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FAQs About Taxpayer Subsides For RedGate:
Answers to FAQs:
1. How large is RedGate's deficit?
RedGate ran a deficit of $546,000 In Fiscal Year 2010, the last full year of operation, leaving it with a debt to taxpayers of about $1.4 million at year end. The annual deficit is estimated to increase to over $670,000 in the current year, and to more than $900,000 within four years.
2. Why is RedGate running a deficit?
The number of rounds played per year has dropped from the mid-60,000 level in the late 1990s to about 35,000 currently. At the same time, costs have increased, and the fees paid per round have stayed flat for the past five years. Competition from an increasing number of golf courses since RedGate was built, including eight that are operated by the County, is drawing golfers away.
The number of rounds played would have to double to fully erase RedGate's deficits.
3. Who pays for RedGate's deficits?
Taxpayers. Every taxpayer dollar that's spent on RedGate is one less dollar available for police protection, snow removal, roads, sidewalk repairs, our neighborhood rec centers, seniors, and other essential services.
4. Can't we save RedGate without spending taxpayers' money?
It seems very unlikely, but who knows? The question should be "Do you want to invest your money in a project that has been losing money for the past 11 years?" Given the difference between revenue and expenses, and given the decline in number of rounds played, we clearly cannot continue without making substantial changes. At a minimum, we need new management, and we need to turn management over to a proven outside manager. Take a look at the NGf assessment, which concludes that even if we contract out the operation of the golf course to a private management company, the golf course will continue to lose money for the indefinite future. Meanwhile, taxpayers would have to invest hundreds of thousands in improvements to the golf course and continue to pay hundreds of thousands of dollars each year to subsidize operating expenses.
If we head down this route, I hope we only do it by contracting with a nationally recognized golf course operator who agrees to be paid on a performance basis. The NGF report says it is highly unlikely that any operator would sign such a contract, citing the competition from the County Golf Authority. Thiis ought to be a huge red flag.
5. What's wrong with using taxpayers' money to subsidize RedGate? Isn't Government supposed to provide recreational opportunities?
When did golf become an entitlement? What happened to the promise made when the golf course was established that golfers would fully pay for its costs?
The City can provide recreational activities at no cost to taxpayers, just as it provides essential services like water and trash removal without providing taxpayer subsidies. Golf is an expensive luxury, and half of the subsidy goes to golfers who live outside the City and do not pay City taxes.
The notion that just because the government does it, it should be subsidized, is at the root of the financial problems of governments at all levels. Money doesn't grow on trees, not even in Rockville. Every taxpayer dollar that's spent on RedGate is one less dollar available for police protection, snow removal, roads, sidewalk repairs, our neighborhood rec centers, seniors, and other essential services.
6. If you oppose subsidizing RedGate, why in September did you advise Mayor and Council to pay off RedGate's accumulated deficits?
Because I discovered that the City accounted for RedGate's deficits as assets of the General Fund, which then were counted as additions to the General Fund reserve. The reserve is a Rainy Day fund to cover emergencies without having to raise taxes. Since the golf course is bankrupt, the "assets" weren't worth the paper they were written on. I was especially alarmed to find out that these worthless "assets" made up one-sixth of the General Fund reserve, and they would grow to more than 40 percent of the General Fund reserve in another four years. Meanwhile, Mayor and Council were dipping into the reserve to pay operating expenses, thinking the reserve remained above the 15 percent target that is considered safe. See my Sept 6, 2010 email to Mayor and Council for a complete explanation.
In short, RedGate's deficits had put the City's financial future at risk in ways that Mayor and Council did not understand. Once they understood the issue, they quickly moved at the Sept 13, 2010 meeting to use about $2.4 million of the unexpected surplus from FY 2010 to pay off RedGate's debt.
We could have used that surplus for many other priorities. Unfortunately, the past is prologue.
7. Is the RedGate Advisory Committee correct when it claims that it isn't unfair to include overhead expenses in the subsidy estimate, when overhead isn't charged to the swimming pool and the Senioir Center?
This is a clever but disingenuous argument. Allocating full cost to the services that create the cost is the Gold Standard of budgeting. Every first year student in public finance learns this. It is recognized as a Best Practice by the Government Finance Officers Association, which has given the City awards for its budget for 20 years. I was shocked to hear a member of the RedGate Advisory Committee identify herself as a CPA and state that her company allocates overhead to each business line, and then say that she didn't think it made sense for Rockville. You would think that a CPA would follow the example of doctors and try to do no harm.
History is littered with examples of budget failures that are due to failing to include full costs in the budget. The need discussed in #6 above to use the FY 2010 surplus to pay off the Golf Fund debt and replenish the General Fund reserve is an excellent example. The budget for the General Fund failed to include the cost of taxpayers'subsidies of the Golf Fund. Instead of showing the Golf Fund as a drain on General Fund resources, it inexplicably showed them as assets.
There is an equity argument regarding the failure to charge the Swim Center for overhead expenses. I will only note that the Swim Center serves 9 times as many customers as RedGate, so the subsidy amounts to much less per user of the Swim Center.
As for the Senior Center, it's hardly just a recreation center. I find it incredibly distasteful to hear Mayor Marcuccio and Councilmember Newton, as well as the RedGate Advisory Committee, compare the Senior Center to golf. Maybe they can justify their statements, I can't.
8. How do you respond to the RedGate Advisory Committee's claim that it is unfair to send the monopole (cell tower) revenue to the general fund, instead of the Golf Fund?
Another disingenuous argument from the Advisory Committee. Golfers don't generate that revenue, so why should it be used to benefit the golf course, instead of being used to benefit taxpayers who own the golf course and pay a major share of it's expenses? What if we struck oil on the golf course? Would that mean we should offer free golf?
The original bargain with golfers was that revenues from golfers would fully cover expenses. Proposing to divert monopole revenue from the general fund to the golf fund is nothing more than an attempt to hide the huge deficits in the golf fund and the failure of golfers to abide by the original promise.
9. Is there any truth to the claim by the RedGate Advisory that RedGate would be sold if it ceased being a golf course?
This is one of the most outrageous and false claims by the Advisory Committee. I doubt that there was one vote to sell RedGate. There certainly wasn't two. One councilmember suggested that it be included as an option so that they had a full range of options. Joe Jordan used it as a way to strike fear into the environmental community in Rockville and get signatures on a petition that he passed off as support for keeping RedGate as a golf course.
If you signed a petition thinking that RedGate might be sold, I'm sorry to tell you that you were used.
10. How do you respond to the RedGate Advisory Committee's claim that the property would be a neglected eyesore if it is not operated as a golf course?
Rocktrash knows where to put this rumor. It's an insult to the strong environmental ethic in this Community to make such an outrageous statement. It is refuted simply by driving over to Glenview Mansion and admiring the wonderful treasure that the City has maintained for more than 50 years.
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