Loading...
HomeMy WebLinkAboutCSD-07-032 - Doon Valley Golf Course Expansion Principles ) R Community Services Report To: Date of Meeting: Submitted By: Prepared By: Ward(s) Involved: Date of Report: Report No.: Subject: Community Services Committee April 2, 2007 Keith Baulk, Director, Enterprise Division, 2393 Doon Valley Golf Course Expansion Project Team all March 27, 2007 CSD-07-032 DOON VALLEY GOLF COURSE EXPANSION PRINCIPLES RECOMMENDATION: That staff be directed to complete the business case for a 9 hole expansion and golf skills facility at Doon Valley Golf Course based on the 10 "guiding principles" outlined in Report #07-032 and; That a final report and the business case be presented for Committee's consideration within 60 days. EXECUTIVE SUMMARY: As staff began to undertake the development of the business case for expansion of Doon Valley Golf Course, it became evident that further direction was required from Committee. Specifically, in order to complete the business case, Committee recognition and support for the following guiding principles would be necessary: · The current Golf unit strategic directions will serve as the foundation to develop the business case · The expansion concept includes a full length 9 hole addition, teaching and practice facilities along with a 9 hole pitch and putt · The current golf holes will be retained but the new 18 hole layout will be comprised of some old and some new holes · Support of the general golf course "design concept" as attached in Appendix #1 · The project will be phased and take 5 years to be fully implemented · 18 holes will be available for play at all times during the construction and grow-in · Basic budget assumptions as presented in Appendix #2 will be used to complete the business case · The golf course will operate in a deficit position until at least 2014 · The dividend would increase by 350/0 (consistent with increased revenue projections) commencing in 2015 when operations return to a surplus position Report No: CSD-07-032 2 · Any major reconstruction of the clubhouse not be considered at this time, but be reconsidered in the future Committee support of these "guiding principles" is required to provide the basis for the development of the business case. BACKGROUND: The City of Kitchener has been considering expansion of the Doon Valley Golf Course since the late 1990's. At that time, the concept of expansion was approved in principle and the City began to acquire additional lands adjacent to the golf course to facilitate the expansion. Additional parcels of lands to support the expansion were acquired by the early 2000's. Shortly thereafter, the City began the approval process which included a zone change application and official plan amendment with the City of Cambridge. Cambridge approval was required since some of the golf course lands were south of the 401 which is within Cambridge's municipal boundaries. Cambridge refused the application and the City of Kitchener took the matter to the Ontario Municipal Board. The Ontario Municipal Board ruled in favour of the City of Kitchener, which resulted in the re-zoning of the Cambridge lands to permit golf course expansion. However, during this time there were some changes to the golf industry landscape as a number of other golf courses (albeit higher fee courses) were built or were under construction. At the same time, the City formed an Asset Management Steering Committee which is mandated to review major City of Kitchener property development initiatives. To make sure the best development option was being considered for the Doon Valley property, the Asset Management Committee asked for a more in-depth review. The review was to focus on potential options for developable and undevelopable land parcels at Doon Valley Golf Course. Various development options were considered for the golf lands and developable tablelands. The options included expansion of golf services, continue status quo, private sector management of the golf business and use of the table lands for residential development. After significant public consultation and analysis by a multi-stakeholder project team, it was recommended that the City retain the lands and management of Doon Valley Golf Course and that staff pursue the development of a business case for a city owned and operated 9 hole expansion and golf skills facility. Council ultimately ratified that direction (CSD Report #06-054) and instructed staff to develop a business case for expansion and golf skills facility. Subsequently staff began some initial work on the business case which included development of the new 9 hole course layout and routing. This layout was reviewed by the public (including members and neighbours) at a public meeting this winter. The layout was generally well received. Some comments were made regarding improving the specifics and these are included in the most recent layout. REPORT: The Doon Valley Golf Course expansion concept has experienced a significant level of review and transformation since the project was initiated a few years ago. Following Councils direction to complete a business case for the expansion, staff began the research and analysis phase of the business case. While undertaking this work staff encountered a number of issues, opportunities and/or options in the manner in which the golf course development could proceed. Report No: CSD-07-032 3 Consequently it was felt that Committee should address these issues, opportunities and/or options prior to the presentation of the final business case. Staff developed 1 0 "guiding principles" to respond to the issues, opportunities and options. There is no doubt some of these principles have been inherent in developing prior components of the project (such as assumptions used for the development of the Net Present Value analysis) but some are new and full ratification would provide clarity to staff in order to complete the final business case. A summary of the 1 0 principles as proposed by staff are as follows: Principle #1 - The current Golf Unit Strategic Directions supporting broad access, youth, beginners, the environment and reasonable fees (limited to inflationary increases) will be the basis for designing