Golf course asset acquisition agreement approved

Masha Scheele
Local Journalism Initiative

Council approved the Asset Acquisition Agreement between the Town of Hinton and the Hinton Golf Society and directed Administration to proceed with establishing a one-year Operating Agreement with the Hinton Golf Society.

“This has been in the works for many months. Administration and the Society worked hard to get to this point. I think this year has gone exactly as we hoped, the society is doing better, the golf course is doing better, and we’re in a more certain place as far as the municipality so I’m pleased with where we are currently at,” stated Coun. Dewly Nelson during the regular council meeting on Oct. 6.

The golf course will be exchanging their assets for a waiver of their existing loan in the amount of $1,350,000, which is the outstanding amount owed to the Town as per the June 2017 Loan Agreement of $1,5000,000. 

The Town allocated $250,000 to the Society in 2019 to assist with 2020 operations, and the $235,000 expensed by the Society remains payable under the terms set out in the Asset Acquisition Agreement.

Based on current projections, the Society may be able to repay the additional allocation amount within four to six years.

“Having been on the board as councils’ representative, I’m very happy with some of the strategic planning they have and vision for the next year. I think it’s well thought out, not too much, it’s responsible and reasonable and will help protect the asset moving into the next year,” said Coun. Ryan Maguhn.

Upon the closing date, the Town will be responsible for several unbudgeted expenses until a new operating agreement is complete.

Those include a debenture payment of $15,000 per month, utilities between $1,348 and $2,000 per month, insurance of $22,000 per year, the security system of $40 per month, and asset maintenance between $0 and $15,000 per month.

A portion of these costs can be recuperated by charging them back to the operator in the form of an operating agreement, which will reduce the overall amount that is repaid annually with respect to repayment of the $235,000.

Due to the amount of funds still payable, a one-year Operating Agreement with the Hinton Golf Society effective between Oct. 31 this year and Oct. 31 in 2021 was established to determine if the repayment method is sustainable.

The remaining Society debt that is not associated with the Asset Acquisition is the Golf Cart Lease, approximately $75,000 in 2021 alone, which was included in the Acquisition Agreement as an exempt asset.

Coun. Maguhn asked whether the Town is appropriately positioned to offer the sole source to the Society or if a request for proposal (RFP) should go out.

“At this time, administration feels that sole sourcing is the appropriate course of action due to risk in maintenance to the asset and then the impact to the next golf season,” said CAO Emily Olsen.

Despite a tough summer for many local businesses and organizations, the Hinton Golf Club had a net income of more than $130,700 this year.

Expenses at the course include greens and fairways, administration, pro shop, golf carts, and food and beverage, which added up to $823,106.87 between November 2019 and September 2020. In that same time period, total revenue was $953,830.01.

“In the Last week or so that revenue number is looking more like $975,000. We’re trying to hit that million dollar mark here by the end of October,” said Kyle Crawford, director of the Hinton Golf Club during his presentation to council.

Due to the pandemic and the limitations on gatherings, the course missed out on revenue from building rentals this year, Crawford added.

Other revenue streams included memberships and leagues, green fees, golf carts, pro shop merchandise, driving range, club storage, equipment rentals, and food and liquor.

Profitable months included December, May, July, August, and September.

Memberships sold in December allowed for a net income of around $35,000, followed by several months of negative net incomes. Memberships were again being sold in May, allowing for the first profitable month of 2020.

“We had a net income of $118,000 [in May]. So we were just pretty much mirroring 2019 on the memberships, we sold about 187,000 this year, versus I think 189,000 in 2019,” Crawford said. 

June saw another negative net income due to some expenses that could have been pushed to July or been paid in May.

A substantial amount of work was done on the golf course this year, including bunker updates and the purchase of a new sprayer.

The old sprayer would have cost roughly $12,000 to $15,000 to fix. A new sprayer was quoted at $53K and bought for $46,916.

“Going with RCAP leasing, we saved the golf course about $5,600, just kind of maneuvering the lease and how it worked,” Crawford said.

In 2019, the course saw 12,000 rounds, while this past season had 21,000 rounds of golf, almost doubling the rounds. The majority of rounds, or just over 10,000 rounds were members of the public.

Key additions in 2021 include the addition of an assistant superintendent, Golf Course improvements, updated golf shop renovation, improved drainage, and landscaping of core area.

“Our maintenance staff is very small, especially for a golf course this size. We are going to add an assistant superintendent to work under our head superintendent for 2021, so there is going to be an increase in cost,” Crawford said.

The maintenance budget includes $25,000 in planned funds for course improvements and pro shop renovations, used to update the golf course and to maximize merchandise sales.

Drainage work on hole five started this year and will continue as it has caused a lot of problems in past years, as well as landscaping in around the clubhouse.

The projected budget in 2021 includes $1,198,3310.65 in revenue, leaving $81,695 in profit projected for 2021.

“We are in great financial shape this year to pay the $50,000 loan payment back and then also now moving forward until we pay it back. It’s going to be in the budget,” Crawford added.

He clarified that the big jump in projected 2021 memberships is solely due to talking with past members that were on edge this year but committed to purchasing a membership next year.

Crawford is hoping to create more corporate memberships and has talked to a few local companies in Hinton that were very open to the idea.

He hopes to see an increase in driving range revenue as well with an integrated driving range machine that will eliminate the token system.

The Hinton Golf Club is partnering up with an organization to provide access to a virtual golf machine, which will increase revenue during winter months. 

“Good season this year but we’re hoping for a better one next year,” Crawford concluded.

He responded to several questions from council, including that green fees will increase next year by $2 and memberships will increase by $50. He added that revenues and expenses are tracked daily and changes will be made to mitigate financial risks as they come up.

“It’s remarkable to see the work that’s been done this year in context of COVID and also in the sense that Mr. Crawford showed up remarkably late actually in the planning cycle for the upcoming season. I’m excited to see what him and the board can get done with this upcoming golf season ,” said Coun. Tyler Waugh.

Town Administration was first made aware of the Society’s financial challenges over the course of a two-year period from June of 2017 to June of 2019.

The Town entered into a Loan Agreement with the Society in June of 2017. A condition of this Agreement included the transfer of all Golf Course assets to the Town in the event of default on the loan payments. When the Society defaulted on their payment in 2019, the process of transferring assets to the Town began.

Conditions for the allocation of the $250,000 in late 2019 included the hiring of a Director of Golf to ensure adequate course management, financial oversight from Town Administration related to the use, and repayment of the $250,000.

Administration worked collaboratively with the Director of Golf and the Society to finalize all the components of the Asset Acquisition Agreement.