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Trying to Stem Hemorrhage of Green, Palm Coast Studies Patchy Golf Club Take-Over

| June 28, 2016

palm harbor golf club

It’s never known better days. (© FlaglerLive)

So far this year, the city-owned Palm Harbor Golf Club—a hemorrhage of greens that has cost city taxpayers millions of dollars since opening in 2009—has run up a $155,000 deficit, or 30 percent steeper than last year, with a few months to go yet. The tennis center has lost $61,000, or 32 percent more than last year. KemperSports, the contractor running both operations, has not lost any money. It’s been rewarded with its combined management fee of $75,000 so far, on its way to $106,000 for the year.

That $106,000 is in addition to every other dollar the city pays for every other service at the two operations: the city also assumes all costs—payroll, maintenance, supplies. Revenue has never come close to matching expenses. Recurring deficits have been the norm.

“My problem is,” Steven Nobile, one of the council members and its only regular golfer, said, “Kemper continuously gives us numbers that are pie in the sky, and doesn’t come close to hitting them, and they also have sat in this room and said there are no new options. So at that moment I was trying to understand, we’re just paying for management, that’s it.” (Kemper’s officials were not invited to the table this time.)

“They don’t do any other kind of contract,” Chris Quinn, the city’s finance director, said, “other than basically you’re responsible for everything, even our mistakes, and you pay us a management fee. I’m oversimplifying it, but that’s essentially it.”

“It doesn’t make a whole lot of business sense to keep doing the same thing when we’re not happy with the results,” City Manager Jim Landon said as his administration presented four alternative options to the council this morning. Closing the golf course was not—is not—an option to the council. Nor is selling it at a time when golf is sports’ equivalent of the eight-track tape. “Don’t even think about trying to sell it, there’s no market,” said council member Bill McGuire, the most persistent critic of the money-losing operations.

All other options mean keeping both operations going, with likely greater or lesser losses to the city. There is no money-making model. At best, there are loss-limiting models.

Even then, the same lack of clarity and vision that has framed the council’s oversight of the two sports operations since their inception framed its discussion on both today, resulting in a less-than-clear directive to the administration that adds up to this: KemperSports will continue managing the operations on a month-to-month basis for now, giving the administration time to prepare yet another proposal to the council. That proposal would envision yet another pitch for a third-party management company (like Kemper) to take over, but under more strict guidelines. For example, the management fee would not be paid on any given month when a profit or a break-even point isn’t reached. Alternately, another proposal would have the city be more directly in charge of the two operations, while contracting out all essential services to different contractors.

Today’s discussion seemed like a group of amateur golfers struggling to pull themselves out of ill-designed bunkers. The resulting directive to the city manager had the making of a gofer’s idea of landscaping a green. But neither was any different than what caused the city to spend roughly $9 million on its two sports operations since the city got the idea of getting into the golf and tennis business, with plenty of deficits to show for it in return. Indeed, since the tennis and golf operations were ostensibly “folded” into the city’s Parks and Recreation operations in 2014, giving city staff more oversight, the deficits have gotten steeper, and with them dissatisfaction with Kemper, whose contract was renewed that same year.

Quinn and Beau Fagout, the city’s head of economic development, led the presentation on alternatives Tuesday morning.

The only four options presented (the council added none of its own and rarely does): One, the city could keep going with Kemper, with a rich history written in red of what that would mean.

Click On:

Two, the city could lease the properties, getting the city out of the golf and tennis business, limiting the financial risk to the city, eliminating the management fee and other associated costs. But it would represent a significant risk to the golf and tennis properties, as those properties would be at the mercy of the company running them. It would give the city no control over the properties, or the way the businesses are run. There would be no guarantee of sustainable operations. The recovery of the property, should things go awry with the company leasing it, could be costly.

The city administration is well aware that the golf industry is in trouble. It’s not just in recession: it’s in depression, with golf courses closing by the hundreds each year since the Great Recession. Another one –Cypress Knoll—closed in Palm Coast just this month. Nobile said he would consider leasing only if money was put in escrow to ensure against risks. “Mr. Nobile, if you don’t think a private company could make money on a golf course, you shouldn’t lease it to them,” Landon, who’s not interested in that option, told him.

