Does It Matter If Golf Is Self-Sufficient?

Discussion in 'Sun City General Discussions' started by BPearson, Nov 20, 2021.

  1. BPearson

    BPearson Well-Known Member

    The other day following the board meeting i approached the gm and had a discussion regarding golf. He pointed out to me some oblique nonsense about it was never intended to be. Then he shifted to so what if it isn't? What's the difference if it's a couple of million dollars in the red every year but we still maintain a million dollar overage by the corporation as a whole? Fair question and he had to leave before i could answer.

    So, let me do that here. We now know the exiting gm wrote by-laws that gave her absolute authority. But wait you say, there's a budget and finance committee, there's a board for oversight. Yes there is, and i defy, challenge any one of them to tell me how much money golf spent/lost over the last 15 years?

    They simply can't. The numbers posted to the RCSC site and distributed to the committee and the board never showed those cumulative losses in one area (golf), they always dealt with the overall financial picture of the corporation. In fact, what we always heard from the gm was a statement all departments are operating within their budgets. On occasion a department would miss expectations and there would always be a reason, most often weather related.

    The problem of course is budgets tell us nothing. They were just the figures the gm predicted they would reach by years end. There was no accounting for what they spent versus what they took in. The board viewed it a bit more pragmatically; will i have to raise the lot assessment and if so, how much to cover the increases? Members tended to view how the board was doing by how much the increase was, or in several years wasn't.

    All of which fits in to Bill Cook's narrative; what's the difference as long as we keep the cost low? That is a very simplistic argument and without doing a deep dive, we miss the proverbial forest through the trees. This is getting long so i will break it off shortly and come back and revisit why it matters/mattered.

    I will tell you, i have had these discussions with board members who have filled more than six years. I have told them point blank the gm was spending bushel baskets of money over and above on golf. Their answer was always to point to the money spent from PIF and how little it was compared to the amenity side. All i could do was laugh...and in the next section i will tell you why.
     
  2. BPearson

    BPearson Well-Known Member

    A couple of years back, might still be posted (nope, it's not), it showed a break down of PIF between what was spent on amenities and what was spent on golf. It came in under 100 million with 23 million to golf and and something in the neighborhood of 50 - 60 million for amenities. Better than 2 to 1, which made sense. The existing board would always tell me that was proof that golf wasn't draining the community of needed assets.

    It was hopeless to argue because they would flash the numbers the gm gave them. It mattered not that i would tell them the gm rolled golf course maintenance buildings into the amenity side. I have never figured out if she did the same with pro shops, snack shops and outdoor patio areas. They never showed the composite total for each project and where it was allocated. It didn't matter really because the PIF was literally a freebee. It was silly to not show the expenditures where they belonged because it simply didn't matter; PIF was passed to upgrade and update the amenities as they aged. Golf included. Not allocating expenses where they belonged was more about appearance.

    My problem was of a more practical nature. Over the years, through discussions, i came to understand the gm had been spending money from the capital projects budget and not adding them into overall expenditures to keep golf revenue neutral. When i would tell board members that they acted like i was crazy. Then in 2019 i saw golf lost 600 K. What i had long expected suddenly became crystal clear. No one from the board or management really cared what we were spending or losing for golf. Everyone was focused on rounds played; which means virtually nothing if you sell rounds for half of the true cost.

    It all made sense when i heard the exiting gm say golf had no obligation to be revenue neutral. Then to no one's surprise the new gm parroted it. They made a nonsensical argument the agreement that everyone knew said it had to be self-sustaining was really never intended to say that. Even though in 1975 the RCSC board president told the community the courses were purchased under those terms and conditions.

    The real question we need to explore is why this matters; and i will. The challenge is i don't want to guess they spent a million dollars or more a year than they took in (frankly i think it is higher than that). It is why i have requested the information from the RCSC to be able use accurate numbers when i have the discussion with you. The new GM asked if thought golf should go away. Not even close and in fact a lazy man's argument.

    I know golf is a critical aspect of the Sun City way of life. We are golfing community and in all likelihood will continue to be for years to come. The real question for everyone is this: At what cost are we a golfing community, not just on the expense side, but also when we don't have the money to do the things that should have/need be done. We'll look at that next.
     
  3. FYI

    FYI Active Member

    I find that to be an interesting statement! Kinda makes me wonder why Bill Cook, who was already an RCSC employee, suddenly was determined to be the best candidate to replace the retiring GM?

