Made wildly popular by financial institutions, automakers and insurance giants, bailouts have become almost a right of passage for any company struggling to make monthly loan payments.
The list of businesses seeking public funding has grown to include high-end luxury resorts, golf courses built as part of lavish properties, private clubs and even municipal layouts that annually struggle to make a profit.
Without outside aid, many developers and owners are faced with the prospect of foreclosure and significantly devalued properties.
Like each corporation that has petitioned either Congress or its own local government for help discovered, the question of which golf-related businesses deserve bailouts stirs debate. In many situations, those opposed to the use of public funds have specifically targeted golf as a frivolous activity enjoyed by the wealthy that hardly merits saving. So who and what in the golf industry deserve a bailout?
Municipal golf facilities should hardly be the target of public ire as many were designated as green space many years ago and aren’t intended to be endless streams of revenue.
A recent report by the Tennessee Center for Policy Research found that only one of 12 state-owned golf courses earned a profit in 2008, and that taxpayer dollars in the amount of $2.3 million were needed to help those courses break even. The only course that made a profit was Bear Trace at Harrison Bay. It should be noted that the recession caused many courses to lower greens fees.
“There’s no justification for the state to be in the golf course business,” said Drew Johnson, president of the policy research organization. “There’s no where in the state constitution where it says the word golf.”
That is a very naïve statement, and before certain organizations decide to bash ‘golf,’ they should consider that these municipal facilities are designed for public enjoyment and as sustainable open space.
At the majority of Division I universities football and men’s basketball are the only profitable athletic programs, but that doesn’t mean Olympic sports like wrestling, gymnastics and field hockey are shut down.
Many municipal courses also face budget shortfalls because their usage fees are kept quite low in order to make them as accessible as possible to city residents.
The city-owned Fernandina Beach Golf Course located just outside of Jacksonville has recently asked the city to subsidize improvements to a course that is projected to operate at an $80,000 deficit this year, and a debt of $250,000 stemming from a 2006 clubhouse and irrigation system improvement project.
Suggestions to raise funds such as privatization, alternate revenue sources and sale of unused land around the golf course have been made, but none have been agreed upon. Golf Course Director Scott Womble told the local News Leader that whichever method is chosen to keep the course up and running and in good condition has to include a commitment to accessibility.
“We’ve pushed revenues up,” he said. “But we need a long-range plan for improvements. We want to keep it affordable for city and county citizens. We’re a gem to this city. People call from Georgia wanting a place to play near the beach. The golf course has been rode hard and put away wet for 50 years.
The 27-hole Fernandina Beach Golf Course opened in the late 1950s and attracts visitors and residents of both Florida and Coastal Georgia.
Courses set aside as affordable public-access options should be bailed out or helped out by local agencies if possible, but once the line between public and private is crossed, the correct plan of action isn’t always clear.
On Wednesday, June 10 semi-private Wild Dunes Club in Charleston, S.C., will introduce a new signature 18th hole, the result of a $10 million project that required offshore sand drudging and at least $3 million in public funding. The Charleston Post & Courier said that for now, the fight over whether public money should have been used to shore up private property in a gated resort to protect potential tax revenue has ended.
“I thought we had to renourish, said Mayor Dick Cronin. “The beach is crowded with people; it’s worked out very well.”
This is an example of using public money to subsidize a privately-funded operation in an effort to restore an established resort entity for the benefit of the overall community. The price tag was very reasonable, but there are examples of lavish resorts built during what USA Today referred to as the “height of the gilded age of excess in the 1990s and 2000s,” that don’t necessarily deserve public funds, many of which haven’t received a cent.
The swank Terranea, a luxury hotel and golf resort in Rancho Palos Verdes, Calif., was constructed at a cost of $475 million and required a loan of $8 million from taxpayers to open this past Friday. The loan was granted by the city.
“This is not a bailout,” developer Robert Lowe Sr., told USA Today. “We’re looking for the city to partner with us on an important project in a difficult time.”
In this case the community was forced to weigh bailing out a high-end luxury property designed to cater to wealthy visitors against the potential benefits, like jobs and tax revenues, created by having such a property in the area.
USA Today’s Dennis Cauchon wrote in his article, “Terranea is a local version of the “too-big-to-fail” argument that drove the federal government’s decision to inject huge sums into giant financial institutions.
Two names that have become emblematic of overdevelopment in the golf course construction industry and synonymous with the struggles to sell high-end golf-related real estate during the current recession are Ginn and Las Vegas.
Led by Robert Edward Ginn III, the high-profile Ginn Resorts development company bought up miles of shoreline during the golf course and golf resort construction boom of the 1990s, and snapped up golf tournament sponsorships like were going out of style.
Now Mr. Ginn’s properties are barren wastelands according to a recent article by the New York Times. The 1,900-acre Bella Collina property in Central Florida has only 48 houses on a parcel of land designed to hold 800. At the Conservatory in Palm Coast, things are even worse with 335 out of 340 lots remaining unoccupied.
“The aggressive building of new resort courses continued from the mid-1990s into the 2000s, contributing to an increasing glut of inventory that finally found no market,” Joe Beditz, CEO of the National Golf Foundation told the NY Times.
Despite having to declare bankruptcy at a number of properties throughout Florida and having to contend with a lengthy list of lawsuits as a result of the complicated financial dealings associated with his development deals, Ginn told the NY Times that he was optimistic about the future.
“My belief is that when the depression ends, there will be a pent-up demand for happiness,” he told the Times. Sometime between 2035 or 2040, Florida will double in size.”
Wishful thinking is wonderful, but in a golf market already oversaturated with lavish courses and resorts that can’t afford to operate because of declining sales, I’d bet on consolidation rather than expansion. Florida’s unfilled lots could remain empty for a very long time, and daily-fee golf will probably continue to trump resort golf for the foreseeable future. A recent publication produced by the PGA of America and the National Golf Course Owner’s Association showed that while nationwide rounds of golf played in April were down slightly, same-store rounds at resort courses had dropped 8.0 percent.
No area has been hit harder than Las Vegas, and properties like the luxurious Lake Las Vegas neighborhood, a collection of high-end homes and golf courses the USA Today recently called, “a symbol of Las Vegas largesse during good times that had become an emblem of recession blues.”
Among the sobering statistics the paper reported about Lake Las Vegas were a vacant property rate that reached nearly 80 percent, property values that have fallen as much as $400,000, abandoned golf courses and a gaudy loan of $540 million that caused the latest developer to default on loans and lose the property in foreclosure.
This community, and the city is located within, are largely dependant on discretionary spending, and as the economy took a turn for the worst, the most prominent example of a place that depends on tourist spending and second-home buyers, encountered significant problems.
“This was the height of the gilded age of excess in the 1990s and 2000s,” Launce Rake, a spokesman for the Progressive Leadership Alliance of Nevada, a liberal government watchdog group told USA Today. “It was a community built on the idea that there were no limits to natural resources or to the number of millionaires willing to invest in a project.”
When the recession eventually eases and economic conditions return to normal it will be interesting to see whether these cautionary tales like Lake Las Vegas and Ginn Resorts are remembered, or whether history is bound to repeat itself.
Regardless, golf will continue to fight stereotypes and critics when small-market operations or less privileged municipal facilities request public help, largely because of the opulence and overabundance of high-end facilities built during the “Gilded Age of Golf Development.”