“I will tell you, if you go this route, I’m done,” Landon snapped moments later, when council member Heidi Shipley cautioned that even if the properties were leased, every complaint call would still return to the council and to City Hall. Four minutes before McGuire asked Landon to clarify: “Does that mean you’ll resign as city manager? That’s what ‘done’ means to me.” Landon backtracked, saying he was just trying to “overemphasize” that leasing would be a problem.

Three, the city could take over, managing and running the two operations. It would have complete control. It would limit the risks to the properties and eliminate the management fee. But it would still be responsible for the deficit, it would have increased labor costs, as it would have to hire additional employees, and it would be in the restaurant business. Landon isn’t interested in that option, either. Nor are council members.

Four, the city could adopt a “hybrid” model, which looks like the city taking over the operations in a half-pregnant way: the city would still need to hire additional employees even as it hires various contractors to run some parts of the operation—marketing, landscaping, some golf and tennis pros who do lessons, the restaurant (the latter being the only truly money-making operation at the golf course, chiefly because of its chef’s creativity and reputation)—but the city would presumably have more flexibility to make changes. McGuire said the end result would be a $50,000 difference from what’s in place now (if that), which he said would not be worth the headaches.

“This would be a halfway point,” Quinn said, giving the city a chance to explore the running of the business “and see what we can do with it” without committing to hiring a large number of employees. (Absent a recession when budgets forcibly shrink, the city may shift or reclassify positions, but it generally does not get rid of positions once it creates them.)

And in the end, the council adopted a hybrid of the hybrid: unable to decide between the two, it sent Landon back to analyze options one and four as possibilities, which means two things: the city will prepare a request for proposal to solicit interest from companies interested in running the entire operations (like Kemper). It will also prepare requests for proposals for a variety of services at the two operations while also preparing a budget and operational plan, putting the city in position to take over the two operations while still keeping the fig leaf of not running them entirely.

It’s not clear when the recast proposals will be brought back to the council, or whether McGuire will even be there to hear them. McGuire is aching to make his exit from town and council.

Palm Coast’s Sports Operations: Possible Alternatives

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22 Responses for “Trying to Stem Hemorrhage of Green, Palm Coast Studies Patchy Golf Club Take-Over”

  1. Veteran says:

    Never mind the money, the greens are the worst in the county, and there are weeds everywhere. I don’t know the financials of Grand Reserve but it is in great condition. In my opinion either the greens keepers don’t know what they are doing or don’t have the resources.

  2. DaveT says:

    Fire Kemper and find a group that understands real golf course management and run this golf course. But first are the books available to the public to find out where the money is going as received by “someone”. Is it going into the course or into some City project not golf course related.

  3. psness says:

    While golf courses are struggling, there are many who still play. In Palm Coast, as in many markets, it’s a matter of over-supply. I would think the closing of Cypress Knoll, the nearest public course, could help Palm Harbor somewhat.

  4. I'm simply done says:

    I have golfed on the course 4 times this year so far. The greens are bad and I’m done. Not ever golfing there again no matter what. Good bye good customer. Luckily I live in Palm Coast Plantation so I don’t have to pay for this large money pit.

  5. southflorida says:

    How about option 5? Close down the course and turn it into a city-owned nature preserve? You would have a ready network of walking trails complete with plenty of parking to attract visitors from all over. Home values may even rise faster given the lack of lot privacy in that area. Perhaps the money-making restaurant could be an attraction of its own. There would probably be an initial investment to manage the planting of native flora and to remove golf course sheds and equipment, but at least you wouldn’t have the operational hemorrhaging.

  6. YankeeExPat says:

    With the normal Florida 1000 % humidity, how can anyone even enjoy a round? The folks on the links here remind me of sharecroppers in plaid pants. California is still the best place to play. While golf in general is diminishing, it is so much more pronounced in the state of Florida. Maybe the Florida Commission on Tourism should promote HillbillyHandfishin

  7. r&r says:

    Before the city does their normal knee jerking think of the millions spent on walking trails, parks, boat landings etc. they have zero return on the investment and require constant maintenance. These are all good because they’re for the enjoyment of the citizens. Noble leave the course alone and get a hobby or something to take up your time.

