HomeMy WebLinkAbout05/23/1995, 3 - GOLF COURSE FUND RATE REVIEW �I���ul�lll�llll,�llllli��llMEETING DATE:
'w j����� city of San LUSS OBispo -�
COUNCIL AGENDA REPORT I NUMBER:
FROM: Paul LeSage, Parks & Recreation Director
SUBJECT: Golf Course Fund Rate Review
CAO RECOMMENDATION:
■ Adopt resolution setting golf course fees for 1995-97 as follows:
July 1 , 1995 July 1 , 1996
Senior/youth weekdays $4.50 $5.00
General weekdays 6.50 7.00
Weekends 7.25 7.75
■ Approve a onetime general fund transfer of $68,700 in 1994-95 to bring the
golf course to full enterprise operation status by 1996-97.
DISCUSSION:
Background
Laguna Lake Golf Course (LLGC), the only public golfing facility in the City of San Luis
Obispo, is a nine hole executive course accessible to golfers year around. Course
amenities include a driving range, pro shop, and hand cart and equipment rentals. The
course draws golfers from throughout the county. LLGC is a prime attraction for the
"SLO-Birds", retired individuals from desert climates who come to "summer" in San
Luis Obispo.
Due to the cost effective operation of LLGC, it was changed from General Fund
Program operation to an Enterprise Fund structure in July of 1993. The golf supervisor
serves in two capacities, maintenance superintendent and proshop manager. At most
courses two separate individuals fill these positions. There are two full-time
maintenance workers employed at the course responsible for 24 acres. The 12 acre
to 1 worker ratio is slightly higher comparable to other city parks maintenance staffing
and considered quite low in the golf industry. Other city parks maintenance staffing
is based on a 10 acre to 1 worker ratio. All other staff at the course is part-time. The
proshop is staffed with one person, who also functions as the course starter. All
course marshals are volunteers. Non-salary expenditures (utilities, equipment, &
supplies) are carefully monitored and controlled. The cost of running the course is
reasonable. However the golf fund will not generate sufficient revenue to cover the
total cost of the enterprise fund for the fiscal year 1994-95
Fees were revised in January of 1994 in order to enable golf course revenues to equal
the fund budget. Calculations used to determine the fees implemented in January,
1994 were based on an estimated 60,000 rounds of golf played annually. The
problem in the golf course fund is the revenue shortfall, primarily resulting from a lack
of green fee revenue. A recession in the entire golf industry has been experienced
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i►�h�i�u��IIIII�I�j��lll MY Of San L"IS OBISpO
COUNCIL AGENDA REPORT
during the last two years. National statistics indicate the rounds played are off 15-
20%. At LLGC this translates to 10,000 fewer rounds in 1994-95 than projected.
Additional difficulties resulted from the rains during Winter, '95. A course usually
described as an "all weather course" was rendered non playable due to the high
amounts of rain received in SLO County.
Rate Review Objectives
The objectives to the 1995-96 rate review are to establish a fee schedule that will
maximize revenue and begin to recover the rounds lost over the last two years. The
approval of the revised rates will accomplish the following:
- Ensure continued operation of the facilities
- Establish a rate structure consistent with similar courses
- Create increased opportunities for more residents to experience golf
- Incorporate a fee schedule that is equitable to all course users
- Close the gap between fund expenditures and revenue during the two year
budget cycle
Rate setting methodology:
Step 1: Determine course requirements for:
- operations & maintenance (due to the fund status, capital
improvement projects have been deferred)
- overhead
Operating budget request $295,900
Overhead 76,700
CIP 900
$375,394
Step 2: Determine sources of revenue
a. Non-green fee revenue remains consistent at $40,000.
This includes: proshop sales, concessions, & the driving
range.
b. The course currently generates $240,000 from 46,000
rounds which is an average of $5.20 per round. This
includes:
■ 21,500, Senior/youth rounds
■ 15,500, Weekday rounds
■ 9,000, Weekend rounds
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COUNCIL AGENDA REPORT
Step 3: Identify the rate structure of other local executive length courses.
