Dale Martin
City Manager
Fernandina Beach
November 13, 2020
A challenging recommendation to the City Commission is included on the agenda for next Tuesday’s meeting. The management agreement for the City’s Golf Course between the City and Billy Casper Golf (BCG, but recently re-branded as Indigo Golf Partners, IGP) expires on December 13, 2020. I have recommended that the City Commission not renew the management agreement.
The original management agreement dates to 2010. The City solicited proposals for Golf Course management and, following a review of submissions and an Evaluation Committee recommendation, the City Commission, through Resolution No. 2010-148, executed a five-year Municipal Golf Course and Amenities Management Agreement (December 13, 2010).
The introductory paragraphs of the agreement stated: “It is the intention of the City that BCG operate and maintain all operations and amenities of the Golf Course in a fiscally responsible manner so that users (rounds of play, sale of merchandise, food, beverages, etc.) of the Golf Course can fully support the daily operational and maintenance, costs, debt service and also the long -term capital improvements needed to keep the facility attractive, functional and competitive with the local golf market up to today’s standards for golf courses.”
The agreement included an $84,000 management fee (with annual price index increases not to exceed three percent). The City remained responsible for personnel, operational, and capital costs.
In 2015, BCG offered a contribution of $50,000 to improve the West Course greens in exchange for a five-year extension to the original agreement. The City Commission, on February 17, 2015, adopted Resolution No. 2015-30, accepting the offer of BCG and extending the agreement.
The challenges associated with operating a golf course are industry-wide, so the management and efforts of BCG (IGP) should be viewed through a broader perspective. The explosive growth of golf in the early 2000s has been followed by a significant contraction in the 2010s. As the 2020s begin, the current pandemic will continue to impact golf (and much more).
The financial challenges of the City Marina and Golf Course have been well-documented: both facilities have struggled financially, accumulating significant cash flow deficits. These deficits are internal to City operations, not to outside creditors: the City, using other funds (most notably the Wastewater Fund), “loans” money to the Marina and Golf Course at the end of each year to “balance” the budget. The cumulative deficit for the Golf Course as a result of these “year-end loans” is approximately $1,250,000.
The ongoing growth of the deficit was notable enough that the City auditors urged the City to develop a plan to address the deficits. The City retained Stantec to conduct an analysis of the City’s General Fund, Marina Fund, and Golf Course Fund. Stantec’s Integrated Financial Sustainability Analysis was published last year. In summary, the Stantec report recommended that the City’s strong financial General Fund pay back the deficit with additional sizeable contributions over the course of the next five years. At the conclusion of the five years, the deficits would be anticipated to be eliminated (but, it must be noted, continued contributions from the General Fund to both the Marina and Golf Course would continue). The Stantec recommendation was incorporated into the draft 2021 budget.
The most critical component of the Stantec recommendation, however, was to maintain the existing millage rate. By maintaining the millage rate, the reserves used to diminish the Marina and Golf Course deficits would be sufficiently replenished annually to continue the deficit elimination effort. With the subsequent adoption of a lower millage rate, the Stantec model was rendered unsustainable and discarded.
With “Plan A” now shelved, what could be “Plan B”? Any plan at the Golf Course will be first helped with the elimination of the Golf Course’s only external debt: the full repayment of a note (which renovated the clubhouse) will be completed this year, immediately eliminating an annual expense of $180,000. That alone will improve the annual cash flow for the Golf Course, even moving the Golf Course to financial independence within several years. It does not, however, address the cumulative deficit (it will likely only keep the deficit from growing more).
With the anticipated revenues associated with Toptracer (scheduled to be functional by the end of the calendar year and generate approximately $90,000 annually), those funds can be used to pay down the deficit. The elimination of the management fee and other costs associated with the management agreement, should provide relief on the expense side of the Golf Course and expedite the elimination of the long-term deficit.
The City has had a satisfactory relationship with BCG/IGP and I have enjoyed a professional relationship with national and regional IGP staff. Addressing the financial challenge of the Golf Course, however, is my first responsibility to the community, and it is solely for financial reasons that I have made the recommendation to the City Commission to not renew the management agreement with IGP. The City Commission will consider that recommendation on Tuesday evening.
