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HomeMy WebLinkAboutCSD-07-046 - Doon Valley Golf Course Expansion Approval ) R Community Services Report To: Date of Meeting: Submitted By: Prepared By: Ward(s) Involved: Date of Report: Report No.: Subject: Community Services Committee May 28, 2007 Keith Baulk, Director, Enterprise Division, 2393 Doon Golf Course Expansion Project Team all May 23, 2007 CSD-07-046 DOON VALLEY GOLF COURSE EXPANSION APPROVAL RECOMMENDATION: That the Doon Valley Golf Course Expansion Business Case as appended to CSC Report #07-046 be accepted, and; That staff be directed to proceed to construct a 9 hole golf course addition, practice facility, 9 hole pitch & putt course and necessary support amenities as outlined in CSC Report #07-046 subject to receiving final external planning and agency approvals, and; That a total amount of $3,503,546 be allotted to fund the project components, and; That Finance Staff be authorized to secure a 25 year debenture in 2009 in the amount of $3,101,097 to fund the 9 hole addition component of the project, repayable solely from golf enterprise revenues, and; That, Finance staff also be authorized to secure a 10 year debenture in 2010 in the amount of $402,449 to fund the golf skills component of the project, repayable solely from golf enterprise revenues, and; That the Mayor and Clerk be authorized to execute an Architect/Construction Management contract with Shawn P. Watters & Associates to an upset limit of $375,874 plus GST, said contract to be subject to the satisfaction of the City Solicitor, and further; That a business case for a major upgrade or replacement of the clubhouse be brought forward when Golf Unit cash flows are sufficient to provide for the capital cost of such project. EXECUTIVE SUMMARY: Staff are seeking direction to proceed with an expansion of Doon Valley Golf Course. It would include a 9 hole golf course addition, practice facility, a 9 hole pitch & putt course along with the necessary amenities to support the expansion. The project budget for this phase is $3,503,546. This project is beneficial for many reasons including: CSD-07-046 - 2 - · There is still a demand for modestly priced golf in the Region. · New market segments including beginners and very young juniors will be able to participate in the sport in a non-threatening environment. · Golf provides a healthy social and recreational experience that can be enjoyed for a lifetime. · The project is self funding, meaning no tax subsidy is required; in fact, the city's taxpayers benefit from an increased dividend in a few years. · A conservation easement will provide permanent commitment to environmental protection of the lands. In addition, staff will pursue Audubon International Sanctuary certification for the facility. · A significant amount of public support has been garnered through various phases of the project development. Staff are not supportive of advancing significant clubhouse improvements at this time but would be, once the course achieves a healthy accumulated surplus. BACKGROUND: The City of Kitchener has been considering expansion of the Doon Valley Golf Course since the late 1990s. 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 2000s. 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 un-developable land parcels at Doon Valley Golf Course. Various development options were considered for the golf lands and developable table lands. 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 past winter. The layout was generally well received. Some comments were made regarding improving the concept and these are included in the most recent layout. CSD-07-046 - 3 - As the business case evolved, the staff team felt it was appropriate to prepare a report for Council requesting direction on 10 "Guiding Principles". These principles would be the foundation on which the final business case would be prepared. Council ratified 9 of the principles (CSD Report #07-032) and directed staff to complete the final business case. The guiding principles ratified are as follows: · 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" attached as 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 · That the budget assumptions provided be the basis upon which the business case would be developed · 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 Staff also recommended another Guiding Principle that "any major reconstruction of the clubhouse not be considered at this time but be reconsidered in the future". Rather than approving this principle, Council directed staff to investigate the potential of completing significant clubhouse upgrades at this time. REPORT: In May of 2006, Council directed staff to complete a business case for a 9 hole expansion and golf skills facility for Doon Valley Golf Course (CSD Report #06-054). The business case is appended to this report. The business case provides the supporting documentation for final approval of the project. Highlights of the business case are as follows: Proiect Rationale and Obiectives The expansion project was conceived in the late 1990s to address a growing and changing demand for golf services. While a number of courses have been built since the late 1990s, these new courses are targeted at the higher end of golf fee spectrum and have done little to address the continued demand for modestly priced golf. This project not only services entry level demand, it also addresses the key strategic reasons the City of Kitchener is in the golf business. The project will allow the city to meet its strategic directions for golf in the following manner: · Continue to provide affordable golf activities for the majority of its citizens. · Enhances the ability to teach the game to juniors and beginners so they can become life long participants. · Fulfills the growth opportunities identified in the 2004 KPMG Golf Demand Study within the defined local area. · Allows for the introduction of additional new participants in the sport at all ages CSD-07-046 - 4 - · Allows for involvement in golf of an entire new market segment - those 5-1 0 years of age. · Provides environmental stewardship and long term commitment to green space protection at no cost to the taxpayer. · Improve the financial benefits to the taxpayers over time through an increased dividend. Concept Description and Desion The project will include the following components: · 9 additional holes - public course style · Teaching facility/practice range · 9 hole pitch and putt course · Expanded and improved parking Council directed staff to complete the business case based on these components in May 2006 (CSD-06-054). Timelines One of guiding principles approved by Council (CSD-07-032) was that 18 holes would be available for play at all times during construction. The cash flow analysis has been developed based on having 18 holes of play at all times to maintain current levels of revenue until construction of the 9 hole addition is completed. In order to keep 18 holes of golf in play at all times, the window for completion of the entire project is scheduled 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. Environment Doon Valley Golf Course and its expansion lands include significant natural and cultural assets. A number of protocols and policies for developing a golf course on the new lands were established by the Ontario Municipal Board in its April 2003 decision. This includes development of a conservation easement over the entire land holdings in Cambridge which will ensure protection of these assets during construction and over the long term once the golf course is completed. In addition, further agency approvals are required that will also ensure a further level of protection of the environmental features. These agencies include the GRCA, Ministry of Natural Resources, Ministry of the Environment and Ministry of Culture. Finally, staff are planning on seeking Audubon International Sanctuary Certification through the Audubon Classic Sanctuary program. This is a voluntary, award winning education and CSD-07-046 - 5 - certification program that helps golf courses protect the environment and preserve the natural heritage of the game of golf. This program is similar in a sense to the LEED designation for buildings in that it is based on meeting criteria in various environmental categories. Rockway Golf course is more than half way to achieving full certification as an existing course. The certification for Doon Valley Golf Course will begin with the start of the development of the new featu res. Architect/Construction Manaoement The report recommends engaging the Golf Course Architectural firm of Shawn P. Watters and Associates as the project architect. The Architect has the intellectual property rights of the concept drawings that have been utilized throughout the public consultation phases. In addition, he was commissioned to provide all the architectural services prior to the OMB approval a few years ago. Watters' firm will complete the detailed working drawings for the project, finalize all agency approvals and act as the Construction Manager to ensure the project comes in on budget. They will be involved at some level with this project through the next 5 years until the final grown in is virtually complete and the City has signed off the project. A more detailed summary of the work to be undertaken is as follows: · Preliminary design of golf