RedGate Report Part I: Course Needs New Revenue Sources

Richard Singer was blunt.

Like it or not, Rockville is in the golf business, the director of consulting for the National Golf Foundation told the City Council on Monday during a discussion of NGF Consulting's report on RedGate Golf Course.

And business is not good.

“There are very few examples of highly successful municipal golf courses in the entire United States of America right now,” Singer said as he spent more than two hours presenting a report and taking questions from the council, which in September voted to spend up to $25,000 on the NGF Consulting study.

The report recommends outsourcing management of RedGate and improving conditions on the 18-hole championship golf course in order to attract more golfers.

At the peak of its popularity, in the late 1990s, the 36-year-old course hosted up to 55,000 rounds of golf per year, according to the NGF Consulting report.

Between fiscal 2008, when the course saw 41,116 rounds and fiscal 2010, when the number declined to 33,479 rounds, RedGate’s course generated between $1.02 million and $1.17 million in revenue, the report said.

That revenue has not offset the course’s $1.6 million annual operating expense, leaving RedGate with a deficit of more than $1.7 million through fiscal 2010 that was projected to increase to $2.4 million by the end of fiscal 2011.

In September, the City Council voted to use $2.4 million from the city’s general fund to bridge the budget gap.

The major finding of the study is that “RedGate might not be sustainable under its current system,” Singer said.

“I have to say that this one of the highest overall expense structures I’ve really ever seen in a municipal golf course,” Singer said. “I mean $1.7 million to operate one 18-hole golf course with a modest clubhouse — that’s about as high as I’ve seen in 20 years. And I think that in and of itself is the issue with RedGate.”

The expense structure includes pension costs and a salary structure that is not uncommon to municipal governments, but is uncommon in golf course operations, Singer said. It also comprises administrative costs that include charges from the city attorney’s, city manager’s and city clerk’s offices, as well as from the city’s human resources, finance, information and recreation and parks departments and the City Council. Those costs are projected to total $334,000 in fiscal 2012, according to the NGF report.

“Even if the best case scenario comes together and you can grow this thing to 43,000 rounds, which is 7,000 to 8,000 rounds a year more than you’re playing now, even if you get to that level, I think you’ll still find that you’re short on expenses,” Singer said.

With inflation “you may find that you’re right back where you started from in three, four years from now. This could become a $2 million operation in terms of expenses.”

There are very few municipal golf courses that would be able to earn enough to cover such costs, he said.

Rockville is a small business competing for the same share of golfers in a market against big business, namely the Montgomery County Revenue Authority, which operates nine courses across the county and benefits from the economies of scale created by being a larger operation, Singer said.

“I think the city needs to make a commitment one way or the other about RedGate,” he said. “I think you’ve been sending mixed messages in the rhetoric about this facility. It has definitely impacted the facility.”

Golfers surveyed for the study said that the course’s uncertain future impacted their decisions to purchase season passes and that competing courses have taken advantage of that.

“I think there’s also a problem in that RedGate doesn’t have a tradition of marketing,” Singer said.

That is not uncommon for municipal courses, but it is more important as more courses compete for patronage of a golfing population that has stagnated, he said.

The city has marketed RedGate with ads in The Gazette, on Comcast cable television, in foreign language newspapers, in golf discount books and recently through targeted emails, said Burt Hall, the city’s director of recreation and parks.

Staff review RedGate’s fee structure every season and the course has tried golfer loyalty programs, offering discounts for frequent patrons, but got rid of some of those offers after they didn’t yield the expected revenue, Hall said.

While there has been an increased effort to market RedGate in recent years, the course management needs to be able to adjust greens fees on short notice and offer specials “without having to go through red tape and have those approved,” Singer said.

Check back later for the second part of Rockville Patch's report on the RedGate study discussion.