City of Lawrence

Parks and Recreation Department

MEMORANDUM

 

TO:

Mike Wildgen, City Manager

Debbie Van Saun, Assistant City Manager

 

 

FROM:

Fred DeVictor, Director, Parks and Recreation Department

 

 

DATE:

December 15, 2004

 

 

RE:

Proposed green fee increases for Eagle Bend Golf Course for 2005

 

 

  

Introduction

Today we have a more accurate accounting of rounds played and revenue generated at Eagle Bend Golf Course for 2004 then we had during the 2005 budget process this past spring.  We have used this information, together with actual history from 2003, in an updated review of our golf revenue as it relates to fees for 2005.

 

Analysis

In 2003, golf rounds (32,694) and revenue ($896,158) were down 9% from 2002. Expenses for the golf course in 2003 were about $1 million.  In evaluating our prime months for 2004, June was a good revenue month, however, in July and August we had seventeen days (eleven of which were Fridays, Saturdays or Sundays including the July 4th weekend) that the course was either closed or play was affected dramatically by inclement weather.  There were six days affected by rain in September and October, including the Labor Day weekend.

 

Total 2004 revenue through December 15 is $910,034, which is almost $14,000 ahead of 2003 revenue.  Unfortunately, year-to-date revenues are not meeting budget estimates even with our marketing plan, which was implemented this year to heighten public awareness of Eagle Bend.  As you may recall from previous reports on the status of the golf course, the competition has increased in the metro area with the addition of numerous new courses.  This increase in competition for the “golfing dollar” is coupled with a sluggish economy the past several years, directly affecting the amount of play at Eagle Bend. See the attached Golf NewsLinks article “Why Golf Courses are Struggling” (fall, 2004).”

 

According to the National Golf Foundation, operational expenditure in the Midwest for a municipal golf course ranges from $762,300 to $1,372,600. Note that these numbers do not include debt service. Excluding the expenditure for bond and interest, the operating costs at Eagle Bend in 2003 was $667,771.  In 2004 we reduced budgeted expenditures by over $152,000, bringing the anticipated expenditures to about $725,000 less bond and interest.  It is clear that we are operating Eagle Bend on a reduced budget, although to date we feel customer service, condition of the golf course and overall customer satisfaction has not been negatively affected.

 

We initially recommended a $.50 increase in green fees for 2005, based on a projection of 35,000 rounds.  Given further analysis, we don’t believe such a small increase will generate enough revenue to support our operation in 2005 based on a more realistic projection of 30,000 rounds.  The gap between expenditures and revenues in 2003 was $109,000.  We are estimating another gap in 2004 (please see the attached fund accounting that has been updated with some adjusted revenue and expenditure estimates for 2004).  We would recommend increased revenue of about $50,000 in 2005 in order to have a more fiscally sound operation.   

 

Options

Using a revised estimate of 30,000 paid rounds with 60% of 18-hole rounds played on weekends (15,600 rounds) and 40% played on weekdays (10,400 rounds) we provide the following options for comparison:

 

o       $4.00 increase to $24.00/18 holes on weekends = $62,400 revenue increase

o       $3.00 increase to $23.00/18 holes on weekends = $46,800 revenue increase

o       $2.00 increase to $22.00/18 holes on weekends = $31,200 revenue increase

o       $0.50 increase to $20.50/18 holes on weekends = $7,800 revenue increase

 

Utilizing the $2.00 increase as a model for 18 hole rates, and a $1.00 increase for 9 hole rates, we estimate the following additional revenue:

 

·         15,600 weekend rounds x $2.00 increase for 18 holes = $31,200

·         10,400 weekday rounds x $2.00 increase for 18 holes = $20,800

·         4,000 weekday/end rounds x $1.00 increase for 9 holes = $4,000

·         total potential increased revenue = $56,000

 

We would need to factor in the percentage of golfers we could potentially lose with fee increases. If we lose 10% of golfers from these fees based on the aforementioned increases we could possibly generate $50,400  from green fees in 2005.

 

Recommendation

We recommend $2.00 18-hole green fee and $1.00 9-hole green fee increases for 2005 rather than the previously requested $.50 increase.  Based on our experience the last year and a half, this $2.00/$1.00 increase in revenue coupled with streamlined expenditures, should help us get closer to a more fiscally solvent enterprise fund.

 

Initially one of the goals of the City was to provide affordable golf to the Lawrence community and area.  We feel we are continuing to meet that goal while maintaining a positive golfing experience/facility for our customers.  However, our circumstance requires us to request higher fees.  The recommended increase would make our fees more comparable to area golf courses (see attached table of area fees).

 

Conclusion

In closing, we would remind the City Commission that the public golf program is not the only community recreational program that is not funded 100% by user fees.  Our aquatic, youth, or special populations programs, to name a few, are funded in the Recreation Fund.  About 50% of the total revenue for that fund comes from sales tax and property tax revenue.  While it is a goal to establish the Golf Course Fund as a self-sustaining fund, until the debt is paid and/or the participation levels increase, it will be a challenge to meet that goal.    

 

c:       Ed Mullins, Finance Director

         

att.     Golf Newslinks article

          Public Golf Course Fund accounting – updated

          Table of area golf course fees