155 local governments lost money on public golf courses in 2020
155 local governments suffered losses in 2020 related to their public golf courses, in some cases losing enough money to be locally significant.
That’s according to a report by the Reason Foundation which found that of the 221 local governments that reported operating golf courses in their 2020 financial statements, 155 suffered total losses of $61 million, five of which suffered losses of $2 million or more. The report’s author said the results point to an opportunity for privatization.
The Reason Foundation began collecting this data in an effort to take a closer look at corporate funds run by local governments. This is the first year the libertarian think tank has published golf course data on state governments, but it plans to publish more in the coming years.
The 62 localities that broke even or made a profit saw a total of $16 million generated from public golf courses in 2020.
Of the five local governments with losses over $2 million, three were in California.
The biggest operating loss was suffered by the small desert community of Indian Wells, California, home to the Indian Wells Golf Resort, which suffered a loss of $4 million. While Indian Wells is an affluent community with a median household income of over $100,000 according to census data, it has a small tax base for residents.
These losses and gains are not big numbers when looked at nationally, said Marc Joffe, senior policy analyst at the Reason Foundation and author of the report. But when considered individually, a loss of $4 million for a city like Indian Wells, which has a population of 5,575 according to the last census, can be significant.
“Nationally, golf courses are not going to represent a very large percentage of municipal finances,” Joffe said. “But there will be exceptions in communities where it’s a significant factor.”
The report notes that COVID-19 related lockdowns certainly played a role in the 2020 financial statements, the contribution of COVID-19 to golf course losses will likely not be known until the financial statements for 2021 and 2022 are available. will not be available, Joffe said.
But as Joffe noted, there are limits to what can be done to analyze golf course spending using corporate fund data, as many local governments, including Los Angeles which operates 13 public golf courses, includes them in their larger parks and recreation funds and does not. You can’t separate those numbers from their broader spending.
“We don’t really know what the total is,” Joffe said. But golf courses have caused significant distress to some local governments in recent years.
Buena Vista, Va., closed its Vista Links golf course in March after years of legal battles over its inability to repay bonds. The deal used City Hall and Buena Vista Police Headquarters as collateral, threatening to shut down all three.
The city’s default and unwillingness to repay bondholders for years represents the complex nature of debt issued by the city to pay for facilities such as golf courses that do not necessarily represent “essential” government functions. .
Under the structure of the bond agreement, the city was supposed to send the rental payments to its Public Recreation Facilities Authority, and when the payments did not arrive and a lawsuit was filed, the U.S. District Judge Norman Moon rejected it, concluding that the debt was a moral, not a legal obligation.
According to the report, The Crossings golf course in Carlsbad, Calif., roughly broke even this year, excluding depreciation expenses. But as one of the most expensive courses in the country, issued via 30-year construction bonds totaling some $18.5 million in 2006, the course struggled to keep up with its ongoing construction costs until that it be reimbursed in 2016.
Golf courses take up valuable land for local governments and instead of defaulting on bonds, local governments have other options.
“There’s value that’s locked up on the city’s books right now,” Joffe said. “By selling it to a private golf course operator, real estate developers or any other private entity that has a higher and better use of the property, the city can unlock a lot of value that they can then use in various ways to improve life in their city.
The Reason Foundation intends to release more reports on the data it gathered as part of its more in-depth review of local government corporate funds.