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Snake oil

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To the Editor:

The Oak Hills Park Authority (OHPA) will be seeking $4,205,325 in taxpayer-subsidized loans to fund the construction of a Golf Learning Center and a separate Welcome Center and upgrade the money-losing 18-hole golf course it manages. And this despite the fact that it already owes taxpayers more than $2,500,000.

Nevertheless, the Finance Committee of Norwalk’s Common Council chaired by Bruce Kimmel has scheduled a meeting this Thursday to consider providing the Authority with additional loans.

“We want to discuss the various assumptions that their math is based upon,” Mr. Kimmel said. “We want to discuss their ability to carry some additional debt service.”

Unfortunately, the members of OHPA see themselves as running a business owned by golfers rather than as stewards of land in a public park that should be managed in the interest of all the taxpayers of the city. As a result, when the business began losing money because fewer and fewer people were playing golf, they came up with a plan euphemistically called a Master Plan to construct a large commercial driving range euphemistically referred to as a Golf Learning Center. The fundamental assumption “their math is based on” is that the Golf Learning Center together with a Welcome Center and course upgrades will solve their financial problems.

“There is no denying a significant drop in golfers,” the Authority admits. But its premise is that as the economy recovers, the demand to play golf will increase and the driving range together with the golf course operating on tax-free land in Oak Hills Park will cover their costs.

Unfortunately, the Authority’s assumption and the premise on which it is based are belied by the fact that rounds were declining prior to the most recent downturn and have declined further as the economy has begun to recover.  Rounds played at Oak Hills, for instance, declined from 45,475 in 2008 at the height of the Great Recession to 34,219 in 2013 (more than three years into the recovery).

Clearly, in other words, as the online website Golfing Live puts it, “golf’s popularity is waning and the industry is getting whacked.” Adidas AG, for instance, recently reported an 11 percent drop in its third-quarter earnings and announced plans to close its golf facility in Texas and reduce “its golf-segment workforce by 15 percent.”  Meanwhile, sales at Callaway Golf Company dropped 20 percent in the second quarter of this year and, in July, Dick’s Sporting Goods (DKS) laid off 478 golf professionals.

What is the reason for the loss of interest in golf? According to Jim Koppenhaver, the president of Pellucid Corporation, a golf industry data analysis firm, the reason is that consumers today, especially young people, are looking for “recreation options that are easier to learn, lower-cost and less time-consuming than golf.”

Nevertheless, even if the demand for golf does not recover, a second premise on which the assumption that the driving range, welcome center and course upgrade will solve the OHPA’s financial problems is based is that the driving range alone will generate enough income to cover any difference between the cost of operating and maintaining the golf course and the revenues collected from the diminished number of golfers playing its links.

But if driving ranges were such sure-fire money makers, private sector firms would have no trouble obtaining loans to construct them and they would be springing up all over the place. Yet only two firms responded to a request for proposals to construct a driving range in Oak Hills Park and Total Driving Range Solutions (TDRS), the firm selected by the OHPA, was unable to obtain private sector financing for the project. Hence it got together with members of the Authority and helped author an appeal for taxpayer-subsidized loans.

The appeal, billed as a Master Plan, contains 15 pages of unsubstantiated speculation as to the revenues the driving range will generate and the cost of constructing it. In a best-case scenario, TDRS assumes the driving range will generate $276,000 in revenue from 11,342 patrons in its first year of operation and $659,691 from 13,178 patrons after 10 years. In a worse-case scenario, TDRS assumes its proposed driving range will generate $214,500 from 11,342 patrons in its first year of operation and $512,695 from 13,178 patrons after 10 years.  In both the best case and worse case scenarios, in other words, the same amount of patrons are expected.

Where do these numbers come from? One might be excused from thinking they are pulled out of thin air.  But that would be wrong.  They come from Forecast Golf Group, “a golf range development company” that TDRS relied on for its research.

