Duluth has made an ambitious pledge to the patrons of its two city-owned golf courses.
Signs at Enger Park and Lester Park golf courses vow the city will "provide our customers with the highest standards of excellence and service within all areas of the golf operation."
Though many say course conditions and customer service are at an all-time high, that commitment comes with a price.
Despite local participation levels that run counter to a national decline and a 10 percent hike in daily and season ticket prices, Duluth is losing money on its golf operations.
The city's Golf Enterprise Fund, which accounts for operations at Enger Park and Lester Park golf courses, ran a $1.26 million deficit from 1994-2003 (see graphic).
Part of total expenses is an annual debt service payment for money borrowed in 1989-90 to expand each course to 27 holes. A payment of $364,892 this year will put the loan at $1.38 million, according to the city's debt service schedule. The loan is due to be paid off in December 2007.
Even more alarming is the amount of money pulled from the city's General Fund to offset operational losses over the past 10 years.
The General Fund provides government services and accounts for all financial transactions not accounted for in another fund. Financial support is received in part through property taxes, special excise taxes, and licenses and permits.
More than $2.35 million has been plucked from the fund since 1994 (see graphic). Last year, $137,043 was pulled from the fund, putting the Golf Enterprise Fund $35,282 in the black.
"That surprises the daylights out of me. I would have thought the golf courses would have been holding their own," said Zane Chastain, a regular at Lester Park for more than 40 years. "The fact that taxpayers are footing some of the cost doesn't really bother me because I'm a golfer, but others might not think it's such a good idea."
One person pushing for change is Duluth Mayor Herb Bergson.
"The expenses can't exceed the revenues," Bergson said. "That's been allowed to happen in the past. If it happens again this year, we're going to have to look at some significant changes."
Duluth City Council President Jim Stauber is another. He says municipalities should fund only essential services that would not otherwise be provided.
"Golfing does not fit that criteria, especially with other courses nearby," Stauber said. "There is no reason we should be taxing our seniors out of their homes in order to subsidize golfing."
Despite rising yearly losses, participation at Enger Park and Lester Park outpaces the national trend. According to the National Golf Foundation, the number of rounds played annually has steadily declined since a record high of 564 million in 1999.
Meanwhile, participation at Lester and Enger has held steady or risen occasionally. In 1998, the courses saw 107,591 rounds. That dropped to 96,875 in 1999 but increased to 102,122 the next year. The past three years have held steady at 98,699 in 2001, 90,999 in 2002 and 98,436 last year.
"Golf is pretty flat right now but our golf courses are pretty much always busy," said Paul Schintz, director of golf in Duluth. "We're bringing in the revenue, but now the expenses are more than the revenues. We've been successful at keeping the numbers (of golfers) high at both courses. Now we have to find a way to cut down on the expenses so we don't lose money."
While overall golf operations have shown consistent losses, the courses themselves are profitable when comparing operating revenues to operating expenses (personnel, supplies, utilities and equipment depreciation). Since 1994, the city courses have shown a net income of $260,335. The past two years, however, the operating expenses have been $173,706 more than the operating revenues (see graphic).
In Rochester, Minn., where the city runs three municipal courses and a learning center, the Golf Enterprise Fund is self-sufficient.
"I've been here since 1978 and in my recollection, the city has never run a deficit," assistant finance director Bruce Atkinson said. "Operating revenues have covered operating costs.
"Revenues don't cover capital needs, of course. When improvements need to be made, that's a different story."
Bergson and other city officials blame the shortfall on Duluth's unpredictable weather, competition and the economy.
"A big part of the golf industry is weather," Bergson said. "Another is competition and yet another is the product you provide the community.
"We need to do a better job of the ones we can control. We can't control the weather. And there's certainly competition here that wasn't here 10 years ago. We can control what we offer, and we're going to offer the best product possible to the people of Duluth and the people who visit here."
Parks and Recreation director Carl Seehus says revenue generated from golf always will be limited in Duluth.
"We're at a distinct disadvantage going in," Seehus said. "We have a short season here in Duluth because of the weather. Plus, it's been hard to raise fees too much because we don't want to price ourselves out of the market. Our hands are sometimes tied."
Skyrocketing labor costs also contribute to the shortfall. Labor accounted for 28.8 percent of the total expenses last year, as $506,700 went to pay salaries and benefits for four full-time and four temporary maintenance workers. Another $90,000 was paid to temporary, part-time maintenance workers. Labor costs are expected to rise to $523,000 -- or 30.3 percent of expenses -- this year.
"That's certainly a concern," Bergson said, "especially in an enterprise fund where you can only have employee costs that are equal to revenue coming in."
Rising labor costs are at the center of a debate in Superior, which has accumulated an operating deficit of $70,000 the past two years.
Superior Mayor Dave Ross is suggesting Nemadji Golf Course should operate under a private management agreement. He wants the city to negotiate with head club professional Mark Carlson and superintendent Steve Flagstad, who, under the proposed plan, would lease the city-owned course.
Bergson said he isn't considering that route. He thinks the golf financial shortfalls can be reversed.
"I'm not going to comment on how Superior is handling Nemadji because I'm not the mayor there anymore," said Bergson, who served as Superior's mayor from 1987 to 1995. "But I do not envision the city of Duluth leasing out its golf courses to anyone.
"There's something to be said for providing recreation to your community. But at the same time, I have to pledge that I am going to make sure it pays for itself."
Source: Duluth News Tribune