Golf course to take a fresh swing at funding
One might say it's just par for the course.
One might say it's just par for the course.
After several years of decreasing memberships and increasing debts, Perham's municipal golf course, Lakeside Golf Club, is now faced with the task of finding new ways to stay in the black.
Lakeside has managed to break even in recent years thanks to generous private donations, but this temporary fix has merely served as a band-aid over a problem that isn't going away. City leaders and the golf club board are now proposing a more sustainable solution that does not rely on donations to make a balanced budget.
City leaders discussed the course's funding challenges at a meeting last week.
"I've watched the struggles and...have seen this coming," said Perham City Councilor James Johnson, who is the council's liaison with the golf board. "There's been a definite decision made (by course leaders) to quit kicking the can down the road and start dealing with the problem."
The problem, simply put, is a waning participation in golf, coupled with the cost of maintaining Lakeside's 27-hole course. To make matters more difficult, the club owes more than $184,000 per year in debt payments (its annual operating expenses are roughly $675,000).
Lakeside's not alone in this situation. In a letter to councilors, City Manager Kelcey Klemm explained that the golf industry as a whole has been struggling since its heyday in the late 1990s, and plenty of other golf clubs "are facing the difficulty of maintaining courses with a limited number of people willing to pay memberships and green fees."
He added that, over the last several years, Lakeside "has had to do a delicate balancing act between raising rates while not alienating its members and losing affordability."
The two largest sources of long-term debt for the club are the addition of the Pine Course (which is one of three nine-hole courses at Lakeside) and the construction of the new clubhouse, Mulligan's, in 2003. These account for more than half the club's total debts, which exceed $1 million. Other debts are associated with equipment, golf cart leases and special assessments.
After reviewing the club's 2012 financials, the board identified that a restructuring of its debt would be necessary to "right the ship," according to Klemm.
The budget projected a deficit of roughly $87,000 next year.
Earlier this month, the golf board and city finance committee met to come up with a plan to bridge that shortfall. What they came up with calls for a mix of fundraising efforts and city assistance.
In short, the three-part plan would:
-Pay off a bank loan using $40,000 originally budgeted for a new well. The new well, if still deemed necessary, could become a fundraising effort for the club.
-Forgive remaining city assessments of about $90,000. The city would be able to make up the difference with some tax increment dollars, since the infrastructure was part of a large bond issue that included a Tax Increment Financing (TIF) housing development.
-Relieve Lakeside of a $180,000 loan for the clubhouse project. The club could make interest-only payments until 2016, at which time an equipment loan paid by the city expires. The city would then assume the remaining balance on the clubhouse loan.
Klemm said the plan allows Lakeside to restructure some of its debt without creating a hardship for the city.
"The idea is to keep our (city) contribution to the course about the same annually," Klemm said. "From a cash flow standpoint, I think we can absorb those assessments... So we're not paying more, but we're not going to collect that, either."
This plan would save Lakeside about $41,000 in 2013.
The other $46,000 of its projected deficit would need to be made up by the club through possible rate increases, cost containments, hole sponsorships and other creative means.
"We've been exploring other options outside of some of the private giving...that really the golf course has relied on for the last few years," said Brian Mann, a member of the golf club board, at the meeting. "We've tried to get as skinny as possible on the expense side."
Mann said the club's board will continue to look into any other money-saving tactics, including possible cuts to staff and the establishment of an endowment.
However, Johnson added that Lakeside's annual budget is already pretty lean, and he and Mann agreed that further cuts could hurt the quality of the course.
"The problem is not simple; it's not that they're out buying lavish things," Johnson said. "It's debt. Also, at the time the course was built, golf was very popular... The number of golfers has dropped significantly. But I believe these problems can be solved the way a lot of things are solved in this community - by everybody participating in them."
City councilors made no final decisions about the proposed financial plan for the golf club at last week's meeting. The discussion will be ongoing.