Tuesday, December 22, 2009

Indianapolis Golf Course Bidding Process Raises Concerns

Ron West's R.H. West company opened the door to Indianapolis' nearly 20-year experimentation with the privatization of the City's golf courses. The administration of former Mayor Stephen Goldsmith awarded the first privatization contract for a city golf course to West's company in 1993 for the Winding River golf course in Decatur Township. Smith's company expanded the facility from a 9-hole course to an 18-hole course, including $1.6 million in capital improvement investments consisting of $400,000 of his own money and another $1.2 million in funds he borrowed from the bank. When the City sought proposals to rebid the contracts for the management and operation of the City's golf courses through an RFP process, West submitted a bid to continue operating Winding River and a new proposal to run Smock. Instead, the City's parks department chose another operator to take over Winding River and rejected West's bid for Smock without even the courtesy of a phone call or letter. He had to learn from a third party that he had lost out in the RFP process after nearly 17 years of successfully operating Winding River.

The City's experimentation with privatization of golf courses has been a big success and the Ballard administration is wise to continue this approach to running them. The parks department pays nothing to operate and maintain the golf courses under the privatization agreements. The City saves the cost of paying salaries and benefits to the employees, as well as all capital improvements to the facilities, which the private operators agree to absorb under the terms of the public-private agreements. The private operators returned about $1.25 million to the City on total golf course sales of approximately $9.2 million this year.

According to the IBJ, the City actually expects to receive less money from the private contractors under the new agreements the Ballard administration plans to execute with them than it currently receives. Annual revenues are expected to drop by two-thirds to just $400,000 to $450,000 annually. City parks director Stuart Lowry told the IBJ that the smaller revenues were worth the nearly $6 million in new improvements the parks department expects private operators to make over the next 10 years.

Instead of allowing West to continue operation of the Winding River golf course, the parks department has decided to award the contract to a company owned by Jerry Hayslett, who has had the contract to operate Eagle Creek since the Goldsmith administration. Hayslett is also being awarded a contract to operate several other city golf courses as well. This is very troubling to West. He testified before the City Council's Parks & Recreations Committee last week about his concerns. He noted that Hayslett had defaulted on a contract with the City of West Lafayette to operate golf courses there and simply walked away. According to West, a major vendor for the City's golf courses wrote a letter to Lowry complaining that Hayslett would not pay for the chemicals his company had supplied to him for the city golf facilities he manages.

West sought to inform the City-County Councilors present at last week's meeting about the way the private operators are able to borrow money to operate the golf courses. As West explains, a bank would never loan the money to a private operator to make capital improvements to the golf courses because they would not be able to lien or mortgage the city-owned facilities. To allow a private operator to find private financing, the City agrees to a termination fee in an amount that allows the private operator to repay any borrowed funds for capital improvements. That acts as security in the event the City decides to terminate the private operator's contract early due to dissatisfaction with his services.

In its proposal for Winding River, West agreed to pay off the balance of his $1.2 million loan and make new capital improvements at the facility of at least $860,000 during the first two years of a new agreement. He also agreed to share 5% of the sales revenues with the City. Winding River currently generates about $20,000 a year in revenues to the City after crediting the private operator with its $1.6 million in capital improvements. By all accounts, Winding River has enjoyed success and has been well-managed by West despite the introduction of several new golf courses near the Decatur Township golf course, which is generally less-populated than other areas of the county, and the loss of business the course lost when the City closed a bridge over White River providing access to the course for nearly a year.

By comparison, Hayslett has been fortunate to have a contract to operate Eagle Creek, perhaps the City's best golf course. Despite being one of the City's best golf courses and having 36 holes, Hayslett only pays about $42,000 a year to the City on annual sales of $1.1 million. Some smaller golf courses pay considerably more to the City. Sahm is generating $325,000 in annual revenues to the City on almost $100,000 in fewer annual sales. Pleasant Run returns $189,000 a year on annual sales of just over $750,000. According to West, Eagle Creek has actually declined under Hayslett's tutelage in terms of sales given the course's popularity and size.

Instead of awarding the contract for Smock to West, the City chose R.N. Thompson, which currently operates Coffin, Riverside and the Golf Academy. Coffin and Riverside are among the lowest performing golf courses in the City. The City likes the idea that Bob Thompson, owner of the R.N. Thompson, contributes to St. Mary's Child Center, a free preschool that serves 200 children around the city. The City suggests it needed to expand R.N. Thompson's stake in the city golf courses to continue that benefit for 200 children.

So why did West get shut out? He thinks it has a lot to do with politics. Hayslett is friends of former Mayor Goldsmith. He has also donated generously to the political campaigns of Republicans and Democrats alike over the years. One of the largest recipients of his political contributions has been Mayor Ballard. Hayslett contributed $4,000 to Ballard in 2008 alone. Campaign finance reports for 2009 contributions are not due until next month. West, on the other hand, is a well-respected businessman, who also serves on the Johnson County Council as a Republican. West's business operates a number of golf courses in Indiana.

I applaud West for having the courage to come forward and express his concerns to the Parks & Recreation Committee. Unfortunately, none of them seemed to really give a damn. The Democratic councilors on the committee, all African-Americans, seemed primarily concerned about whether minority contractors were being taken care of. Councilor Monroe Gray assured them they were being taken care of. The Republicans on the council seemed peeved that West had even bothered to waste their time with his testimony. With that, the committee gave its blessing to the new contracts. West warned them that the City could be left holding the bag if any of the private operators failed. By any objective standard, West's company would have had to score higher on his proposal than the one submitted by Hayslett for Winding River. It is troubling that the City would decide to award more facilities to Hayslett in the face of some troubling signs about his financial status. West is right. It smacks as politics at its worst.


Paul K. Ogden said...

It smacks of politics at its worst, the same sort of pay to play politics that brought down an Illinois Governor. This adminstration seems to be run by people just filling their own pockets with as much money as they can before the clock runs out in 1/1/2012.

Hoosier in the Heartland said...

Golf? People still play golf? Who knew!

(Stats show that twice as many people bowl as play golf, yet the city isn't concerned about bowling alleys.)

I know said...

Gee, pay to ply politics in Indiana? Say it ain't so Joe!

The good old boys club in both parties and the friends and family plan maybe be the rule of governance in Indiana?

No sarcasm intended! Indiana politics and government is a JOKE! It is worse that a snatch and grab on the street with purse snatching...At least the crooks on the street let everyone know what they are up to and get prosecuted by the court system.