A Needed Slice: Operating in the Red Is Par for the Course

July 18, 2006 8:44PM

By Drew Johson & Douglas Kurdziel The Tennessee Center for Policy Research proposes a solution to the wasteful problem of state-owned golf courses in a commentary article in the July issue of BusinessTN magazine. With the sunny days of summer upon us, golfers are flocking to courses across the state. Many golfers may be surprised to learn that some of the least-crowded fairways belong to the largest golf course owner in Tennessee—the state government itself. Insulated from natural business concerns such as convenience and profitability, the state has constructed courses in desolate areas at a considerable cost to all Tennesseans. These state-owned greens are in the red to the tune of nearly half a million dollars this year alone. Even Tennesseans who have never set foot inside a tee box have paid hard-earned money to keep state-owned courses afloat. Until this year, the State of Tennessee owned eight golf courses. The Department of Environment and Conservation—the agency responsible for state-owned courses— has taken to calling these courses “The Traditionals,” despite the fact that they maintain no particular tradition to speak of, except perhaps for traditionally operating in a deficit. Only two of the eight Traditionals actually generate more money than they consume. The remaining half dozen are supported by a welfare system for golf courses in which state taxpayers actually subsidize state golf course fees, reducing the true cost of a round of golf.The Tennessee golf course welfare program was expanded significantly in December when the state took control of four Bear Trace golf courses. The Jack Nicklaus-designed Bear Trace courses were built in the mid- 1990s at a cost of $20 million to the state. A private firm—Redstone—managed the courses, but because of their remote locations—in far-off places like Henderson, Winchester and Harrison along the state’s southern border—there was little demand for the lavish resorts. The private management company, which successfully runs a PGA tour course in Houston and several other distinguished courses, tired of hemorrhaging money— $6.85 million over the past three years—on the out-of-the-way courses and returned them to the state. Without the management expertise of Redstone and carrying a decades-long track record of failure in the golf business, the state government figures to lose even more than the private company. The difference is that, under state management, the loses incurred by the courses are paid by taxpayers. The Bear Trace courses are not an isolated case of—well—isolation. The course at Fall Creek Falls state park, for example, is located in Bledsoe County—population 12,785—and sits an hour from the nearest interstate. The Fall Creek Falls course has the fewest visitors of any stateowned course. The course also saddled taxpayers with an operating loss of $116,799 last fiscal year alone. Unfortunately, several of the state’s golf courses are in areas so remote and unpopulated that not all the senior discounts, free golf lessons and cute beverage cart girls in the world would be enough to draw the necessary crowd of golfers to make the courses self-sustaining. State-owned courses in the tiny towns of Buchanan, Pickwick Dam, Chapel Hill and Burns each require taxpayer subsidies to stay in business. In response to concern regarding the raising costs of subsidizing stateowned courses, Tennessee Environment and Conservation Commissioner Jim Fyke was recently quoted as saying, “Let’s say three of [the courses] are successful and one is not. I think as public recreation opportunities, the state deserves to get to play on all four of them if they can be collectively sufficient.” Unfortunately, with only two of its eight courses in the black, the reality of state-owned golf courses is the reverse of Fyke’s hypothetical. And what sensible businessperson would operate one successful business just to squander all the business’s profits on keeping the lights on at three perennially insolvent ones? Of course, bureaucrats, not sensible businesspeople, run state-owned golf courses. If the golf courses fail, state administrators do not have to worry about real-world ramifications like falling stock prices or meeting payroll. Rather than closing a failing business, bureaucrats can simply use taxpayer dollars to cover the costs of bad management and poor decisionmaking. There is a silver lining to Tennessee’s golf-related pork. A few of the courses, namely Kingsport’s Warriors Path and Old Stone Fort in Manchester, can and do generate an operating surplus.This offers promising revenue-generating possibilities for the state government. During the 1990s, New York City outsourced management responsibilities for seven of thirteen golf courses, and privatized the remaining six courses. By doing so, the city government was able to change a $2 million annual loss to a $2 million annual profit. Before determining to outsource management responsibilities, the seven courses cost the city$1 million annually. They now generate more than $1.7 million a year in revenue. Similar results are possible in Tennessee. Following New York’s model, rescuing taxpayers from the state government’s unjustified foray into the golf business should be a simple process. First, the Tennessee Department of Environment and Conservation should transfer the management of the few successful state-owned courses to private companies—a process that almost always results in greater revenues and a better golf experience for customers so long as the course is in a populated area.The state should then sell the remaining courses to the highest bidder. Finally, any courses that go unsold should be shuttered and returned to their previous splendor as woodlands within state parks. By following simple steps to get the state out of the golf business, Tennessee can end the ridiculous practice of golf course welfare once and for all.