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Council: Golf course loan protects city asset
Published 11:18am Monday, November 26, 2012Several Fergus Falls City Council members said the fact that Pebble Lake Golf Course was a city-owned asset, had no ability get a loan privately, and had a solid plan to get in the black, were the prime reasons why the council on Monday approved a $300,000 line of credit and deferment of a $500,000 loan.
“The golf course was out of cash, and because the city owned all of the course’s assets, they had no where else to go,” said Council member Scott Rachels, who also is the council’s liaison to the golf course board. “I didn’t want to turn my back on them.”
Council members voted 7-0 in favor of both the line of credit increase and loan deferment, with Pat Connelly abstaining.
Council member Randy Synstelien pointed out that because the city owns the land the golf course sits on, the clubhouse and other buildings, the PLGC board does not have collateral available to obtain credit.
“To me, the golf course is a community asset, and it’s not like the city wants to get into the golf course business right now,” Synstelien said.
Instead of going through a bank, the PLGC board took out a $497,000 loan from the City Council’s general fund to pay for a maintenance facility and irrigation system. The city offered the course a 3 percent interest rate as opposed to 4 or 5 percent PLGC would have been offered with a bank. Another bonus to the city is that the interest paid goes back into the general fund, making this loan an investment for the City Council, he said.
PLGC has not made a payment on the loan since 2007, and council members were told the course has lost about $35,000 per year at least the past two years. However, both Rachels and Synstelien said they felt confident about the PLGC board’s plan to get the golf course in the black.
PLGC board president Aaron Sletten said reasonable changes are being made at the course, and payments should start being made again within the next two years.
Maintenance costs are being cut by 20 percent, and PLGC is taking over management of the restaurant under the new name of Tavern 59, Sletten said.
“We are trying to find ways to save substantial amounts of money,” he said. “We want to make sure we are getting the best rates for everything. We’re going to the extremes of looking for $10 here and $10 there. We could be anywhere from 10 to 15 to 18 percent reduced expenses on what we have had previously.”
Tavern 59 will be a completely new revenue source for PLGC, and this will play a big roll the economic turnaround of the course. PLGC will be able to offer more services and have better control over operations by taking over management, Sletten said.
One of the things PLGC will not do is increase rates substantially. The board has already voted to continue with its standard, minor annual rate increase, he said.
“We are 10 members doing everything we can to make sure this course makes money,” said Sletten. “We’re cutting costs where we can without affecting the course or restaurant.”
While Rachels said there are certainly some risks to the city, if the PLGC board’s plan succeeds and the loans are repaid, the cost to local taxpayers will be zero.
“We’re certainly going to keep an eye on it and keep the lines of communication open,” Rachels said. “But if they if they do the little pieces here and there, they can get it back to turning a profit and get the loan paid back.”
