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Save Norwalk’s Oak Hills, victim of recession, bad decision

NORWALK, Conn. – Oak Hills Park Authority (OHPA) needs additional revenues to stay alive. If these revenues are not achieved, then as their independent auditor states, “(there is) substantial doubt about its ability to continue as a going concern.”

While interest in a driving range has existed for years, OHPA’s financial difficulties have brought the driving range idea to the forefront. OHPA has been working closely with the city on the Request for Proposal for the range.

There has been a lot of community discussion over the driving range. The most vocal opponents appear to be reacting from an intensely passionate environmental perspective. However since Oak Hills has been a Norwalk gem for decades and a source of community pride for many, there has been strong city support to help OHPA regain its footing.

Therefore this letter attempts to address questions raised by other Norwalk citizens.

How did OHPA get into this financial mess? Two things happened. The first was the recession, which has driven down golf rounds from 45,716 in 2008 to 33,167 in 2012. The second was the city decision in 2005 to require the OHPA to assume the $2.275 million restaurant debt. In retrospect the restaurant and its debt were too large – a much smaller and less costly venue would have served the golfers better.

Do Norwalk taxpayer dollars pay for OHPA operations? No. There is no line item in the city operating budget for Oak Hills. Created by the Common Council in 1997, OHPA has its’ own revenue stream – like the Parking Authority or the WPCA. OHPA revenues come from golf fees, ID cards, cart revenue and rental income – not from tax dollars.

But doesn’t the City support OHPA? Yes, in the form of loans. The first city loan to OHPA was in 1999; $990,000 to fund the installation of the irrigation system. This loan has been repaid down to $260,526. Additional $2,275,000 loans were made in 2005 and 2006 to finance the restaurant construction. The restaurant loans have been repaid down to $1,971,067. Smaller loans in 2009 and 2012 were made to finance cart path paving plus other capital improvement projects.

Has OPHA taken steps to improve itself? Yes. The new leaders have cut costs and raised fees. In exchange the city modified the OHPA loans to spread out the repayments. However all of these steps are still not enough.

What about the recent $150,000 loan to OHPA? Authorized 13-1 by the Common Council and approved by the BET, this loan prevented OHPA from running out of cash this winter. While OHPA has always had negative winter cash flow, its weakened state created this seasonal emergency for the first time – hence the urgency to move forward.

Where does the city get the money for the OHPA loans? The city issues bonds as part of its normal capital budget process. OHPA repays the loans to the city and the city repays the bonds to its investors. The whole process is designed to be a wash and at no cost to the Norwalk taxpayers.

Is golf still financially viable at OHPA? Yes. From July 2011 through December 2012, OHPA generated positive cash flow of $170,959 before the restaurant debt repayments and capital expenditures. So OHPA is making money from core operations. However it is not enough.

In conclusion, we are at a financial crossroads. OHPA needs additional revenues to repay the restaurant debt plus cover the winter months. The most coherent new revenue idea that has been presented is the driving range. We cannot risk losing this community gem. Doing nothing is no longer an option.

Fred Wilms

Chairman, Board of Estimate and Taxation

Comments

19 responses to “Save Norwalk’s Oak Hills, victim of recession, bad decision”

  1. McFadden Biancatesta

    Maybe they do math a little differently on the BET these days. But doesn’t it look like the Oak Hills group has several past due loans that are owed to the City. It looks like they owe the City over $2,300,000– that’s a lot of green fees. Why would an alleged businessman and banker want to throw good money after bad? It doesn’t make sense.
    The only thing that makes sense is why Fred Wilms is pushing for more city money to go to this group. The Mayor has appointed his people to run the Oak Hills Commission and they are looking like a pretty incompetent bunch.

  2. jlightfield

    I for one am tired about reading the tit for tat explanations about why the OHPA needs to either a) build a driving range or b) preserve the landscape. Both sides in this “debate” seem to forget that as a business, the OHPA has been mismanaged simply because the fundamental business decisions about fees, marketing, amenities and maintenance have largely been left up to anecdotal evidence rather than operational data. Its been all politics and no common business sense.

