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r qItem No. Staff Report No.97/9Y'Zl1.5 Meeting Date: March 3, 1997 0Type of Business: WK WK: Work Session;PH:Public Hearing; CA:Consent Agenda;CB:Council Business City of Mounds View Staff Report To: Honorable Mayor and members of the City Council From: Bruce Kessel, Finance Director i.,‘_, Item Title/Subject: Contracting for golf course management services Date of Report: February 27, 1997 Attached are excepts from the National Golf Foundation's publication titled"Golf Course Management and Operations Contracts." It is noted that for a variety of reasons, it is becoming more common to lease golf courses to private managers or to enter into contracts for the management of such golf courses. Within the metro area, it should be noted that there are numerous privately owned and operated courses and the publicly owned courses are operated under a variety of different arrangements. For example, Ramsey County has several courses, of which one was leased to a developer who constructed a golf course and pays the County a yearly fee for thirty years; at the end of the thirty years,the lease expires and the course is then transferred to the County; at another course,the County has contracted with a firm for the overall management of the course, and at still another course,the County has entered into contracts with • several firms to manage different segments of the course. Other cities and counties have similar management contracts while others manage and operate their courses using City employees. For the courses operating under some form of management contract,the contracts usually require the contractor to provide proof of insurance and to maintain some level of overall maintenance. In addition, the city/county may retain some rights over fees, selection of management employees, etc. Both parties in the arrangement usually receive a percentage of revenues generated at the course, with the percentages being dependent upon the type of service (green fees, driving range,golf cart rental, concession sales, merchandise sales, etc.) and the responsibilities of both parties. The advantage of this type of arrangement is that the management of the facility has a financial incentive to maximize the revenue potential since it affects their bottom line. Also, individuals in the golf profession are usually better able to respond to the needs of their clientele better than city management which has limited knowledge of golf course needs. Our golf course was financed mainly by the issuance of$3,090,000 in revenue bonds, payable over twenty years; the debt was structured with no principal repayment for the first five years. Based upon the financial projections that were prepared in conjunction with the bond issue, it appears that the project would not generate sufficient funds to allow for the repayment of any of the principal in the early years of the project. As such, it should be noted that the financial success of the golf course will be dependent upon its successful operation in these early years. If 0 we experience problems such as bad weather,poor management which either increase operating costs or result in the loss of golfers, etc.,the golf course will require a City subsidy.