Contributor Opinion by Art Stigile: Golf Subsidies 10 Times Greater Than Swim Center Subsidy

This Contributor Opinion is by Art Stigile.

For the past two years, I’ve been challenging golfers to answer a simple question — why should Rockville taxpayers provide a $24 subsidy for each round of golf played at RedGate, when golfers are supposed to be paying the full costs?

A common answer from golfers’ is that we subsidize swimming, but we can’t see the amount because the Swim Center subsidy is hidden away in the General Fund. In contrast, the Golf Course stands alone in a separate enterprise fund where the costs are transparent. If you pull the Swim Center out of the General Fund and compared apples to apples, the argument goes, you would see the Swim Center subsidy.

Well, I like apples, so let’s do the math.

For RedGate, the total subsidy for the current fiscal year is the sum of the projected deficit ($673,990) and the 50 percent reduction in the charge for central administrative expenses ($165,750), for a total cost to taxpayers of $893,740. Divide this amount by the projected number of rounds played (roughly 35,000) to get the estimated subsidy of $24 per round.

The calculation of the Swim Center subsidy is a bit more complicated because of how the City accounts for it, but the formula is the same. According to page 14-44 of the FY 2011 Adopted Budget, the Swim Center will have $1.694 million of operating revenue in FY 2011 and $1.730 million of operating expenditures, for a net operating deficit of $36,430.

To be comparable to RedGate’s bottom line, you have to add debt service ($169,762), depreciation ($70,745), and administrative overhead expenses ($398,386) to the Swim Center’s operating deficit. These amounts do not appear in the regular budget document, but they are provided in a March 26, 2010 memo from Gavin Cohen to Mayor and Council. The memo appears as attachment G to agenda item #10, “RedGate Business Plan (Plan) Financial Update”, June 21, 2010 meeting of Mayor and Council, page G-2. The amounts are for FY 2009, but they are not likely to be much different for FY 2011. Together, they sum to $638,893, increasing the Swim Center’s total cost to taxpayers to $675,323.

This is the total taxpayer subsidy for the Swim Center. To calculate the subsidy per visit, you have to know the number of visits. In response to my request, the City Manager provided me by email with an estimate of the number of visits in FY 2010. ( Mayor and Council and Joe Jordan, Chair of the RedGate Advisory Committee, were copied.) The number includes 113,378 visits by people using membership cards, 53,206 paid visits, 57,002 for classes, 58,792 for the RMSC Swim Team and the Rockville Rays Swim Team, and some other odds and ends. Together they add to 296,251 visits. I’ll assume the same number for FY 2011.

When you divide the Swim Center deficit by the number of visits, you get a subsidy of $2.28. (For reference, the subsidy per visit in FY 2010 was approximately $2.50.)

To summarize, that’s $24 per visit to the Golf Course, $2.28 per visit to the Swim Center. That’s one-tenth the taxpayer subsidy per round of Golf Course.

Any way you look at it, that’s a lot of apples!

The next time someone uses the Swim Center to justify taxpayer subsidies for the Golf Course, remember these two numbers — $24 taxpayer subsidy per round of golf, which is 10 times greater than the Swim Center subsidy.

Art Stigile

This is a Contributor Opinion. Rockville Central encourages readers to submit such pieces for consideration — the more voices the better. Simply send them to hello@rockvillecentral.com. We ask that all such contributions be civil and we reserve the right to edit (in consultation with the author) or reject. Contributor opinions should not be seen as reflecting opinions held by Rockville Central editors, as they are just as frequently at odds with our own views. That’s the whole point!

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Contributor Opinion by Art Stigile: 10 Questions for RedGate (UPDATED)

>In our recap of Monday’s Mayor and Council meeting, we promised a full list of Art Stigile’s questions about RedGate Golf Course from Citizen’s Forum. Thanks to Art’s courtesy, here they are:

Image from RedGate Golf Course

[UPDATE: Art has provided backup for his assertions in this piece; they are here.]

Next week the RedGate Advisory Committee will present its recommendations for improving the financial condition of the golf course. In anticipation of the meeting, I have 10 questions that I would like to ask the Advisory Committee. I believe they are hard, but fair, questions that should be asked of the Committee, which after all, serves primarily as the golfers’s advocacy group. I won’t be able to ask all of them tonight, but I will start tonight and finish up next week. I have already emailed them to the Chairman of the Advisory Committee and to the Mayor and Council.

