Fore!
If you’re like me, and admit it, you have a deep desire to understand municipal budget minutae, you’ve had a hard time understanding the ongoing discussion surrounding the city’s golf budget. For a while now, I have been trying (albeit slowly) to understand the numbers and perspectives, it’s a classic case of he said, she said. But at the end of the day, there are a couple of things that just not accurate in the golf commission/supporters statements.
On one hand you have columnists like the Sun’s Ron Salsig writing that “The council takes approximately $1 million from the golf complex each fiscal year, right off the top” (also here, here, and even here). Joining him is a small chorus of letter writers, continuing the drumbeat. All of this appears to be fed by information from the city’s golf commission.
On the other hand you have city staff and the city council who are saying that the golf course is losing money and needs to get control of its budget. (This is not a post about the golf plan!)
The issue revolves around 5 payments (explained here in the Issues Bin Responses (page 12)) that the Golf Course makes to the city’s general fund. It is an enterprise fund, like Alameda Power & Telecom, the ferry system, and the sewers (yep, our city really is funded by crap!)
The first thing you will notice is that there is no $1 million. The number this year is $778K. $1 million may have happened in better times, but it 33% higher than reality today.
The next thing is that of the $778K, $283K is “cost allocation.” This is hardly “money off the top” as it is consistently portrayed. It’s the Golf Courses share of the administrative costs it uses. Employees get paychecks, insurance, the course gets legal advice, etc. This number is evaluated every other year to make sure that it’s as accurate as it can be, and it’s the amount that the golf course “owes.” AP&T and the sewers also pay this. This is standard accounting 101. Nothing fancy, no Enron accounting, just the city making sure the costs are covered.
So already, the diverted amount is under $500K.
The next biggest charge is the Payment in Lieu of Taxes (PILOT). This is a 1% charge for public entities that don’t pay property taxes. If the course was a private golf course, the city would be collecting property taxes on it. This charge emulates it. It exists in order to support the ancilliary services that the general fund supports and which benefit the golf complex (and rest of the island). Service such as police, fire, roads, traffic signals, etc. That’s another $200K.
Next is the surcharge: $171K which is a per round assessment instituted in 1991. It’s $1 for residents and $4 for non-residents. It was instituted to generate money for the city and goes up and down based on the number of rounds played.
Lastly, there’s almost $100K in Return on Investment. This was instituted in 2004 at a rate of 1%, but has already dropped to .43%. If there’s a gripe to be had, this would be the payment, and it’s 10% of what everyone’s yelling about.
The golf folks are correct, the course puts money into the general fund and the $700K+ operating deficit that they currently have wouldn’t exist if they didn’t have to pay for city services the complex uses and if they didn’t have to transfer money to the general fund. History is on their side. They have contributed positively to the city’s cash flow for many years.
BUT. That same history seems to counter their arguments, with the exception of the ROI payments, they have been sending surcharges to the general fund since 1991 and paying their PILOT and Cost Allocation amounts as long or longer. Unfortunately, somewhere along the way, these payments for services rendered became seen as a gift to the city. They aren’t. It’s really no different than arguing that they should pay the golf cart subcontractor, because they need to balance the budget. These payments cover actual costs.
Secondly, the surcharges and ROI payments go to the city’s general fund. This money ($271,000 this year) is cash generated by the course and paid to the general fund. The surcharge was specifically instituted to do exactly that as far as I can see. Take that money away, and that’s $271K that comes out of something else (this year it was the fire department budget).
The argument that the golf course should make none of these payments in tough budgetary times is akin to saying: “cut everybody else, but not the golf complex.” It’s literally suggesting to the city council, which is actually the body that is suppose to make these decisions (the commission makes recommendations), that the golf complex–which is losing money no matter how you slice it, unless you suggest that the rest of the city should cover the complex’s admin costs-is more important than keeping all our fire engines in service.
And at the end of the day, city staff actually acquiesced on the issue! They recommended returning the ROI and surcharge to the golf course so that the course could save $271K in its reserve. And the staff recommended rotating brown outs in the fire department as a result. It was the council, led by Councilmember Lena Tam, who voted to put the money into fire protection instead of golf.
These are the trade-offs that have to be made in tight budgetary times. The Golf Complex has burned through $3 million of its reserve over the last few years. This discussion is not helped by using inflated budget numbers, mis-representing (or worse refusing to understand) financial realities and casting staff, the council, whoever as the bad guys. It’s clearly time to look at how the course does business in these new times. (but i’ll stop there, this is not about the golf master plan).
If one wants to argue that the golf course shouldn’t pay its share of expenses because it’s special. Go for it. But to keep saying that the city is taking a million dollars “off the top” is just not right….or accurate.
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