Recap Of The RedGate Report Presentation

The new report by nonprofit golf consultants the National Golf Foundation that was kicked off at a Mayor and Council meeting last September was formally presented to the Mayor and Council (see the report here) on Monday night.

(This recap is based on my own notes and may contain errors. Also, it is not comprehensive, though it certainly felt like I was typing a lot!)

Richard Singer of the National Golf Foundation gave the presentation:

In reviewing a golf facility, there are things you can and can’t control. Put bluntly, the City of Rockville is in the golf business. Right now, that is a very tough business. What the City is facing with RedGate is not at all unique. “You can’t control the economy, and you can’t control the long term trends for golf,” said Singer, who has 21 years of experience in examining municipal golf courses.

The report, said Singer, focuses on what can be controlled. This includes:

• Facility
• Condition of course
• Quality
• Staff
• Pricing
• Message given to the public

The City is small (one course) competing with large businesses (Montgomery County, which has a number of courses).

The City has a lot to be proud of — RedGate is an excellent facility with excellent staff that has dedicated itself to the facility.

Despite all that, Singer said, RedGate may not be sustainable under the current system. While it has potential, it is difficult to see it going forward without outside support. The City needs to make a commitment one way or the other as regards RedGate, he said: The rhetoric and negative news of the last two years has contributed to the sharp decline in rounds played.

Singer reported that “there is no tradition of marketing at RedGate,” which is common among municipal courses. However, the market has changed and it is now much more important to have a serious marketing program. That said, he said, “It certainly appears that in the last year there is a new commitment to marketing this facility more.”

RedGate needs investment, he said. “It needs TLC.” Some of the assets at RedGate are getting to the point where they are getting beyond their useful life. “You’re on borrowed time with your facility,” he said.

Key Finding

“I have to say that this is one of the highest overall expense structures I have ever seen in 20 years,” he said. “That in and of itself is the issue with RedGate. That is especially true in terms of personnel costs, but we did not see those direct costs to be out of line.”

Singer said that, even if every idea were implemented and successful, the course would still be short in terms of its ability to meet expenses. “Even if you get a couple of good years,” he said, “you might be back where you started in three to five years.”

The NGF’s best recommendation, he said, is to privatize the course so as to both control expenses and grow revenue. He recognizes this could be problematic when it comes to staff and good will.

Questions And Discussion

Councilmember Mark Pierzchala began the questions. “It’s a very good report,” he said, “and I’m the one who voted against doing the report.” Is RedGate a good candidate to capitalize on latent demand? He wondered. Singer responded that, even as a municipal course that is not necessarily a good beginner’s course, it is. This is in part due to the good beginner’s program at the course.

Councilmember Bridget Newton asked why other local municipal courses were not examined as competitors or exemplars (for instance, Herndon). Singer replied that his main focus was Montgomery County, but that more important the key driver is the high expense level. In addition, the report embodies the large experience the NGF has in examining other municipal courses.

She asked, “Did you look at taking it out of an enterprise fund?” Singer replied that he was not asked to look at that, but that it speaks to the decision the community must make about the course.

Councilmember Piotr Gajewski asked about the charge that the report got no input from the Advisory Committee, and also whether the report was altered in any appreciable way based on staff input. Singer said unequivocally that the draft review process did not change the tenor and tone of the report in any way. He also said he had expected to get input from the Advisory Committee.

Gajewski pointed out that the report calls for reducing costs and growing rounds by 7 or 8,000 per year. He said he thought that unlikely. “Can you provide any optimism?” he asked. Singer said yes, it is realistic, and RedGate has been at that level in the past. Furthermore, the growth is not 8,000 per year, but in the aggregate. “It’s not going to come easily, but it is a realistic target,” he said.

Councilmember John Britton focused on the staff expense issue. Compared to Montgomery County, RedGate’s expenses are high. “Do we pay our people that much less?” he asked. Singer said, “There are other expenses associated with retirement benefits from previous employees that are long gone that are on your books that are not on [Montgomery County's].”

Britton also asked about management issues and staffing. “What has worked and what has not worked in terms of management of this facility?” he asked. Singer replied that there are things to look at both in terms of on-site management and management by City. For instance, the lack of marketing is a City management issue. On the food service (which got low marks), “I am not sure anything jumps out at me in terms of mismanagement,” but the food service was given poor marks even by regular players.

Mayor Phyllis Marcuccio said, “Throughout the report, I saw pretty clear indication that we had done a poor job of keeping that course in good condition. There was a lack of caring. Is the only way we can get caring for the course is through an outside vendor?” Singer replied, “It is not the only way, but I think it may be the best way for you.”

She also asked whether NGF had looked at the costs of all the other recreation facilities in the City that do not recoup costs. Singer said “We did not think that was really a part of this study, but it is a valid question. Certainly there are many facilities that recoup far less than RedGate. You still earn over a million dollars in revenue, which has got to be a lot higher than other recreational amenities.”

Councilmember Pierzchala asked about hiring a golf management company. “What if we decided to do that, and started an RFP process. That will take a few months. That will take us into May. Have you had experience where this has happened in the middle of the year as opposed to over the winter?” Singer said he has seen it happen but it is a mixed bag. ‘It would be better to do it at the end of the season or beginning of the season. . . . We assumed you would finish a full golf season before doing this, and start it in October 2011.”