    I have heard from someone who was involved in the interview process that Mr. Cook was not necessarily the strongest or best qualified candidate for GM.

    Could it be that when the exiting GM locked herself away to fiddle with the numbers every year that Mr. Cook knows where all those skeletons are buried? What better way to keep your secrets hidden?
     
    Poison_Ivy likes this.
  4. SCR

    SCR Active Member

    What year might you be talking about that the breakdown of what was spent on amenities and what was spent on golf?
     
  5. BPearson

    BPearson Well-Known Member

    That was the rumor FYI, but who really knows? Bill Cook will either try and change things or he won't. I suspect if he doesn't the challenges will be plentiful.

    I want all 15 years SCR. We, the community needs to know how much money has been spent on golf that was hidden from us. Tomorrow, i will show you why.
     
  6. BPearson

    BPearson Well-Known Member

    Damn, woke up around 2 am wondering how to layout the rest of the story. My mind works in strange ways, so i elected to step back a couple of years when the Sun City softball club made an aggressive push for a new building. At that point the old one had only been broken into 3 times (i think they are at 5 or 6 times now). I was on the long range planning committee and still a regular attendee of board meetings.

    Their pitch, pardon the pun, was for a safe and secure clubhouse adjacent to their field. As i chatted with players after meetings i warned them; "don't let them ship you off to the long range planning committee; it's where great ideas go to die." Unfortunately at the next meeting that's where they were sent. It got stuck on a plan well into the future. They made one more plea for it to be done as a yearly capital project. That was quickly shot down when one of the board members told the assembled crowd if they (the board) was to do that, it would cost card holders $25 to $45 more per year added to their lot assessment. It was pure BS. I wasn't at the meeting because by then i had quit the LRPC, but as i watched it, i was hollering at my screen as to the utter nonsense.

    So, what is the point? We, the community, have been led to believe golf was self-sustaining; or at least very close. We already saw above that PIF monies had been dumped into golf with no bill back factored into the calculation. Those numbers are somewhere between 35 and 50 million dollars (a higher point if put all of the money spent on golf buildings into the equation or if you use the exiting gm's silliness that carves them out).

    What i am looking for over the past 15 years is how much shortfall there was in the golf budget. I know in calendar year 2019 they lost 600K and with the two years before that, the number grew to well over a million dollars. I also know the request from capital projects for 2020 for golf was over a million dollars (that would be the same account the softball players were asking for their building to be built from). For those failing to connect the dots, if the softball club house was going to add $25 to $45 per year to the lot assessment, why wasn't a like amount for golf course enhancements having the same impact? Did i mention BS?

    I don't want to argue minutia, it is too easy to get lost in it. What i want is access to the real numbers spent/lost over and above PIF for golf that wasn't billed back to assess the yearly rates. Now that i know where to look, it's pretty simple. I basically need two sheets from each of the 15 years. I don't want to guess at numbers, that's not fair to anyone. And so we are clear, there are at least two more aspects to this discussion that i need lay out so you all understand why the choices made were so devastating.
     
    Poison_Ivy likes this.
  7. BPearson

    BPearson Well-Known Member

    Let's look back before we look forward. There's nothing we can really do about it but learn from it. In 2012 and 2013 the Lakes Club became available. Hell, we toured it and the assessment was we could buy it and remodel it for under 10 million dollars. Don't get me wrong, lots of money but it was 38,000 square feet situated on one of the most gorgeous settings in all of Sun City. Carole and I literally begged the the board and the general manager to let us have a town hall meeting to discuss it with the community.

    It was not to be and for many of you reading this, so what? There was actually a theater already there (Theater Works) used it when their original location burned down. Had we bought and remodeled it, we wouldn't be looking at the 25 million dollar Taj Mahal at Mountainview. The Players wouldn't be out of their space for several years while it was being built. The entirety of the corporate offices would have been moved there and we wouldn't have some crazy idea of building a free standing corporate building. Card clubs could have had dedicated space with set up and take down they do in social halls. We could have had dedicated space for life long learning that actually met their needs.

