Losing money on public golf

At issue | Aug. 27 Herald-Leader editorial, "Public golf in peril; Private clubs still trying to gain control"

A recent Herald-Leader editorial opined that public golf in Lexington is in peril. Unfortunately for readers, the writer had no real understanding of the current circumstances of Lexington's golf operations.

The peril Lexington-owned golf faces is not the transparency and accountability demanded by public-interest groups like the Kentucky Club for Growth, but a crisis of leadership from Lexington's elected officials.

This year, the budget expects citizens to pay approximately $2.3 million in personnel costs, $500,000 in costs of goods, $1.3 million in operational costs and (a generously low estimate of) $200,000 in debt service to maintain six courses.

This sum of over $4.3 million does not account for things like lost property taxes and services such as insurance, legal counsel, marketing or auditing.

In terms of revenue, golfers in Lexington paid about $3.4 million to play on Lexington's courses in 2009, a sum the city will have been lucky to reach in 2010. Netted against the $4.3 million in expenses, the result is an annual deficit of nearly $1 million.

This deficit is more than the city's budget for special programs, which includes holiday events, festivals and arts funding.

Very few cities would tolerate such losses. A management audit of the city's operations in 2007 by Mayor Jim Newberry showed most cities that operate golf courses create positive revenues that are used to pay for other parks services.

To look at it another way, mayoral candidate Jim Gray's "Fresh Start for Lexington" proposal suggests comparing Lexington to benchmark cities like Madison, Wis., and Ann Arbor, Mich. Ann Arbor is privatizing one of its two courses in an effort to stem annual losses. Madison operates its four courses as an enterprise, aiming for self-sufficient operation (although they've never quite succeeded, bailing out the fund in annual $150,000 installments).

By any comparison, Lexington is hemorrhaging tax dollars to pay for its golf ownership. The cause of Lexington's loss is fundamental: The supply exceeds the demand.

This was apparent in 2008 when Aaron McDowell, the head pro at Lexington's Tate's Creek Course told the Herald-Leader, "I just think there's a lot of golf courses in the area and not enough people to play on them."

As McDowell pointed out, daily-fee golf is no longer a scarce activity. In addition to the six courses Lexington owns, there are over 20 publicly accessible courses in Fayette and surrounding counties. From the affordable High Point course in Nicholasville to the acclaimed Old Silo in Mount Sterling, a variety of privately operated greens are within a short drive.

The city's $1 million deficit also makes it difficult to afford the investments necessary to offer a high-quality, competitive product. When Lexington does want to invest in golf, the deficit means improvements must be paid for entirely by taxpayers, not golfers.

This year, taxpayers will foot a new $440,000 bond to purchase new golf carts.

While Lexington's golf courses are routinely bailed out, entrepreneurs and employers who operate golf businesses do not have that luxury. They must compete for customers with an operation that can lose money regularly but still survive.

Instead of constantly improving, they are forced to cut corners and forgo improvements in order to compete with Lexington's artificially low prices. Lexington's losses degrade the golf experience in the entire region.

The Urban County Council should support changes that allow Lexington golf to be a positive contributor to the golf experience in the Bluegrass. Whether that means realigning some courses, securing a private operator or simply operating as a self-sufficient enterprise, the goal should be eliminating losses to the taxpayer and creating a product that attracts golfers to Lexington.

Lexington and nearby courses should partner to promote Bluegrass golf as a destination experience. Just as the Bourbon Trail links together a signature product as a destination, regional daily-fee operations should work together to create a Bluegrass Golf Trail.

Councilman Jay McChord should be commended for his efforts to understand why Lexington's golf continues to suffer such a financial loss. He is beginning to ask questions about what a better future for golf might look like. Just a little leadership could start the transition from decline to stability, and create a better situation for golfers and taxpayers alike.