Pierzchala also asked about the role of pricing. “Aren’t we in a position where if Montgomery County wanted to drive us out of business they could just do it?” Singer replied that they may be able to, but they might also drive themselves out of business too. “Also, we are seeing that the number one objection among golfers for why they don’t play is not price, but the time they have to play.”

Councilmember Newton asked about the City’s business plan that had been put together for RedGate. “Did you look at it?” Singer replied, “We did review it very thoroughly. We addressed that on page 32. It looked to us that it was more just words on paper, not a plan per se. . . . A business plan needs to be updated on an annual basis, and have performance measures.”

She also said, “There is a statement that you make in the report that you do not see RedGate as a good value as compared to Montgomery County course. We thought that was one of the things RedGate had going for it. Is Montgomery County Revenue Authority operating in the black?” Singer replied “That’s actually two different questions. Our sense is that the relative value of the course has declined in recent years as compared to a Montgomery County course. As far as their profitability, it does appear on paper that they are operating in the black or close to even.”

Councilmember Gajewski asked about layoffs and whether we had reduced staff at RedGate. Burt Hall replied that 2003 was a bad year in terms of staff reductions.

Gajewski asked about the budget tables near the end. “On page 79, in the as-is scenario where we make no changes, the course is projected to lose approximately $750,000 per year, and administrative charge is almost half of that loss ($300,000). Moving forward and looking at other budgets, it looks like the administrative charge does not reduce at all. Basically the administrative costs are at par [whether it is private or not]. What really changes are the direct personnel costs, and enhanced revenue. Am I getting it? The takeaway is we will reduce our labor charge and increase revenue?” Singer replied, “Yes. The management company estimates we have put forth are based on what numerous management company expenses look like nationwide. There are a couple issues with your administrative charge in Rockville though. First is what is usual for a golf course to have? It is typically $180,000 to $200,000, and in Rockville it is estimated to be above $330,000. Second, what does it cover? What do you get for that? With a management company, the line item administrative expense includes some things that are now included in direct labor costs.”

Councilmember Britton asked, “Can we increase tournaments? It seems that they provide great revenue.” Singer replied, “I think there is great opportunity in tournaments. Washington DC is the golf outing capital of the world. But there are capacity issues. If you displace too many regular golfers, you can run into problems.”

Mayor Marcuccio asked about demographics. “You must have looked at the demographics of the area when doing this study, and at the Science City and White Flint developments going on around Rockville. What kind of an impact will that have?” Singer said, “I would suspect that to have a great impact. Everything we looked at in terms of demographics was very favorable for golf. That is what’s keeping you afloat now. Other communities do not have the kind of ‘fall out of bed’ market that you have.”

She also asked about the RedGate Advisory Committee report, and some of the possibilities it lists beyond golf (for instance, a learning center). “Would you suggest it?” Singer said, “We did review it and it was a great report. The suggestion we took the most seriously was the one about expanding the driving range and adding a learning center. The problem is that all of these suggestions involve investment, and you need to make sure the uses are complementary to each other. The benefit to the community must match the investment required.”

Councilmember Pierzchala asked about enhancement mentioned in the report. “Some struck me as why are they secondary priorities. You’ve identified over a million dollars of improvements. If these were to be made, and do them all at once, would that enhance the prospects versus doing them over a five year period?” Singer replied that it is a mixed bag. “Some of them need to be done all at once, such as replacing greens. Others, like patching cart path areas, they can be done piecemeal. Doing it all at once could have a positive impact, but you would have to close the facility down and lose revenue. You could then have a grand reopening.”

Councilmember Newton made a comment about other courses nearby. “NGF put out an article about the courses that survive and succeed are the ones that keep up on infrastructure, and RedGate hasn’t done that. It is frustrating to think we are in this position when, if we had been doing what we should do all along, we would not be here.”

Councilmember Gajewski said he had a question about the food business. “Under enhanced service to golfers, there appears to be an opportunity for more service to golfers, through on-course beverage carts.” Singer said, “Beverage carts are something that’s kind of expected by the golfers. In looking at the numbers, it did not look like it was doing as well as it could. It should be high margin, and beer and golf seem to go together well.”

Councilmember Britton said, “If we followed your advice and put out an RFP, the Montgomery County Revenue Authority could respond. Did you discuss what would happen if they did so?” Singer replied “We did not really look at that. I can’t comment one way or another as to how that would work. It is in the fine print whether that would work for you.”

Councilmember Newton said, “I want to come back to the idea of having a Director of Golf, which you don’t recommend. Why not?” Singer replied, “Let’s flesh it out. My original sense of the Director of Golf system was that it would be in the General Fund. The reason that is not in here is that goes beyond the golf business — we wanted to focus on your enterprise fund, the RedGate Fund. Looking at the enterprise fund, if we did it that way, we would add a new salary to the enterprise fund, and we might see greater revenue, but I don’t know how that changes the basic fundamental equation you are facing here. Perhaps if this individual is really strong, it could happen.”

Councilmember Gajewski said, “Let’s say we go ahead with the outside management. What do we require of the management company in terms of the present people working at the golf course? Singer said, “It is a tough situation, no question about it. Other places are looking at the same thing. In many cases, the RFP’s require that current staff be employed. On the other hand, any management company coming in will surely recognize the current value of staff.”

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