Sunday
Jun102007
“So the amount of revenue the city gets for the big golf tournament, the U.S. Open, will be $500,000?”
In the Millard Golf World piece on the USGA and Walter Driver, the Executive Committee's "hands-on" approach (euphemism for conflict of interest) is explored and yours truly weighed in with an "acerbic" remark. In light of Tod Leonard's San Diego Union-Tribune story Sunday, maybe I was not acerbic enough.
From the Millard piece:
Says one current staffer, "The last two administrations have been very hands-on. Personally, I'd say too much. I think they've gone too far."Oh but now we learn from Leonard that it's just so much worse.
One current example of this trend is the case of Cameron Jay Rains. Rains is the co-chairman of the 2008 U.S. Open at Torrey Pines. He is also a member (since 2003) of the executive committee. This circumvents the time-honored practice in which local championship chairs report to USGA staff. When asked whether the arrangement presents a conflict, Driver says, "He was the chair of the '08 Open before he came on the executive committee, and we essentially screened him off from any potential conflict." Pressed to admit Rains' dual interests could at least raise some eyebrows, Driver is dismissive. "Doesn't work that way," he insists.
Some observers aren't so sure. "The person negotiating on behalf of the city of San Diego [Rains] is also on the USGA executive committee," says Shackelford. "He's on both sides of the table. So when San Diego [officials] want to know how many hats were sold and what their cut of the revenue is, this isn't a problem? Who is [Rains] looking out for? It's just astonishing."
It has been estimated that the '08 Open at Torrey Pines could produce as much as $100 million in gross revenues for the non-profit U.S. Golf Association, which uses its net proceeds from each U.S. Open to fund virtually all of its other championships and programs for the year.Oh just wait, that's the positive news!
By contrast, the city will receive $1.2 million from its contract with the Friends of Torrey Pines LLC, the organization formed to be the negotiating entity between the city and the USGA.
Only $250,000 of that will be in a cash payment, due in January of next year. Another $250,000 is going to the city from merchandise sales in the Torrey Pines pro shop, for total revenue of $500,000.
Beyond that, the Friends of Torrey Pines agreed to spend $350,000 on course work related to the Open and $350,000 for public safety services such as police and paramedics during the week of the tournament. It is spending an additional $100,000 on a practice facility for the Open.
Meantime, the city's golf enterprise fund will make no direct money from the U.S. Open, while about $3 million has been spent on projects related to the Open, according to Golf Manager Mark Woodward. That work includes the acquisition and installation of one million square feet of kikuyu turf, the moving of trees, repainting the clubhouse and restrooms, and the construction of new cart paths to minimize damage to the grass.
So the city is losing money on this deal. You say, big deal! The tax revenue will be worth it. The branding will be out of this world. And...uh, maybe not.
With part or all of the North Course to be shut down from April to August of next year because of corporate hospitality for the Open, the city will incur significant, as-yet untold losses in green-fee revenue. While Woodward estimated in a budget hearing on May 23 that the city's green-fee earnings will increase by $2.9 million in the 2008 fiscal year, he said last week that number will have to be lowered for the final budget.
Woodward said $3.5 million is being spent on the renovation of the main parking lot and the course's maintenance facilities, neither of which is being directly tied to the Open, though both projects will be complete when the tournament arrives.
“The percentage of compensation is unconscionable. I feel like there's a stinginess on the USGA's part in the face of this big bonanza,” said Paul Spiegelman, a founder of the San Diego Municipal Golfers Alliance, which gathered 1,400 signatures last year in opposition to the city's five-year golf business plan. “The golf enterprise fund should not take a beating because of this Open.”
Okay, and this before we get to the fun part...
Spiegelman spoke at the May 23 budget meeting of the city's Natural Resources and Culture Committee. At the meeting, Councilwoman Donna Frye, who was not on the City Council when the Open lease was approved, referred sarcastically on two occasions to the “wonderful” deal made by former Deputy City Manager Bruce Herring.
With a tone of incredulity in her voice, Frye asked Woodward, “So the amount of revenue the city gets for the big golf tournament, the U.S. Open, will be $500,000?”
Ah, here we go.
In San Diego, the Friends of Torrey Pines is the organizing body that will earn a percentage of corporate hospitality sales.
Jay Rains, a La Mesa attorney who led San Diego's Open bid and raised the $3.5 million from private entities to have the South Course reconstructed in 2001, is the local co-chairman of the tournament and also sits on the USGA 15-member executive committee.