    So, why didn't it happen? The board was predominantly golfers and the gm's agenda was golf. PIF was about 6 million for the South course, 6 million for Riverview, 8-10 million dollars at Willowbrook/Willowcreek and other assorted issues. What i never knew was how much money above and beyond PIF was being shoveled off into golf with no accountability. I knew there was some, now my mission is to find how much? If it was a million a year, that 15 million could have done lots of things we ignored. If it was 2 million dollars a year, that 30 million would have had us sitting on top of the world.

    Think about it: owning the Lakes Club, investing in technology and security, built another 20 or more pickleball courts to get us into the per capita area of other age restricted communities. We could have afforded all those things but more importantly we wouldn't be looking at the massive costs staring us in the face today. Sun City would have been perfectly situated to deal with all of the challenges coming at us.

    Next up, we will try and look forward.
     
  8. CMartinez

    CMartinez Active Member

    https://images1.loopnet.com/d2/lJwoH5-filkk_NH40rFtvYEo5dQfgvxZ_rN8zP1vCaI/Lakes Club Brochure.pdf

    Since I do not know how to insert a link on TOSC, I did my best to attach the URL for the Lakes Club above. It is currently leased by the Core Institute, with Healthcare Trust of America Owning (HTA) the property. No, I did not do this as a way to rub anyone's nose in anything, I did it so everyone could get a look at the property as well as see the potential value for the community. HTA must have an idea of what the porperty ios valued at and what kind of price they would find enticing enough to ask the CORE to move.

    As a matter of fact, HTA currently has an available 11,306 sq foot property attached to Banner Boswell that is vacant and available for lease. Perhaps this property location could be more attractive to the CORE and save them some of the walking trips they make back and forth across Thunderbird. The link for the Cardiac Care Property is https://looplink.htareit.com/Listing/10415-W-Thunderbird-Blvd-Sun-City-AZ/23656657/. Always looking for an opportunity to get another chance at the Lakes Club for the membership. It was an opportunity squandered away by the GM, but that doesn't mean the membership can't look at another opportunity to garner it as a place for meeting so many needs.

    Sorry for the intrusion, I saw this as a chance to possibly set a relocation for the CORE, have them be within the hospital facility, and free up the Lakes Club once more.
     
    Poison_Ivy likes this.
  9. OneDayAtATime

    OneDayAtATime Active Member

    Great idea Carole!! Just makes so much more sense than spending so much money to build a "state-of-the-art" theatre and "resort-style" swimming pool. I'm all for the theatre for the folks that have asked for it forever; but they just won't tell us how much the theatre alone is going to cost. Since the swimming pool that is there now is so loved, just make room for another pool. Or, better yet, go back to the drawing board and have lots more town halls and rethink the whole project!
     
  10. BPearson

    BPearson Well-Known Member

    Before we look into our future, let's visit the here and now. I learned a very basic premise over the years, whether it be at work, at home or as a volunteer for countless organizations: You can't fix a problem if you refuse to acknowledge it even exists. Seems simple enough right? Just admitting we have to deal with it at least starts us on a path to fixing it. Sadly, the RCSC has spent the last 15 years pretending there was no problem

    Think not? When confronted with the fact the golf courses needed be self-sufficient, we saw all manner of excuses and push back. I won't recap but the way they were diving through their ass was embarrassing for anyone who has lived here and knows what the deal was (and still is). In fact, what the charade tells me is, they have no interest in addressing the problem, ignoring it is way easier.

    Here's the reality. Look back two board meetings ago when i confronted the board/president about the motion regarding approving the budget and finance committee's recommendation. I asked specifically about the golf rate increase and she told me that wasn't what the motion was about. Yikes. Then someone jumped in and attempted to bail her out by telling her it included a $1 increase on full play rates to outsiders; which she quickly agreed is what it said. Then the director of golf had to get up and clear everyone's comments up and tell them, no, the $1 increase was for all full play rounds no matter where they lived.

    So what does that prove? They have no freaking clue. They don't know how much money golf is losing, they have no idea what the $1 increase will do, and frankly, it appears they don't care. But why should they if they don't understand how much golf is costing the community every year? If the management and the gm has not showed them over the past 15 years, why would they now suddenly grasp it?

    Here is what we found out over the years regarding golf; when you raise the price for a round of golf, people play less. It's simple cause and effect. It's true in almost every retail setting. The goal always is, if you are to raise prices, they can't be so much so as to lose sales when you do. Let's stay with the analogy but looking at the full play and surcharge play (which is better than half of golfs revenue). If you owned a liquor store and sold a case of beer for $10 but you were paying $20 for it, how would that work out? You could try and make it up by selling half of it for $40 a case, but guess how that would balance out?

