Bailing Out Inver Wood Golf Course

Editor’s note: This article is the first in a two-part series looking into the finances of the city’s golf course and community center.

The golf industry wasn’t always this bad, Inver Wood Golf Course Manager Al McMurchie remembers.

In the late 1990s, business was booming for Inver Wood, a 27-hole municipal course along 70th St. in Inver Grove Heights. Golfers played as many as 70,000 rounds at the course each season, and Inver Wood, opened in 1992, was generating nearly $2 million in annual revenue—more than enough money to cover the course’s expenses and pay off roughly $600,000 in debt payments each year.

But the golf industry hit the skids in the early 2000s, McMurchie said. A saturated market with too many courses, fewer corporate golf outings and an aging customer base ate into golf course earnings. Last year, good weather allowed Inver Wood to stay open for record 197 days, but even with the longer season, the course only tallied roughly 50,000 rounds played—substantially lower than its heyday in the 1990s.

Since 2006, the net asset loss posted by the golf course has grown ever larger, from roughly $226,000 in 2006 to a $389,000 in 2010, according to a 2010 audit of city finances.

The numbers have Parks and Recreation Director Eric Carlson convinced that something has to be done to return the course to profitability—but city officials have yet to decide upon a solution that will put the course back in the black.

Looking For Answers

In 2009, the Inver Grove Heights City Council approved a $55,000 contract with a consultant to find ways for the city to reduce the golf course’s expenditures, Carlson said.

The consultant, McMurchie and Carlson said, returned several recommendations to the city: Improve the golf course’s online presence, offer online tee-time registration, create variable course rates and replace staff at the driving range and a concession stand with vending machines to reduce staffing costs.

The city implemented those changes last year, and raised rates for “premium” or high-demand times, like Saturday mornings, while lowering rates for off-peak times. The rate change came with mixed results, McMurchie said. While the volume of rounds played increased by roughly 10 percent, the course didn’t see a corresponding rise in revenue.

The reason for the problem was simple, McMurchie said: The discounted, off-peak rates drew in more golfers, but more players began avoiding the peak times and higher rates.

The other changes—installing vending machines to reduce staff and improving the course’s website, resulted in one-time costs that actually drove up expenses in 2010, Carlson said. The city also raised its marketing budget for the golf course by $30,000 to mount a stronger advertising campaign—further adding to the operating expenses last year.  

But in the long run, Carlson hopes the changes will reduce employee expenses and increase traffic at Inver Wood.

“We’re still evaluating the changes that they implemented last year, and trying to determine which ones were good ones, and which ones need more tweaking,” Carlson said.

A Permanent Solution

But those tweaks may not be enough to return the course to the black, Carlson said.

Instead, Carlson and McMurchie said, the key may be to pay off the debt incurred by the construction of the course.

When the city began building Inver Wood nearly two decades ago, it financed the roughly $7 million project and land purchase with gross revenue bonds—which meant that the course would have to pay for its construction through future revenue. In the 1990s, when the course was in its heyday, it could easily absorb the roughly $600,000 in annual debt payments.

The last few years have been a different story, Carlson and McMurchie said. Although debt refinancing brought the annual payments down, the course still had to cover roughly $471,000 in debt payments in 2010, according to Finance Director Ann Lanoue. Under the current schedule, the gross revenue bonds will be paid off by 2014, but Carlson wants to move faster than that.

City officials, Carlson said, are considering selling two parcels of land adjacent to the course, and using the money from the sales to pay the bonds for the course. The council, Carlson said, could discuss the move as early as August.

McMurchie also wants to ditch the varied rate system currently in place and phase in increased rates over a several-year span to boost the earnings of the course.

Even at the worst of financial times, McMurchie said, the golf course is still a recreational resource for the community.

“I think in the end, it’s important to remember that these are community assets, and you live through the up times and the down times,” McMurchie said. “To think that it’s always going to stay down is probably faulty thinking.”

An "up" economy may be exactly what Inver Wood needs, according to Baker National Golf Course Manager Jeff May. Baker, a 27-hole municipal course near Medina, faced many of the same challenges in the early 2000s.

The average number of rounds played at the course in a year has dropped roughly 12.5 percent from the peak years in the late 1990s, May said. The course tried new junior golfer camps and lesson programs to boost revenue, but the impact those strategies had was minor, May said.

“Jobs are tough, the job market is really tough, all those things add up,” May said. “I don't think there is an answer."

“We need a turnaround in the economy, in the housing market, in the golf industry—you need a turnaround in everything,” May said.