  8. Anonymous says:

    I don’t play golf I don’t have a home along this course either BUT I do support the City keeping it. Like all other parts of our parks it is not meant to turn a profit. Does the city make a profit from all the bike/walking trails nope. does it make money from the playgrounds and ball fields nope. does it make money from the parks on the water again nope. The city golf course is unlike most of them not totally dependent on tax dollars. I do think it should be run by our parks department especially when we pay all the expense of it.

  9. Flatsflyer says:

    Very easy answer, take Option # 2 and get rid of the idiot City manager. He said he would resign, no exit package, the savings of his salary, benefits, ($240,000.) etc. would bail out both the golf and tennis operations. Hire a new City manager for $100,000. which would be a reasonable salary for a city of Palm Coast size.

  10. Rich Y says:

    Why does this need a Restaurant? I have played golf at public courses with snack bars and been fine as long as I know to eat before (or after I play) players will be fine. Oh, wait – work a deal with a local place Houligans and advertise and do a “Golf Special”.

    If my math is right, the loss for the 2 (Golf and Tennis) were 216k (61 + 155k). 106k of that is the fee. So the city is spending 110k on “payroll, maintenance and supplies”. Let’s assume they could run it for 70% of the fee or 74.2k (after all they already are paying for payroll, maintenance and supplies). If the city can run it as well as Kemper their expenses would be 184.2k. The goal should be to make money but as indicated in the past, since this is part of the city parks, break even should be acceptable. I doubt the boat dock and other “improvements” have an amortization schedule of one year to make their money back. I agree with a poster above, open the books, this place doesn’t make enough to break even 184k in expenses? Really? I think with some creativity and realistic approaches these places could be saved and been the asset they were at one time for Palm Coast.

  11. Rich Y says:

    You solved my budget challenge below!

  12. David S says:

    Flatsflyer you could not be more right I agree 100%.

  13. Oldseadog says:

    I VOTE OPTION 2…………….!

  14. PalmCoastPioneers says:

    Many of you know or have seen our Levitt & I.T.T. Showcase Golf Course Neighborhood Efforts in desperately trying to save the very rich Heritage and History of ‘ The Palm Coast Project’. ;
    They include, working off our our kitchen tables and floors since we have little, xeroxing like crazy at Staples because we don’t have a necessary xerox machine, acquiring Heritage and History from the Official State of Florida Historic Preservation Offices.
    Tho’ we have very little we go forward anyway , one brick at a time, one baby step at a time.
    We achieved:
    Recording Historic Structures in our Neighborhood.
    Acquiring TWO Official Historical MARKERS from the State of Florida Historic Preservation Offices.
    Worked with ‘ Garfield ‘ – Palm Coasts ‘ Mascot and SpokesCat and they put together a neat Disc; giving us a copy and forwarding it to ‘ The Smithsonian ‘
    Network with ‘ The Smithsonian’ and have many documents in the Reference Section – Levitts Palm Coast, at ‘ The Smithsonian’.
    All this required massive research and xerox documents.
    During one of our telephone conversations we contacted Billy Casper Golf. I was told ‘…we have been very interested in that Golf Course for many years…’…and..’…We have played that course many, many, many, many , many times…’
    Our hands are tied; we have to wait until the city asks for ours’/ others input.
    We have reviewed it many times,’…we can not turn a massive profit like a Donald Trump Course..’…’..but we can make modest profit…’.
    I told them it is very Historic; they said…’…that does not pose a problem because we have Historic Golf Courses in our Portfolio…’.
    I told them in time we hope to achieve it becoming part of the State of Florida’s Historic Golf Trail…they said..’…thats great; it enhances it more…’.
    Guy on the telephone regularly said…’…I’ve told you….I have played it many many many many many times…’…
    For the newcomers – the Palm Coast Golf Club was the first G.C. that brought Championship Golf to an entire County – Flagler
    The Palm Coast Golf Club was renamed ‘ Palm Harbor Golf Club ‘ when the Pine Lakes Golf Course ( The second of the ‘ Four Sisters ‘ ), another pledged Amenity , was opened.
    It was the HOME COURSE for Golf Legend Nancy Lopez which was Palm Coasts’ Golf Touring Pro for years.
    The first street of the Gargantuan 93,000 acres comprising ‘ The Palm Coast Project’ was named ‘ Casper Drive ‘ in honour to the Golf Legend Billy Casper.
    The Palm Coast Golf Course was a Developer Levitt & I.T.T. pledged Amenity for me / us.
    Later when we brought in the Special Investigative Units of the Department of Justice it became part of the Federally ORDERED ‘…significant areas of Recreation…’.