    Until the political factions admit that none of them can manage what they don’t know, and actually seek professional guidance, then Norwalk will continue to volley excuse after accusation while taxpayers foot the bill.

  3. NorwalkDinosaur

    It sounds like Mr. Wilms believes, that in Norwalk, even golf courses are too big too fail.

    @jlightfield, if OHPA defaults on its loans, what recourse does the city have?

  4. Suzanne

    Enough already, Mr. Wilms. Your advocacy of this Authority represents at the very least a conflict of interest in your position as Chairman of the Board of Estimate and Taxation which, I believe, is supposed to represent ALL Norwalkers, not just the mis-managed OHPA.

    You have provided not one bit of information as to how much, how much already?, will be provided by a driving range that will pave over a desired and important habitat, to help defray the expenses the incompetence this OHPA has wrought.

    Your “wash” to the taxpayers doesn’t add up (see comment above). And whining about the restaurant? I ate there last night: the food was excellent, the prices reasonable. One other table was occupied. The manager is doing his best to market the place but the OHPA is doing their best to whine long and hard about the debt the restaurant represents. Another poor decision made in managing the Oak Hills Park.

    Why, Mr. Wilms, do you find it necessary to be an apologist for this Authority’s bad management? Have you done the research about other golf courses in the area? Like Vincent Grillo’s letter in The Hour pointed out, this management “team” has repeatedly mis-managed their way out of additional rounds, rounds that would provide the monies necessary to make the course self-sustaining, AS IT HAS ALWAYS BEEN.

    This Park for the people, for all Norwalkers, is, in truth, a private club for a few golfers and that’s it. It is a beautiful asset being used by the few who want a private club at public courses prices. It can no longer operate that way – get professional management and quit your whining.

    Norwalkers should not have to pay for the incompetence of these few (and I understand the Treasurer has resigned – who is counting the money?) with the last natural refuge being paved over.

    You are asking the public to reward this essentially private entity with a new asset while it fritters away golf rounds, fees, a beautiful restaurant, a golf store, all of it, through its inability to run the golf course, its ONLY JOB!!!!!

    To address the driving range without any sense of income realized from such a project, with only one person seemingly interested in developing it who cannot get financing (per the last public OHPA meeting) and not entertaining any other solutions to a failing course is blind.

    Look outside the OHPA box – there have been plenty of excellent suggestions on these threads to get the Oak Hills Park out of its debt, starting with replacing this management team. The management ISN’T WORKING!

    It’s the definition of insanity: keep rooting for a driving range over and over, each time expecting a different outcome without data, without feasibility studies, without EIR, in a vacuum, without anything but a wish that a driving range could just make the debacle that is Oak Hills different.

  5. oldtimer

    First, get a mangement team in place that knows how to run a golf course. Second, get a serious management/operations audit to learn the facts about the finances, and, possible cash being siphoned off. Third, support the management team with loans, if necessary, until it has enough time to develop a positive cash flow large enough to cover annual expenses.
    Then, and only then, reconsider developing alternate sources of income including, but not limited to, a driving range, an expanded pro shop, etc.
    If this requires replacing some, or all, of the commission members, then that should be done as quickly as possible.
    It is hard to see the wisdom of keeping Bob Virgulak in place with his record of conviction for theft from the 2nd taxing district as a commissioner.

  6. Joe Espo

    Thanks, Fred, for bringing some sense and sensibility to this debate devoid of wild-haired paroxysms of irrationality. The driving range WILL be built because it’s financially necessary and because Norwalkers support it. And I and my family can’t wait to be able to sharpen our game with all the practice that we can get under our belts in our own home town, at our home town golf course, and without having to travel to Stamford.!! Whooo-hooo!