course, practice facility, pitch & putt and parking lot · Detailed design of golf course, practice facility, pitch & putt and parking lot · Develop construction drawings · Develop tender packages · Construction management and inspections · Project administration and meetings · Garner all agency approvals Walter Bean Grand River Trail Another project team is overseeing the construction of the Walter Bean Grand River Trail starting from the river crossing and linking with completed trail sections north of the 401 in Cambridge. An email update on the river crossing and trail alignment options has recently been provided by the trail development project manager. While the trail project is considered a separate project a significant amount of consultation has occurred and will continue to occur with golf development project team. CSC Request for Options to Finance a Major Clubhouse Renovation At the CSC meeting of April 2nd staff recommended that CSC not consider a major renovation of the clubhouse expansion now but instead wait until the golf course achieved a healthy surplus. Committee did not support that principle and staff were asked to consider the impacts of including the cost for a major renovation to the Clubhouse as part of the current business case. Specifically, staff were asked to provide options for council to consider for financing the renovation now instead of waiting until a surplus is achieved. A complete overview of the clubhouse funding options, outcomes and risks for advancing the clubhouse portion of the project are included in the financial section of this report. CSD-07-046 - 6 - Following the analysis staff continue to recommend that this project not include a major clubhouse renovation at this time. Instead, staff are proposing that a major upgrade be considered when the Doon Valley Golf Enterprise returns to a healthy surplus. FINANCIAL IMPLICATIONS: At the April 2, 2007 Community Services Committee meeting, Council provided the following direction with respect to the financial aspects of the golf course: a) The expansion project will be phased and take 5 years to be fully implemented b) The golf course will be in a deficit position no longer than 2014 c) Dividend to the City will increase by 350/0 commencing in 2015 d) 18 holes will be available for play at all times during the construction and grow-in e) Staff to look at the feasibility of a major reconstruction of the existing clubhouse. Using these guidelines, the expansion of the golf course by 9 holes with a golf skills component is feasible at a projected cost of $3,503,546. Staff are in support of debt financing to fund the expansion as this is consistent with the City's capital investment policy given that the revenues generated through the expansion will be sufficient to cover the capital and interest costs of the project. Addition of the 9 holes will cost approximately $3,1 01 ,097 and will be debentured over a 25 year period with projected construction taking place in 2008 and 2009. All 27 holes will be open for play in 201 O. The golf skills phase of the expansion is projected to be constructed from 201 0- 2011 and will be ready for play in 2012. Total costs of $402,449 for the golf skills development will be debentured over 1 0 years. The table below shows that with no expansion and remaining at status quo, the golf course would be in an accumulated surplus position in the year 2014. Expanding the golf course, would leave the course in an accumulated surplus position in 2015 which is only one year later than if there were no expansion. Accm Surplus Accumulated Gross Accm Surplus (Deficit) as Net YEAR (Deficit) Surplus (Deficit) Revenue 0/0 of Gross Revenue Revenue (Expense) 2008 $ (244,428) $ (320,428) $ 1,671,405 -19.20/0 $ (27,857) 2009 $ (359,059) $ (507,681) $ 1,718,984 -29.50/0 $ (2,146) 2010 $ (302,649) $ (453,507) $ 2,264,831 -20.00/0 $ 244,834 2011 $ (227,990) $ (436,910) $ 2,364,1 07 -18.50/0 $ 212,977 2012 $ (207,990) $ (429,423) $ 2,565,821 -16.70/0 $ 209,758 2013 $ (94,711) $ (275,699) $ 2,644,306 -10.40/0 $ 362,064 2014 $ 40,501 $ (107,796) $ 2,724,665 -4.00/0 $ 382,492 2015 $ 198,998 $ 4,652 $ 2,814,735 0.20/0 $ 410,835 The dividend to the City is expected to remain at an inflationary increase of 30/0 per year until the golf course is at an accumulated surplus position (projected 2015, when the base dividend will increase by 350/0 to $298,387 (2007 - $174,481 )). The cash flow projection of the golf course (excluding the clubhouse) and the related assumptions over the next 25 years is provided in the business case. Clubhouse As directed by Council, staff did look at including the clubhouse as part of the expansion. Staff have not had an opportunity at this time to undertake a detailed audit of the clubhouse renovations required. The cost used for this analysis is $1 ,953,000 and is only a very CSD-07-046 - 7 - preliminary Class C estimate based on some high level analysis of major refurbishments to the clubhouse. Staff investigated three different scenarios for funding a major clubhouse upgrade at this time. These scenarios are as follows: Scenario #1 - Funding the clubhouse renovation solely utilizing golf revenues and providing a 350/0 increase in the dividend in 2015 per the pre-approved "guiding principle". Scenario #2 - Funding the clubhouse renovation solely utilizing golf revenues but foregoing the increase in the dividend in 2015. Scenario #3 - Funding the clubhouse renovation using tax subsidies. A summary of the findings for each of the scenarios is as follows: The renovation of the clubhouse renovation based on Scenario #1 will result in the golf course being in an accumulated deficit position until 2028. Staff do not support projecting for an accumulated deficit for a significant amount of time, as it is inconsistent with the municipal act. Scenario #2 would result in the golf course being in a deficit position until 2025. Again this is inconsistent with the municipal act. It is also inconsistent with the direction of the pre-approved guiding principle which requires payment of the additional dividend starting in 2015. Furthermore this scenario does not align with commitments made to the public during consultation phase that an increased dividend would be a project benefit. Scenario #3 is based on funding a clubhouse renovation using tax subsidies. Staff do not support funding the clubhouse from City tax revenues for three reasons: a) this would be inconsistent with the approved agreement the City has with area golf course owners, whereby the City would not utilize tax subsidies to fund any portion of golf course improvements or operations b) it was clearly stated at the public meetings that no portion of the golf course upgrades would be funded from tax subsidies c) the capital funding pool is also fully committed and there is no funding currently available to accommodate this project. In addition, other Capital projects identified and prioritized for the community may have to be deferred or eliminated to meet the City's Capital Funding Policy if this project were to be accommodated. Renovation of the clubhouse is not feasible at this time for the reasons stated above. Staff are supportive of looking at the renovation when the golf course returns to a healthy surplus position in the future. In the interim, $75,000 per year has been included in general provisional capital funds to accommodate any immediate and near term necessary improvements to the clubhouse. COMMUNICATIONS: A significant amount of public and stakeholder consultation has taken place throughout various phases of this project's evolvement. Public consultation occurred as follows: 1. Zone change application process 2. Throughout the OMB appeal 3. Asset Management review of options 4. Concept design input CSD-07-046 - 8 - A total of 12 public meetings and consultations were held throughout these 4 phases. CONCLUSION: Approving the recommendations in this report provides direction to staff to seek final agency approvals in order to construct a 9 hole addition, 9 hole pitch and putt course and a driving range at Doon Valley Golf Course. The project fits extremely well with the City's strategic directions for golf and will provide a modestly priced opportunity for people in this region to develop the skills to enjoy the sport of golf for a lifetime. Keith Baulk Director Enterprise Division, Community Services AP PROFORMA INCOME STATEMENT Proposed Expansion to 27 Holes & Golf Skills Development 2008 2009 2010 2011 2012 2013 COURSE OPERATIONS Revenue $ 1,181,607 $ 1,217,055 $ 1,676,754 $ 1,760,269 $ 1,847,286 $ 1,902,70 Cyclical Costs $ 77,251 Expenses $ 558,127 $ 574,870 $ 709,937 $ 733,650 $ 755,660 $ 778,33 Gross Profit $ 623,480 $ 642,184 $ 966,817 $ 1,026,619 $ 1,014,375 $ 1,124,37 CANTEEN OPERATIONS Revenue $ 492,056 $ 506,817 $ 604,099 $ 629,222 $ 648,098 $ 667,54 Cyclical Costs $ 22,792 Expenses $ 370,104 $ 381,207 $ 453,074 $ 466,666 $ 480,666 $ 495,08 Gross Profit $ 121,952 $ 125,610 $ 151,025 $ 162,555 $ 144,640 $ 172,45 GOLF SKILLS Revenue $ $ $ $ $ 93,112 $ 95,90 Cyclical Costs $ 3,788 Expenses $ $ $ $ $ 43,396 $ 15,67 Gross Profit $ $ $ $ $ 45,928 $ 80,22 Total !!ross nrofit $ 745,432 $ 767,795 $ 1,117,842 $ 1,189,174 $ 1,204,944 $ 1,377,05 INTEREST REVENUE (EXPENSE) $ (2,257) $ (4,889) $ (16,021 ) $ (25,384) $ (22,675) $ (21,84 Other exnenses Administration $ 434,031 $ 447,052 $ 541,964 $ 578,223 $ 595,570 $ 613,43 Transfer