Yes, and that appointment came after negotiating this deal on behalf of his hometown. Or was he really negotiating on their behalf?:
Rains said this week he believes the Friends of Torrey Pines will receive about $3.5 million from the Open – $2.5 million in corporate sales and the $950,000 the city reimbursed it for the South's reconstruction.
Rains said none of that money will be kept by the nearly 30 individuals and businesses that compose the Friends of Torrey Pines.
“The money that comes back will be given to charity,” Rains said. “I don't want anybody to say we made money off a public golf course.”
Would that be we, the Friends of Torrey Pines, or we the USGA? Which side are you speaking on behalf of?
Though Rains said he will leave it up to the individual donors on how they donate their share, he intends to encourage funding a project that will enhance the experience for city golfers. He said he could not be more specific at this time.
Spiegelman said he is opposed to the Friends of Torrey Pines controlling the money earned from the Open.
“I wouldn't begrudge the Friends of Torrey Pines for creating money for charity if the city wasn't taking a beating on this,” Spiegelman said. “I don't think there should be any profits until the city and the golf enterprise fund are fully reimbursed.”
The Open windfall for the golf enterprise fund will come in the future, when in 2011, for example, residents will pay $73 and tourists $218 on weekends to walk one of a handful of public courses ever to hold the U.S. Open.
Actually, now I know who Rains is negotiating for. And it isn't his hometown.
Sunday, June 10, 2007 at 08:49 PM
Reader Comments (6)
History has shown that local championship chairs are not immune from dipping into ancillary Open revenue. Even RICO authors can be blinded by free address labels.
Let's recap:
1. The cost of redoing the course, in 2001, preparing for the Open, was 0.95 million, and was reimbursed to the city by the Friends of Torrey Pines, who raised 3.5 million by private donations.
2. The remaining 2.5 million of the above amount, controlled by Friends of Torrey Pines, is to be given to charity, or as yet is unspecified as to its final disposition.
3. The San Diego Golf Enterprise Fund will spend about 3 million on Open-related projects. These include both course-related and non-course items for the tournament (grass, cart paths, clubhouse, etc.).
4. The city will _also_ be spending 3.5 million on the parking lot, maintenance facilities, etc.
5. The city will receive 1.2 million from a contract the city has with Friends of Torrey Pines. 0.5 million of this is a cash payment. Where is the other 0.7 million going? Is that the .35 for course work and .35 for police/paramedics. How about the .1 for the practice facility?
6. City loses greens fee revenue from the south course during the re-do, and for the north course in and around open time next year, cost not specified.
7. City to reap increases in greens fees in subsequent years, amount uncertain.
8. City receives no money from USGA revenue on the event.
So, the city got a new golf course for no cost to them, which will generate increased revenue, at least that is the plan.
The city has some short term losses in greens fee revenue.
The city is paying a total of 6.5 million to the facility, golf and non-golf, in connection with the open. Is this right? This is where I'm confused. They're paying both the 3 million mentioned in one paragraph and 3.5 million mentioned in another?
The city get's 500k in cash... and (is this correct) 700k or so is being spent on the course, police/paramedics, and a new practice facility?
There is about 2.5 million controlled by the Friends of Torrey Pines that is not at present specifically earmarked, but may go "to charity."
So, summarizing:
1. In the "plus" column, the city has course renovations worth 950k (please no editorial comments on how they actually ruined the old girl, we're just talking dollars and cents--and I hope sense--here), plus at least 500k cash (plus maybe 700k 'in kind'), plus somewhere in the range of 2-3 million in potential increased greens fee revenue in 2008 and beyond.
2. In the "minus" column, the city is out 6.5 million in various expenses related to the course and the open.
3. About 2.5 million is presently not spoken for, but would appear to be headed for charity rather than the city.
Is this right?
What we came up with was, among other things, that you were allowed to change your opponent's club selection for a given hole by two clubs, up or down. This lead to some interesting problems, such as trying to hit the pitching wedge 160 yards, etc. We also played that you were allowed to try to openly disrupt someone's swing, mid backswing, by talking, moving, etc., once per nine holes. [We were playing alone, thankfully].
It was great fun.
The former sounds better than the latter. Making one change clubs makes one try different shots and thus makes one more creative. I intentionally leave clubs home somethimes and have a lot of fun punching or trying to kill an iron when I am between distances.