The City of Phoenix’ municipal golf courses continue to lose money. During the 2011-12 fiscal year they operated at a deficit of $2.4 million. Hear from members of an ad hoc committee that has been appointed to search for solutions to the problem.
Ted Simons: Good evening and welcome to "Arizona Horizon." I'm Ted Simons. In 1981, the Phoenix city council decided its municipal golf courses should be financially self-sustaining, so it established a golf enterprise fund. Golf course revenue is deposited into the fund, and golf expenses are paid out of it. But since 1999, there hasn't been enough money to cover costs. Last year, the enterprise fund had a $2 million shortfall. The deficit since 1999 has grown to almost $15 million, and now, the city is looking for solutions to the problem. The city's budget and research department issued a report in May that outlines some options, everything from outsourcing golf operations to closing courses altogether. A citizens committee has been formed to review the report, take public testimony and make recommendations. The committee held the first of five meetings on Tuesday. Here's a sample of the public testimony.
Jana Bommersbach: We don't ask other parks to pay for themselves. The only program we're asking to be self-sufficient is golf, which is really strange to me, because golf is the only recreational activity that we offer that is open to everywhere from children to the elderly. It's the only sport that a grandchild can play with their grandparents without the older person being the referee or the cheerleader. Golf is a game for anyone who wants a fresh air experience that provides good exercise, fun recreation, socialization and a mental challenge and nowhere is this more important than for the senior citizens of Phoenix.
Ted Simons: We'll have more on efforts to solve the problem in a moment, but first, producer David Majure and photographer Scot Olson take us to one of the city's municipal courses.
Man: See? Darn it.
Woman: He had a hole in one on this hole. So pressure's on. That was stinky. Nice shot.
Man: I play at Papago a little bit. Marriott is really nice.
Woman: I come out here a couple of times a week to play and I belong to the ladies club here that plays on Thursdays.
Man: Maryville, here. That's the ones.
Woman: Great day at Encanto golf course. We have a pretty good field it this morning -- this morning. It's starting to slow down a little bit. You come back here at 4:00, we'll have that driving range filled with five, six high schools out here use our facilities.
David Majure: PGA professionals Dianne Escobedo is in charge of golf shop operations for Phoenix's municipal courses. Encanto Golf Course was built in 1935, it's the oldest of the city's six municipal courses and is located smack in the middle of the city not far from downtown Phoenix.
Man: I grew up in this neighborhood. Quite often in high school, we would jump the fence early in the morning and play, hit a couple of balls without having to pay.
Woman: Break, break.
David Majure: Like all of the city's golf courses, Encanto has been struggling financially. Last year, it had close to a $341,000 deficit but it's not alone. Palo Verde, in north central Phoenix had a $259,000 deficit. The Cave Creek course in north Phoenix had a $302,000 shortfall. Maryville Golf Course was short $470,000 and Aguila in south Phoenix had almost a $630,000 deficit. In all, the Phoenix golf program operated at a $2 million loss during the 2011-2012 fiscal year.
Woman: We have an economy that is really hurting us. We have our general economy and then we have our golf economy.
David Majure: That golf economy has become highly competitive. A large number of courses are chasing a limited supply of golfers. They're dropping rates and offering deals.
Man: There is a lot of choices but in the city, there's really not.
Man: My brother learned to play golf at Encanto. He's a scratch golfer. My son learned to play golf at Encanto. He's a scratch golfer. There's no way they could have played golf otherwise. There's no way we can belong to a country club. We can't afford to belong to a country club.
Woman: There's also better deals you can get online like on golf now and stuff. I don't understand why they don't make better prices for city courses because right now, you can golf Carston $25, same price as you can golf here.
Woman: When there used to be a spread between municipal and privately owned public facilities that was this big. When the economy gets bad, that gap really narrows and there's more competition for us.
David Majure: And as the price to play declines, so does the amount of revenue a course can generates.
Man: Seems like it's a six-and-a-half, one half dozen, than the other. You feel like you need to charge more and perhaps fewer people come.
David Majure: Meanwhile, Phoenix is searching for a way to make its golf program more financially self-sustaining. It's an exercise that could result in the closure of one or more municipal courses.
Man: I am -- I just don't want them to close Maryville. You can do whatever you want. Don't close Encanto, and don't close Maryville.
Woman: The city has great programs for golf, for swimming, great programs, dive programs. There are so many programs this city has that don't make money. I just don't understand why golf has to be the program that makes money for the city when there are so many others that are subsidized.
