January 10, 2020
When the City’s most recent annual audit was completed, the auditors noted that the City should develop a plan to address the fiscal sustainability of the City’s Golf Course and Marina. Both of those activities have been a financial burden on the City’s General Fund, as user charges and fees have not been able to provide sufficient revenue to cover operational and debt service costs. As a result, the City’s General Fund provides approximately $500,000 of combined annual support to the Golf Course and Marina.
Even with that support, however, annual costs still exceed revenues, and the Golf Course and Marina require additional support in the form of “loans” from other City funds (most notably the City’s Utilities Fund). At the end of each fiscal year, sufficient money is loaned to the Golf Course and Marina in order to balance their budgets. The accumulated debt of the Golf Course ($1.2 million) and Marina ($2.6 million) led the auditors to question, “What’s the City’s plan to “stop the bleeding”?
At the recommendation of City Comptroller Pauline Testagrose, Stantec, a financial consultant, was retained to review the City’s General Fund, the Golf Course Fund, and the Marina Fund. The Stantec report was completed and published in November (the draft findings had been presented to the City Commission a few months earlier).
The report indicated that the City’s General Fund was in a very strong fiscal position: the combination of rising property values (and resulting tax revenues) and the financial management by former Comptroller Patricia Clifford and current Comptroller Testagrose have generated a healthy financial reserve- approximately $2 million above the City’s required reserve (by City ordinance, the City must budget and maintain a twenty-five percent (of General Fund operational costs) reserve for emergency purposes.
The Stantec report indicated that “the Golf Course Fund’s and Marina Fund’s cash flows are structurally unsustainable and will require significant increases in revenue amounts or annual cash support from the General Fund in order to fund ongoing operational costs, debt service, and capital requirements.” The City’s annual revenue and reserves could, in Stantec’s opinion, support additional contributions to the Golf Course and Marina in an effort to eliminate the accumulated debt. The combined contribution necessary to eliminate the debt, though, was substantial: an additional $600,000 to the Golf Course and $1.5 million to the Marina would eliminate the debt within five years. Unfortunately, although the debt would be cleared, the need for continued annual support from the General Fund would not be eliminated for either the Golf Course or Marina.
As mentioned, the Stantec report indicated that another option was to significantly increase revenue. This option would still require some additional General Fund support to reduce the debt, but the additional revenues would also provide a path to long-term self-sustainability. The Marina has significant challenges to generate new revenue, especially sufficient revenue to cover both operational and debt costs. As the City continues to struggle with the Federal Emergency Management Agency (FEMA) regarding Hurricane Matthew reimbursements (more on this in a future article), the City’s financial commitment to the Marina continues to deepen as replacement and repairs continue.
At the Golf Course, however, the long-term financial outlook is somewhat brighter for a couple of reasons. First, repayment of a bond, requiring approximately $200,000 annually for principal and interest, is completed next year. Second, an additional significant source of revenue is also available.
The popular perception is that golf is a “dying” pastime. Admittedly, the growth of traditional golf is stagnant, at best: people are no longer as willing to commit the time to play golf. What is growing significantly are what is referred to as “off-course activities”: simulators and, as is popularly known, Top Golf.
Top Golf is an “arcade” experience in many ways, but for many of you, Top Golf is the modern social equivalent of bowling- gather some friends, go play, eat, drink, and laugh for an hour or two. The growth of Top Golf is significantly higher than stodgy rules-laden time-consuming expensive traditional golf.
At the Jan 8 Golf Course Advisory Board (GCAB) meeting, I presented the concept of bringing a Top Golf style project to the City’s Golf Course. At the earlier direction of the City Commission to provide a business plan for the concept, the resulting plan indicates that the additional revenue will provide long-term self-sustainability for the Golf Course. The GCAB unanimously recommended approval to the City Commission.
The GCAB did ask for some additional information which will be incorporated into the presentation to the City Commission on January 21. If approved, the project could begin to be implemented this summer. At least for the Golf Course, the City should be able to adequately respond to the auditors concerns of fiscal stability.