  7. Vincent Grillo

    I was harrassed and pushed out of Oak hills 18 months ago due to false accusations of mismanagement and free golf being given away. And we’re not talking about a few rounds here and there, but thousands of unaccounted for rounds by a few confused individuals who never asked me about it.Then, after I resigned, they went behind my back publicly and accused me. In a letter to the Hour I explained that these so-called free rounds were actually tournament fees, gift certificates, rain checks and school outings which are fully accounted for at the year-end reconciliation. Their agenda was to prove that by my so-called mismanagement OH could get back on financial track by eliminating me and turning all the “free rounds “into paying rounds.These FALSE ACCUSATIONS, which slandered my good name at the time that I was seeking new employment, were believed by certain powers to be in the city government — including certain members of BET. This was confirmed to me by one sitting member of the BET after I went to his office to confront him with this issue. This so called “free golf” was probably the ticket that city leaders were hoping to use to get Oak Hills it’s financial freedom. I was still hearing about this through the grapevine well after I stepped down, but with no proof and only going by hearsay. I could do nothing about it,but when Mayor Moccia said at the Feb.14 2012 council meeting (about at the 57 min mark, 6 weeks after I resigned that “FREE GOLF HAD BEEN ELIMINATED FOR EMPLOYEES AND THINGS OF THAT NATURE.” I was shocked and dismayed, but not surprised. I had tried on so many occasions to contact him through email and telephone only to be told, by a third party, that the mayor did not want to meet with me and that I should leave him alone. If it had only been true about all the free golf it would have turned into real $$$ to pay back the debt. A driving range would never have had to be considered. I guess someone got that one wrong.

  8. Orange U. Glad

    And the gloves are off.
    Fred Wilms finally getting outed as a political hack (Art Schlub in better suits).
    Moccia exposed as a guy who’s more worried about saving his reputation than saving his city.

  9. Jlightfield

    @NorwalkDinosaur I’m not by any means a finance expert but it would seem that any past defaults have been to the City of Norwalk and thus are represented in a lower revenue stream and thus the tax payer has been paying for the “lost income” already. There is really no penalty since the city already owns the asset. The reason for creating these type of authorities in the first place was to keep capitalized debt “off the city books” in the guise of keeping debt versus income ratios appropriate for a triple a bind rating.

    All is routine finance manipulations. What Norwalk lacks overall in its political leadership is an understanding that financing debt these days is essentially playing with free money as the finance rate is less than inflation. Therefore a focus on financing projects which old actually demonstrate a return back to the City’s revenue would pay for itself. I’ve simplified the process, but think along the lines of this: a city would pay to build a new road and finance it because buildings would eventually be built by private developers that would accrue taxes back to the city. I suspect that is in essence what the proponents of investing in a driving range are modeling their argument on, but unlike a road that is an easily identifiable public good, a service in a public park offers no easily forecast able return back to the city. The underlying argument for it has been that some people think its a good idea.

  10. 0ldtimer

    It is really hard to understand why opinions count for so much and facts mean nothing. Before making a capital investment, certain facts should be obtained. What will it cost ? What is the anticipated rate of return on investment ? These questions need to be answered before any committment is made. To expect some angel to appear, invest his money to build and operate a driving range, and share the receipts with the park suggests somebody overestimated the potential return on investment from a driving range with no lights. The lack of responses to the RFP should tell the commission something.

  11. Bryan Meek

    There is no “guise” to keep assets on or off the books.

    GASB 34 requires the city to account for entities like Oak Hills, WPCA, and NPA as Enterprise funds and use a full accrual basis of accounting. This is GAAP, not some shell game. If the city were trying to pull a fast one, it could technically create a separate enterprise fund for the restaurant apart from the golf course. Still it wouldn’t matter because if either by themselves could not generate revenues to cover expenses, the taxpayers would be liable for the shortfall.

    If Oak Hills lived rent free on the taxpayer’s dime like the rest of the city’s parks we could use a modified accrual basis of accounting. The anti-golf crowd here do not seem to understand that this is where we are headed if we listen to them.

  12. Jlightfield

    @bryan meek all cities use seperate authorities to push debt off their main balance sheets and theoretically keep revenue derived out of the general fund. It is an accounting gimmick as the shortfalls and defaults revert back to the city and keep revenue where it originates, which might be a good thing except there’s a plethora of examples of budgets created for surplus revenues instead of transfers back to the originating municipality.

