Eagle Valley struggles with bond payments
With the economic downturn over the last three years, the golf industry was one of many that got hit with declining revenues.
Eagle Valley Golf Course, a Woodbury municipal operation, was not immune to the dismal economy. Revenue projections made in the 1990s have not been met, according to city documents.
Woodbury City Council reviewed a plan at last Wednesday's workshop that would modify Eagle Valley's debt structure starting in 2012.
"All things considered, we're getting as much out of the facility as we can given the market conditions," said golf course Manager Shaun Peltier.
Staff proposed Eagle Valley's debt to be paid off with other city funds. Under that plan, the golf course would no longer be responsible for financing the principal and interest amounts.
A total of $3.1 million is the outstanding principal balance that's due in February of 2026 under the current debt structure. The proposal suggests that $92,000 would come out of the city's closed debt service fund every year from 2012 to 2015. The remaining $2.7 million would come out of the capital improvement fund, which in total would save about $446,000 in interest costs.
Existing bond structure prohibits refinancing or restructuring the debt until February of 2015.
The plan frees up the golf course to become a self-supporting operation, Parks and Recreation Director Bob Klatt said. More money would be put toward equipment replacement, irrigation and overall operations.
"It sets up the golf course to be very successful financially in the long run," he said, adding that it would gradually reinvent the golf course and build up some reserves.
Though the industry has changed, Peltier said Eagle Valley's revenues are solid compared to other municipal courses in the Twin Cities.
However, net operating revenues continued to decline since 2006 -- from about $320,000 to $184,000 in 2010, which is attributed to declining overall golf participation nationwide, according to city documents.
The National Golf Foundation reports the number of golfers dropped 5 percent from 2008 to 2009 and a total of 9 percent in the last five years. Based on many factors, people have less time, money and flexibility to play golf, Peltier wrote in a council memo.
Weather patterns and family obligations limit time people can devote to golf activities are also significant barriers.
"This applies specifically to Woodbury because our demographics weigh towards younger families with multiple time commitments for leisure activities," he added.
The original business plan set in 1996 aimed for more than 40,000 rounds a year to stabilize the course. However, that goal is not realistic in today's market, according to a council letter.
Total rounds played dropped from about 30,900 in 2006 to 27,500 in 2010. Eagle Valley would have to attract approximately 30,000 rounds annually to cover operating expenses and equipment replacement; and about 36,000 rounds annually at current rate projections to cover the current debt service obligations.
The council will further discuss the proposal at its annual budget workshop meeting in August before a final 2012 budget is approved at the end of this year.