I have been involved with the golf course operation from the RFP committee through 2 City advisory boards. If the management will not be contracted out, that leaves 3 options. One is to bring in a golf pro to operate everything under some type of quid pro quo arrangement (quite similar to pre-Casper situation). The second is to have Parks & Rec. take over. Several problems there – the course needs an agronomist; the course needs restaurant & food management ( which P&R doesn’t have/do); the course needs specialized equipment for maintenance. There are some pieces of equipment (trucks, trimmers) that could be shared by both, if P&R can juggle both and prioritize. The course needs a full-time superintendent and mechanic and blade-sharpener. There is no easy out. The $84,000 savings will be closer to zero (or even less) if the City has to hire a golf course agronomist, a food & beverage manager; a PGA-certified golf pro; more P&R staff. The third option is to lease out the course. I don’t think the City is happy with the River Course leasing issues (and the lease payments go to the airport, not the City).
Spot on Bruce and you are in a great position to know. Personally, the golf course operations this year have been a disaster not due to BCG management but the City’s decision to close the course to play for a number of months in the Springtime. The PGA has a program with guidelines as to how a course can still permit play while still being in compliance with the CDC guidelines (single person in carts, raised cup in green so ball doesn’t have to be retrieved, etc. The long-term financial issue with the golf course has been the debt service of the clubhouse and the irrigation system (just like the marina). There is no question that the golf industry has been in a decline but the COVID environment has encouraged outdoor activities and things may shift around. Making this decision 30 days before a contract is set to expire is terrible planning. This should have been done 6 months ago so all the alternatives can be explored. Those that have been around know all the issues that were in place when the golf course was managed internally. To Gary Martin’s comment about not allowing volunteers, that is because the FL Labor Department ruled years ago against the City that you cannot compensate a volunteer by giving them a certain amount of “free” play; but they must be paid some level of wages.
In addition to the specialized positions Bruce issued, what about reservation and payment software, advertising, etc. Dale’s comments seem to just touch on some of the basic requirements to provide a quality golf course operating including the biggest profit component – food and beverage service. Seems like another case of Ready, Fire, Aim
Just what is needed by the Taxpayers of the City of Fernandina Beach, another “private” commercial operation taken over by Gobernment. The City for goodness sakes can’t even manage to cut the grass areas next to ALL city roads on a regular basis!!! Now they are going to “run” a golf course operation? Not happening but then again Mr. Martin will have yet again expanded his “management basis” thus justifying our need for his “management” skills. He knows as much about managing a golf course as Ronald McDonald. In fact in my ten years here his “tack record in management” leaves alot to be desired but he good at getting more staff hired.
I do not play golf, have never played golf but I am a taxpayer in the City of FB. Welcome to the new normal folks, we pay more and get less. In this case we get zero. Next up Mr. Martin recommends the city sell the land and put up (another) parking lot with a subdivision. It absolutely never ends and you have to not only have eyes in the back of your head but on the sides of your head.
WAKE UP FOLKS!!!!!
With all due respect to our vigilant City Manager, I believe that this is not the time to make an abrupt end to our relationship with Billy Casper Golf (BCG, but recently re-branded as Indigo Golf Partners, IGP). The City has not lined up an alternative talent team, either internal or external, so we would be scrambling. Also, the golf course just made an investment in Top Tracer. Shouldn’t we see if that pans out before pulling the plug on a tried and true vendor? Perhaps we could renew for a shorter time period.
OK- now what? Firing the management company is not a plan. What’s the ultimate goal or vision for the golf course?
Topgolf/Toptracer may help to slow down the money draining from the golf course, but it doesn’t address the financial fundamentals.
If your 20 year old truck gets 10 miles per gallon, and you buy an electric car to mitigate your gas bill, it doesn’t change the fact that your truck still gets 10 mpg.
The current management company doesn’t allow volunteers. No wonder the course loses money hand over fist. Look to the City of Overland Park, Kansas as the model to make money. They have a similar multi course set up.