    I know, we're not a retail business, but it is the same principle. The problem is over the past 15 years (or more), we have been pretending golf was self-sufficient. We have been measuring our success by the total rounds played per year and not whether those rounds covered the actual cost of owning and running a golf course. In fact, as we made the gimmick's (full play pass or surcharge pass), more attractive by raising the cost on people paying the going rate, those buying the cheap golf rounds propped up the actual number of rounds played per year...which made golf less able to pay for itself.

    Basically what i am telling you is the motion they passed this year regarding the increase in golf rates does nothing to fix the problem. Worse yet we have the pandemic year stats that gave us an artificial reprieve, which only further buffers the need to do something. In the next post i will extend this out over 15 years so you can see just why we need to get our heads out of our ass and be realistic.
     
    aggie likes this.
  11. aggie

    aggie Well-Known Member

    It comes to mind that years(& years) ago I wrote to the Board about just this issue. We loved to golf with friends a couple times a month. When the cost for our occasional per round of golf kept increasing it no longer became affordable for us and keep up with other activities that required additional payments such as bowling. I tried to tell the Board that they were unfairly pricing out the occasional RCSC Member golfer while giving undue pricing breaks to yearly golf play passes and outside golfers.

    I asked if they remembered that game that came with the first home computers "Lemonade Stand". The goal of the game was to price a glass of lemonade to make the most profit. Lower prices make you more money but you had to cover expenses. The occasional RCSC Member golfer should not be bearing higher costs while yearly pass holders and even more so the non-resident pass purchasers reap the benefits of cheap golf fees.
     
  12. BPearson

    BPearson Well-Known Member

    Thanks aggie for getting it. Pretending that golf is self-supporting by letting people play for next to nothing and then asking the casual gofer to subsidize them is flat out crazy thinking.
     
  13. BPearson

    BPearson Well-Known Member

    Every forward thinking organization or corporation looks to the future. 5, 10, 15 or 20 year plans are what helps companies set themselves up to be successful. It's what has always driven me crazy about the RCSC, our long range plan typically became whatever the whim of a board member was, an angry group of residents were clamoring for, or worse yet, what the gm wanted. It was literally painful to watch. We had so much money to work with and so little effort put into a cohesive strategic long range plan.

    At one point the chair of the LRPC asked us to put together a commentary regarding the next generation of home buyers; Generation X. We did and it was pretty good. It's still online, you can read it here. Generation X are just now starting to reach their golden years (this year in fact).

    If you don't want to read it, what you should know is Generation X will come with different expectations. The short summary is this: They will be working later in life, retirement will be tough to come by. When they come, they will expect technology to be a high priority within the community. Finally, we know with less disposable time, golf will not be their activity of choice. Too much time and too much money. This isn't rocket science, it's just trends, and they tend to dictate our future.

    Obviously the board didn't pay too much attention. That's not uncommon. If there is a silver lining, Bill Cook's presentation at the last board meeting was a positive. While some of the stuff on it is window dressing that will never materialize, we at least are thinking on a different level. I know part of it was a sales pitch for the importance of increasing the PIF, but was still an important piece of work. I keep looking to see if it has been posted online, but if you click on the long range plan under our financials, nothing happens.

    Let's get back to golf and why becoming revenue neutral matters. BTW, i picked up some of the records i requested, nowhere near all i need, but it is a start. They did give me 10 years of Capital Budgets (i asked for 15) and there were no financial summaries of year to year expenditures for golf. As i quickly looked through them, i realized i would need the PIF expenditures as well. I know where they spent monies on golf courses and want to see if they show up and how.

    I digress; what we do know about golf is they are losing a million to 2 million dollars a year. We know the cost of everything golf related will be increasing in staggering dollar amounts (as well as everything else due to inflation). I don't want to argue over whether it is 2% or 4% or 6%, let's just agree everything will cost more. What we also know is the anomaly of increased rounds of play during covid19 is over. They are already telling us to expect a drop in play. I suspect it will be dramatic. We also know, as they increase the cost for play for single rounds of golf, they will either push people to buy the gimmicks or to play less. We also know those buying here (2000 homes per year), will be less likely to play golf than those coming before them.

