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Meadowlinks under scrutiny as Sumner approaches biennial budget
What to do with the Sumner Meadowlinks?
It's a question that's winked in and out of city budget discussions in the past four years, came up on last year's state audit, and has become a screaming banshee of a boondoggle in the past two months.
As Sumner's municipal government prepares to set its 2013-2014 budget, the city faces repayment of more than $801,000 in Limited-Tax General Obligation bonds for the biennium, and nearly $6 million in total bond debt through 2019. That amount does not include interfund loan debt of $875,000 plus interest, for which the city must draft a repayment plan.
"(The bond debt) is money the city has to pay," City Administrator John Galle said. "We're not anticipating revenue from the golf course to pay those."
Illustrating Galle's point is the LTGO bond repayment for 2012: The city must make a $395,000 payment to bondholders from 2011 revenues. Net income for 2011 was only $22,000.
In 1993, the city of Sumner had a dream: to develop a golf course that would be self-sustaining and profitable in 20 years. To that end, the council approved purchase of 292 acres of northerly land with $5.45 million raised by Sewer District bonds.
By 1995, Sumner Meadowlinks was open to the public, its infrastructure paid for by $2.9 million in LTGO bonds. The city constructed the course on 146 acres. Of the remaining acreage, 11 were sold for Riverbend Park, 30 were used as open space mitigation for the 24th Street interchange, 11 traded for city shops, and 94 were left vacant or leased for farming.
Reception to the course proved lukewarm. Though golfers from cities spread across the South Sound played the course—neighboring Auburn presently represents the largest share at 15 percent—overall traffic was not enough to bring in the desired revenues. The course hit its target revenues once in 1998, when it saw 40,872 rounds played at an average price of $18.98.
A report in 2004 showed declining Meadowlinks revenues and mounting costs to the city general fund. Members of the public argued against selling, and the city council voted to farm out management under a 10-year contract with Billy Casper Golf, a national course management company.
The subsequent three years saw declining traffic—43,054 rounds played in 2005, to 37,464 in 2007—as prices rose from $18.49 per round to $21.27. Green fee revenue was stagnant, starting at $744,126 in 2005, rising to $763,465 in 2006, and falling to $733,270 in 2007.
Billy Casper Golf reduced pricing to $18.93 in 2008, and the results were promising. Traffic rose to a record high of 48,262 rounds played. Green fee revenues followed suit, topping out at $895,520. Promising, but still not fully sustainable after management expenses of $540,000 adjusted for the Consumer Price Index.
Disaster struck in 2009, in the form of the White River flood. Large swaths of the Meadowlinks were submerged in water. The clubhouse—a modest doublewide trailer—was destroyed and never replaced.
Despite that setback, the year saw 44,283 rounds and $801,753 in green fee revenues. But the subsequent two years saw traffic recede back below 40,000 despite price reductions. By 2011, green fee revenues had fallen to $652,601.
Understanding the problem
"Income has declined since the loss of our clubhouse," Galle said. "But even when the city had a clubhouse, the city was still not able to make its debt revenue obligations."
Instead, the city administrator laid the golf course's decline at the feet of a plurality of economic trends, the first being an overall decline in golfers.
City Communications Director Carmen Palmer pointed to a July article from MyNorthwest.com, "Golf still struggling in Washington." In it, Washington State Golf Association CEO Troy Andrew cited a drop in private club memberships and overall declining interest in the sport.
Some private clubs have responded by opening their courses to the public, increasing supply and competition, Galle said.
Golf courses have attempted to mitigate traffic losses by dropping prices, creating a perfect storm of decline; for every new golf course that opened in 2010, two have closed.
Sumner's Meadowlinks may also be unwelcoming to novice and casual golfers.
"(I was) talking to some of our golfers, and they rated the difficulty of our course a seven out of a scale of 10," Galle said. "That's pretty challenging, and if we were to stay in the golf course business, we might look at improvements to bring that down a bit."
Grasping for solutions
For his part, Galle submitted his biennial budget recommendation at the end of last week with a recommendation to loan out $400,000 from the reserve fund—half of said fund's coffers—in order to fulfill the year's bond repayment.
"My opinion is that's not a wise move, financially," Galle said. "Reserves are there typically for a short-term need. Typically, the most provincial thing to do is to have a plan in place for repaying that."
The recommendation is influenced by state law, which requires a balanced budget.
"The only option for me at this point is to pay out of the reserves," Galle said. "That's the only available option to me to balance the budget for (the city council). It's up to the council to say 'We don't like that option, we'll go in this direction.'"
The city faces a number of options for solving its golf course problem.
Under the umbrella of keeping the Meadowlinks, representatives of Billy Casper Golf have offered to partner with the city to obtain a prefabricated clubhouse, in exchange for a 10-year extension on the company's management contract. A new clubhouse is estimated to cost in the ballpark of $750,000, and that figure does not include improvements the course itself may need to remain competitive.
Under the umbrella of selling, the city has two broad options: sell the golf course wholesale or put a portion of the land on the market for commercial development.
Optimistically, the Meadowlinks could sell as a golf course for $1.5 million to $2 million. That amount would cover some, but not all, of the city's debts.
A commercial development sale could invite prices of $4 to $6 per square foot. Of the 292 acres purchased in 1993, 172.44 are able to be developed. There are 132.39 developable acres north of the 24th Street East divide and 40.04 acres to the south. If the city were able to sell the northern acreage at $6 per square foot, the deal would yield $34.6 million, more than enough to cover all debt obligations. The downside would be that such a sale is not guaranteed and could require time beyond the city's short-term debt obligations. The city has been approached by developers, Galle said, but no serious action will be taken unless the council authorizes exploration of that option.
The city is also weighing a property tax increase of $0.30 per $1,000 of assessed value. A $200,000 home would see a $60 increase in property tax per year. That increase would generate $520,000 per year in city revenue.
Administration has also examined the possibility of refinancing the debt.
"Refinancing the debt would be of little value, and would probably be to the detriment of us," Galle said.
As of press time, Sumner's city council had not taken official action on the Meadowlinks. Historically, the council has typically finalized its budget in November. State law requires a balanced budget to be submitted by Dec. 31.