to Capital Fund $ 104,000 $ 104,000 $ 83,838 $ 88,01 3 $ 92,364 $ 95,13 Interest cost on Capital $ 76,000 $ 57,000 Debt payments $ 157,000 157,000 $ 231, 1 85 $ 284,577 $ 284,577 $ 284,57 Total Other Exnenses $ 771,031 $ 765,052 $ 856,986 $ 950,813 $ 972,511 $ 993,14 Total Revenues $ 1,671,405 $ 1,718,984 $ 2,264,831 $ 2,364,107 $ 2,565,821 $ 2,644,3~ Total Expenses $ 1,699,262 $ 1,721,130 $ 2,019,997 $ 2,151,130 $ 2,356,063 $ 2,282,24 Excess Revenue over Exnense $ (27,857) $ (2,146) $ 244,834 $ 212,977 $ 209,758 $ 362,06 ACCUMULATED NET REVENUE Balance at the beginning of the year $ (112,856) $ (320,428) $ (507,681 ) $ (453,507) $ (436,910) $ (429,42 Transfer to city revenue fund $ 179,715 $ 185,107 $ 190,660 $ 196,380 $ 202,271 $ 208,33 $ (292,572) $ (505,535) $ (698,342) $ (649,887) $ (639, 1 81 ) $ (637,76 Add excess of revenue over expense $ (27,857) $ (2,146) $ 244,834 $ 212,977 $ 209,758 $ 362,06 Balance at the end of Period $ (320,428) $ (507,681) $ (453,507) $ (436,910) $ (429,423) $ (275,69 PROFORMA INCOME STATEMENT Proposed Expansion to 27 Holes & Golf Skills Development 2015 2016 2017 2018 2019 2020 COURSE OPERATIONS Revenue $ 2,018,580 $ 2,079,137 $ 2,141,511 $ 2,205,757 $ 2,271,929 $ 2,340,087 $ Cyclical Costs $ 89,555 Expenses $ 825,730 $ 850,502 $ 876,017 $ 902,298 $ 929,366 $ 957,247 $ Gross Profit $ 1,192,850 $ 1,228,635 $ 1,175,939 $ 1,303,459 $ 1,342,563 $ 1,382,840 $ CANTEEN OPERATIONS Revenue $ 708,195 $ 729,440 $ 751,324 $ 773,863 $ 797,079 $ 820,992 $ Cyclical Costs $ 26,422 Expenses $ 525,237 $ 540,994 $ 557,224 $ 573,941 $ 591, 1 59 $ 608,894 $ Gross Profit $ 182,958 $ 188,446 $ 167,678 $ 199,923 $ 205,920 $ 212,098 $ GOLF SKILLS Revenue $ 101,746 $ 104,798 $ 107,942 $ 111,181 $ 114,516 $ 117,951 $ Cyclical Costs $ 5,044 Expenses $ 16,633 $ 17,132 $ 1 7,646 $ 18,175 $ 18,720 $ 19,282 $ Gross Profit $ 85,113 $ 87,667 $ 85,253 $ 93,006 $ 95,796 $ 98,670 $ Total !!ross nrofit $ 1,460,921 $ 1,504,748 $ 1,428,869 $ 1,596,387 $ 1,644,279 $ 1,693,607 $ INTEREST REVENUE (EXPENSE) $ (13,785) $ (5,390) $ 233 $ 6,891 $ 8,414 $ 16,975 $ Other exnenses Administration $ 650,795 $ 670,319 $ 690,428 $ 711,141 $ 732,475 $ 754,450 $ Transfer to Capital Fund $ 100,929 $ 103,957 $ 107,076 $ 110,288 $ 113,596 $ 117,004 $ Interest cost on Capital Debt payments $ 284,577 $ 284,577 $ 284,577 $ 284,577 $ 284,577 $ 284,577 $ Total Other Exnenses $ 1,036,301 $ 1,058,852 $ 1,082,081 $ 1,106,006 $ 1,130,649 $ 1,156,031 $ Total Revenues $ 2,814,735 $ 2,907,986 $ 3,001,010 $ 3,097,691 $ 3,191,939 $ 3,296,005 $ Total Expenses $ 2,403,900 $ 2,467,480 $ 2,653,988 $ 2,600,419 $ 2,669,894 $ 2,741,454 $ Excess Revenue over Exnense $ 410,835 $ 440,506 $ 347,021 $ 497,272 $ 522,044 $ 554,551 $ ACCUMULATED NET REVENUE Balance at the beginning of the year $ (107,796) $ 4,652 $ 137,819 $ 168,282 $ 339,499 $ 525,706 $ Transfer to city revenue fund $ 298,387 $ 307,338 $ 316,559 $ 326,055 $ 335,837 $ 345,912 $ $ (406,183) $ (302,687) $ (178,740) $ (157,774) $ 3,662 $ 179,794 $ Add excess of revenue over expense $ 410,835 $ 440,506 $ 347,021 $ 497,272 $ 522,044 $ 554,551 $ Balance at the end of Period $ 4,652 $ 137,819 $ 168,282 $ 339,499 $ 525,706 $ 734,345 $ PROFORMA INCOME STATEMENT Proposed Expansion to 27 Holes & Golf Skills Development 2022 2023 2024 2025 2026 2027 COURSE OPERATIONS Revenue $ 2,482,598 $ 2,557,076 $ 2,633,789 $ 2,712,802 $ 2,794,186 $ 2,878,012 $ Cyclical Costs $ 103,819 $ 120,355 Expenses $ 1,015,544 $ 1,046,010 $ 1,077,390 $ 1,109,712 $ 1,143,004 $ 1,177,294 $ Gross Profit $ 1,363,236 $ 1,511,066 $ 1,556,398 $ 1,603,090 $ 1,651, 1 83 $ 1,580,364 $ CANTEEN OPERATIONS Revenue $ 870,990 $ 897,120 $ 924,033 $ 951,754 $ 980,307 $ 1,009,716 $ Cyclical Costs $ 30,630 $ 35,509 Expenses $ 645,975 $ 665,355 $ 685,315 $ 705,875 $ 727,051 $ 748,862 $ Gross Profit $ 194,385 $ 231,765 $ 238,718 $ 245,880 $ 253,256 $ 225,345 $ GOLF SKILLS Revenue $ 125,135 $ 128,889 $ 132,755 $ 136,738 $ 140,840 $ 145,065 $ Cyclical Costs $ 5,848 $ 6,779 Expenses $ 20,456 $ 21,070 $ 21,702 $ 22,353 $ 23,023 $ 23,714 $ Gross Profit $ 98,831 $ 107,819 $ 111,054 $ 114,385 $ 117,817 $ 114,572 $ Total !!ross nrofit $ 1,656,451 $ 1,850,650 $ 1,906,170 $ 1,963,355 $ 2,022,256 $ 1,920,281 $ INTEREST REVENUE (EXPENSE) $ 36,717 $ 50,999 $ 59,523 $ 76,533 $ 94,751 $ 114,623 $ Other exnenses Administration $ 800,396 $ 824,408 $ 849,140 $ 874,614 $ 900,852 $ 927,878 $ Transfer to Capital Fund $ 1 24, 1 30 $ 127,854 $ 131,689 $ 135,640 $ 139,709 $ 143,901 $ Interest cost on Capital Debt payments 231, 1 85 231,185 231,185 231, 1 85 231, 1 85 231,185 Total Other Exnenses $ 1,155,710 $ 1,183,446 $ 1,212,014 $ 1,241,439 $ 1,271,746 $ 1,302,963 $ Total Revenues $ 3,515,440 $ 3,634,084 $ 3,750,100 $ 3,877,828 $ 4,010,085 $ 4,147,417 $ Total Expenses $ 2,977,982 $ 2,915,881 $ 2,996,421 $ 3,079,379 $ 3,164,824 $ 3,415,476 $ Excess Revenue over Exnense $ 537,458 $ 718,203 $ 753,679 $ 798,450 $ 845,260 $ 731,941 $ ACCUMULATED NET REVENUE Balance at the beginning of the year $ 1,019,974 $ 1,190,454 $ 1,530,670 $ 1,895,021 $ 2,292,464 $ 2,724,687 $ Transfer to city revenue fund $ 366,978 $ 377,988 $ 389,327 $ 401,007 $ 413,037 $ 425,428 $ $ 652,996 $ 812,467 $ 1,141,342 $ 1,494,014 $ 1,879,427 $ 2,299,259 $ Add excess of revenue over expense $ 537,458 $ 718,203 $ 753,679 $ 798,450 $ 845,260 $ 731,941 $ Balance at the end of Period $ 1 ,190,454 $ 1,530,670 $ 1 ,895,021 $ 2,292,464 $ 2,724,687 $ 3,031,200 $ PROFORMA INCOME STATEMENT Proposed Expansion to 27 Holes & Golf Skills Development 2029 2030 2031 2032 2033 2034 COURSE OPERATIONS Revenue $ 3,053,283 $ 3,144,881 $ 3,239,228 $ 3,336,405 $ 3,436,497 $ 3,539,592 $ Cyclical Costs $ 139,524 Expenses $ 1,248,991 $ 1,286,461 $ 1,325,054 $ 1,364,806 $ 1,405,750 $ 1,447,923 $ Gross Profit $ 1,804,292 $ 1,858,421 $ 1,914,173 $ 1,832,075 $ 2,030,747 $ 2,091,669 $ CANTEEN OPERATIONS Revenue $ 1,071,208 $ 1,103,344 $ 1,136,444 $ 1,170,538 $ 1,205,654 $ 1,241,823 $ Cyclical Costs $ 4 1, 1 64 Expenses $ 794,468 $ 818,302 $ 842,851 $ 868,137 $ 894,181 $ 921,006 $ Gross Profit $ 276,740 $ 285,042 $ 293,593 $ 261,237 $ 311,473 $ 320,817 $ GOLF SKILLS Revenue $ 153,900 $ 158,517 $ 163,272 $ 1 68, 1 71 $ 173,216 $ 178,4 12 $ Cyclical Costs $ 7,859 Expenses $ 25,158 $ 25,913 $ 26,691 $ 27,491 $ 28,316 $ 29,165 $ Gross Profit $ 128,742 $ 132,604 $ 136,582 $ 132,821 $ 144,900 $ 149,247 $ Total !!ross nrofit $ 2,209,773 $ 2,276,067 $ 2,344,349 $ 2,226,132 $ 2,487,119 $ 2,561,733 $ INTEREST REVENUE (EXPENSE) $ 151,560 $ 176,977 $ 204,065 $ 233,356 $ 264,961 $ 289,593 $ Other exnenses Administration $ 984,386 $ 1,013,917 $ 1,044,335 $ 1,075,665 $ 1,107,935 $ 1, 14 1,1 73 $ Transfer to Capital Fund $ 152,664 $ 157,244 $ 161,961 $ 166,820 $ 171,825 $ 176,980 $ Interest cost on Capital Debt payments 231, 1 85 231,185 231,185 231,185 231, 1 85 231, 1 85 $ Total Other Exnenses $ 1,368,235 $ 1,402,346 $ 1,437,481 $ 1,473,670 $ 1,510,944 $ 1,549,337 $ Total Revenues $ 4,429,951 $ 4,583,719 $ 4,743,010 $ 4,908,469 $ 5,080,328 $ 5,249,420 $ Total Expenses $ 3,436,852 $ 3,533,022 $ 3,632,077 $ 3,922,651 $ 3,839,191 $ 3,947,432 $ Excess Revenue over Exnense $ 993,099 $ 1,050,697 $ 1,110,933 $ 985,818 $ 1,24 1, 1 36 $ 1,301,989 $ ACCUMULATED NET REVENUE Balance at the beginning of the year $ 3,539,537 $ 4,081,299 $ 4,667,119 $ 5,299,229 $ 5,791,859 $ 6,525,012 $ Transfer to city revenue fund $ 451,337 $ 464,877 $ 478,823 $ 493,188 $ 507,984 $ 523,223 $ $ 3,088,200 $ 3,616,422 $ 4,188,296 $ 4,806,041 $ 5,283,875 $ 6,001,788 $ Add excess of revenue over expense $ 993,099 $ 1,050,697 $ 1,110,933 $ 985,818 $ 1,24 1, 1 36 $ 1,301,989 $ Balance at the end of Period $ 4,081,299 $ 4,667,119 $ 5,299,229 $ 5,791 ,859 $ 6,525,012 $ 7,303,777 $ MAY 2007 Community Services Department Business Case DOON VALLEY GOLF COURSE PAGE 1 Table of Contents Executive Summary.................................................................................................................... 3 Backgrou nd............................................................................................................................ ...... 5 Problem / Opportunity............................................................................................................... 1 0 Project Description................................................................................................................... . 12 o b j e ct i ve s .............................................................................................................................. . . .. 1 3 Sco pe . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. 1 3 Out of Scope......................................................................................................................... . . . .. 14 Anticipated Outcomes............................................................................................................... 14 Stake h 0 Ide rs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. 1 5 Environment Analysis................................................................................................................ 16 Strategic Alignment................................................................................................................... 18 Project Risk Assessment.......................................................................................................... 20 E con 0 m i c I m pact An a I y s is. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. 