Environment
From "Maple Street Co-op News", Apr/May 2004

Keeping Our Community On Course!
by Alan Harrington

After moving to Maleny 10 years ago, I thought I'd left my golfing days behind. Although I still have no interest in actually playing, I thought I would look at the viability of the golf course concept that is currently an integral part of the so-called Community Precinct proposed for Maleny.

My interest was sparked when I attended the meeting held by representatives of Caloundra City Council and the Community Precinct Task Force on 21 February. Many people, including myself, initially thought it seemed like a good idea in principle to flog off a lot of land and receive a whole lot of benefits for the community.

What struck me as odd about the proposal was that it was supposedly mandatory for a golf course to be included in the Precinct. However, it now seems there is an escape clause, in that the terms of the contract have to be completely satisfactory to the buyer, i.e., Council. Therefore, it seems that if the community doesn't want it and Council doesn't want it, it can be excluded from the contract.

Questions about financial viability

In any event, the crucial factor is the economic viability – or not – of the golf course.

To date, Council has relied on a feasibility assessment carried out by Ernst & Young, which made very general assumptions that may not hold up under closer scrutiny.

With my long history of playing golf and being on committees, I had a niggling suspicion that the numbers just aren't here to make a golf course viable in Maleny and that the hinterland climate and soil would impinge negatively on play.

The Council's own consultant stated in the Ernst & Young analysis that the golf course – a 'quality' golf course, as distinct from a 'championship' course – would not be viable for 10 years.

In the E&Y analysis, the cost estimates are significant. The design cost is calculated at $400,000 and construction at $7.1 million, with another $1.2 million for irrigation. There would be a further outlay of $1 million for golf course maintenance equipment, not to forget another $950,000 required for works such as water storage, an irrigation dam, a reclaimed effluent dam, power provision, access roads, practice facilities and other infrastructure costs. In other words, it would cost an estimated $10.65 million to design, build and equip the course (assuming no unknowns, which is highly unlikely). And the cost of a clubhouse hasn’t even been factored into the equation!
So far, the report presents a broad-brush picture with assumptions based on what is 'normal'. Any investment decisions for a golf course must be rigorously analysed. To ascertain capital costs accurately on a particular site, it's necessary to research suitability of soil types, drainage, water supply, turf species, etc. For example, this site includes springs as well as swampy ground. Factors like these usually have a heavy impact on infrastructure costs.

The sensitivity analysis, which makes an allowance for the unexpected, is based on a 10% contingency – which is low compared with the 15% accounting norm.

Considering the very sizable investment required, we would want to be extremely sure that it is going to be viable as an ongoing enterprise.
The feasibility assessment made assumptions based on general trends in golf, in particular in Queensland and more specifically on the Sunshine Coast. The assumptions were referenced to a golf study conducted during the five years leading up to and including 2001.

Golf course trends and projected revenue

During that five-year period, golf course memberships fell by 2.5% across the country and average club membership levels across Australia at year ended 2001 were at their lowest since 1989. The overall trend was down nationally but was slightly up (by 1.4%) in Queensland, although this had decreased from a 1998 high.

I am unaware of the current trends, although there may be some 2002 data available. However, anecdotal evidence would suggest that this picture is, at best, unchanged but more probably is showing a downwards trend. For example, Horizons golf course at Nelson Bay (a growth area near Port Stephens in NSW, not dissimilar to Maleny) has recently gone into receivership. The second 18-hole course at Royal Pines on the Gold Coast has been closed and – guess what? – is being converted to housing!
Even the assumption that people buying a house would automatically take up a membership is not necessarily valid. Tallwoods, a housing/golf course development near Forster in northern NSW, had only 250 house buyers out of 500 who accepted golf club membership.

In the Ernst & Young report, the estimated operating revenue was based on an initial membership of 500, growing at 100 per annum till it reached 800. The current figure being bandied about is 350. As the numbers are so critical, I would suggest a more realistic figure could be obtained if all the prospective members put a $500 joining fee into a trust account to see who is really interested.

In any event a base of 350 members, each paying a $500 joining fee and $500 annually, leaves a significant revenue shortfall. In fact, it would add $75,000 to the bottom line per annum and a deficiency of $75,000 in joining fees which are normally used for capital items. Comparable courses in this region with far greater membership numbers have joining fees starting at $880 and annual subscriptions from $575 (CPI indexed).

Climate and other variables

Another factor affecting the revenue of a Maleny golf course is the climate. The assumption of the number of days where the course was closed was taken to be 12, this being the average for Queensland courses in 2001.
Taking the Met Bureau figures for Maleny for the year ended 29 February 2004, there were 24 days when more than 20 mm of rain fell, a further 13 days when the rainfall was between 15 and 20 mm, and another 35 days when the temperature was over 30 degrees Celsius. The effect of fog is another unknown.

These types of climatic conditions would impact heavily on playing numbers and therefore on revenue. For example, the additional 12 days lost due to rainfall being over 20 mm would cost $27,000 in revenue in the first year. For every day lost due to weather, it would cost the golf club $2,250 per day. And don't forget, Maleny has just come off a very dry year. Much wetter conditions are normal.

If we take the bare minimum of an extra 12 days lost and cost this out over 10 years using the report's data, then the 10-year deficit calculated by Ernst & Young is increased by a massive $465,840!

One doesn't have to be a genius to realise that the Maleny climate would have a serious impact on revenue.

Maintenance and environmental costs

The ongoing maintenance costs are critical to the success of this venture. These are affected by not just climate variations but the type of grass used, the nature of the soil and many other variables. For example, if kikuyu grass is used it will need to be mowed three times per week instead of the normal two (advice from the Manly GC in Sydney). Costs associated with adopting 'world's best' environmental practices would have to be determined and factored in.

The report concluded that the net return to Council of the golf course operations would be an approximate $90,000 loss over the first 10 years of operation. It also stated that the operation is sensitive to demand – both from members and green-fee-paying guests. I would definitely agree. With this in mind and taking into account variations as discussed, this loss over 10 years would have no problem blowing out to $1.3 million – a figure I'd regard as very conservative.

Guarantees for the community

All in all, it's clear to me that unless other relevant factors emerge that place a positive financial outcome on the golf course operations, this is an extremely high risk 'adventure'. My concern is that if the golf course goes ahead and fails financially within a few years, the land will be turned over to yet another housing development.

In this entire Precinct project, the community facilities should be agreed between community members and Council and guaranteed by Council regardless of the outcome of land sales. In the case of the golf course, Caloundra City Council should agree to fund all deficits. Why should agreed community facilities be delayed or put at risk due to any 'unforeseen' circumstances such as a downturn in land sales or administrative bungles? Should Council make a 'profit' over and above what is agreed, then they can keep it.

Until a thorough, detailed and comprehensive cost/benefit study is conducted into the viability of the golf course, I cannot see how any responsible Councillor could vote to purchase the Porter land based on the information currently available. The only other alternative would be for Council to sell the whole package to a developer for a sum that guarantees the agreed community benefits but ensures that the developer takes all the risks.

Most of us are concerned about retaining our town's character. It's only sensible that the golf course development be reassessed so we can be sure it's economically feasible and environmentally sustainable and will not detract from our community amenity.

[From "Maple Street Co-op News", April/May 2004; published by The Maple Street Co-operative Society Ltd, 37 Maple Street, Maleny, Qld 4552, Australia, tel (07) 5494 2088, email maplest.coop@ serv.net.au,
website http://www.maplestreetco-op.com.au]