Public-golf revenue is up millions of dollars. But a costly public-private contract has swallowed most of the money
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By now, even most nongolfing residents of San Francisco have heard the dire refrain coming from City Hall: San Francisco's public golf courses are sucking millions of dollars from the city treasury! Dozens of media stories have trumpeted this bleak pronouncement, and city leaders are using the shortfall to push for outsourcing control of the century-old open spaces. But a Guardian review of the Golf Fund shows that the links are not nearly as down-and-out as pro-privatization forces have led us to believe.
Recreation and Park Department accounting documents we obtained show revenues at the city's six publicly owned golf courses last year were up nearly $1.5 million from 2005 to 2006 and more than $2.2 million dollars from 2004 to 2005, an increase of nearly 30 percent. But the cost of a lavish contract with a large, out-of-state golf-management corporation has risen precipitously over the same time frame and drained most of these new funds.
For the 200607 fiscal year the city shelled out more than $3.25 million to Kemper Sports Management to operate the pro shop and clubhouse at the Harding Park Golf Course and its nine-hole neighbor, Fleming. By comparison, in 200405, Kemper's tab at Harding and Fleming was a still eye-popping $2.07 million, but that number is nearly $1.2 million less than what the city had to pay last year. These increased costs, as well as a hefty loan repayment for Harding Park's botched remodel in 2002 and 2003, have eaten up the links' improved revenue and forced the city to throw in an extra $1.4 million from the General Fund to keep golf solvent.
"What's going on up at Harding is a disaster," Bob Killian told the Guardian. Killian ran the city's golf operations profitably for two decades until 2001. "When I was in charge we had contracts with various managers for the pro shops and the restaurants, and they made us money. They paid us. Now, Harding is run at a deficit. Where the fuck is the money going? What's it for? Nobody knows. It's all this big secret.... It's a scandal."
Kemper's seven-year deal is unique, to say the least. At every other publicly managed course, the city leases control of the pro shops and clubhouses to outside companies. In exchange for a flat fee paid into city coffers, those companies bear all of the risk and reap most of the rewards of operating the facilities. But at Harding, the city pays Illinois's Kemper $192,000 per year, regardless of its performance, to act as an on-site manager, plus a 5 percent incentive fee for gross revenues over $6 million. But those guaranteed sums are only the beginning of the bill.
Kemper hires staff, rents golf carts, and orders the supplies to be sold in the pro shop and the clubhouse. Unlike in the city's lease arrangements at other courses, though, the company bears none of the risk. It simply invoices the city for its expenses, and the city signs the tab. And the tab just keeps growing.
One public-golf insider who declined to be identified for fear of retribution said, "They've got this enormous staff there, managers and assistant managers and assistants to assistants of managers. It's a golf course, not a hospital! I hear the payroll for the restaurant alone is like $600,000. And it's only open for one shift a day.... They stock their pro shop with top-of-the-line gear that just sits there. If they order 20 Arnold Palmer shirts and only sell two, who cares? The city still pays for all 20."
In an e-mail to the Guardian, Kemper's general manager at Harding, Steve Argo, told us it has between 60 and 80 employees, depending on the season. Citing this seasonal variability and "competitive reasons," he did not break down those numbers between management and nonmanagement, as we requested.
Both Argo and Katharine Petrucione, Rec and Park's chief financial officer, attributed much of the added costs at Harding to the opening of a new permanent clubhouse there in late 2005. Argo said the increased revenues from the clubhouse have "more than covered the city's increase in payments." But while Rec and Park's ledgers do show that concessions revenues at Harding and Fleming have gone up since the clubhouse opened, the increase in Kemper's bill has gone up nearly as much. All in all, with Kemper's multimillion-dollar deal and loan payments for the over-budget remodel at the course, accounts still put the course at more than $500,000 in the red even though a round of golf there now costs well over $100 and Kemper is still making a handsome profit.
It doesn't end there. Petrucione said Kemper's contract costs taxpayers even more than meets the eye. Because the company submits monthly and yearly budget projections as well as reams of invoices and expenses for reimbursement, Rec and Park staffers spend hours examining Kemper's paperwork and activities essentially managing the manager. When we asked her for an accounting of how much the Kemper contract costs the city in staff hours for these oversight duties, Petrucione replied, "It definitely requires more time and effort ... than a lease agreement [like those at every other course] would."
During a recent radio interview, Sup. Jake McGoldrick called Rec and Park's deal with Kemper "the worst contract I've ever seen." He added, "We don't have a golfer problem. Golfers are coming out and playing. We have an accountancy problem."
The golf insider we spoke with echoed McGoldrick's sentiments: "Business is up like 30 percent this year, but Kemper's contract is jeopardizing the whole department.... If we redid the greens, tees, and fairways [at the other courses], just Band-Aid stuff like that, we would have the premier municipal system in the country. But instead they've given this cushy deal to a company from Chicago with no connection to San Francisco. It's so unfair."
Despite the controversy over Kemper's all-expenses-paid arrangement, Mayor Gavin Newsom, Rec and Park general manager Yomi Agunbiade, and others at City Hall have been using the deficits largely brought on by Kemper's contract to push for more private control of the city's links. In June the Mayor's Office put forward a plan to outsource not just clubhouse and pro-shop management but all golf operations at the city's premier courses, including Harding. The proposal was tabled after several contentious hearings at the Board of Supervisors, but many observers expect that it will make its way back to the board in the near future.
"In a perfect scenario, the city could [manage the courses efficiently], but the city has proven that it doesn't have the ability to do it," Sup. Sean Elsbernd told us in July. Elsbernd has been one of the most vocal supporters of bringing in private golf management.
But McGoldrick, Killian, and other opponents of the idea point out that the city provided quality, inexpensive golf for nearly 100 years. They worry that private managers will find profit in higher greens fees, more part-time workers, and lower salaries and fewer benefits for full-time staff. But beyond those concerns, they see the mayor's plan as yet another example of publicly owned assets being offered up for private gain.
The courses, McGoldrick told us, are "priceless.... We can't just dump [them] because you've got folks from the Mayor's Office and his Rec and Park Department who don't want to be bothered."
In his endorsement interview with the Guardian, Newsom said about the golf courses, "You gotta deal with the reality of where we are and what our core competencies are. Golf courses do not reflect a core competency of government. We're losing hundreds of thousands of dollars and about to lose over a million dollars a year, and that comes from somewhere. So rather than continuing to do what we've done and hope for a different result, we're looking at best practices across the country and finding ways to manage our assets differently, and I'm not apologetic for exploring those things."