project components and will serve as the foundation for the development of the business case. Principle #2 - The expansion would include an addition of 9 full length holes of very playable "public style" golf, a teaching facility/driving range, a 9 hole pitch and putt course geared to the very young and beginners as well as improved parking and support amenities. Principle #3 - The current 18 holes will be retained almost in its entirety but the routing would change so the new 18 hole course would be comprised of some of the current holes and new holes. Principle #4 - That the concept design attached as Appendix #1 be the "official" general design and layout and as a result be used to develop business case budget projections. (The golf course architect will be in attendance to provide an overview of the concept). N.B This provides Council with an opportunity to comment on the proposed layout and ensures the business case proceeds based on a design that has a level of official support. Principle #5 - That the expansion construction and grow-in be phased over a five year period as follows: Summer - Fall 2007: finalize approvals Winter - Spring 2008: complete initial tendering Spring - Fall 2008: construct 9 holes on "Cambridge" lands and 2 holes on "Kunsch" lands Spring - Fall 2009: grow-in 11 new holes Fall 2009: construct refurbished/expanded parking lot base Spring 201 0: open 27 hole golf course Spring - Fall 201 0: construct range, pitch and putt course and asphalt parking lot. Spring - Fall 2011 : grow-in new range and pitch and putt course Spring 2012: open new range and pitch and putt course. Principle #6 - That 18 holes of golf will be open for play at all times through the entire construction and grow-in of the expanded facility. Principle #7 - That the budget assumptions outlined in Appendix #2 be used to develop the financial analysis. Report No: CSD-07-032 4 Principle #8 - That the long term cash flow analysis is extremely positive but the golf unit would operate in a deficit position until at least 2014. N.B One alternative to operating in a deficit position is to defer the expansion project altogether until the golf unit achieves a significant surplus. However, there are risks of not proceeding with the expansion at this time including: · Risk current and future approvals from authority agencies · The public have demonstrated support for completing the project at this time Principle #9: - That any major re-construction of the golf course clubhouse not be considered at this time but be re-considered in the future, pending the proven financial success of the golf course expansion projections and cash flows. N.B Initial cash flow analysis demonstrates that any major clubhouse improvements cannot be financed immediately without incurring a larger deficit and/or extending the deficit for a significant period of time. However as stated previously the longer term financial projections are very positive, hence consideration of significant clubhouse renovation could be considered in a few years if the financial projections are realized. Principle #1 0: - That the Doon Golf Course dividend would be increased by 350/0 consistent with revenue projection increases, commencing in 2015 when the operation returns to a surplus position. N.B The payment of an increased dividend is consistent with goals of Asset Management regarding ROlon enterprise operations. Once staff receives confirmation regarding these 1 0 guiding principles, a final report and business case will be presented within 60 days for final ratification. FINANCIAL IMPLICATIONS: There are no financial implications as a result of this report. The business case will provide a detailed financial analysis based on the principles supported in this report. CONCLUSION: Staff is seeking direction on the 1 0 guiding principles that will be used to develop a business case for a golf expansion of Doon Valley Golf Course. The final business case will be delivered in 60 days. Final direction from Council to proceed on this project will be requested at that time. Keith Baulk Director of Enterprise March 28,2007 Appendix 2 - Doon Expansion Business Case Assumptions CAPIT AL COSTS 9 Hole Expansion · The 9 hole expansion is projected to be constructed from 2007-2009 with all 27 holes open for play in 2010. · The costs related to the 9 hole expansion is approximately $3,101,097. · The costs will be fully debentured over 25 years at a 5.5% interest rate. · Annual debt payments are projected to be approximately $231,185 commencing in 2010. Pitch & Putt- Golf Skills · The golf skills phase of the expansion is projected to be constructed from 2010- 2011 and will be ready for play in 2012. · The costs related to the 9 hole expansion is approximately $402,449. · The costs will be fully debentured over 10 years at a 5.5% interest rate. · Annual debt payments are projected to be approximately $53,392 commencing in 2011. OPERA TIONS Operating Assumptions · The revenues for the golf course after expansion are projected to increase by 35% but will be phased over 3 years as follows: i. 30% of existing demand in 2010. ii. Additional 2.5% in 2012 iii. Additional 2.5% in 2013 · User fees are projected to increase at a rate of 3% · Expenses are projected to increase at a rate or 3% · Adjustment has been made for inclement weather every 5 years that will have a negative affect on the golf operations. Revenues during this time are expected to decline 5% with a related decrease in expenses of 2%. March 28,2007 OTHER · The projected surplus (deficit) for the golf course for the years 2008-2015 is projected at follows: Surplus (Deficit) Gross Revenue Surplus (Deficit) as ok of Gross Revenue 2008 $ 2009 $ 2010 $ 2011 $ 2012 $ 2013 $ 2014 $ 2015 $ (244,428) (374,681 ) (316,707) (309,696) (327,495) (202,338) (65,315) 13,746 1 ,671 ,405 1 ,718,984 2,268,631 2,353,667 2,536,966 2,613,900 2,691 ,892 2,779,398 -14.60/0 -21 .80/0 -14.00/0 -13.20/0 -12.90/0 - 7. 70/0 -2.40/0 0.50/0 · The dividend to the City is expected to remain at an inflationary increase of 3% per year until the golf course is at an accumulated surplus position (projected 2015, when the base dividend will increase by 35% to $298,387 (2007- $174,481)).