1. When Rockville agreed to establish the golf course in 1974, golfers promised to pay all of the expenses of the golf course and not saddle taxpayers with any of the cost. In exchange, RedGate would be run like a business that focused on meeting the needs of golfers, without a lot of meddling by taxpayers. Setting RedGate up as a separate Enterprise Fund was essential to carrying out this deal. Through 1999, golfers lived up to their bargain with taxpayers. However, Redgate has run deficits in each of the past 10 years, and taxpayers have been forced to fill the gap. Are today’s golfers willing to live by the original deal struck with taxpayers, and if not, why should taxpayers feel obligated to subsidize golf?
2. RedGate is expected to run a deficit of $674,000 this year, and taxpayers are once again going to have to fill the hole. If you do the math, that works out to a taxpayer subsidy of about $19 for every round of golf played at RedGate. Does the Advisory Committee agree that this is incredibly excessive? How would you define the appropriate level?
3. Redgate is expected to end the current year with a negative balance of about $2.4 million. This figure is more than double the revenue that we expect to collect from golfers for the entire year. The cumulative losses are expected to grow to $5.9 million by the end of FY 2015, which by then will be more than 5 times RedGate’s annual income. My question is this. How and when do you propose to repay taxpayers for this debt?
4. Rockville has operated for several years with a requirement to run a General Fund reserve equal to 15 percent of revenue. At the June 21^st meeting of Mayor and Council, staff testified that incorporating RedGate into the General Fund would immediately reduce the General Fund reserve to 13.6 percent in FY 2011 and reduce it further each year, leaving it at just 2.7 percent in FY 2015. This is a recipe for financial suicide. It would result in the loss of Rockville’s Triple A rating, make it extremely expensive to issue debt, and it would make it very difficult to operate the City budget. In light of this testimony, do you agree with the staff recommendation to keep RedGate as an Enterprise Fund, separate from the General Fund? If not, how do you suggest that Rockville deal with the dangerous drop in the General Fund reserve that would be caused by folding RedGate into the General Fund?
5. When RedGate was created in 1974, it provided Rockville’s middle income golfers with their first opportunity to play quality golf at an affordable price in the local region. Today, there are numerous public golf courses within easy driving distance, including several that are owned by the County. In light of RedGate’s declining customer base and large and growing deficits, wouldn’t Rockville taxpayers be justified, indeed, be smart, to say “let’s end this wasteful duplication of services, close RedGate, and direct golfers to any of the other public course in the area?”
6. The biggest flaw in the 2006 business plan was the assumption that fees would rise by about 5 percent per year. If fees had, in fact, risen by those amounts, RedGate’s revenues would be about $400,000 higher in FY 2011, and we wouldn’t be discussing the need for a new business plan. Instead, fees have stayed flat for five years, and they are likely to remain flat, given the over-saturation of the local golf market. But if fees stay flat, then the only way to eliminate the $924,000 deficit that is projected for FY 2015 is to double the number of rounds of golf played to more than 70,000. However, the number of rounds has not exceeded 50,000 since 2002, and the highest number in the past five years was 41,116 in FY 2008. Doesn’t this mean that under any realistic scenario, the only way that Rockville can continue to operate the golf course is through large and growing taxpayer subsidies?
7. Last year, you vigorously opposed consideration of an option to turn RedGate over to the Revenue Authority without a long list of preconditions. Now, several large golf course operators have expressed interest in operating RedGate. Given the sharp deterioration of RedGates finances, are you now willing to support turning RedGate over to some other management company without strings, or do you continue to insist on preconditions, even if it means that taxpayers would have to continue to pay large subsidies for golfers?
8. The 2006 business plan specified various measures of success, including that RedGate’s budget would return to surplus by 2009. However, it was totally silent about what would happen if these measures were not met and losses continued to rise. When I began in 2008 to point out that RedGate was off-track and the business plan would not succeed, the Chairman of the Advisory Committee advised me that I just needed to give it time to work. Now the flaws are abundantly clear, and we are considering yet another rescue plan for RedGate that, by necessity, would depend on large taxpayer subsidies for several years. My question is this. In exchange for continuation of taxpayer subsidies for a defined period of time, would the Advisory Committee agree to a business plan with hard targets that, if not met, would require closing the golf course?
9. RedGate has been operated by the same manager for many years. Despite his best efforts, deficits have risen, and they are projected to grow as far as the eye can see. Given the results, would the Advisory Committee agree to a new business plan that includes replacing the current manager?
10. Finally, from FY 2011 through FY 2015, taxpayers are going to have to spend about $4.2 million to cover RedGate’s deficits. That’s a lot of money, and there are many other ways to spend that money for the benefit of taxpayers. For example, we could put another 6-7 police officers on the street with that money. We could double our support of caregiver agencies, which certainly would make sense in this recession. We could use it to pay for replacing about 2.5 miles of water lines, instead of borrowing the money, or we could pay for about a third of the cost of converting the old Post Office to a police headquarters. We could actually fund the Mayor’s dream of creating a Rockville Science Center for our kids, which I have to say as a proud father whose daughter left Einstein High School a year early because she was bored, and who just graduated at age 20 with her Masters in Engineering, the Science Center would be the best new investment in kids that Rockville could start. Or, we could just cut the property tax rate and let taxpayers keep the money. My list could go on for an hour. My question is this. Could you tell us why golf should have priority over so many other public services that obviously would provide greater public benefits, and why the golf subsidy shouldn’t be the first thing on the chopping block in the FY 2012 budget?