21 Co n c Ius ion s .............................................................................................................................. . 25 Supporting Materials................................................................................................................. 26 Appendices.................................................................................................................... ............ 27 PAGE 2 Executive Summary The City of Kitchener has been considering expansion of the Doon Valley Golf Course since the late 1990s. 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 2000s. 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 un- developable land parcels at Doon Valley Golf Course. Various development options were considered for the golf lands and developable table lands. 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. Proiect Parameters and Financial Impact The Doon Valley Golf Course Expansion project has a total budget of $3,503,546 which accounts for the following components: · an additional nine hole course; · an improved 18 hole course with 3 sets of tees to accommodate juniors through scratch-handicap golfers; · a pitch and putt course (oriented especially to families, juniors, those who seek to hone their short game skills, and as a teaching venue); · a practice range for those wishing to increase long ball skills and to provide a teaching venue; · practice greens · infrastructure to support the course expansion (parking lot expansion, cart storage area/cart charging facility, cart paths, improved irrigation system. The addition of 9 holes will be funded through a 25 year debenture in the amount of $3,101 ,097, repayable soley from the golf enterprise revenues. The golf skills component of the project will be funded through a 1 0 year debenture in the amount of $402,449, repayable soley from the golf enterprise revenues. PAGE 3 Executive Summary (Cont'd) Timelines · 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 2010: open 27 hole golf course · Spring - Fall 2010: 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. Recom mendations That staff be directed to proceed to construct a 9 hole golf course addition, practice facility and 9 hole pitch & putt course and necessary supporting amenities subject to receiving final external planning and agency approvals, and; That a total amount of $3,503,546 be allotted to fund the project components, and; That Finance Staff be authorized to secure a 25 year debenture in 2009 in the amount of $3,1 01 ,097 to fund the 9 hole addition component of the project, repayable solely from golf enterprise revenues, and; That, Finance staff also be authorized to secure a 1 0 year debenture in 201 0 in the amount of $402,449 to fund the golf skills component of the project, repayable solely from golf enterprise revenues, and; That Purchasing be directed to complete an Architect/Construction Manager contract with Shawn P. Watters & Associates to an upset limit of $375,874 plus GST, subject to the satisfaction of the City Solicitor, and further; That a business case for a major upgrade or replacement of the clubhouse be brought forward when Golf Unit cash flows are sufficient to provide for the capital cost of such project. PAGE 4 Background Doon Valley Golf Course Expansion The City of Kitchener has been providing golfing activities to its citizens for many years through its operations at the Doon Valley Golf Course and the Rockway Golf Course. In the 1990s the popularity of golf in Canada grew considerably and the City began to take steps to expand its golf operation at the Doon Valley Golf Course. An extensive amount of work and investment had been undertaken in this regard, including: · Feasibility study by Moote/Blundell - 1998; · Acquisition of additional land parcels to facilitate expansion - 1998 to 2001 ; · Various agency approval consultation and submissions (Ministries of Culture, Natural Resources, Environment, Transportation; Region of Waterloo, GRCA, etc.), corresponding research and reports, liaison with Walter Bean Trail committee, etc. - 2000 and ongoing; · Demand study by KMPG - 2001 and updated in 2004. In the late 1990's, the concept of expansion was approved in principle and the City acquired additional adjacent lands to facilitate an 18-hole expansion. The City began both the detailed design / tendering process and the approvals process. Tender documents were prepared. Approvals were sought from agencies and a zone change application and official plan amendment was submitted to the City of Cambridge. Cambridge approval was required for the golf course lands south of the 401 within Cambridge's municipal boundary. The City of Cambridge refused the application in 2001 and the City of Kitchener referred the matter to the Ontario Municipal Board for a hearing that commenced in 2002. The Ontario Municipal Board ruled in favour of the City of Kitchener (April 2003), which resulted in the re-zoning of the Cambridge lands to permit golf course expansion. During this time a number of other golf courses (albeit higher-fee courses) were built, or were under construction, potentially affecting the results of the demand study carried out earlier. At the same time, the city formed an asset management steering committee which is mandated to review major projects and property development initiatives. Because of the delay caused by the OMB hearing and the goal to ensure the best development option was being considered, 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. The review was conducted in 2004 - 2006 by a Project Team, comprised of representatives of the Lower Doon Neighbourhood Association, Doon Valley Golf Course members, City staff, and the City's consultants. It considered a number of options, ranging from selling the entire golf course to the private sector, to expanding the course to 27 holes with a golf skills component. The options staff were directed to consider are as follows: Golf course land options 1 . Relocate current tableland holes and redevelop an 18 hole golf course utilizing expansion lands. 2. Expand the golf course to 27 holes. 3. Expand the golf course to 27 holes via a private sector lease to build and operate. 4. Sell the golf course to the private sector. 5. Continue with the golf operation as is. All the above scenarios, with the exception of #5 "continue as is", provide for the opportunity to utilize approximately 14.5 acres of tablelands for various development options. The tableland development options staff were instructed to review included the following. PAGE 5 Background (Cont'd) Tableland options A) R6 zone multiple family residential (similar to adjacent mill club development) B) R1 zone single family residential (similar to some nearby development) C) Institutional (parking or educational use for Conestoga college) D) Golf skills (practice/teaching range, pitch and putt course) E) Decommission (remove all uses and leave for future development to be determined) An overview of the land parcels that was considered for these options is shown below as Figure 1. On December 5th, 2005, the above mentioned options were presented to Community Services Committee. The committee directed staff to undertake a public consultation process, complete an evaluation and report back to committee in the spring of 2006. PAGE 6 Background (Cont'd) Proiect Team Role It was determined the best way to complete the evaluation and consultation, was to form a Project Team comprised of a relatively broad range of staff and stakeholders. The Project Team included representatives of the Lower Doon Neighbourhood Association, Doon Valley Golf Course members, City staff from various departments (for technical and process input) and the City's consultants. The Project Team was mandated to: · Design an evaluation and decision-making procedure · Design a public consultation process · Conduct the public consultation · Assess the information from the consultation · Rank options based on the decision-making criteria · Recommend a preferred alternative to Council for the future direction of Doon Valley Golf Course Overall Evaluation Criterion and Matrices The Project Team's first step was to develop criteria for ranking the various options for Doon Valley Golf Course's future direction. The criteria to rank the options were established and included the following: 1 . City's strategic direction for golf 2. City's risk/reward for each option 3. Public consultation responses 4. Impact on adjacent and subject lands Each of these criteria, with the exception of public consultation, had a number of specific more detailed sub-categories which actually created the matrices used for ranking these options. At the same time, a financial matrix was developed based on Net Present Value (NPV) that showed the relative financial position of each of the various options. In summary, it was agreed that the ranking exercise and application of the financial analysis would lead to determining a preliminary preferred option for the future direction of Doon Valley Golf Course. First Public Consultation The next step was to undertake the first public consultation which was held on January 25, 2006. A notice of the public meeting was advertised in The Record, on both the City of Kitchener and Doon Valley Golf Course websites, on signage around the golf course and at Doon Pioneer Park Community Centre. In