Boosting golf course revenues

Municipalities searching for ways to raise additional revenue might take some tips from two southern California cities. Recently, Downey and Montebello decided to re-examine and upgrade under-performing assets to provide more revenue. Their strategy: renovating and expanding municipal golf courses to attract more players and to justify higher greens fees.

Golf’s continued growth in popularity is enabling many cities to proceed with golf course improvements with the assurance that the strong market demand will sustain the fee increases. That is particularly true in Downey and Montebello, whose courses attract golfers from adjacent Los Angeles County cities.

In 1993, Downey financed a $5 million reconstruction of its 18-hole Rio Hondo municipal golf course, originally built in 1924. When the course reopened in 1995, fees were increased.

Since the reconstruction, the number of rounds has increased, and the golf course now generates $800,000 per year. That is more than twice as much as the $385,000 annual payments that must be made on the 25-year bonds.

Neighboring Montebello is following suit by financing a $5.6 million renovation and improvement of its golf course and an expansion and improvement of the clubhouse. The golf course was built in 1926; the city purchased it in 1941 and treats it as a self-supporting enterprise fund. The course is operated and managed by the Montebello Parks and Recreation Department, while the clubhouse is managed by an outside operator.

Situated about 10 miles from downtown Los Angeles, Montebello’s facility lies on 120 acres and includes an 18-hole public championship course; a full-service pro shop; a lighted, 32-stall driving range; and a clubhouse.

The clubhouse, called the Quiet Cannon, contains a coffee shop, a bar, a second-floor entertainment lounge and banquet facilities for up to 1,000 attendees. Already an established community center, the clubhouse features a variety of amenities such as catering facilities and large meeting rooms used by the Rotary Club and other community groups for regular monthly meetings. The banquet facilities are to be upgraded, and a wedding gazebo will be added.

The improvement project will provide additional amenities and make the course more challenging than the average municipal golf course. New greens and tees for all 18 holes will be constructed, and lakes will be added to provide water hazards at three holes.

Additionally, greens bunkers will be rebuilt, and improvements are slated for the fairway drainage. The course will be regraded, and fair bunkers and a new cart path will be installed; restrooms will be added; and the driving range fence will be extended. A 25 percent increase in greens fees is projected for the Montebello course once the project is completed.

Montebello issued two series of tax-exempt B bonds (variable-rate demand certificates of participation, also known as revenue bonds) in minimum denominations of $25,000. The 28-year bonds will finance the renovation of the golf course and clubhouse and establish a reserve fund. The largest issue ($3.65 million) will be used for the golf course, while $1.94 million from the smaller issue will fund renovations to the clubhouse.

Revenues from the Quiet Cannon, greens fees and money from other sources are expected to be sufficient to pay off the bonds. However, if those sources come up short, motor vehicle license fees will guarantee payment.

Both bond issues carry variable interest rates since that was determined to be the least expensive issue. No prepayment penalty is prescribed for an early payoff.