  13. NorwalkDinosaur

    @jlightfield, thank you for your response. I appreciate your clear explanation.

  14. David

    So, let me see if I’ve got this straight:

    1) Golf operations are profitable
    2) The restaurant is not
    3) The OHPA owes millions to the city for the restaurant
    4) More revenue is needed if the debt is to be repaid in any reasonable sort of time frame (or, at all).

    It seems to me that the anti-driving range (or anti-golf course altogether?) people are saying “let it fail”. In which case the city loses the millions in loans AND a golf course. I don’t think you have to *play* golf to appreciate that having a course adds to the livability factor in Norwalk. It’s one of the reasons why realtors promote its existence when trying to sell listed properties, I imagine.

    So how about we get back to the issue of that restaurant debt? Write it off or write it down. Keep the golf course, negate the need for a driving range.

    Everyone will be happy. Except those who complain about eating a bad investment. Which is was – a bad investment. If I was going to invest millions in anything, a restaurant would be the LAST thing I’d invest it in.

    I know that thought won’t gain any fans on this site, so I await your vitriol with eager anticipation.

    Fire away…. 🙂

  15. Suzanne

    This is what I don’t get: the OHPA simply complains about the restaurant debt but does absolutely nothing to make the restaurant a success by promoting its existence (it’s there, get used to it!) Don’t they see that if the restaurant succeeds, they succeed? And, likewise, if the golf course gets more rounds, the restaurant has potentially more diners? This “crying over spilled milk” thing just adds to the overall impression that these are not grown ups Norwalk is dealing with in the OHPA. No, they would rather complain and whine and moan then make a business plan that would include a successful amenity, that is beautiful with excellent meals and service. So, the golf course fails because there are not enough people playing and the restaurant fails because, in spite of the new managements’ efforts to publicize, is constantly being down-graded by the Authority. None of this makes any sense: I have to ask, does the OHPA want everything to fail?????

  16. Bryan Meek

    @JL. This is not a gimmick like operating leases being kept off of balance sheets. The net assets of the enterprise funds are fully consolidated in the city’s financials. http://norwalkct.org/ArchiveCenter/ViewFile/Item/5971

    Enterprise fund accounting allows cities to treat business type operations under a full accrual basis of accounting as there is no tie in to involuntary revenues like property taxes. IT IS NOT A GIMMICK. IT IS REQUIRED BY GASB 34, who by the way does not enforce this. Who might care if we decided we were not going to follow the rules is our ratings agencies who would not take any departure from GAAP very lightly. Sorry we don’t make the rules here, we just follow them. We are not required to have separate entities manage these however and maybe that is your point (?).

  17. 0ldtimer

    Why not spend a little promoting the restaurant to non-golfers ? It is a beautiful location and it wouldn’t take much to draw a crowd if the food is decent and the prices are reasonable. The restaurant might even generate some profit for the golf course.

  18. cc-rider

    The answer to “Has OPHA taken steps to improve itself?” is laughable at best. No kidding it isn’t enough….

    No one has any answers on how to increase the amount of rounds played at Oak Hills. It is far easier to blame the economy, weather, former pro than actually do some critical thinking about why the rounds have gone down and come up with real solutions to the problem. Should anyone be surprised by the weak answers and solutions offered given the background of the folks running the show over there.

    What kind of golf and marketing answers would you expect from the chair- board of estimate and taxation?

    All this back and forth on the driving range is utterly pointless without seeing any real bids and potential income projections. I would like to see the cost analysis for every additional thousand rounds played at the course.

  19. 0ldtimer

    Mr Meek
    “If Oak Hills lived rent free on the taxpayer’s dime like the rest of the city’s parks” Are you kidding ? What happens to all the cash collected at Vet’s and Calf Pasture from visitors without stickers ? And what happened to all the cash collected from the ISLAND BELLE customers for parking @ $5 apiece ? And what happened to all the money the Island Belle paid to stay on the City visitor’s dock and run a business there ?

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