, "WALK" . The proposed fee schedule would cost me
over $2000 per year. Regrettably I will find another place to
walk. My share of the supposed $34800 increase will not
materialize and the $500 to $600 contributed to the current
$60000 receipt will be lost. I suspect I am not alone.
' ME
�d 9�AGENDA '
o:M.01
AIR 11! DTE N ITEM
MAO fl SFW CHIEF #
1QRW ��,�,q DEC - 3 1993
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OTFM QREC DIR SAN U S OBISPO..CA
D FILE A UTIL DIR ;! !
Q PERS DIR /
Do Golf
Season Passes
r or Membership Plans
t = Make Sense (Cents)?
By Gene Burress
Regardless. o what label Y9uplace Ary management
f,..
on the program-o 'o eri`" guidelines are There are some mistaken
tho o f n8 $0�� required to preclude a give-awn philoso-
ppartunit 'fo`purehase"'an program and potential liabilityay goe Phies which are used to "sell" the
s. n�'pa3'mt+t•P{-r! -fd ,.rrie- are If
Program. Some of
- �3 ;the.=80 :COwte.• the; these are;
sbe etaftbzi&oundness of aAflosophy needs to; a- Prepare standards and objectives a• An "up-front"revenue base is
..Thr#cle primasily for the desired level of golf course assured and from this base "interest"
E'8 cb"uraPs;ivfiiiCh maintenance including manicuring can be drawn. These amounts are
`�`"" and beautification. normally:- e my insufficient to make up for
Aw2u aooer�rnee►'lral"rigetuiea . b- Establish the expense factor to the revenues lost bad these golfers
'°W.- 11* came oftenhave.s Produce an individual round of golf been paying the regular fees. Any
dea't�i W. .- `.. interest derived is n
�$ Bol -4ro6gams of Determine the amount of revenues. egligible-
esa atnnid required to sustain the average total b. Pride will be instilled in our golf
,,,:• mit been
'". :�`B .deal„ rounds of golf course which will result in the golfers
for" d- Maintain a level of profit suffi- taking better care of the course. This .
aIm tient to have a health reserve of is an optimistic approach continue`fxi`e. pgiain<:Tie 8s: revenues. Each muni pality must unrealisnall per is
somewhat permit
•'membersiip,,.1�FoB= i:producee have a target figure for this reserve holders can become extremely demand-
Power Base'cf m q,eeaiors, level of revenue base(e.g-$250,000 for mg and possessive The same number
retirees siyd'semiretired''�wh_ can a single course). Multi-course opera- of ballmarks will appear on the
exert extrabrdinary pte'seuics upon greens as well as ours tions could require increased levels of placed divots
the elected officials"and department reserves. The "revenue reserve base" and abused teeing grounds- The fail-
administratore to:retain the annual will provide for revenues during a bad ure to follow golf etiquette, slow play
Peru even.when itjh,economically weather year when the golf program and the misuse of pull carts and golf
disadvantageous to 40.80. may operate "at a loss." Also, the carts are Problems which may persist
This can severely i.i:pact the golf reserve must provide for capital among the"members.,,
Program of some municipalities The improvements,preventative mainte- One of the most irritating{actors to
-eduction in reveque base is tie nance,and unfc_eseen expenditures golfco'um managementU-an attitude
nary reason or many munici
municipalities (e a extensive mad and path repair, which develops',among some of the
e se sir o course to a new heating/air conditioning eye- membership-"'Theac few bring a
5rtva a opera or. . ease offer pre- tems, new roof, and potential loss of ti�°a upon the rest Their attitude of
en a city guvernment reflects turf due to epidemic diseases), entitlement" for special privilwas—
nstant dollars to bolster a sagging be it tee times, extra go -ho es, reals.
en;,, fund budget. Department If these objectives have been Rules and Policies are for the "non-
tante to registration and that the.
drr:'l leasing
and politicians often acUeved and a"membership"pro- members"—crestas an atmosphere of
iew leasing h an instant cure fora gram can be offered,then the rates for hostility between "members" and the
'he r there
which may be a liability, or the mem e i
here there is a trend towards becom• assure continued solvency. The regular Pays g"non-members"and
19 a budgetary liability, rein a *Y_ _s:ations to manage- '
Where "membership" pro rate is continunl]v Ensu p1n o arrogancy may per-
grame are reviewed and.undated commensurate mea some"members"in which they
+ailable or being considered, budget• -
? blatantly announce that .then Imnw
'm'ore about the operation of the �anding and provide a resource for
municipal golf program than the pro- -ppointed administrators and elected "Congratulations
fessional managers,golf professionals officials to enhance their knowledge Rose Bowl Ticket
and superintendents hired to do the of the municipal golf operation.
ss
job. A Isrirvey of me�hopolitan,an with ><nner
• The factors concerning the ratio. mtiriicip }';golf=pr> aic :Fevealed
TAIe to supD013 s mem er6 ip, season thatr8"l8 ge'mi jonty;� B .ecesslul Four-year-old Amanda Lutz
ass or an annual greens fee must e - goif.g"#, m6_,t10 ss.QtP�ffer an•sdvance drew Ms.Jane Nagel as the lucky
nriman v center on the impact to pamrit1„ea :-Moet.utisntxeasful or winner to the Rose Parade and
the revenue base.However,even if the stfu, is o ro rams ave a Rose Bowl game tickets. The
objective for t-; revenue base is mem ro 'One can almost drawing was held at the CPRS
achieved, the nusiance factors which a assure t at when an outside booth in Anaheim at the NRPA
those in public service encounter dry a1zency leases ancloverates the mumc- Congress in October. The two
seem to be intensified m the Drovi- - ipa g0 to amt at the criteria for tickets were contributed by the
cion of annual permits. es a is ino a mem ere iD” plan Pasadena Convention and Vis-
In 1981, one city instituted an will be based on sound management itors Bureau.
"annual greens fee" program which Practices. _
did not meet revenue objectives set for �!
a three year period. In 1985, this pro-
gram was discontinued for this rea-
son.However,all of the citizen factors
manifested themselves, as portrayed
in this article, including petitions to we're Proud of
City Ball. Selfish attitudes plainly_
stated that "they did not care who Our Emmy!'
e s as on as eir
as
Tnot affected." Personal About the Author•. But our technology Is the-alTa-c-Es--w-e-r-e-c-o-nTri-v-eUa-gainstgainst golf Gene Burress is a Supervisor of Golf Big or Little Leaguel
course officials who were long time administering the City of Cincinnati's
acquaintances. Incidents such as seven municipal golf courses. He is a
these have been reported in many cit• member of USGA new Public Golf
ies. Professional golf administrators, Committee, the USGA Public Links 1
golf managers,golf professionals and Committee and Executive Director of
superintendents desire to effect pro- the OKI Golf Association. A former f
grams which are for the "good" of Certified Golf-Course Superintendent,
their golf program and consequently former Golf Professional, and pub- r
the game-of golf.The purpose of this lished-numerous times in Golf indus•
article is to create a forum of under- try periodicals. '
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