  15. Coyote says:

    Well, this is what comes of Palm Coast “embracing the future” and becoming a Progressive City. We’re no longer a retirement community, and those busy progressive business people who the City Council is trying to attract .. well .. they don’t play golf – or do most of the things us ‘old folks’ do.

    You know , If i had wanted to live my retirement in a big city, I would have stayed in a big city. Instead, I came to a pleasant little retirement town , that now is trying desperately to become a city ‘wanna be’ and can’t understand why they can’t pick and choose which aspects of a big city to become. You get the bad with the good, as in crime, low income population, and the degradation of retirement-oriented amenities.

  16. A.S.F. says:

    The city-owned ‘nature preserve” idea sounds good but too often they seem to attract drug dealers and worse.

  17. robjr says:

    No matter what type of scheme; hybrid, hybrid of a hybrid, city run, management company it’s a LOSER.

    It’s a LOSER.

    It started out $1,000,000 in the hole. And with an administration that knows next to nothing about the economics of golf course development and operation it has not gotten any better.

    There are two outs to this debacle.
    Sell it and take the loss. That is doubtful because the majority of the town council prefers to try and ride a dead horse.

    Let those cheerleaders, is it the Friends of Palm Coast Golf, collectively and individually up the money that equals the yearly deficit. If they want a golf course so bad pay for it instead of the taxpayers subsidizing this losing effort.

    It took thousands of signed petitions to rid this city of most of the red light cameras. So do you think these news articles, which there have been several, that continually call out the town council and administration over this blunder is going to make them change course?

  18. robjr says:

    I overlooked the third option and probably the best option.

    Close it.

    And use the equipment the city paid for to keep the grass mowed.

  19. Arthur H. says:

    Perhaps we take a lesson from other municipal golf courses in Florida that have found success with model #4 in which the city retains in control of the entire operation by running the front of the house and outsources the specialized services associated with the facility. Maintenance is obviously the largest single expense associated with any golf course. A performance based contract for golf course maintenance with a highly qualified and resourced golf course maintenance service provider will require a fixed set of maintenance standards for a fixed annual cost, opposed to the current system of passing all maintenance costs through to the City regardless of the budget. The City of Daytona Beach Golf Course serves as an example to review.

  20. Dennis says:

    I play at Palm Harbor weekly. If the city would take some pride in ownership, the course might not be a big a deficit as it is. Compared to the other local golf courses Palm Harbor is terrible. As stated by others the greens are terrible and have been for far too long. The sand bunkers, when not filled with water, are like hitting off very hard ground or concrete. Throughout the course there is a lot of over growth that needs to be trimmed or eliminated. That’s why it’s the cheapest course around to play on. No one would pay premium rates to play there.
    The club house also could use some sprucing up. Last time I used the men’s room the urinals didn’t flush.

    So if the city decides to run it themselves, hire someone to run it, or any other plan they maybe pondering, they have to clean the place up and make it at least presentable and better playable before they see any improvement in the financial status.

  21. Oldseadog says:

    Many years ago when I lived in St Augustine, we would journey down and take the ferry across (before that fancy toll bridge was built) with our golf clubs to play at “Nancy’s Golf Course”. It was always in great shape and such a fun day for our foursome. Those days of a great Golf Course have indeed seemed to have changed.

  22. Greg Feldman says:

    Seems like it is time for a management company that sits back and collect without doing anything but the bare minimum to exit, and see if we can find a company that can be incentivized through profit sharing to keep up the grounds and run the facilities. Wouldn’t it be great to have a company in there that said “Hey guys, this is how we can turn this around” instead of “Hey guys, where’s my check”?

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