Rockville's RedGate Golf Course a loser financially, consultant says
Privatization of management an option to make course viable
Rockville's municipal golf course, which posted an accumulated deficit of $1.1 million between 1999 and 2009, might never be able to make enough money to pay for its employees without a subsidy from the city.
Monday, a consultant for the National Golf Foundation explained to the City Council that while salaries and benefits enjoyed by course staff are not uncommon for municipal employees they are ill-suited for the golf business. The presentation from Richard Singer was based on findings from a $25,000 city-commissioned NGF report released last week.
His suggestions to make the course self-sustaining remain the same as what is written in the report: privatize management of the golf course and make major infrastructure improvements.
"This is one of the highest overall expense structures I have ever seen in 20 years," Singer said. "With the inflation you have [in personnel costs] you may find that you are right back to where you started from three or four years from now."
Redgate's annual expenses are $1.3 million for fiscal 2011; $1 million of that is paid for by course users and $300,000 of it is subsidized from the city's $105 million operating budget.
The course's $830,700 in personnel costs would be eliminated if course management is privatized. That would be replaced by a fee paid to the management company with the savings in fiscal 2012 estimated at about $200,000.
Singer attributed the high personnel costs to the benefits enjoyed by RedGate's six person full-time staff, pension costs that remain from long-retired golf employees and how much the golf fund is charged for administrative fees from the city. The city charges the golf course for the use of resources such as personnel and information technology labor.
These benefits are slightly better than those enjoyed by Montgomery County Revenue Authority staff, who operate courses that compete with RedGate, Singer said. The authority turned a profit on its nine courses in fiscal 2010, earning $768,382.
"Rockville is in the golf business," Singer said. "It is a tough businesses to be in and different that it was even five years ago."
The council has been having discussions for years on what the city should do with the 18-hole, public golf course Rockville has owned and operated since it was built in 1974.
Susan Prince is the president of the West End Citizen Association. She spoke at Monday's meeting as a private resident and on, Tuesday, said she saw privatization as a drastic measure. She said the city should consider creating a director of golf position, a person who would run the course like a business.
"I just feel like there are steps in between keeping things the way they are and going straight to outsourcing," Prince said. "I just hate to see us give up control with out trying some other things."
The problem some see with privatizing management of RedGate is that the city would lay off its RedGate staff. Although they might be rehired by a management company, it could mean a reduction in pay or benefits for those employees. Singer said what often happens is a shift from a pension plan to a 401K and a shift of employee pay from a guaranteed to a performance based or "at risk" basis.
These, Singer said, are the hardest policy decisions to make.
"No one on earth knows your golf course better than your superintendent," he said. "The management company will recognize the value of your staff but this is certainly the most difficult part of this."
Suggested improvements, such as replacement of the course's greens, would require closing the course for an entire season. Other improvements such as cart path repairs, additional beverage cart service, adding a tournament pavilion and increasing the number of tournaments played on the course require less drastic measures, Singer said. The estimated cost of all the improvements is more than $1 million.
"If you closed the facility down, made all the improvements and had a grand reopening it could have a real bang," Singer said. "But I hesitate to ask municipalities to make large investments in their courses because we are often asked to come in after a large investment has failed. You have to look at the cost of the investment plus the loss of revenue."
Singer told the city to only worry about things it could control. Using that as a benchmark, Singer said the city failed the course most in its lack of marketing and lack of infrastructure improvements. Recreation and Parks Director Burt Hall admitted the city has asked the course staff to do more with less.
"I would agree that [RedGate's staff] does an excellent job with what they have," Hall said. He went on to say the staff has a list of what they want to accomplish but that list is often shortened by their resources.
Singer emphasized that what he has seen with RedGate, he has seen in other municipalities.
"It falls out of a traditional [municipal] management structure," he said. "A generation ago, all you had to do was open the doors and enough people would come that the numbers would work out."
RedGate averaged 60,000 golf rounds annually in its height in the mid-1990s. Those numbers now are about 35,000 per year.
The City Council is scheduled to discuss the report at its Feb. 7 meeting. Before a management company could be hired, the council would have to initiate a request for proposal process. Singer suggested the city hire a company at the end of the 2011 playing season.