addition, approximately 3,000 invitations were delivered to residents living in the lower Doon Neighbourhood, as well as members of both Rockway and Doon Golf courses. A total of 185 people attended this information session. Of the total, 58 were members of the Golf Course and 127 were residents. PAGE 7 Background (Cont'd) First Public Consultation (Cont'd) The consultation was an information sharing and question/answer session. The various options were presented to the public along with the evaluation criterion. Following the information session, those in attendance were asked to complete evaluation forms which allowed them to rank their preference for each of the options for the golf course lands and table lands from the most to least preferred. Respondents were also given the opportunity to offer comments on the form. These forms were available at the meeting as well as Rockway Golf Course, were mailed to over 2000 residents and members, and were available on-line on the City's website. In total 137 written responses were received. Of the 137 responses, 69 were Lower Doon residents, 50 were Kitchener residents outside Lower Doon and 18 were non-Kitchener residents. Communications staff then summarized the comments and populated the public feedback matrices. The results from the summary show the public supported two options for the golf course lands - "Continue with the Course as is" and "Expand to 27 Holes by City". The public felt strongly a golf skills facility was the only acceptable alternative use of the tablelands. A summary of the public response from the two consultation matrices were appended to Report CSD-06-054 presented at Community Services Committee Meeting on May 15, 2006. Completion of the Overall Evaluation Matrix After receiving the written responses, the public's collective response was entered on the overall evaluation matrix. As well, the Project Team began their process to populate the matrix under the other evaluation criteria. Each member ranked the criterion against each option from "most beneficial' to "least beneficial". The rankings were then averaged to complete the scoring. There were two studies completed to assist the Project Team in ranking the outcomes where the team felt more data and technical analysis was required. The Landplan Collaborative Ltd. completed an overview of the potential effects of the options for Doon Valley Golf Course on the tableland and adjacent land environmental features and functions. As well Paradigm Transportation Solutions Ltd provided a traffic analysis on the various options. These studies assisted the Project Team to complete rankings in the environmental and traffic sub-categories within the "Impact on Adjacent and Subject Lands" criteria. Once the total scoring was completed, the results were used to determine a preliminary preferred option for Doon Valley Golf Course's future direction. It became clear there were only two options that should be considered as preferred options based on the overall evaluation matrices scoring which included public consultation. "Continue with the Golf Course as is", or "Expand the Golf Course to 27 holes with a Golf Skills Facility" were the only options that the results indicated should be considered. However, the financial NPV matrix previously attached to Report CSD-06-054 showed the "Expand to 27 holes with a Golf Skills Facility" option as returning a higher NPV to the City. NPV was compared for the two clearly preferred options. The outcome of the NPV comparison is as follows: · Continue with golf course as is · Expand to 27 holes with golf skills NPV $6.1 million $7.6 million Increase in NPV over status quo $1.5 million PAGE 8 Background (Cont'd) Completion of the Overall Evaluation Matrix (Cont'd) As a result the project team agreed to present the expansion option as the preliminary preferred option to the public at the second public meeting. Second Public Consultation - Preliminarv Preferred Option As indicated, the Project Team recommended that the preliminary preferred option of "Expand to 27 holes with a Golf Skills Facility" be presented for public input at the second public meeting on April 5th, 2006. A total of 118 attended the second meeting. Attendance was comprised of 24 members and 94 residents. A presentation was given to those in attendance. It summarized the public's comments from the first meeting, the Project Team's evaluation outcomes and the rationale for the preliminary preferred option. Attendees were requested to ask questions or comment on the preliminary preferred option. A number of studies were conducted in support of the Project Team's task, including: · updating the KPMG demand study in 2004; · a justification study for a proposed practice facility; · a traffic impact study to determine potential impacts on the neighbourhood ; · a situational demand analysis conducted by City staff; and · an assessment of the potential effects of the golf course / table land options on the environmental features and functions The public was invited to provide input on the options. A public meeting was held in January 2006. The options and evaluation criteria were presented to more than 150 attendees. The evaluation criteria included: · the City's strategic direction for golf; · the risk/reward profi Ie; · financial outcome; · public consultation; and · impact on adjacent land uses. Public response indicated preferences for continuing with the golf operation as is, or expanding the golf course to 27 holes and constructing a golf skills facility. An analysis of all the criteria, including public comment made it clear that these were the only two options that should be considered as preferred and the financial net present (NPV) value matrix indicated that the "expand to 27 holes with a golf skills facility" returned a higher N PV to the City In May of 2006 staff and the project's consultants presented Report CSD-06-054 to the Community Services Committee. The report detailed the history of the project and public consultation process and recommended that staff be directed to complete the business case for a City owned and operated 9-hole expansion and a golf skills facility at Doon Valley Golf Course and that staff take no further action with regard to other potential options for the golf course lands and table lands. Third Public Consultation - Proposed Desian In October 2006, the Project Team hosted a public open house and information session at the Doon Valley Golf Course to share the proposed design for the planned expansion of the course. The public was invited to provide input on the proposed design and were informed that public input would be incorporated into the expansion business case to be brought forward to City Council in early 2007. Sixty-four people attended. Comments on the proposed design were generally favourable. Some of the comments and suggestions made during the public consultation were incorporated into the final design. PAGE 9 Background (Cont'd) Doon Vallev Golf Course Expansion Principles On April 2, 2007 City staff and their consultants presented Report CSD-07-032 to the Community Services Committee requesting direction to complete the business case for the 9 hole expansion and golf skills facility based on the 10 "guiding principles" outlined below. Council ratified 9 of the principles (CSD Report #07-032) and directed staff to complete the final business case. The guiding principles ratified are as follows: · 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" attached as Appendix A · 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 · That the budget assumptions provided be the basis upon which the business case would be developed · 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 Staff also recommended another guiding principle that "any major reconstruction of the clubhouse not be considered at this time but be reconsidered in the future". Rather than approving this principle, Council directed staff to investigate the potential of completing significant clubhouse upgrades at this time. Following the analysis staff continue to recommend that this project not include a major clubhouse renovation at this time. Instead, staff are proposing that a major upgrade be considered when the Doon Valley Golf Enterprise returns to a healthy surplus. A breakdown of the analysis related to the clubhouse can be found in Section 7 of the Business Case. Problem I Opportunity The population of the City of Kitchener is growing at a rate faster than that of Ontario and Canada. The 2001 Census gives the population of Kitchener as 190,399. The Region of Waterloo estimated that Kitchener's population had already grown to 201 ,500 by 2003, and, it is anticipated that Kitchener's population will reach 234,500 by 2016 (Stats Canada) - or an additional 33,000 people. Demand for golf in the City and the Region has increased in the past decade at a rapid rate. The 2004 KPMG Market Study findings indicated that based on critical indicators, discussion and analysis, the economic indicators and conditions for golf in the market area are favourable as a whole. A micro-level (local market) analysis of green fee rates demonstrates that the average green fee rate growth for the 2001, 2002 and 2004 golf seasons exceeded inflation - green fee rate increases in excess of inflation are a positive indication of demand. Rounds played at the mature courses in the market area over the last five years has been above or similar to normal operating capacity of 35,000 from 1999 to 2002. 