By Mike Lednovich
Fernandina Beach City Commissioner
November 25, 2020
There are 4 options in managing the City Golf Course – which is the best?
We know in life that there are always choices to make. The key to success is identifying and making the best possible choice.
So it is with the City Commission’s choice in going forward with how to manage the City owned 27-hole golf course.
On Dec. 13, the City’s management contract with Indigo Golf (formerly Billy Casper Golf) expires after a 10-year run. During that time, the golf course has lost nearly $1 million, with the closure earlier this year due to the pandemic accounting for almost $200,000 of that deficit.
While losing that $1 million, the City has paid Indigo Golf approximately $900,000 in management fees.
Therein is the crux of the problem. Is this any way for the City to run a business that is meant to be self-sustaining?
Management of the golf course is on the City Commission’s Dec. 1 agenda, and with time running out on the Indigo contract, a decision will have to be made.
According to golf course experts Golf Property Analysts, in Conshohocken, Pa., there are four options City officials can choose from to manage a municipal golf facility. Larry Hirsh, president of the company, identified them as:
1. Direct Management: Where the city uses its existing employees to manage the entire golf course operation, usually as part of the park and recreation department.
This method saves a ton of expenses, but the golf course can suffer both financially and condition-wise due to a lack of golf operations expertise.
2. Indirect Management: Where the city hires experienced golf industry professionals to operate the golf course and report to the city manager.
This option is being proposed by City Manager Dale Martin, who says the City will eliminate the $90,000 Indigo Golf management fee.
The downside is that the City will add about six full-time employees and carry the burden of employees’ benefits and pension expenses adding about $100,000 beyond the contract fee savings. So, how do you make up this $100,000 in added expense?
3. Private Management: This option reflects the current Indigo Golf situation in which the City retains a third-party, private management firm on a contract basis for an extended period. In some contracts, the third party and the City share revenues and costs, though often the third-party manager has revenue incentives built in. Indigo Golf has an incentive clause in its contract, but in 10 years has never met the gross revenue incentive threshold.
The advantages to private management is that the City has no employees and the associated benefits/pension costs. Indigo Golf, which manages 160 courses nationally, also claims the City saves money by leveraging Indigo’s collective discounted purchasing power.
4. Lease to a Private Firm: Where the right to operate the golf course is
leased entirely to a private firm or individual, which/who retains all the revenues and is responsible for the operating expenses in return for a rental payment, which often includes performance percentage rents.
The City is currently using this option for the Amelia River Golf Course located on airport property. The lease method has never been explored by the City in regards to the Fernandina Beach Golf Course.
So where do we stand going into the Dec. 1 City Commission decision on the future of the golf course?
First, given the four available paths before us, I believe Commissioners don’t have enough information to make the best decision for the citizens of Fernandina Beach and the golf course as a business.
Here’s what I propose in order to make such an important decision:
1. Negotiate a contract extension with Indigo Golf (six months to a year).
2. Issue a Request for Proposal for outside golf course management. There are 20 golf course management companies in the U.S. Once received, pick the best offer.
3. Issue a Request for Proposal to lease the golf course. Again, pick the best offer.
4. The City puts together a Indirect Management expenses/revenue business plan.
5. The City Commission then compares the best outside management contract, lease contract and Indirect management plan and makes a decision by December 2021.
The best decisions are made with the best data collected and analyzed. Poor decisions are made in a hurry with few facts. We need to take the time to make the best decision.