HARLINGEN — Can a private company pull the city’s golf course out of the hole?
Members of the city’s new Golf Course Advisory Committee are counting on it.
After two meetings, the 10-member board is recommending city commissioners consider hiring a private company to operate the Tony Butler Golf Course.
Other options include continuing to run the golf course without changes and making “band-aide” improvements.
“We’re looking at several scenarios — that’s the most likely right now,” committee member Jesse Robles said, referring to the recommendation that the city hire a management company to operate the course.
A new consultant’s report also includes the hiring of an operator among its recommendations.
Last month, city commissioners appointed the committee to review the National Golf Foundation’s $22,000, 97-page report.
Commissioners are expected to review the committee’s recommendations later this month.
At City Hall, officials have been dipping into their tight $44 million general fund budget to offset the course’s deficits.
Since 2013, the course has lost about $1 million.
According to the consultants, the golf course is apparently on track to lose at least $500,000 a year if the city fails to improve operations.
Now, the committee is recommending hiring a management company to help turn the golf course into a money maker, said Robles, a businessman and former city commissioner who chairs the Harlingen Community Improvement Board.
“You need someone who knows how the industry operates, knows how the numbers work and how to incentivize rounds,” he said. “Right now, the city has to carry a deficit. We can improve that operation and help reduce the deficit.”
Robles said an operator would market the golf course to drive up revenue.
“In the end we need to create rounds of golf,” he said. “How do we create enthusiasm, excitement and encouragement for the community?”
Management companies have helped other city-owned golf courses turn profits, committee member Scott Allex said.
“It seems to work well in other communities with municipal golf courses — somebody that has experience in running courses and turning around courses like ours to help our course become viable,” said Allex, a financial advisor who sits on the Harlingen Area Chamber of Commerce’s board of directors.
Allex said a management company could more efficiently operate the golf course.
“They probably have economies of scale so they can get some leverage with vendors,” he said. “They could probably get discounted prices.”
Allex said a management company would likely offer flexibility pricing, including setting discount prices to help lure golfers during periods such as the off-season.
Committee members also plan to present other recommendations.
“There are three options — leave as is. Basically, it’s deteriorating,” Robles said. “The other option is to band-aid it but not necessarily fix it.”
In their report, the National Golf Foundation’s consultants estimated the cost of renovating the golf course at between $3.5 million and $7 million.
“We’re not interested in going all out — not at this time,” Robles said. “It’s a pretty large expenditure when we have other responsibilities.”
Robles, who as a boy worked as a caddy at the golf course, believes a management company can revive Tony Butler.
“It’s good when golf courses can provide entertainment for the community — but not when it’s losing money,” he said. “We need to recognize Tony Butler is one of Harlingen’s icons. It’s a beautiful piece of real estate.”
Allex described the golf course as an economic engine.
“It’s a quality-of-life issue,” he said. “Other communities don’t have municipal golf courses. It’s a beautiful, pleasing facility. It’s an asset we probably need.”
During the past five years, the city’s budget shows the golf course has lost revenue.
But Tony Butler might be pumping money to the local economy, Allex said.
“We have to look at the bigger part of the picture,” he said. “The golf course isn’t making money. Well, maybe it is. We’re bringing people into Harlingen that otherwise wouldn’t come. Perhaps they stick around shopping.”
In their report, the consultants weighed the pros and cons of hiring a management company to operate the golf course.
“Some advantages to this strategy are a private labor expense structure and the benefit or professional management — plus access to national purchasing and marketing programs if a larger national firm is chosen,” the report states.
“The potential disadvantages are some loss of city control and the requirement of the fixed-fee compensation, regardless of yearly variations in performance,” the report added.
According to the consultants, management companies tend to operate on 4- to 6-percent of golf courses’ gross revenues.
“The municipality earns all revenues, is responsible for all expenses and pays a management fee to the operator,” the report states.
“Increasingly, NGF is seeing management agreements with a lower fixed-fee component plus an additional incentive — usually gross or net revenue-based — that allows the operator and municipality to share in the risk of the operation.”
By the Numbers
• Management companies tend to charge 4- to 6-percent of golf courses’ gross revenues
• Consultants recommended $3.7 million to $7 million in improvements
• The city-owned golf course has operated in the red for five years
• The golf course has lost $1 million since 2013