2003 rounds were slightly lower due to weather conditions. Rounds data in excess or at normal capacity is a positive indication of demand. PAGE 10 A situational demand analysis conducted by City staff indicates: · pro shop staff continue to turn away large numbers of green fee player requests for tee times - at least 200 players are turned away each Saturday and Sunday; · there is a growing trend towards more nine hole golf tournaments; · women's golf is the fastest growing segment in golf - many women want to play just nine holes creating a huge untapped market; · a significant number of requests are being made for leagues, some of whom wish to play nine holes only; · junior golf is one of the fastest growing segments within golf - Doon and Rockway have experienced an increase in the number of junior golfers; · many families have expressed a desire to come out and play with their children; · except for last season's poor weather conditions rounds and revenues at both Rockwayand Doon Valley have increased in the previous three years. In order to meet the anticipated demand arising from future population growth in the City and Region, and to satisfy the known demand for additional rounds, women's golf, junior golf, family golf, nine-hole tournament and league play, the following expansion at Doon Valley Golf Course is proposed: · an additional nine hole course; · an improved 18 hole course with 3 sets of tees to accommodate juniors through scratch-handicap golfers; · a pitch and putt course (oriented especially to families, juniors, those who seek to hone their short game skills, and as a teaching venue); · a practice range for those wishing to increase long ball skills and to provide a teaching venue; · practice greens · infrastructure to support the course expansion (parking lot expansion, cart storage area, cart paths, improved irrigation system). PAGE 11 Project Description Project Description The city of Kitchener has been considering expansion of the Doon Valley Golf Course since the late 1990s. At that time, the concept of expansion was approved in principle and the city began to acquire additional adjacent lands to facilitate an 18-hole 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 their 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 projects and property development initiatives. Because of the delay caused by the OMB and the goal to make sure the best development option was now being considered, 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. After an extensive review process including three public open houses it was determined that in order to accommodate the anticipated demand from the growing population, as well as address the demands in the growth of the popularity of the sport and fulfil the mandate of the City's Strategic Direction for Golf the current golf course is proposed to be expanded through the addition of the following facilities: · an additional nine hole course; · an improved 18 hole course with 3 sets of tees to accommodate juniors through scratch-handicap golfers; · a pitch and putt course (oriented especially to families, juniors, those who seek to hone their short game skills, and as a teaching venue); · a practice range for those wishing to increase long ball skills and to provide a teaching venue; · practice greens · infrastructure to support the course expansion (parking lot expansion, cart storage area, cart paths, improved irrigation system). PAGE 12 Project Description (Cont'd) Objectives The Doon Valley Golf Course Expansion Project will fulfill the following objectives: · assist in meeting increased user demand due to population growth by ; adding nine additional golf holes, a driving range and practice facility and nine hole pitch and putt course · continue to provide affordable golf activities for Kitchener citizens · enhance the ability to teach the game of golf to as many juniors and beginners as possible · meet the requirements and expectations of the project within the physical and financial parameters of the project · assist in fulfilling the needs identified in the KPMG Demand Study (August 2004) within the defined local area · provide environmental stewardship and maintain golf green space at no cost to the taxpayer · focus on skill development to encourage life long participation and enjoyment · continue to return a dividend back to the city to help reduce taxes · prepare for projected population growth in the Region which will increase demand for modestly priced golf. Scope Proiect ComDonents The scope of the Doon Valley Golf Course expansion includes the following components: · an additional nine hole course; · an improved 18 hole course with 3 sets of tees to accommodate juniors through scratch-handicap golfers; · a pitch and putt course (oriented especially to families, juniors, those who seek to hone their short game skills, and as a teaching venue); · a practice range for those wishing to increase long ball skills and to provide a teaching venue; · practice greens · infrastructure to support the course expansion (parking lot expansion, cart storage area, cart paths, improved irrigation system). A detailed course layout can be found in Appendix A Facilitv ComDliance The facility will be designed and constructed adhering to the basic principles and standards of the American Society of Golf Course Architects. The golf course will also consider the needs and requirements outlined as follows: · stakeholder/user needs · standards recommended by Royal Canadian Golf Association (RCGA) · Grand River Accessibility Advisory Committee (GRAAC) PAGE 13 Project Description (Cont'd) Scope (Cont'd) Proiected Timeframe · 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 2010: open 27 hole golf course · Spring - Fall 2010: 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. Out of Scooe The following components are not within the scope of the Doon Valley Golf Course Business Case: · Clubhouse redevelopment · Walter Bean Trail, routing options have been left open through the course design process to accommodate trail location Anticipated Outcomes The Doon Valley Expansion Project will have a number of anticipated outcomes. These include: · address the need anticipated as a result of new growth in the City. · Relieve the pressure and requirement of the need for more tee times and golf holes. · Allow the City to accommodate regular lesson programs at its own facilities and potentially allow for programming growth for junior golf lessons and camps, adults, women and beginner lessons; while providing a practice range and additional golf holes to develop those skills taught and learned. · Grow the game of golf as an affordable leisure time wellness activity for Kitchener citizens. · Grow the number of new golfers to help and aid both the local golf industry and private golf operations. · Fulfill the need of not having a public practice facility anywhere in this area. · Improve on existing service efficiencies such as food and beverage, staffing, and carts with additional customers using the facility. · Overall updated and renovated facility which is needed to remain competitive in the market place through overall customer perceived value. PAGE 14 Project Description (Cont'd) Stakeholders Stakeholders Overview Primary - Internal City Council Budget approval, design Facility Staff Design, Operation Communications Media Releases, Communication Info Finance Operating & Capital Budgets, project funding Primary - External Club Members Design, end users Facility Users End users Neighbourhood residents Design, support of option Corporations Tournaments, Team Building Secondary - Internal Community Services Department Design, facility programming Legal Agreements Inclusion Services/Barrier Free Design Purchasing T enders/RFP's H/R Staffi ng/T rai n i ng Secondary - External City of Cambridge Planning approvals Region of Waterloo Conservation Agreement Walter Bean Trail Group Trail location Ministry of Natural Resources Approvals process GRCA Approvals process Ministry of Culture Archaeological Approvals Conestoga College Neighbouring property owner Taxpayers Dividends PAGE 15 Environment Doon Valley Golf Course (DVGC) and its potential expansion lands adjacent possess considerable natural and cultural environmental assets given its location in the Grand River Valley, including: · wintering habitat for the endangered Bald Eagle; · an Environmentally Sensitive Area with a Provincially significant wetland and regionally rare bird and plant species; · important wildlife corridors and linkages; · approximately 3.5 kilometres of river edge; · approximately 85 hectares (210 acres) of flood plain; · two historic railway rights-of-way; · significant archaeological resources; and a significant 20th century cultural landscape. Addressing both the natural and cultural environment has been and will continue to be a high priority item for Doon Valley Golf Course. Capital projects must undergo strict review and approval by government agencies including: · Grand River Conservation Authority; · Ministry of Natural Resources; · Ministry of Environment; · Ministry of Culture; · Ministry of Transportation; · Regional Municipality of Waterloo. A protocol for approvals for the expansion lands south of Highway 401 was established by the Ontario Municipal Board in its April 2003 