City May Lose Money On New Golf Contracts

By Carol Dimmick

The City was forced in March to enter into unfavorable interim agreements for three golf courses, and it raised green fees at one course to cover revenue losses after Arnold Palmer Golf Management pulled out of negotiations to turn the Harding Park golf complex into a PGA-style course and backed out of management agreements it held at three municipal courses.

The double-whammy by Palmer Golf stunned city officials who thought they were days away from finalizing a deal that would turn Harding Park into a PGA-style course capable of raking millions of dollars into the city's coffers.

Peter Nanula, a former president of Arnold Palmer Golf Management, said the deal broke down in January over concerns about recouping an initial investment of $15 million. According to Nanula, the shortfall was created by a 35 percent cap on tee times for high-end green fees that non-residents would be charged.

Now members of the SF Recreation and Park Commission are trying to blast their way out of a deep bunker by approving interim management agreements for the three golf courses abandoned by Palmer Golf when the deal fell apart. But according to revenue projections by the SF Recreation and Park Department, the stop-gap agreements could cost the city nearly $90,000 in lost revenue.

Because the City is currently in negotiations with Kemper Golf to develop a PGA-style course at the Harding Park complex, finding an operator for this course was the most difficult.

Although the department received a proposal from Celtic Golf Management, which owns the Franklin Canyon Golf Course in Hercules, it recommended a proposal by Principled Women Committed to Growth (PWCG), a firm owned by Margaret Ryan, who was employed by Palmer Golf as a regional director. The department's financial analysis of Ryan's proposal concluded it would result in a net loss of $43,241 in revenue during a six-month period.

Four proposals were received for Golden Gate Park golf course, with the department recommending the one submitted by Global Golf.

Although the Global proposal includes introducing a number of recreational and instructional programs, the department projected a $45,285 net loss in revenue during 2001 for the month-to-month agreement.

The city could be facing even larger revenue losses from the Global agreement if the same terms remain in effect until December 2002, the deadline set by the Recreation and Park Department for approving a long-term agreement for the facility.

The agreement negotiated for the Lincoln Park course will have the least financial impact on department revenue. Yugi Golf Management will assume the lease vacated by Palmer Golf with only one minor change requiring the City to pay an additional amount for claims involving "errant golf balls" which the department estimated at $500 per month.

To off-set the projected revenue losses, the Recreation and Park Department is proposing to hike green fees at the nine hole Golden Gate Park course by 18.8 percent for seniors, 20.8 percent for residents and 22.5 percent for non-residents. Under this scenario the Recreation and Park Department projects an additional $115,752 in revenue to cover the expected shortfall from the interim agreements.

For years the City has siphoned off millions of dollars from golf fees to supplement the general fund, leaving the golf courses to fall into disrepair and precipitating the present situation. On the average, the city's golf courses generate about $7 million in yearly revenue, but only $3 million goes back into maintaining the courses.

Three years ago, Mayor Willie Brown proposed a partnership with Palmer Golf to renovate the Harding Park complex with the promise of bringing the PGA Tour Championship to the city in 2003. The plan drew a mixed reaction from residents, with many golfers expressing concerns that the corporate giant could only recoup its initial investment by hiking green fees for residents and reserving the best tee times for well-heeled tourists willing to pay green fees topping $100 per 18-hole round.

The interim contracts and proposed fee hike at the Golden Gate Park course drew fire from a vocal group of senior golfers who oppose the city's efforts to remake the Harding Park into a PGA-style course, a decision they say was never in the best interest of local golfers.

"Well, if they didn't try to privatize Harding we wouldn't be in this latest mess. This is the beginning of the domino effect. They are going to raise rates at the other courses," said David Cohen, a member of Friends of Muni Golf, a group that gathered 3,000 petition signatures opposing the Harding project.

City Puts All Contracts for Pro Shops and Restaurants Up for Bid
Stung by Palmer Golf's untimely retreat from the City, the Recreation and Park Department has come up with a plan to put five municipal golf courses, now operating under month-to-month management agreements, on the bidding block in the hope of securing long-term lucrative agreements.

Details of the bidding schedule were presented at the March 20 meeting of the Recreation and Park Commission by Jaci Fong, director of property management for Recreation and Park Department.

According to Fong, putting the contracts out to bid one-by-one would encourage smaller, local business to participate. Fong told commissioners that a piecemeal approach would avoid another Palmer-type scenario.

But Commissioner John Murray raised questions about the wisdom of drawing out the process for two years. He said the department's proposal failed to take full advantage of potential business opportunities for the City.

"Why can't we put all the parks together and have one selections process to see if there are synergies and get the process done sooner?" Murray asked.

Under the schedule announced at the March 20 meeting, with the exception of the Harding Park complex, contracts for managing the pro shops and restaurants at Golden Gate Park, Lincoln Park, McLaren Park and Sharp Park golf courses are currently scheduled go out for bid in January 2002.
It is hoped that agreements for all courses can be signed by July 2003.