Art Stigile

This is a Contributor Opinion. Rockville Central encourages readers to submit such pieces for consideration — the more voices the better. Simply send them to rockvillecentral@gmail.com. We ask that all such contributions be civil and we reserve the right to edit (in consultation with the author) or reject. Contributor opinions should not be seen as reflecting opinions held by Rockville Central editors, as they are just as frequently at odds with our own views. That’s the whole point!

Contributor Opinion By Art Stigile: From The Record

>If you’ve seen the Mayoral debates, you know that Councilmember [Phyllis] Marcuccio has been pitching herself as the candidate who opposes charging fees for services. This has puzzled me for some time. I follow the Mayor and Council meetings fairly closely, and I never noticed much difference in their votes on fees. So, I decided to research each candidate’s voting record on fee issues.

I did this by electronically searching the minutes of the Mayor and Council meetings for two words – “fee” and “rate”. I included all meetings, starting with the meeting on November 21, 2005, when Councilmember Marcuccio first took her seat on the Council, and ending with the meeting on September 21 of this year. Minutes for the two meetings that occurred this month are not posted yet. However, I included the vote on the parking garage fees that occurred last Monday night, which I observed in person. I recorded a description of the motion regarding the fee issue, the name of the Councilmember who offered the motion, the total votes for and against each measure, and the votes of Councilmember Marcuccio and Mayor [Susan] Hoffmann. I only counted final votes, and did not include other votes that, by themselves, would not implement or change a fee. For example, I excluded interim votes that instruct staff to draft a fee ordinance and bring it back for consideration at a later date.

The minutes are posted on the City website here. You can do the same test, if you want to check the accuracy of my list. If you find a vote that I missed, please let me know, and I’ll update my list.

My compilation is shown below [and in a table here]. I found a total of 27 votes on fees where both candidates voted. Mayor Hoffmann and Councilmember Marcuccio voted the same way 22 times. In other words, the two candidates had the same position on fees more than 80 percent of the time during the past 4 years. This is consistent with my memory of how votes on fees have been cast. In fact, most times (19) the votes on proposed fee ordinances are unanimous.

The two candidates voted differently only 5 times. Two of these involved fees for the refuse and recycling system, with their votes reflecting their opposing positions on the larger issue of once-weekly trash service. For example, on the question of whether to freeze the trash fee in FY 2010 for the third year of the five-year freeze promised when the Council approved once-weekly trash service, Mayor Hoffmann voted yes and Councilmember Marcuccio voted no.

Two other votes involved parking fees. I’m not sure what this says because they voted the same on parking fees six other times.

They voted differently on only one other occasion. The vote occurred in May of this year on a motion to revise and establish a new fee schedule for licensing rental units. Mayor Hoffmann voted to approve the fee schedule; Councilmember Marcuccio voted against it. This contrasts with both of their votes to approve an increase in licensing fees in July 2006.

Now, since I’m a strong supporter of Mayor Hoffmann’s reelection bid, I’m sure that some of Councilmember Marcuccio’s supporters are going to cry foul about this review of the voting record. I have two responses.

First, I think it is perfectly reasonable for voters to consider a candidate’s record as well as the candidate’s campaign promises.

Second – and I this is, perhaps, the more important point – no matter which candidate is elected, the Mayor and Council will continue to approve fees. This is because fees are often a more fair and effective way to fund many City services, and because voters generally support using fees over taxes. For example, most of us would agree that if someone wants to water his lawn every day in the summer, he should pay for the water, not taxpayers. And requiring the homeowner to pay for the water used by his family encourages them to use water more efficiently.

