Mayor Joe Winfield, Vice Mayor Melanie Barrett and councilmembers Josh Nicolson and Joyce Jones-Ivey successfully campaigned for their seats on the Oro Valley Town Council with a promise to listen to community members and address the controversial purchase of the El Conquistador golf course and community center, which has been operating at a loss for the past five years.
Now the power is in their hands to make some significant changes, but the council’s study session Jan. 28 showed that the proposed solution of simply reducing or eliminating golf holes is more complicated than anticipated.
In December 2014, a previous town council voted 4-3 to purchase the former El Conquistador Golf and Tennis Club from HSL Properties for $1 million in cash paid over three years, and to establish a half-cent sales tax to subsidize operations. HSL had taken over the property from previous owner MetLife earlier that month.
The purchase included 45 holes of golf, 31 tennis courts, six racquetball courts, two pools and the country club building with a restaurant and fitness center. The property was appraised that year with a $3.25 million value, and the replacement value for all the amenities was listed at $42 million. Building a brand new community center would have cost around $20 million.
Previous councilmembers reasoned that by taking over the courses, which are surrounded by Oro Valley homes, the town would eliminate the uncertainty of a high-bidding private buyer entering and redeveloping the land for other uses.
Former Oro Valley Town Manager Greg Caton predicted $2 million in revenues from the half-cent sales tax, which would cover capital improvements and an expected revenue shortfall of about $1.2 million during the first two years of operations.
But in 2015, the council transferred $1.2 million from the town’s general fund to promptly cover that deficit, since tax revenue took longer to trickle in. At the study session, town staff said the general fund has only been paid back $220,000, with $960,000 still outstanding.
Caton predicted the deficit would decrease to $200,000 by 2018 and the town could break even by 2019. At the study session, current town manager Mary Jacobs called this an unrealistic projection.
“Those projections, based on the golf course itself becoming solvent in five years, was also based on a pretty significant capital investment,” Jacobs said. “They were based on the assumptions that were made about the current level of [membership] fees that were in place at that moment, which ended up being dropped right after.”
Jacobs recommended the council retain the two 18 hole courses near the community center, replace the aging irrigation system, transition operations of the nine holes at Pusch Ridge to HSL and make capital improvements at the community center. Those changes were intended to begin in the current fiscal year, with $6 million in bond capacity originally budgeted for improvements on these facilities. After the outcome of the 2018 election, Jacobs decided to remove her recommendation for bonding so that the four new members of council could implement their own strategies.
The purchase agreement came with deed restrictions on the golf courses. Among those restrictions: the nine holes at Pusch Ridge and 18 holes at La Cañada cannot be redeveloped for anything besides golf, open space or recreational purposes. The El Conquistador course is not bound to that, but HSL representatives would need to authorize in writing any other permitted uses.
The town is required to operate at least 18 holes out of the 45. Before the previous council was voted out, there were talks of considering a transfer of the nine holes at Pusch Ridge to HSL, which would operate it in partnership with the Homeowners Association. Jacobs said that option is still a possibility and those discussions could start back up soon.
To break even, Troon Privé Division President Rob DeMore said the town needs to find a balance between shrinking the course’s tax dependency while also increasing its revenues. Capital investments will be necessary going forward because once quality declines, memberships and related revenues do too.
Winfield noted that the sales tax was not part of the initial projected revenues. The tax revenues were supposed to go to only capital improvements.
“Projections were what they were, what we have now is four years of hard data,” he said. “And what that data tells us is that we’ve directed that sales tax that was intended for capital investment to essentially prop up the losses that weren’t anticipated in the operation and maintenance.”
Winfield said he was not convinced that capital improvements would help the town break even.
Michael Shoeppach, a long-time resident and president of the Men’s Golf Association in Oro Valley, has been a member at the golf course since 2001. He has seen a tremendous improvement in the facilities over the last three years.
“There are no complaints from members about playability anymore, and that did not used to be the case,” Shoeppach said. “When I first came here, frankly those golf courses were in very poor shape… We’ve got more tournaments now that come in and want to play and book those courses than we’ve ever had before,” he said.
If the town council decides to re-purpose the golf courses in any way, whether that be closing one and turning it into open space land or a municipal park, it will still cost money to maintain and there would be a significantly reduced revenue stream.
In addition, the 555 homeowners who live along the perimeter of the La Cañada and El Conquistador golf courses could see depreciation in their property values after they paid a lot premium specifically to live on the golf course.
David Hriczak is one of those homeowners. He lives on the El Conquistador course. According to him, the golf course is looking better than ever, thanks to the management company, Troon. Hriczak hopes the town council will work together to fix golf operations and not just get rid of it, because that course of action will negatively impact homeowners.
“If this golf course was to be done away with, any of the 45 holes, you are going to have a tremendous impact on property values and that’s the number one concern,” he said. “I’ve lived here since 1994. I’m the original owner of my house. We came here into this beautiful community in particular because of how it was woven in with the golf and the amenities and all these things that make a good town.”
Hriczak’s house, which he paid a premium for, would be up for sale if the golf course was changed into a park or natural desert. He said he and his neighbors paid an additional $10,000 to $40,000 to live on the golf course.
At the study session, councilmembers questioned the exclusivity of funding for the town’s golf course and community center with its own designated sales tax.
“We have other golf courses in this community that affect other property owners and other homeowners that are going under, over losing only $400,000 or $500,000 a year, but they don’t have the town’s ability to charge a sales tax to prop them up,” said Vice Mayor Barrett. “And I see a fundamental unfairness there.”
DeMore said the controversy over the initial purchase has overshadowed marketing efforts to increase revenues at the golf course. It’s been one of the most publicly discussed projects that Troon has seen in its 30 year history. He believes the instability of the golf course’s future is what prevents more people from buying memberships.
“People invest in memberships to be part of a community on a long-term basis,” he said. “They view stability as sort of a key ingredient.”
Town staff is expected to conduct more research and come back with recommendations for the council in September. Several councilmembers, including Mayor Winfield, said they would like to complete to work more quickly.