City staff reported at this week’s City Council meeting that 2012 revenues at the city-owned golf course, The Crossings at Carlsbad, will not only cover expenses, but will be used to help pay down the debt service on the bonds used to build the course.
Adding to the good news, staff reported that revenues are expected to increase 4 percent for the first half of 2013, compared to the same period in 2012. Revenue from greens fees are projected to increase 4.9 percent in the first half of calendar year 2013 compared to the same period in 2012. Historically strong food and beverage sales are projected to increase 3.4 percent during the same period.
Consistent with golf industry trends, The Crossings was affected significantly by the recession, seeing fewer rounds of golf than originally expected, although its food, beverage and special events business has been strong. In addition, during the first several years of operation, the course’s expenses included extensive habitat restoration in the open space adjacent to the course. As a result, the city paid for some of the course’s operating expenses with money from its general fund, money generated primarily from sales tax, hotel tax and property tax.
Today, the course is covering all of its operating expenses and a portion of the debt service from construction bonds. Payment of the debt service for the bonds is estimated to be approximately $382,000 for the first six months of 2013. The city will pay approximately $251,000 of that amount with general fund money.
City staff anticipates the financial strength of the course will continue to improve in the coming years. “With the bad economy and an up front investment in habitat restoration, the course required more support early on,” said Chuck McBride, finance director for the City of Carlsbad. “As the course matures and the economy improves, we are seeing revenues increasing.”
City staff presented a six month budget to bring the golf course’s budget cycle in line with the city’s overall budget calendar, which runs on a fiscal year beginning July 1.
Starting July 1, 2013, the golf course budget will be considered annually at the same time as the overall city budget. Also during Tuesday’s meeting, the City Council approved a new contract with Kemper Sports Management, which operates The Crossings at Carlsbad. Kemper was originally selected in 2007 to operate the course for five years. The city conducted a competitive bidding process in late 2012 and received 10 proposals. Of those, the city selected three to undergo an extensive interview process. Kemper was deemed the most qualified. As a demonstration of Kemper’s commitment to the course’s financial health, the firm agreed to base fee of $125,000 a year, $25,000 less than the current contract. Kemper will also have a new incentive fee arrangement in which the firm will only get the maximum incentive fee if the courses gross revenues exceed projections.
–City of Carlsbad