As spring brings golfers back to Northwood Golf Club the city of Rhinelander is considering forgiving the nearly $2 million the golf course owes the city's general fund.
City administrator Daniel Guild made a presentation to the full Common Council April 22 proposing the council switch the accounting of the financially struggling course from an enterprise to special revenue fund and forgive approximately $1.76 million in debt.
2019 will be the second season Green Golf Partners, who contracted with the city in 2017 to operate all aspects of the business including food and beverage, will be in charge of the course.
The move came after GGP studied all aspects of the course when the city operated it and recommended the course be run by an outside management firm with an eye toward increasing revenues. This would then hopefully increase the price the city could get for the course if a buyer can be found.
Switching the course's accounting from an enterprise to a special revenue fund, and forgiving the debt Northwood has run up in loans from the general fund almost from its establishment in 1987, is not a new idea. City officials have been discussing the possibility for several years.
Guild revisited the idea during the council's April 22 meeting.
"Looking at the financials of the golf course, and considering what makes some of our opportunities that could be explored in the future, I believe it might be prudent to explore making some changes," Guild told the council.
An enterprise fund is a way of accounting for government activities that involves charging a fee in an amount that is supposed to cover its expenses, Guild explained, adding that the water utility and sewer and stormwater utilities are examples of enterprise funds that stay in balance through the adjustment of rates charged to residential and business customers
"Right now, when an enterprise fund like the golf course doesn't make enough money from the revenues that it receives, that fund ends the year at a deficit," Guild explained. "So if it costs $10 to run the golf course, and we only make $8, then there is a deficit of $2. But, as I just mentioned, you're supposed to run and operate a enterprise fund at either zero or at a slight profit."
To bring the golf course enterprise fund into balance, the council must approve a transfer of money from the general fund to make the annual books balance.
Guild said these transfers were $184,000 in 2014, $152,000 in 2015, $133,00 in 2016, $373,000 in 2017 and 2018 appears to be $286,000, but that transaction has not been completed yet.
"When we do the accounting for the general fund, we put down a note that the golf course enterprise fund owes the general fund some money," he said. "Well, that amount has been building and building over the course of time."
He noted that this amount also does not take into account any debt associated with the golf course.
"The first thing I want to put in front of the common council is that I think it is pretty unreasonable to suspect that the golf course with its revenues will ever cash flow at such a level that not only will it cover its operations, its current debt but will also pay back the debt that is owed to the general fund," Guild said. "So, from an accounting standpoint, the first thing I want to put in front of the table is that I would like the Common Council to consider that in the future that we look at a resolution in which the general fund would forgive the golf course fund of all of the money that it is owed."
If the city budgets to spend $10 and only spends $9, that extra $1 "just sits in the checkbook" Guild noted, explaining why there may be a cushion in the general fund to cover the plan.
"And, hopefully, every year goes by and you spend less than you plan to spend," Guild said. "And there is a little fund balance that builds up, there is a little cushion. And our city's financial policy is that that cushion that sits in our general fund should be between 15 and 25-percent of the operations of the city."
At present, the $1 the city should be banking is instead going to the golf course fund to cover its shortage every year, he noted.
"I think a much more transparent and honest approach for how we would plan for the golf course's finances going forward would be to eliminate the golf course as an enterprise fund starting January 1, 2020," Guild said. "And then we would transfer golf into a special revenue fund."
He suggested that the amount to finance the special revenue fund difference come from a tax levy similar to that levied for the airport or library. This would allow the council to budget how much money goes into the golf course more efficiently instead of continuing to loan it money from the general fund.
Guild also provided statements from the city's financial advisor Ehlers stating that forgiving the golf course debt would not overly affect the city's bond rating.
Green Golf Partners CEO Matt McIntee also addressed the council. Operating a golf course does not have to be a "financial black hole," he said, adding that this change would put Northwood on much more sound financial footing "so it doesn't become any sort of determent to the city, it becomes one of the better assets."
Guild said discussions will likely continue during the 2020 budget process.
Jamie Taylor may be reached via jamie @rivernewsonline.com
Posted: Wednesday, May 8, 2019
Article comment by:
Bravo Rhinelander (sarcasm)! A couple years ago you hired a consultant to tell you how to make the golf course profitable to avoid forgiving the debt. You then got rid of the manager and replaced them with the same consultant you hired to evaluate the situation. Convenient. Now, the consultants and the city admin want to forgive the debt. You came full circle, but you're out the consulting fees to do the thing you should have done two years ago. Should have folded then, Rhinelander. Well played Green Golf Partners. .
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