Updated, Feb, 14: copy edit; 9:54 a.m.: Copy edits
NORWALK, Conn. – The Oak Hills Park Authority has worked out a deal to restructure its loan agreement with the City.
“We have crafted something that would allow Oak Hills to move forward and not have to come back to the City while recognizing the fact that a lot of the issues creating the current situation were issues that happened 15-18 years ago, and it really was a difficult situation for them to continue to operate under those conditions,” Mayor Harry Rilling said at Monday’s Board of Estimate and Taxation (BET) meeting.
The BET went on to unanimously approve the restructuring – which replaces yearly loan payments by the Authority with a percentage of its intake, and lowers the interest rate to zero. The arrangement also authorizes a $83,000 “reimbursement” to the Authority for its expenses in upgrading restaurant equipment.
The loan restructuring will now go to the Common Council for approval. Council President Tom Livingston (D-District E) and Finance Committee Chairman Greg Burnett (D-At Large) helped craft the deal, through consultation with Council members via emails and phone calls, Rilling said, so he expects that it will be approved.
The Authority has long attributed its financial problems to the payments on a $2.2 million loan from the City issued in 2005 to fund improvements at the park, the construction of the restaurant building and cart paths. The debt has been restructured three times. A restructuring in 2015 reduced payments from $290,000 to $160,000; payments dropped again when the loan was restructured to include the “irrigation that had 10 years remaining,” former OHPA member Joe Tamburri said in September.
“The Authority has a balance of just under $2 million to pay,” then-OHPA Chairman Jerry Crowley said in 2017. The Authority made only the interest portion of its payment in September 2017, paying $52,000 instead of $131,000, and has not made any payments since.
Construction on the course, funded by a $1.5 million state grant, lowered golf course revenue three years ago as the course was down to nine holes and it was noisy, then there were two years of bad weather, Controller Mark Gartner said Monday.
“We went from almost 40,000 rounds to this year we had 34,000-35,000 rounds. So, our cash inflows were heavily reduced… it’s kind of a storm of just constantly decreasing revenues while increasing outflow,” he said.
The Authority evicted restauranteurs Amar Haouri and Vincent LaForte a year ago. Their new tenant was not paying rent, OHPA Chairman Bill Waters said in June. A new lease has been negotiated with that same tenant, to pay $4,000 a month from July to the end of the season, and then either a Request for Proposals will be issued or the current tenant, if doing well, will negotiate based on his intake, Waters said Monday.
The Authority spent $93,000 on new equipment for the restaurant. The BET approved a resolution to repay the Authority $83,000, based on the Authority’s cash flow needs, as described by Gartner.
The Authority “will be completely tapped out” on its $200,000 line of credit by Friday, Gartner said. The BET’s $83,000 appropriation will get it through the winter. The revolving line of credit can be renewed by the Authority in November if it’s been paid in full for at least 30 days.
If the Common Council approves the new deal, the Authority would make monthly payments on its loan, equal to $2 per round of golf. This payment would go up by five cents per round in every fiscal year afterwards.
Payments would not begin until July 1, 2020. In addition, the Authority would make an annual payment of 1 percent of its audited annual gross golf revenue, but would not be required to use its line of credit to do so. The interest rate would be dropped to zero, retroactive to Fiscal Year 17.
BET member Troy Jellerette asked why the payments would begin next year.
Burnett, sitting in the audience, answered that thinking shifted from an initial idea to have the Authority start making minimal payments when it paid off its line of credit.
“We felt allowing another seven or eight months would allow Oak Hills to build up a set of reserves that could be used for any capital improvements or contingency items that might come up,” Burnett said. “Oak Hills has done an assessment of all the work that should be done on the course to bring it up to even a higher standard, such as replacing the bathrooms, (and) several other items. Those items alone are somewhere between $700,000 to $800,000.”
“Obviously we are not going to fix all that in one year but building up some reserve to address those issues allows Oak Hills to make the payment to the City, address the conditions of the course and not have to draw down on their line of credit, the whole 200K that’s there. That’s why there’s a seven-month period before they start paying this.”
BET member James Frayer peppered Waters and Gartner with questions, asking what happens if the number of rounds doesn’t increase, and instead continues to drop.
“The deterioration, I think, the last couple of years is a combination of some very real things,” Waters said. He noted that construction affected three seasons, and “(former Chief Financial Officer) Bob Barron always told us we can’t use weather as an excuse but there was 144 days of rain last year.”
He chuckled when Frayer mentioned climate change, and Frayer asked what would happen to the agreement if rounds declined.
“We keep hearing how beautiful the course is, it’s just like a country club,” Gartner said. “We have a lot of regular players. I don’t foresee that happening.”
Some expenses are tied to the amount of play, so that would mitigate the issue somewhat, but it’s possible that it might take longer to pay off the loan, he said.
“Extending the loan is not a preferred approach, but if it becomes a serious issue where we are seeing the number of rounds constantly decreasing I think we call a do-over,” Burnett said. “We come back to the table, we look at the trend and we might have to make some adjustments. … The data that we looked at so far is projecting that we are going to see an increase.”
“I like the idea of paying monthly,” Jellerette said. “I didn’t like the idea of paying yearly. I think that the only thing is, in the business world I would say this is a best-case projection. … My only concern is, like Jim says, if the rounds don’t come in where you’re going to have, you’re going to push this out, what is it, (2042) now?”
A potential deal with the Authority was first reported by NancyOnNorwalk in June. The proposal was not on the agenda for Monday’s BET meeting.