Current Senior Weekday Weekend
Sea Pines $7.50 $8.50
Pismo $4.25 $6.50 $7.25
LLGC $4.00 $6.00 $6.75
Proposed 7/1/95 Senior Weekday Weekend
Sea Pines $7.50 $8.50
Pismo $4.75 $7.00 $7.75
LLGC $4.50 $6.50 $7.25
Rates set in excess of other courses will lead to reduced rounds
& revenue
Step 4: Determine the new green fee structure.
The proposed rates are based on a projected 2 year recovery in
the number of rounds played. If the fee increases of 1995-96 are
approved again in 1996-97 and rounds increase to 56,000 the
course will achieve full recovery during that fiscal year. A 4 year
plan designed to meet operating, overhead, and capital
expenditures included as "Attachment A".
Increasing greens fees by .50 cents will bring the average round cost to $5.70. This,
coupled with a modest increase in rounds played will bring green fee revenue to a
1995-96 projection of: 52,000 X $5.70 average = $296,400.
FISCAL IMPACT:
The golf course fund is currently operating at a deficit. A one time allocation of
$65,100 will offset the shortfall that currently exists, as is projected to exist, through
the end of the 1995-96 budget year. Beginning in 1996-97 the golf course will
operate without assistance from the general fund and produce a sufficient revenue to
address Capital Improvement Projects.
ALTERNATIVES
The proposed alternatives suggest possible methods of eliminating enterprise fund
deficit during the 1995-96 budget.
1) Raise all green fees by $1 .25. Instead of the recommended fifty cents.
The most probable result would be a decrease in rounds played and a
reduction in revenue.
2) Eliminate the reduced senior found fee. This has the potential of
generating $43,000, but would probably result in reduced play.
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ffijj% COUNCIL AGENDA REPORT
3) Extend the SeniorNouth reduced rate to weekends. Staff feels that this
could potentially increase revenue, as very few seniors play on the
weekend. However before recommending this alternative, staff would
like to try to increase the number of full fee weekend rounds.
4) Sell the course. This alternative is contrary to policy established in the
newly adopted Parks & Recreation Element and would not result in
noticeable cost savings. Most of the golf course would be shifted to
other enterprise funds or be born by the General Fund. Of the $82,000
in overhead costs.associated with the Golf Fund, only $17,400 could be
saved by selling the course.
5) Lease the course to a private operation. This was done from 1978-84.
Course conditions deteriorated and the city assumed operation.
6) Terminate the golf course's status .as an enterprise fund. As a regular
Parks & Recreation program would recover 90% of the total operating
cost in the 1995-96 budget year. This would be the highest level of
recovery of any program. Staff feels that this is not necessary. With
modest fee increases and a return to the previous level of rounds played,
LLGC can operate as an enterprise fund.
SUMMARY:
Based upon current economic conditions in the golf industry, the proposed rate
increases are believed the highest that can be implemented without reducing the
rounds played at the course.
The golf course fund will be closely monitored and a status report submitted quarterly
to the CAO. Council will be notified if the fund does not appear to be meeting
revenue targets.
ATTACHMENT
Resolution setting golf course rates for 1995-97.
EXHIBITS
A. Proposed golf course rates for 1995-97
B. Golf Course financial schedules
1 . Revenues, expenses, and charges in.fund balance
2. Rate-setting assumptions
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RESOLUTION NO. (1995 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 1995-96 and 1996-97,
NOW THEREFORE BE IT RESOLVED by the Council of the City of San Luis
Obispo as follows:
SECTION 1. Resolution No. 8250 (Series 1993) is hereby rescinded upon the
effective date of the new fees.
SECTION 2. The following green fees shall be as follows:
July 1, 1995 July 1, 1996
Senior/youth weekdays $4.50 $5.00
General weekdays $6.50 $7.00
Weekends $7.25 $7.75
SECTION 3. The fees for the driving range, wholesale goods and lessons shall be
set by the Parks & Recreation Director and Golf Course Supervisor.
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On motion of , seconded by
and on the following roll call vote:
AYES:
NOES:
ABSENT:
The foregoing.Resolution was adopted on this day of 1995
ATTEST:
Mayor Allen K. Settle
City Clerk Diane Gladwell
APPROVED AS TO FORM:
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