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Thursday, September 13, 2012

 

PHX Munis

 The City of Phoenix has a dilemma regarding its golf courses. And so do I.

The city owns a superb array of courses, playable and enjoyable for skilled players and duffers alike. But they are financially struggling.

The golf courses are supposed to be self-supporting. According to current city policy, green fees and other golf-related income should cover the cost of operating the courses without any assistance from the general taxpayer.

Until about a decade ago, that was the case. Now, it isn’t. The accumulated deficit in the golf fund is now $12.4 million. The annual deficit is around $2.5 million.

Part of this is because the city decided to use golf and the golf fund to achieve social policies.

The Palo Verde golf course used to be private.  In the late 1990s, the owner wanted to develop it, which made the neighbors apoplectic. So, the city bought it and stuck the golf fund with the cost.  It’s been a money-loser ever since.

About the same time, Aguila was built in the southwest part of the city. Aguila is a great layout – a desert golf experience without the target-golf frustrations of many such courses.

But there wasn’t really a demand for a golf course in that area. It was built as an amenity for an underserved part of the city. Again, the golf fund got stuck with the cost of what was really a social policy, rather than a golf, decision.

The purchase of Palo Verde and the development of Aguila were financed through bonds paid off by the golf fund. The cost of doing so explains much of the current deficit.

Still, there are some harsh realities about the golf business that can’t be blinked away. Play has declined as the number of golf courses in the Valley proliferated. At present, there is an excess of supply to demand.

Rounds played at Phoenix muni courses are down by a third to a half. The bonds arguably attributable to city social policies were retired in 2009. Yet annual deficits continue.

The city has appointed a committee to figure out what to do about it. One possibility examined by city staff is to close up to three courses – Palo Verde, Aguila and Maryvale.

http://www.azcentral.com/members/Blog/RobertRobb/172026

 


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