Fort Walton Beach Council agenda — 06-17-08 special agenda — reading text

Golf Club policy meeting are: Assist City Council in understanding the Golf Fund' s available revenue sources and current fee structure, and allow revisions as desired. Assist City Council in understanding the Golf Fund' s operations and expenses, and allow revisions as desired. Ascertain City Council's position on certain policy issues critical to golf course operations becoming self-sustaining. Staff respectfully requests that City Council reach a consensus on the policy issues presented in order to guide the FY 2008 -09 Golf Fund budget development process. Paae 3 of 59 3of23 Golf Fund Meeting ECONOMIC INDICATORS A May 2008 article in Business Week magazine outlines the current golf environment: Golf rounds played are flat or declining. A 2008 survey by the National Sporting Goods Association found the player pool for golf has shrunk 7. 3% from 2003 to 2007. The latest report from the National Golf Foundation reports that rounds played are down 3. 5% for the first quarter of 2008 and are basically flat since 2005. Facilities ranging from resorts to daily fee courses are experiencing slimmer margins as a result of a weak economy, rising fuel costs, and competition for consumers' entertainment dollars. Research conducted by the Longitudes Group indicates that courses' peak rates have increased at the same rate of inflation, but off -peak rates have increased 33% more than inflation. Off -peak rates generally account for a majority of rounds played, which means that the price for a round of golf has increased while demand is flat or declining. The cost of fertilizer has doubled over the past two years. A March 2008 article in the Sun -Sentinel cites the following: Nationwide, the number of rounds played has remained flat since 2002 according to the National Golf Foundation. In central and south Florida, the number of rounds declined 4% from January 2007 to January 2008. People are not quitting the sport altogether, just playing less. A February 2008 article in the New York Times states: The number of people who play 25 times or more per year has dropped by about one -third according to the National Golf Foundation and the Sporting Goods Manufacturers Association. Core players are now considered to be those who play eight or more times per year. Active hurricane seasons in the South and the increasing popularity of electronic games may be a contributing factor, similar to what the United States Tennis Association found in a 2006 study. Changing family dynamics may mean fathers are less likely to spend every weekend on the golf course. A total of 82, 068 rounds were played in FY 2006 -07, a decline of 38% or 49,668 rounds from ten years earlier. During the same period, paid rounds decreased 35% or 40, 121 rounds and totaled 75, 564 rounds in FY 2006 -07. Since FY 2000 -01, membership is down 53% or 425 members. There are currently 181 City members ( down 69 %) and 193 County members ( down 9 %). The rate structure has changed several times since 2004, so it is difficult to determine if rate increases or economic and other factors are contributing to the decline in membership and play. Total Rounds Members 140, 000 1, 000 120, 000 800 100, 000 600 80, 000 E 60, 000 400 40, 000 200 20, 000 0 0 FY98 FY99 FY00 FY01 FY02 FY03 FY04 FY05 FY06 FY07 FY03 FY04 FY05 FY06 FY07 FY01 FY02 Member DNon- Member Leagues & Tournaments DOther City D County Paae 4 of 59 4of23 Golf Fund Meeting REVENUES FY 2007 -08 Budgeted Revenues — $2, 540, 022 Driving Range Cart Rental d 9; 0/ Rental Income 4. 1% Membership Other Fees 0. 1% 5. 5% Tournament Fees 3. 9% 53. 1% The largest revenue source for the Golf Fund is green fees. Despite the number of paid rounds showing a decline over the past five years, revenues have increased due to rate increases. These rate increases have been necessary to keep pace with increases in personnel, grounds maintenance, and capital improvement expenses as well as attempt to maintain self- sufficiency as an enterprise fund. Green Fees Paid Rounds 1, 500, 000 1 100, 000 1, 200, 000 80, 000 900, 000 60, 000 600, 000 40, 000 300, 000 20, 000 0 0 FY 2003 FY 2004 FY 2005 FY 2006 FY 2007 FY 2008 FY 2003 FY 2004 FY 2005 FY 2006 FY 2007 FY 2008 est. est. Year -to -date through May 31, paid rounds are on target to reach 74, 000 rounds this fiscal year, which is about 2% or 1, 500 rounds less than last fiscal year. However, green fee revenues are on target to be about 9% or $ 132K less than last year. Play cards were introduced in FY 2005 -06. Staff believes the disconnect between relatively stable rounds yet decreased revenues is directly attributable to play cards, especially member play cards introduced in October 2007. Member play cards discount green fees 33% from $ 15 /round to $ 10 /round. Non -member play cards in essence result in any rounds played above 88 rounds per year being free for walkers. The FY 2007 -08 budgeted cost to produce one Member, Non -Member, ana Flay tiara KOunas 90, 000 round is $ 33. 87 based on 75, 000 paid of golf rounds, compared to $ 26. 50 /round for members 75, 000 paying full price with cart and $ 40. 00 /round for non- 60, 000 members paying full price with cart. Play cards and walkers reduce these revenue amounts. C 45, 000 Furthermore, the budgeted cost excludes the cost of 30, 000 services absorbed by the General Fund due to the lack of reimbursement per the Cost Allocation Plan. 15, 000 In general, just over 80% of non -members use a golf 0 cart and member use is slightly less. Cart fees are FY 2006 FY 2007 FY 2008 est. anticipated to be comparable to last year at about Member 0 Non -Member D Play Card Paae 5 of 59 5of23  Golf Fund Meeting 721 K. Membership fees generate approximately $ 11 OK and are estimated to come in 5% or $ 5600 less than last year. Driving range revenues will likely total $ 114K, which is 8% or $ 9600 less than last year. Net Assets — Net assets reflect the difference between assets and liabilities accounted for in an enterprise ( i. e. self- sustaining) fund. In other words, the net available financial resources externally or internally constrained as to use. There are three types of net assets: a. Capital, net of debt —the value of fixed assets less the remaining debt payments to be made. b. Restricted — funds committed for identified purposes or required to be segregated ( e. g. debt service). c. Unrestricted — funds not required to be on hand and with no particular purpose identified; available for capital projects or to balance the budget. The City' s auditors have commented in the last three years' audits about the Golf