Woman: We walk this tight rope doing the things that parks and recreations is known for, services to the community and we walk the tight rope over here saying we've got to make money and be a business. It's been a hard, hard few years. We did have a good year last year, things are moving up. So we're optimistic. We're still going to try to give the best affordable golf to our clientele, we're here for them.
Ted Simons: And joining me now to talk about the financial viability of the phoenix golf program is James Burke, acting director of Phoenix parks and recreation. Curt Hudek, executive director of the southwest section of the PGA and a member of the city's citizen's ad hoc committee on golf, and longtime valley golf writer Bill Huffman, who co-hosts the radio golf show "Backspin" and writes for www.AZgolf.org, the Arizona Golf Association's website. Good to have you all here. Thanks for joining us. We just kind of got an overview there. Why are these courses losing money? What's going on?
James Burke: It's the confluence of a couple of things. The number of courses and the declining number of golfers, and then the overall economy. Just been a confluence that's come together and we're challenged with dealing with this. We've got a parks and recreation board that's created a citizens ad hoc committee and gone out and created a process. The community come talk to us about how important golf is to them and what they think the idea are.
Ted Simons: As far as the ad hoc committee is concerned, what is the committee charged with? What are you hearing so far?
Curt Hudek: As a committee member, we've been charged with looking at the operation of the golf courses and how does it fit the current economic environment? It's very interesting to think this enterprise fund was created in 1981 and 1982. There's been more than 100 golf courses built in the valley since that time. Competition has increased significantly but as a part of the ad hoc committee we're reviewing current operations and listening to public opinion and what we're finding out is there's a financial look, there's a significant emotional and social tie to what happens at these facilities.
Ted Simons: Give us an overview, what you're seeing going on out there and where the city can go from here.
Bill Huffman: Well, I know Jim's not going to like this. I wrote an editorial today that was the city should get out of the golf business basically and the reason they should is because golf nowadays, to make it at your golf course, it's such a fine line. Two, three, 4,000 rounds can make the difference between making money and losing money and if you look at the city's course numbers, there are five major golf courses, not Palo Verde, but the five major gold courses, they average 44,000 rounds of golf last year on each one of them. Cave Creek being the high, 57,000, and Maryville being the low at 35,500. If you make those kind of numbers, they say in the business if you can do 40,000 rounds a year, you should break even, okay? Then everything else is kind of gravy. And, you know, according to these figures, they should be doing a little better. I think that there's some stuff that they probably get hurt with like maintenance and stuff like that, they probably have a maintenance bill that's quite a bit higher. But their water isn't really -- it's not higher, it's usually lower than other golf courses in the valley. And they don't pay a mortgage payment. So these golf courses are pretty much paid for.
Ted Simons: Respond to that.
James Burke: Sure, I think the figures are probably right. Also, the market. It's who's coming to the municipal golf course? It's not north Scottsdale residents, it's not the country club set, it's the entry level and they're not doing as much food and beverage as they might be doing at other pay for play courses, buying a hamburger for lunch or staying around for a meal. There's a combination of things that are happening there. Sure, price model for city employees might be a little high but we're down 12% maintenance on our courses. We're also dealing a lot with the part-time staff. We've been cutting costs and trimming as much as we can. It's the revenue coming in that's really not been where it has been before.
Ted Simons: What about green fees? Are they much different, than what folks can find elsewhere?
James Burke: What we saw in the last couple of years is pressure, there were days when you can play it for almost the same. People have an incredible array of choices. They can make a choice. Sometimes they haven't chosen us because they wanted a variety of experiences.
Ted Simons: If that competition is out there, if those choices are there, is Bill right? Should the city look to get out of this particular enterprise?
Curt Hudek: It's more than just the dollars and cents commentary. It was created to provide affordable entertainment for the citizens of that community and I think in that model at that time, there was no intent to make money off the provision of that activity. It was really to provide something for the citizens to participate in. So certainly, bill makes a good point at 40,000 rounds, could you make money? The city runs a golf course a little bit differently than a private sector where that's all I do. If all I do is run golf courses, I'll get pretty good at it. I think they've identified a couple of key areas where they can show some significant improvement in their operation and make all of these golf courses if not completely viable, at least palatable to the costs.
James Burke: It's an option that's on the table. The suggestion has been out there, vetting that as an option. We're open minded to that.
