If you haven’t already done so, check out the New Mexico Breeze. It is a news source available both online and in a print format. The Rio Grande Foundation has agreed to provide original content to the paper on at least a monthly basis. One such article that ran in a recent edition of the paper came from RGF Policy Analyst Marcos Portillo. He explained how policymakers in Albuquerque could have used the private sector to avoid the recent green fee increase at Albuquerque’s public golf courses. Read the full article below:
Albuquerque’s city-owned golf courses recently raised their rates by $2.50 per round. The primary reason for the increased rates is that the golf program had been underperforming and was not self-sustaining. Last year there was a shortfall of nearly $500,000 and the program required a bailout from the city’s taxpayers to cover it.
The fee increase may temporarily fill the gap (although it could reduce play and thus harm revenue), but a rate increase isn’t going to solve the long-term problem of government-managed golf courses.
What if there’s another financial crunch in the future? We’ll be back to where we started with more rate hikes and golf bailouts. The city should take a hard look at the option of privatizing management, an option that has proven successful for many municipalities across the country.
In 2007, Tulsa Oklahoma’s golf program was in a much worse position. The city was projected to subsidize their golf courses by approximately $1 million in fiscal 2008. As a result, the city entered into a contract with Billy Casper Golf Inc. The company assumed management in January 2008 and for the first year of operation cut the city’s subsidy nearly in half to $610,000. The next year it was cut to $200,000 and Billy Casper Golf submitted a five-year plan that would cut the subsidy to zero. In less than two years, rounds played grew by 39% and net operating income increased by over $1 million.
To be clear, “privatizing” management will not make Albuquerque golf courses any less open to the public. In fact, under private management operating with a profit motive, these courses could provide service equal to or better than is offered now, without the costs to taxpayers or higher fees for golfers.
In Cincinnati, the city privatized their golf courses in 1998 after a mid-90’s scandal that resulted in operating losses that totaled $1.3 million over two years. After a private management company took over, they were able to expand outreach programs for children and disabled golfers, and certified four city courses under an Audubon Society program that promotes wildlife preservation strategies, all while operating at a profit since privatization.
Even after this rate increase, Albuquerque taxpayers remain on the hook for capital improvements to City courses. Ladera golf course has recently been going through a significant irrigation renovation of its 18-holes (which should be completed by July 30th). This project cost nearly $2 million and did not come from the revenues of its own operations but from the capital improvement fund that is primarily funded by property taxes.
Let a private management company worry about improvements and allocate the taxpayers’ money towards more important core services and infrastructure improvement. In Indianapolis where former Mayor Goldsmith awarded the first privatization contract for a city golf course to R.H. West Company in 1993, the company expanded the facility from a 9-hole course to an 18-hole course, and unlike Albuquerque, $1.6 million in capital improvement investments were made to the course without the need for taxpayer money. The city pays nothing to operate and maintain the golf courses and saves the cost of paying salaries and benefits to the employees, as well as all capital improvements to the facilities. The private operators returned about $1.25 million to the city on total golf course sales of approximately $9.2 million in 2009 alone.
By giving up the reins to private entrepreneurs and the discipline of the market, the performance of many of publicly-owned golf courses has dramatically changed. In many cases, the private managers ended up expanding operations, renovating facilities, and even returning a percentage of revenue back to the city.
In New Jersey, Governor Christie contracted Atlantic Golf Management to take over operations of Spring Meadow Golf Course in April 2011. It was committed to paying the state 15 percent of the revenue it received exceeding $1 million per year. It took just over six months to reach that benchmark. Let’s get our golf courses to make our city money, not cost it money.
Why should non-golfers subsidize a luxury for a small number of the population that are golfers when another provider can provide such services at no cost (if not, a profit) to the public? Golf is but one of many services that the government provides that can be turned over to the private sector for better management.
Marcos Portillo is a policy analyst with New Mexico’s Rio Grande Foundation. The Rio Grande Foundation is an independent, non-partisan, tax-exempt research and educational organization dedicated to promoting prosperity for New Mexico based on principles of limited government, economic freedom and individual responsibility.