Fees are here to stay. We use them to fund a lot of services. The real question is how fast and by how much will they increase. This is where I think a candidate’s promise to restrain fee increases might be a factor to consider.

Even then, however, we have to admit that circumstances often overwhelm campaign promises. Sometimes, such as for our water and sewer fees, we simply have to face up to fee increases because we have to cover the cost of replacing 33 miles of old and corroded water pipes that are mostly located east of 355. It’s very expensive, costing as much as $300 per foot. But we have no choice. It’s a matter of protecting life and property. The pipes are so plugged up that 51 fire hydrants do not have enough water pressure to fight a fire.

There are times, however, when we can implement efficiencies in program delivery that make a significant change in the trajectory of future fee increases. The once-weekly trash service was such an opportunity. The large trash bins allowed us to cut in half the frequency of trash pickup, which generates huge savings in personnel costs, and the large recycling bins plus single-stream recycling allows us to reduce the volume of trash that goes into the landfill. The annual savings are about $1.4 million, producing a permanent savings to homeowners of $100 per year.

Opportunities like this come very infrequently. We have to grab them when they come. We absolutely need them to offset the impact of other costs that are rising.

So, to summarize, these two reasons – understanding the valid and necessary use of fees to fund many City services, and grabbing opportunities to realize efficiencies – are far more persuasive to me than campaign promises. Thus my vote for Mayor Hoffmann.

Art Stigile

This is a contributor opinion. Rockville Central encourages readers to submit such opinions for consideration — the more voices the better. We especially welcome people who disagree with us. We ask that all such contributions be civil and we reserve the right to edit (in consultation with the author) or reject. Contributor opinions should not be seen as reflecting opinions held by Rockville Central editors, as they are just as frequently at odds with our own views. That’s the whole point!

Rockville Central does not endorse candidates. We are encouraging towards all people who choose to run for office the city and try our best to make ourselves open to all. We actively encourage candidates to submit opinion pieces and other news. We don’t include every last bit, but we try to be fair to all and give useful information about what is happening.

Contributor Opinion By Art Stigile: Trash Is Truly Cash

>Remember the Great Trash Debate of 2007? Remember the group of determined Hungerford residents who called themselves Rocktrash and trooped down to each Citizens forum for 5 months to prod certain Council members to come to their senses and support once-per-week trash pickup? Remember the gloom and doom forecasts by opponents of the new trash system? Remember the promise that trash fees would be frozen for 5 years, if the once-weekly system were implemented, and the derisive response from a few noisy naysayers? Remember the vote by Council members Marcuccio, Robbins, and Dorsey against once-per-week service? Remember the November election and the December vote to reverse the previous decision and approve implementing once-per-week service?

It seems like a long time ago, so let me refresh your memory. The vote was 4-1. Mayor Susan Hoffmann voted yes, as she had the entire year before, and newly elected Council members John Britton and Piotr Gajewski supported her, just as they promised during the debates. Why, even Anne Robbins jumped on board and supported the motion. Council member Phyllis Marcuccio was the only vote against it.

I mention this subject, partly because the next election is approaching. This is our only opportunity to hold our elected leaders accountable for their votes. But I also bring it up because the once weekly trash system has now been rolled out to most neighborhoods in the City, and the financial results are in. It’s time to celebrate!

For the entire year, the Refuse Fund ran a surplus of $508,443. The numbers come from the 4^th Quarter FY 2009 Financial Report prepared by City Staff for this past Monday’s Mayor and Council meeting. (See page A-8 of the report, which is posted on the City website here.)

Folks, this is a significant achievement! It’s not just a success. It’s a resounding success. The budget projected a small $2,000 deficit. Instead, we ran a $500,000 surplus! Expenses are down across the board, far more than projected, and in areas like personnel, which indicate that a lot of the savings are permanent. And we’re selling recyclables to the tune of about $10,000 per month. If this had been a horse race, and you had bet your money on the Rocktrash nag, you’d be rolling in dough right now.

In 2007, City Staff estimated that total annual savings from once weekly service would be about $1.4 million, which works out to an annual saving of about $100 per year per household, once the system is fully implemented. That’s a permanent savings, year after year after year. Now I’m wondering if the savings weren’t underestimated. The FY 2009 surplus amounts to about $40 per household.