decision. This includes the development of a conservation easement over the entire DVGC land holdings in Cambridge with conditions satisfactory to the Regional Commissioner. The expanded golf course will be designed and constructed in a manner that minimizes environmental impacts by: · moving as little earth as possible on the expansion lands; · relegating significant grading to mainly tees and greens; · minimizing mowed fairway areas while providing a public style golf experience; · leaving large areas of the course in native grasses and forbs; · providing significant buffers to the wetlands and river edge; · minimizing irrigation water use; · conserving the cultural resources on the site (railway roadbeds, archaeological resources). Current maintenance and operations of the golf course include numerous environmentally sound practices. Doon Valley Golf Course is a leader in this regard, having turned significant areas of the course over to un-mowed native grasses, significantly reduced pesticide use and irrigation, and engaged in recycling to the greatest degree possible. Operations practices also include the closing of the course from November through March to protect the wintering habitat of the Bald Eagle and will include a management plan, especially for people, and agreement with the Ministry of Natural Resources by which the eagle habitat can be protected over the long term. PAGE 16 Environment (Cont'd) The Audubon Co-operative Sanctuary System (ACSS), an international program administered by Audubon International, is an award winning education and certification program that helps golf courses protect the environment. It includes the following components: · environmental planning; · wildlife and habitat management; · chemical use reduction and safety; · water conservation; · water quality management; · waste reduction and recycling; and · outreach and education. The City's Rockway Golf Course has completed more than half of the programs it needs to achieve certification recognizing environmental stewardship to the highest standards of golf course maintenance practices. Certification was initiated in 2004 as a wildlife conservation effort designed to protect the ecological systems on the golf course. The remaining programs will be completed by 2008 in order to achieve full certification. Doon Valley Golf Course is planning to seek Audubon International Sanctuary certification through the Audubon Classic Sanctuary Program, a program designed for projects in the planning stages of development. One component of the Doon Valley Golf Course expansion involves the construction of a cart storage/ charging facility. Report FIN 07-029 detailed the plan to replace the existing 42 gas powered carts to electric carts over the next 3 to 4 years. The current project budget includes the cart related expenses. Environmental Committee Comments The City's Environmental Committee, which is comprised of Kitchener citizen volunteers and is advisory to Council, reviewed the options for the Doon Valley Golf Course expansion. At their regular meeting of March 23rd, 2006, they passed the following resolution in support of the preferred options: "That either Option 1 (continuation with the golf operation as is) or Option 4 (Expand the Golf Course to 27 holes), as outlined in Appendix 2 of Community Services Department report CSD-05-025, be selected as the preferred golf course lands option for the future of the Doon Valley Golf Course; and further, That all developable table land options, which call for the sale of the 14.5 acres of Doon Valley Golf Course Table Lands for the purposes of development be rejected." PAGE 17 Strategic Alignment Corporate Plan Alignment Goal level of Impact Explanation Additional holes and a practice facility will allow more Service First Medium golfers to play the course as well as assist and encourage the growth of the sport through utilization of the practice facility. Community and Business Relations - Neighbourhood Association, neighbours and Golf Involved and Educated Citizens Medium Club Members were all members of the Golf Course Expansion Steering Committee The growing regional population combined with the Change and Improvement Medium growth in Golf requires the addition of more entry level golf courses and development facilities to allow for more golfers to get on the course leisure Facilities Master Plan Goal level of Impact Explanation Fair and equitable leisure opportunities The provision of golf by the municipality allows for a that encourage participation by all more affordable rate reaching out to a larger portion of dimensions of the community in terms Medium the population. An expansion to allow for a of ability, culture, economic, geographic development and practice facility will encourage and related interests and backgrounds children to participate in the sport. Kitchener's Strategic Direction For Golf Goal level of Impact Explanation Provide affordable leisure time activity for The provision of golf by the municipality allows for a its citizens Medium more affordable rate reaching out to a larger portion of the population. Focus on the skill development to High Creation of a golf skills facility will help encourage encourage life long participation and young kids to enter into the sport enjoyment Teach the game of golf to as many High Creation of a golf skills facility will help encourage juniors and beginners as possible young kids to enter into the sport Provide and maintain green space at no Medium Land south of the 401 is being converted from publicly cost to the taxpayers inaccessible agricultural land to a public golf course Encourage healthy lifestyles and leisure Medium The provision of golf by the municipality allows for a access more affordable rate reaching out to a larger portion of the population. An expansion to allow for a development and practice facility will encourage children and beginners to participate in the sport. Return a dividend to the city to make Medium The additional holes and practice facility will result in involvement in other leisure activities more rounds of golf played seasonally. The dividend more affordable will increase by 350/0 in 2015. PAGE 18 Strategic Alignment (Cont'd) A Plan for a Healthy Kitchener Goal level of Impact Explanation medium A multi-purpose Golf facility including a golf skills Quality of Life component will encourage use by a broader cross "A great place to live is section of the community. The expansion also allows important to us" for the increased ability to provide affordable leisure activities to the citizens. Leadership and Community medium Extensive public consultation took place throughout Engagement the entire process. Environment medium Doon Valley Golf Course and its expansion lands "Responsible stewardship of include significant natural and cultural assets. A number of protocols and policies for developing a our environment is.. .key to the golf course on the new lands were established by quality of life we all enjoy" the Ontario Municipal Board in its April 2003 decision. This includes development of a conservation easement over the entire land holdings in Cambridge which will ensure protection of these assets during construction and over the long term once the golf course is completed. DVGC will be seeking certification through the Audubon Cooperative Sanctuary Program PAGE 19 Project Risk Assessment Risk of Proceeding with Project Risk Probability Impact General Mitigation Strategy · Revise design details · Revise phasing of Project comes in over budget low medium course development · Hire a construction/project manager Demand for golf declines: · Reduce capital and (population decline, economic low medium operating expenses decline, competition from other · Market more rounds leisure activities/sports) Competition from other courses: · Reduce capital and (lower fees, better quality) low medium operating expenses · Market more rounds Competition from new courses of · Reduce capital and similar caliber built within the low medium operating expenses market area · Market more rounds Project delay: · Timing contingencies have been built in to the (weather, availability of contractors, low medium project schedule allowing approvals delays, etc.) for some delays Risk of Not Proceeding with Project (Status Quo) Risk Probability Impact General Mitigation Strategy Demand for quality, affordable golf · Develop strategy to fill high medium traditional non-peak tee not met times Affordable golf skills development medium medium · Cannot be mitigated with not met current facilities Access to and growth in youth golf high medium · Cannot be mitigated with not met current facilities Access to and growth in women's medium medium · Cannot be mitigated with golf not met current facilities Increase in dividend to City not · Reduce capital and realized, making involvement in medium medium operating expenses other leisure activities less · Market more rounds affordable · Increase fees PAGE 20 Economic Impact Analysis Doon Valley Golf Course Business Case Assumptions At the April 2, 2007 Community Services Committee meeting, Council provided the following direction with respect to the financial aspects of the golf course: A. The expansion project will be phased and take 5 years to be fully implemented. B. The golf course will be in a deficit position no longer than 2014. C. Dividend to the City will increase by 350/0 