    None of that bodes well, but it gets worse. We know Viewpoint lake needs to be repaired. They are projecting 6 million dollars, i suspect when all is said and done it will be closer to 8 to 9 million. We also know according to the agreement for golf to be self-sustaining, half of that cost should be billed back to golf. We also know they will continue to tell us that agreement doesn't mean anything. We also know they are projecting 17 million dollars to deal with the conversion to desert landscaping on all of the roughs still on golf courses. I suspect that price too is about 3 million dollars short.

    To summarize, virtually everything about golf tells us, costs (both PIF related or yearly shortfalls), will be butt ugly. To make matters worse, rounds of play will continue to diminish and if they stay true to their solutions, they'll try and fix it by increasing the rates for those who play minimally. All of the above is the recipe from hell and it appears if the only ones talking about it are us.

    All tragic, but there may be a bright spot, stay tuned.
     
  14. BPearson

    BPearson Well-Known Member

    If you haven't figured it out, i am analytical to a fault. I pay attention to the stuff most folks could care less about. At coffee yesterday with my friend Ben (who has many of the same problems), i asked him if it was a blessing or a curse? Perhaps it's better to ignore it all and just not care. Unfortunately, that's not how either of us are built.

    The good news i mentioned above is really more of a "fix" that will happen over the next 5 to 10 years. And, it's not really a solution, but more perhaps a reprieve from the inevitable. We know the issues coming at us in 2025 regarding less water per golf course can be summarized this way: You can have enough water to keep your tee boxes, fairways and greens watered. The rough areas will need to be converted to desert landscaping or die and go to dirt. The RCSC has already stared throwing conversion numbers around in the 17 million dollar range. It will be higher but those numbers alone are staggering.

    We know this problem isn't universal to the RCSC. Every course will face it, whether the phase in is 1 year or 5, no one knows. The good news is, we potentially have the resources to make the conversion. The bad news is, the 3 private courses in Sun City won't. In fact, with a conversion figure in the conservative range of 2 million dollars, that will be on balance what the owners of those courses paid for them. More daunting is each of them is lucky to break even now, so what happens when the state tells them they don't get enough water to keep the courses green and to cough up 2 million dollars?

    I've written this several times and i never makes friends when i do. The challenges they face will be exacerbated by the fact the land they own is worth 10 or 15 times what they paid for them. A 2 million dollar golf course when used for golf is all it is worth. A 2 million dollar golf course to a land developer looking to build high end condos is worth 20 or 30 million dollars. You do the math, put yourselves in the private country club owners shoes and what would you do?

    If you have followed golf over the last 20 years, you know we over-built courses. All through the last half of the 1900's golf looked like the sport that couldn't wouldn't fail. Sadly, little is forever. Since the early 2000's courses have been closing around the country. Often lot owners on golf courses waive deed restrictions around and say, we will sue. Golf course owners have found the way around it by simply shutting the course down, fencing it and letting it turn to seed. The courts have most often ruled you can't force them to run a non-profitable business.

    The jungle in people's back yard becomes an eye sore and inevitably a settlement is reached where lot owners abutting the course are paid the premium they paid for the home and the lot. Sometimes an agreement includes a dedicated green space, a buffer between whatever they would build on the course. In Sun City, there is no more land for development, other than these private courses, and if you paid any attention to the KHov development next to the cemetery, those 140 home sites sold quickly. People want new homes and are willing to pay for them.

    If and when that happens, we will eventually lose 3 courses in Sun City. It will drive more golfers to our RCSC courses and the number of new homes will also provide additional revenue, both in added PIF collections and additional lot assessments. BTW, new developments have to buy into usage of Sun City amenities above and beyond the current $3600 PIF. The developers buy-in is $5000 per unit. A huge windfall somewhere down the road.

    Hopefully all of the above will cover the reduced numbers of golf rounds played per year. In that we are years down the road getting there we simply must start balancing our books when it comes to golf, or at least trying to break even. We cannot afford to sell golf rounds for $5 or $10. It just doesn't work. If it did, then the RCSC should immediately start a national advertising campaign promoting the cheapest golf in the southwest: "Buy in Sun City and Golf for as little as $5 per day."

    There are challenges and changing coming to Sun City. Carole and i begged the board and management to start talking about them 10 years ago. Rather than listening to us, they went the other way. The board gave management all of the responsibilities and shut the community out. Just the opposite of what they did the first 45 years.
     

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