I’ll stop crowing after a big thank-you to folks who had the good sense and resolve to seize this opportunity, and make Rockville City Government more efficient and save us money. Some folks like to talk the talk, but the real McCoys walk the walk. So hat’s off to:

• My friends and neighbors from Hungerford who piloted this program for a year and a half and fought against all odds to save it for the rest of the City. You know who you are. Take a bow.

• Mayor Susan Hoffmann, who fought the good fight in the previous Council and passed it in this Council. Take two bows, Susan.

• Council members John Britton and Piotr Gajewski, who promised to support and made good on their promise. Take a bow, guys.

• Larry Giammo, I hope you read this because this was nothing without your leadership. Take a bow, and come back for an encore.

• Council member Robbins, who roughed it up at first, but had the courage and wisdom to change her mind. Take a bow.

• City Staff, who did outstanding analysis. Take a bow.

Folks, I like trash. Trash is truly cash.

Art Stigile
Hungerford

This is a contributor opinion. Rockville Central encourages readers to submit such opinions for consideration — the more voices the better. We especially welcome people who disagree with us. We ask that all such contributions be civil and we reserve the right to edit (in consultation with the author) or reject. Contributor opinions should not be seen as reflecting opinions held by Rockville Central editors, as they are just as frequently at odds with our own views. That’s the whole point!

Contributor Opinion By Art Stigile: Response To Redgate Golfers

>This is a contributor opinion. Rockville Central encourages readers to submit such opinions for consideration — the more voices the better. We especially welcome people who disagree with us. We ask that all such contributions be civil and we reserve the right to edit (in consultation with the author) or reject. Contributor opinions should not be seen as reflecting opinions held by Rockville Central editors, as they are just as frequently at odds with our own views. That’s the whole point!

The following contributor opinion is by Art Stigile.

I read with interest Joe Jordan’s recent contributor’s opinion about the RedGate Golf Course, and I listened closely to the statements made by many golfers at the recent Citizen’s Forum. Golf is not my game, but I understand and respect their passion. I think hockey is life. But if golf is your passion, I hope you can continue to enjoy playing at RedGate for many years.

Unfortunately, nothing that I heard from golfers deals with one very important inconvenient truth. RedGate is drowning in a sea of red ink, and taxpayers are being asked to fork over increasingly large subsidies for as far as the eye can see. Over its first 28 years, golfers paid for all of RedGate’s operating and capital expenses. Since FY99, the golf course has operated in the red every year, except one, despite receiving $600,000 in taxpayers subsidies over the past three years. The current budget projects an FY09 deficit of $275,745 that grows to $388,479 in four years. By the end of FY13, RedGate’s cumulative deficit is expected to exceed $2 million – more than the expenses to run RedGate for one year. Red seems to be the appropriate color for the golf course.

Who’s paying for this? Taxpayers.

It wasn’t supposed to be this way. In May 2006, Mayor and Council approved a Five Year Business Plan for RedGate. (See here.) The Plan promised to put RedGate “in the black” by FY09.

By any measure, the Plan has failed.

The Plan identified two key ingredients to success – average dollars spent per round, and total rounds played. Below are the Plan’s projections for both measures and results to date. Results have fallen far short of the Plan, and the results for FY09 will not be any better, given the sharp drop in rounds played last summer.


I have 2 questions for golfers. Why should we taxpayers subsidize golfers? How much subsidy is enough?

The closest thing to answer that I’ve heard is that the City subsidizes other recreation, so why shouldn’t it subsidize golfers? I’ll tell you why. I pay high taxes, with no complaints, to fund services that benefit all of us – a first-class police force, good roads, conservation of our natural resources, snow removal – and to provide opportunities to less fortunate folks who are struggling to stay afloat in the worst economy in 35 years. I don’t expect to pay high taxes to subsidize middle-class adults who can afford to pay for their favorite recreation.

If golfers disagree, if golfers feel they are entitled to a taxpayer subsidy, then I have a suggestion. The Community Services section of the Rockville budget provides funding to nonprofits that provide social services to the needy. Let’s add a line for Taxpayer Subsidies to Golfers. That way, golfers can come down to City Hall each year and explain to Mayor and Council and to all taxpayers why they have a higher priority than folks who are finding it hard to stay in their homes and pay for their kids’ health care.

Frankly, I’d rather spend my tax dollars helping the truly needy.

There is an alternative. Increase fees immediately by $7-8 per round of golf, and it would eliminate the annual deficit.

Art Stigile