commencing in 2015 D. 18 Holes will be available for play at all times during the construction and grow-in. E. Staff to look at the feasibility of a major reconstruction of the existing clubhouse. Using these guidelines, the expansion of the golf course by 9-holes with a golf skills component is feasible. Staff are in support of using enterprise debt financing to fund the expansion as this is consistent with the City's capital investment policy given that the revenues generated through the expansion will be sufficient to cover the capital and interest costs of the project. Renovation of the clubhouse as part of the initial phase is not feasible as this would place the golf course in an accumulated net deficit position for a significant time (i.e., until 2028). In the interim, $75,000 per year has been included in general provisional capital funds to accommodate any immediate improvements to the clubhouse. CaDital Cost AssumDtions 10,097 9 Hole Golf Skills Construction Consulting Construction Contingency Additional Fleet & Bldg Upgrades Design Contingency Hard Service Costs Golf Cart Charging Facility Existing Unfunded Costs 1 % for Art 1,701,604 332,600 340,321 275,000 59,556 25,000 100,000 250,000 17,016 3,101,097 288,494 43,274 57,699 2,885 402,449 9 Hole EXDansion · 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 5.50/0 interest rate. · Annual debt payments are projected to be approximately $231 ,185 commencing in 2010. PAGE 21 Economic Impact Analysis (Cont'd) 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 golf skills development is approximately $402,449. · The costs will be fully debentured over 1 0 years at a 5.50/0 interest rate. · Annual debt payments are projected to be approximately $53,392 commencing in 2011. Interim Construction Financina · Interim financing for construction and consulting costs will be required. An estimate of $133,000 based on an average of 500/0 of the construction and consulting costs at an interest rate of 5.50/0 has been provided for in the cash flows. Ooeratina Cost Assumotions · The revenues for the golf course after expansion are projected to increase by 350/0 but will be phased over 3 years as follows: i. 300/0 of existing demand in 201 O. ii. Additional 2.50/0 in 2012 iii. Additional 2.50/0 in 2013 · User fees are projected to increase at a rate of 30/0 annually. · Expenses are projected to increase at a rate of 30/0 annually. · Adjustment has been made for inclement weather every 5 years that could have a negative affect on the golf operations. Revenues during this time are expected to decline 50/0 with a related decrease in expenses of 20/0. · The table below compares the accumulated surplus (deficit) with no expansion with expanding to 27 holes and adding a golf skills development pitch and putt for the years 2008-2015. A B (A/B)*100 Accm Surplus Accumulated Gross Accm Surplus (Deficit) as Net YEAR (Deficit) Surplus (Deficit) Revenue 0/0 of Gross Revenue Revenue (Expense) 2008 $ (244,428) $ (320,428) $ 1,671,405 -19.20/0 $ (27,857) 2009 $ (359,059) $ (507,681 ) $ 1,718,984 -29.50/0 $ (2,146) 2010 $ (302,649) $ ( 453,507) $ 2,264,831 -20.00/0 $ 244,834 2011 $ (227,990) $ (436,910) $ 2,364,1 07 -18.50/0 $ 212,977 2012 $ (207,990) $ (429,423) $ 2,565,821 -16.70/0 $ 209,758 2013 $ (94,711 ) $ (275,699) $ 2,644,306 -10.40/0 $ 362,064 2014 $ 40,501 $ (107,796) $ 2,724,665 -4.00/0 $ 382,492 2015 $ 198,998 $ 4,652 $ 2,814,735 0.20/0 $ 410,835 · Staff do not support budgeting for an accumulated deficit balance for the long-term as this inconsistent with the Municipal Act. Reflected in the table above, with no expansion and remaining at status quo, the golf course would be in an accumulated surplus position in the year 2014. Expanding the golf course, would leave the course in an accumulated surplus position in 2015 which is only one year later than if there were no expansion. · The dividend to the City is expected to remain at an inflationary increase of 30/0 per year until the golf course is at an accumulated surplus position (projected 2015, when the base dividend will increase by 350/0 to $298,387 (2007- $174,481)). · Attached is the cash flow projection of the golf course (excluding the clubhouse) over the next 25 years. (Appendix B) PAGE 22 Economic Impact Analysis (Cont'd) Clubhouse As directed by Council, staff evaluated the potential impact of including the clubhouse as part of the expansion. Staff have not had an opportunity at this time to undertake a detailed audit of the clubhouse renovations required. The cost used for this analysis is $1 ,953,000 and is only a very preliminary Class C estimate based on some high level analysis of major refurbishments to the clubhouse. The breakdown of the Class C estimate is as follows: Capital Cost of Clubhouse Renovations Construction Consulting Construction Contingency Design Contingency 1 % for Art Projected Capital Costs Amortization Period I nterest Rate Annual Payment Estimate 1 ,400,000 21 0,000 280,000 49,000 14,000 1 ,953,000 15 Years (Consistent with KMAC Improvements) 5.50/0 Starting in 2010 Staff investigated three different scenarios for funding a major clubhouse upgrade at this time. These scenarios are as follows: Scenario #1 - funding the clubhouse renovation solely utilizing golf revenues and providing a 350/0 increase in the dividend in 2015 per the pre-approved "guiding principle". Scenario #2 - funding the clubhouse renovation solely utilizing golf revenues but foregoing the increase in the dividend in 2015. Scenario #3 - funding the clubhouse renovation using tax subsidies. A summary of the findings for each of the scenarios is as follows: Scenario #1 The renovation of the clubhouse renovation will result in the golf course being in an accumulated deficit position until 2028. Staff do not support projecting for an accumulated deficit for a significant amount of time, as it is inconsistent with the municipal act. Scenario #2 would result in the golf course being in a deficit position until 2025. Again this is inconsistent with the municipal act. It is also inconsistent with the direction of the pre-approved guiding principle which requires payment of the additional dividend starting in 2015. Furthermore this scenario does not align with commitments made to the public during consultation phase that an increased dividend would be a project benefit to the taxpayers. Scenario #3 is based on funding a clubhouse renovation using tax subsidies. Staff do not support funding the clubhouse from city tax revenues for three reasons: A) this would be inconsistent with the approved agreement the City has with area golf course owners, whereby the City would not utilize tax subsidies to fund any portion of golf course improvements or operations B) it was clearly stated at the public meetings that no portion of the golf course upgrades would be funded from tax subsidies PAGE 23 Economic Impact Analysis (Cont'd) C) the capital funding pool is fully committed until 2013 and there is no funding currently available to accommodate this project. In addition, other significant infrastructure projects identified and prioritized for the community may have to be deferred or eliminated to meet the City's Capital Funding Policy if this project were to be accommodated. Renovation of the clubhouse is not feasible at this time for the reasons stated above. Staff are supportive of looking at the renovation when the golf course returns to a healthy surplus position in the future. In the interim, $75,000 per year has been included in general provisional capital funds to accommodate any immediate and near term necessary improvements to the clubhouse. PAGE 24 Conclusions The City of Kitchener has been considering expansion of the Doon Valley Golf Course since the late 1990s. At that time, the concept of expansion was approved in principle and the city began to acquire additional adjacent lands to facilitate an 18-hole 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 their 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. Various development options were considered for the golf lands and developable table lands. 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. The Doon Valley Golf Course Expansion fits well within the City of Kitchener's strategic directions for golf and will provide a modestly priced opportunity for people in this region to develop the skills to enjoy the sport of golf for a lifetime. PAGE 25 Supporting Materials The information contained in the supporting materials have been used in the justification of various reports and recommendations in the evolution of this project and include the following: · Doon Valley Golf Course Traffic Impact Study: Paradigm Transportation Solutions Ltd., April 2006 · DVGC, Feasibility Assessment of Proposed Golf Skills Development Centre: Shawn P Watters & Associates, April 2006 · Environmental Impact Study, Doon Valley Golf Course Expansion: Thompson and Associates, March 1999 · Doon Significant Bird Habitat Study: North-South Environmental Inc., August 2003 · Assessment of the Potential Effects of the Golf Course / Table Land Options for Doon Valley Golf Course on the Subject Property's Environmental Features and Functions: The Landplan Collaborative Ltd., March 2006 · The City of Kitchener Market Study: KPMG (now Global Golf Advisors), August 2004 · Ontario Municipal Board Decision - PL011160, Issue Date April 9, 2003 PAGE 26 Appendix A Course Layout PAGE 27