SDMGA: Comments to the NR&C Committee on Staff Report 10-068: Golf Division Update on Gold Resident Identification Card
Paul Spiegelman co-founder of the SDMGA reviewed the Staff report. His comments and recommendations are given below.
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Comments to the NR&C Committee on Staff Report 10-068
Golf Division Update on Gold Resident Identification Card
By Paul J. Spiegelman
Co-founder SDMGA
I have reviewed the above staff report and have the following comments and recommendations:
Comments:
1. The report, even using unrealistically high estimates of labor costs, indicates
that only 29% of the revenue generated by the Resident ID Card ($339,325) can be justified as cost recovery ($98,995). See Report, p.3 and Appendix B (Report at p.5). This means that even accepting the inflated figures offered in the staff report, the cost recovery price for the resident ID card would be $7.50 (30% of the current $25.00 price.
2. The labor costs of the issuing the card are inflated 973% in the report: Claimed
labor costs = $92,452; Actual labor costs = $9,501.12. Here’s how:
(a) the hours estimates are inflated by more than 500%:
The report’s cost figure is based on an estimate of 9 minutes for card. (See Appendix B, Report, p.5). The nine minute figure is 3 times higher than the actual time spent by associates: 3 minutes or less for new issues; 30 seconds for renewals.[1] I have not only bought cards, but been on starter's lines when they are sold at Torrey Pines. 1 minute is generous for getting verified and 1 minute for getting photographed. Adding another minute for the sake of margin of error and you get a generous estimate (the basis for my 3 minute estimate for new issues). Renewals take less than 30 seconds. They are handled as routine matters when someone goes to the starter's booth to pay; the associate just clicks a couple of buttons on the computer and it is done; the $25 is simply added to the greens fees for the day.
If we estimate that half of the cards are renewals (this is a conservative estimate since city courses do not lose half their golfers every year), and on that basis less than 400 hours total were expended in FY 2010 to March 31, 2010: (13753 cards divided by 2 = 6786 new cards x 3 minutes divided by 60 minutes per hour = 339.33 minutes for new cards + 6786 cards x 0.5 minutes per renewal divided by 60 minutes per hour = 56.55 hours for renewals. A total of 395.88 hours, not the 2035.95 hours suggested by the Report, p. 5 (9 minutes per transaction time for13,753 cards = 122,157 minutes or 2035.95 minutes).
(b) cost of labor claimed in the report is almost double the actual cost. The Report, p. 5 claims that the hourly labor cost is $45.41, annualized
assuming 2,000 hours per year is $90,820. Golf Associates are paid less
than $40,000 per year. Allowing 20% for benefits, FICA, etc. Golf
Associates cost 48,000 per year or $24 per hour.
(c) total labor costs are therefore 395.88 hours times $24 per hour or
$9501.12.
3. The rationale for the “opportunity cost” argument made by the report pp. 2-5
that residents who are told that they are paying greens fees to recover the full cost of a round golf (computed by the same kind of inflated and unaudited cost figures evidenced in this report) – is frightening and would spell an end to the whole idea of municipal golf and public parks. The non-resident fee was instituted as a way of making the Golf Enterprise Fund fully self sufficient. The idea was that non-resident golfers should pay premium rates because they are not taxpayers and can afford to pay high market rates for the privilege of playing San Diego golf courses. To call what local golfers pay a discounted rate assumes that municipal golfers can afford to pay tourist rates to play in their public parks This is a highly objectionable approach. Unlike local tennis players, picnickers, hikers, playground users, local golfers are paying for the cost of using their public park golf courses. If we applied the “opportunity cost” approach to other municipal park users, we could compare the cost of a day at Disney Theme Park to a day at Balboa Park and conclude that the “opportunity cost” of allowing citizens to use Balboa Park is $50 - $100 per person per day. The opportunity cost approach taken by the report assumes that public parks should charge high end market rates to citizens and is totally inconsistent with the idea of public parks.
4. The report’s claim that greens fees would have to be raised to pay for cost
recovery prices for the Golf ID card is unsupported and clearly wrong: the Golf Enterprise Fund is running at a huge surplus; any reduction in revenues would not necessitate a raise in greens fees which are allegedly already set at the cost of the round.
5. The self-serving advocacy in the staff report makes clear that an independent
review of golf operations finances is necessary if the Committee is to get unbiased information.
Recommendations:
(A) That the Committee take the necessary action to put in motion a reduction Golf ID cards to $10 per new card and $5 per renewal for the balance of the FY 2010 and all of FY 2011;
(B) That the Committee refer the issues of cost recovery for both the resident ID card and the cost of a round of golf and the issue of Golf Enterprise Fund balances to the Independent Budget Analyst for a report on the accuracy of the cost figures and on the size of the current Golf Enterprise Fund Balance
(C) That the Committee direct the staff to produce a plan by the next Committee meeting for a Golf Advisory Council that includes those with accounting expertise who could assist this Committee and the general public with analysis of golf finance and policy issues.
[1] I am informed that the City has now instructed Golf Course Associates to not issue renewals, but instead to issue a new card each time a person renews. No rationale was offered for this seemingly wasteful procedure – wasting Associate time and new raw materials (not very green). The abandonment of the card renewal feature is not factored into this analysis because it was not implemented during the period under discussion: July 1, 2009 through March 31, 2010.