Ted Simons: Other options out there, everything from closing the courses to closing them for a few months in the summer to reducing the hours of operation, turning one into a park, there's a lot of ideas out there. Any of these things viable?
Bill Huffman: Not really. The only two options that you have I think that are going to work is the city can keep operating the golf courses and take the loss and put it on the general fund and say this is the price we pay to have our golf, our recreation, to help juniors, to help seniors keep the costs low and just, you know, basically eat the cost. Or you put it in the hands of a private company like a Truman golf, blue star golf, where they really -- it's like science for them where they just bring it all down to numbers. They know right away what they're going to do and I think the other thing that if the city would keep the golf courses or if they give them away, you've got to market these golf courses. They don't get marketed. That's one of the big problems. People don't know what a good deal they are. Right now, it's probably one of the top five golf courses in the city, top 10 in the state in terms of the conditioning, what they did with the renovation. I know there were some problems and it's taken them a while. The numbers themselves, 39,000, that's way low. Should be doing more like 60, 70,000 rounds of golf. If you put all those things together, you've got a lot of options here but you only have two solutions and that's let the city keep the golf courses and take the loss or give them to the pros.
Ted Simons: I am one of those guys who's put those numbers up there. I love that golf course and it is in great shape right now, could use a clubhouse. Are private courses, the other public courses, is golf in general just suffering right now and you need to live through this or is this the time to make change?
Curt Hudek:I think without a doubt, the economy has had a significant impact on the amount of people that play golf and not only that, do they buy a hamburger and a sleeve of balls and the ancillary money that they spend? All that is at an impact. So I think there's some recovery there. I know Bill speaks specifically about the last 90 days there are significantly up over a year ago and they're very pleased about that. There is some recovery but as Jim mentioned, I think everything's on the table. We're interested in looking at all the solutions.
James Burke: And as we mentioned earlier, we did provide a different market. We have 6,000 youth that come to our golf program to get lessons. We have 19 high schools that use this as the home court. That's an opportunity for people. It's not welcome or available on every other course in the community. And, you know, the price and the cost, we've met with private sector golf operators and we've looked at their cost models and they might be lower but the balance is pretty close to what it is. Their ability to deal with the fee and the revenue is what's different and there are other revenues that are taking in, food, beverage, clothing, golf balls, clubs and we do a ton of marketing. We can always do better. We can learn more. We're out there marketing all the time and to people like spring training guests who are trying to get the new people to come to town and we're open to any kind of new trick. We'll try them all.
Ted Simons: The idea, though, we heard at the ad hoc meeting there, the idea that golf as opposed to softball and the library and other amenities, the idea that golf is supposed to be self-sustaining, is that fair? Should that model --
James Burke: I don't know that it was in 1935 to 1981. The city provided courses and it wasn't an enterprise fund. That was created at the request of the golf community and Phoenix wanted to protect the revenues. So it's an interesting question.
Curt Hudek: A decision that was made in 1981, that's around the time, I don't know who made the statement we need to build a golf course every day for the next 20 years just to keep up with demand, that just didn't happen. So we built more golf courses in town than we needed for the current population. For 10 or 15 years from now? It might be the right amount but that's a long time to wait.
Ted Simons: Indeed and it doesn't sound like any of these options will square things away soon. Economic recovery is not expected to recover costs. 40% revenue growth in the next year to come close. To break even. With that all in that mind and from a bird's-eye here as someone who looks at the industry as a whole, are fewer people playing golf? Are there problems with the time it takes to play, the equipment, the average golf score has not improved over decade. What's going on out there?
Bill Huffman: There are fewer people that are playing because they can't afford it and because they don't have the time to afford it. And, you know, if you look at the whole situation in Phoenix, there was a time in Phoenix in the '90s when the golf program actually subsidized other programs. So they were doing numbers that were significantly more than these numbers. And there's been obviously a lot of golf courses built here and we probably have 20% too many golf courses. In the city, we probably have 33% too many golf courses, if you just had the 4 main ones and had not two others, wouldn't be quite in this situation because you added all those options, all those rounds in there, to kind of spread it out and we're counterproductive. If you look at who's making money right now in the country, the only real municipality west of the Mississippi is San Diego. And the reason they're making money is because they have torii pines, they have Coronado and Balboa Park and it's a numbers game. Here, you have to make one a flagship and let them all crews with it.
Ted Simons: We have to stop it right there. Let's hope things turn around, at least for us golfers. Good to have you all here, thanks for joining us.