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More than trees at stake in Oak Hills driving range choice

NORWALK, Conn. – When it comes to a driving range, there is more at stake than trees at Oak Hills Park.

The reason the Oak Hills Park Authority is even considering a driving range is money. The OHPA wants to open a new revenue stream, and a driving range is seen as the way to go. After all, there is a natural, symbiotic relationship between the golf course and the driving range.

When the OHPA put out a request for proposals for the range, only two serious bidders jumped in: King Enterprises and Total Driving Range Solutions (TDRS). King has been in the business of building golf courses since 2004. TDRS is the new kid on the block, in business for a year.

King’s proposal put the range in the woods, well away from the course. The proposal ignited a strong reaction from non-golfers who enjoy walking through the woods at the park.

TDRS put the range behind the restaurant, abutting the course, a proposal some golfers don’t like, citing noise and visual intrusion on golfers on nearby tees and greens.

The Ad Hoc Driving Range Committee settled on the TDRS proposal, and recently presented it to the full OHPA.

The proposal called for TDRS to pay OHPA $1,000 a month lease starting in the second year, which would be the first full year of operation given the six-month construction period. The lease payments would continue at the same rate — $12,000 a year – through the fifth year, when it would increase by 10 percent, to $1,100 a month or $$13,200 per year for the next five years. There are additional 10 percent hikes planned for years 10-15 and 16-20.

In addition, Norwalk would receive 10 percent after gross sales of $500,000 per year or more has been accomplished for five years. The 10 percent would be based on the total gross. TDRS projects to hit the $500,000 gross point by the third year, or second full year of operation. The total lease payment over the 20 years would be $266,460.

King’s proposal included no lease fee for the first year, but 10 percent of the net profit. Starting in the second year, King offered $1,200 a year in lease fees, escalating every two years — $1,800, $2,400, $3,000, $3,600, $4,200 – topping out at $4,800 in years 14 and 15, after which ownership would revert to the OHPA. King projected topping $500,000 gross the first year, with a net of $95,500. The percentage of the net would increase to 15 percent after five years and 20 percent for the final five years. The total lease payment over 15 years would be $42,000. The TDRS 15-year lease payment would be $186,600.

And while King would pay a percentage of the net from the first year, TDRS would likely, based on income projections, not begin paying a percentage until year six. However, TDRS percentages are based on the gross and King on net. In year six, based on King’s income projection, the company would pay $20,332, while TDRS would pay Norwalk $60,172. In fact, for the first six years, Norwalk’s total percentage based on King’s assumptions would total $75,961. In year seven, based on King’s projection of a $613,759 gross and $144,027 net, Norwalk would receive $21,604 from King, $61,375 from TDRS, in addition to lease fees.

The TDRS proposal would cost $2.5 million, half a million more than the King proposal.

The King proposal would be funded with a loan from Titan Capital with a 15-year, 8 percent loan, the proposal summary said. It also said that “the loan would be contingent that in the unlikely event of a default, the city would step in and cover the loan.”

There was no loan guarantee mentioned in the TDRS proposal.

Norwalk Mayor Harry Rilling said during his campaign that he would not be in favor of any proposal that would put Norwalk taxpayers’ money at risk.

The Authority is currently negotiating with TDRS over the terms of the deal. The final figures could change, and the deal is subject to a vote of the full Authority.

9 comments

Oldtimer December 13, 2013 at 10:17 am

I may be missing something, but I don’t see the advantage to Oak Hills, and the City, in having an outside company build and operate a range. The cost of design, construction, and operation, could be assumed by Oak Hills, with a loan, and all the income generated, once a range is operating, would go back to Oak Hills, to pay off the loan, and add to Oak Hills bottom line much sooner without sharing with an outside company.

jlightfield December 13, 2013 at 10:27 am

OHPA can’t figure out how to get an additional $12k a year in revenue without a driving range?
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For a range to generate 500k gross at $15 a bucket of balls, it would take 92 buckets sold every single day.