What about the Master Plan’s $3,130,000 estimate for the cost of constructing the driving range?

“We are confident that our cost estimate is reasonable,” claims TDRS, “and the entire redevelopment and renovation can be completed for the figure shown, including a contingency is 5 percent of total cost. We expect we can develop cost savings once value engineering is completed for entire proposal.”

But the cost estimate it provides is so lacking in detail that it is almost worthless.  And, the presumption that in lieu of a competitive bidding process TDRS would be the firm selected to construct the driving range is scandalous.

In essence, the substance of the “financial analysis” of the so called “Master Plan’ is based on little more than the observation that Stamford’s Sterling Farm’s driving range more than covers its costs.  But as Forecast Golf Group points out, neither of the other two driving ranges in the area make money. Why not?  Because in the words of Joe Felder, the pro at Griff Harris in Greenwich, “ranges are a dying business due to economy and cost of range buckets. People are actually splitting buckets of balls.  State regulations and extreme liability costs restrict ability to build double-decker.”

So with that in mind, the idea that the large commercial driving range the OHPA seeks to construct in an AAA zoned residential area off the beaten track will generate the revenue needed to cover the golf course’s losses makes, in the words of the Norwalk Hour, “no sense at all.”

Unfortunately, the mistake Norwalk politicians made in the past was to lease the land in Norwalk’s second largest park to an autonomous body composed of golfers.  The park needs to be put in the hands of Recreation and Parks so it can be managed in the interest of all the taxpayers of Norwalk. But in the meantime not one more dollar in taxpayer loans should be extended to the OHPA and not one minute more of city officials or Common Council members’ time should be spent on what amounts to a snake oil sales pitch billed as a Master Plan, much of which, incidentally, was downloaded from Finance Resource’s “Free Golf Driving Range Business Plan for Raising Capital from Investors, Banks, or Grant Companies!”

Paul Cantor

Comments

4 responses to “Snake oil”

  1. Beth Altman

    Anyone with a little bit of common sense can see from OHPA P&L statements (you can obtain them from the city website through the BET agendas) will cleary see this golf course is a sinking ship finacially but it seems as long as they are up to date with the town on there bond payments the BET, Common Council, Mayor,and finance departmet continue to turn a blind eye to these dismall nunbers. Apparently the OHPA marketing schemes of letting non residents in for less than the residents on season passes then charging them the same fees as residents, Groupon deals and so on are starting to catch up with them. Combine all this with rising controled expenses, double didget raises for employees, a new dump truck and equipment for the golf course and not to mention the rising uncontroled expenses of insurance, gas, seed, chemicals, fertilizers, utilities, ect. Are we really going to fork over more $$$ to a group who doesn’t have a clue on how to run a golf course??

  2. Tim D

    Coming from anyone else this might be half credible. However, someone so opposed to recreational golf makes it implausible. Which begs: Ultimately, what would the author like to see Oak Hills become?

  3. McKeen Shanogg

    When Oak Hills was run by Parks & Rec, the city treated it like a piggy bank to fund other parks and let the golf course go to ruin. That is why Oak Hills Authority was created.
    Now the course is fixed up beautifully, thanks to the smart hiring of a couple of the best professionals in the area: superintendent Jim Schell and golf pro Ed Ruiz. They both have top-notch experience at the most highly regarded private country clubs and are doing a fabulous job at Oak Hills.
    Anyone who thinks there’s another public golf course in New England that is better run, should take another look.

  4. Suzanne

    I am glad Oak Hills is so beautiful at present and so well-managed. It begs the question: why does a driving range need to be added when there is success without one? Is this the “have your cake and eat it too” mentality? If the course is so successful as it stands, I, as a taxpayer, do not see the need for an additional expense to us since it used by so very few of the citizens of Norwalk making it almost a private club with the public seeing a big sign “DO NOT ENTER.” I will faithfully vote against any Council member up for reelection who approves of this financial plan.

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