The city’s golf courses will always lose money, says a consultant hired to evaluate whether or not the city should put the municipal tracks on the market.
At best the courses can recover between 70 to 85 per cent of annual expenses, writes Donna Smith, of Bain Smith Business Valuation and Consulting Inc.
“It is unrealistic to assume that given the current local market the city golf courses will ever be able to operate using the enterprise model,” Smith wrote, “where revenues and operating, administrative and capital expenditures are equal.”
Smith said city officials should expect expenses, including payroll, to continue to rise, and likely outweigh any increases in revenue.
Coun. Brian McKinnon on Wednesday said there's no question the city courses are losing money, as are the privately owned courses in Thunder Bay.
"We're going to have to make some tough decisions about our own three," McKinnon said. "Personally, I would look at closing one course. I wouldn't name which one and I hope everyone is thinking that way."
McKinnon, a member of a privately owned golf course, added he plans to declare a conflict on Monday night and won't take part in the official discussion.
Coun. Rebecca Johnson has been an adament opponent of Thunder Bay being in the golf buisness and is sticking to her guns.
... Story continues after video
"My personal feeling is that we need to seriously look at closing some of our golf courses. My personal feeling is that we would close all three. I don't know that that would pass in council," Johnson said.
"But if not, I definitely think we should be closing two golf courses."
Realistically, she expects council will vote to sell one, most likely Municipal.
"I certainly think that if we have a choice, I would keep Chapples. It's part of a larger configuration for sporting activities, so to me that makes the most sense. I think we can sell ... Municipal, that would give the municpality of Oliver Paipoonge an opportunity to develop that, which I think they would look seriously at," Johnson said.
"Strathcona, I think, is another opportunity for a developer to purchase that and put in homes and other infrastructure that would be of benefit to the community."
She noted golf can and is being provided by private entrepreneurs and she doesn't believe the city should be competing with the private sector. But when asked if the city should consider getting out of other businesses that compete with the private sector, specifically the money-draining Canada Games Complex, which costs taxpayers in excess of $1 million a year in subsidies, Johnson balked.
"No, I don't think so. I think you have to look at the fact of what that addresses for the community," she said. "We can get into that debate (later). Should we close swimming pools, should we close playgrounds? But I think you've got to look at what we can provide as a service. We have golf courses provided, whether they're nine hole or 18 holes, by private entrepreneurs. So we do not need to be in the golfing business."
Questioned further, Johnson did relent a little.
"Maybe down the line that's something we should look at. But at this point in our environment, in regards to budgets, in regards to financial restraints, we have to seriously look at what businesses we need to be in. "
Greg Alexander, the city's manager of community and emergency services, told Thunder Bay Television that should council decide to sell, administration would be recommending they sell one, course, that being Municipal.
The consultant, who did not recommend whether the city should sell or not, also pegged values for each course, based on Municipal Property Assessment Corporation figures. Chapples Golf Course, whose value includes surrounding amenities like the nearby tennis courts is the most pricey, at $5.6 million. Strathcona is worth $1.5 million, while Municipal is valued at $1.18 million.
Smith said the city could realize some savings by closing a course or two, but some costs would have to be absorbed by other municipal departments.
While the report doesn't advocate direction for city council, it does provide numbers detailing past and future losses in different scenarios.
According to the figures, in 2010 Municipal Golf Course lost $116,307. Chapples lost had a $120,387 shortfall and Strathcona cost taxpayers $166,729. The report then goes on to estimate what the city could expect if Municipal and Strathcona are closed or sold. The one remaining course would almost double its losses, to $212, 241 annually. That's about half of the $407,462 the three municpally owned courses combined to lose two summers ago.
If the city chose to sell only the Chapples course, the annual loss would be $337,269, while selling just Strathcona would result in a loss of $314,392 and selling Municpal would result in a $357,123 deficit.
City manager Tim Commisso is expected to release his core business review report to council on Thursday, in which he is expected to make recommendations to council about whether to retain the golf courses or put them on the market. That report is also expected to include a recommendation for the city-owned conservatory.
Smith said the city would also have to consider how much new tax revenue they might be able to generate by selling the property for redevelopment purposes.
She added the golfing industry has declined in Thunder Bay in recent years, which could result in the closure of one or more of the city’s private golf courses. The report also notes that between 500 to 1,000 golf courses in the United States are expected to close in the next five years, and 45 in Ontario alone have been closed in the past five years.
"Ontario and Canadian golf industry statistics appear to show that there are too many golf courses operating in Thunder Bay," Smith says.
"The golf industry in Thunder Bay has followed a similar pattern with the number of rounds declining over the past five years. The private golf course owners do not feel they earn a sufficient return on their investment."
Follow Leith Dunick on Twitter: @leithdunick