Piberman December 13, 2013 at 3:28 pm

These projections demonstrate what most of us already figured out – – the range would only provide chump change to the Authority and the City would still pick up the marbles when the project came unglued. Here’s a proposal. Let’s tax or request $5 contributions from each of the City’s 40,000 or so adults to preserve Oak Hills. That sum just about equals the cockamaybe projections of added net revenues from these outlandish proposals. Here’s another one – a voluntary one buck contribution from each of the golfers every time they enter the park. Call it a parking fee. Here’s another one — golfers pay for the use of the park ! After all it’s everyone’s park.

LWitherspoon December 13, 2013 at 5:11 pm

@Mark
Thank you for an article about the Oak Hills driving range that appears to contain more fact than emotion. A welcome change from nearly all that’s been written on this subject to date.
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@jlightfield
Great questions. $12,000 per year by itself seems like chump change, so I hope the decision makers will share with us the assumptions behind a projection of $500,000 gross revenue in the second year of operation. I also think it’s necessary to make some estimate, regardless of how crude, of how many additional rounds a driving range would attract.
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On the other hand, let’s say the revenue projections are completely wrong because the range is badly sited, and it becomes a total flop that has to close after three years. What will be the harm to taxpayers and the golf course?
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Everyone on all sides of this issue seems intent on avoiding a repeat of what happened with the restaurant, where too large a sum was spent on a building that couldn’t be leased for enough to cover the debt service. Sometimes in our haste to avoid repeating prior mistakes, we find ways to make new ones. Could that be happening here?

Mark Chapman December 13, 2013 at 7:55 pm

@L Witherspoon

Thank you. The King proposal specifically states that if King defaults, the city is on the hook. The TDRS proposal, which is the one the committee recommended, had no info about the financing and no indication it expected the city to guarantee any loans. The OHPA is in negotiations now and terms could change. Also, with TDRS, if the $500,000 gross threshold is not met for the prescribed period, the percentage would not kick in according to the original proposal. That would mean the lease fee would be the lone income for OHPA. Also, if King’s projections fell short, the city would get a much lower payout based on the net plus the nominal lease fee.

Also, while the city would own the facility after 15 years under the King proposal — for better or worse — there is no such proviso in the TDRS proposal.

Assumptions for both were based on the performance of other area ranges, especially Sterling. The proposals factored in Sterling’s number of rounds and its number of buckets of balls hit on the range and came up with a percentage that was applied to the Oak Hills number of rounds.

Fore Naught December 14, 2013 at 6:14 am

King sounds the way to go. If you don’t understand the intrinsic and intangible values of a full service golf course, please stop commenting on these pages. It’s insulting. Sterling charges $11 for a large bucket of 100. $8 for a medium of like 50. And $5 for around 30 balls. The place is always packed even when the course isn’t. Many of them live in Norwalk. Many of them loathe not having colocation of a range. OHPA need only make sure proper controls are in place as this is a cash business.

McKeen Shanogg December 14, 2013 at 7:46 pm

@Taxpayer Fatigue, the reason OHPA was created is because Parks & Rec was using Oak Hills golf course as a piggybank, not maintaining the course and taking the $$$ for other city uses.

Kevin December 16, 2013 at 9:40 am

Sorry jlightfield I believe your numbers are annual ? since 85% – 90% of golf revenue comes from March – October you can double that number needed. Now configure how many “bays” / stations that need 1/2 – 1 hour for each participant(s) they have . . . will tell you how close to “maximum” capacity will be needed to get to 500k. Plus you will be “splitting” the market place with Stamford which does a very fine job at this . . . so it is not a “build it and they will come” . . . build it correctly and you will get a piece of the market . . .all this being said . . . its a necessity at a golf course like OHP . . . but with some very nice people on the Authority that are trying to change the “not so nice” financially inept golf decisions and atmosphere of its jaded history . . . all the best

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