Next Step Taken on Huron Hills Proposal

About 50 people showed up Friday morning in the city council chambers to hear a presentation by Miles of Golf partners about their proposal to assume operations of the city-owned Huron Hills golf course, and move their business there.

During the 90-minute meeting, president Chris Mile and other partners with the Pittsfield Township business gave a presentation and answered questions from a seven-member selection committee. Members of the public were allowed to submit questions, which city staff said will be answered and posted online within the next couple of weeks.

Much of the presentation covered the same material found in the Miles of Golf initial response to the city’s request for proposals (RFP), as well a separate financial report. [.pdf file of Miles of Golf RFP response] [.pdf file of Miles of Golf financial proposal] The business has proposed operating the 18-hole, 116-acre course essentially unchanged for three to five years. Then, it plans to build a new facility on what is now the front seven holes – land east of Huron Parkway – with a driving range, teaching center and golf shop. It would relocate its current operations, which are located off of Carpenter Road, south of Packard, and convert the remainder of Huron Hills into a 9-hole course. They’re also hoping to partner with Project Grow or Food Gatherers, to put in a community garden on land they don’t plan to use for golf.

To fund construction, the proposal calls for the city to issue a $3 million bond, which Miles of Golf would pay off over 20 years. The business proposes to pay additional funds to the city during that time, totaling about $1 million. Miles of Golf also estimates that the city would save about $5 million over the 20 years, since it would no longer be paying to operate the course – an estimated $250,000 per year.

During their presentation, Miles of Golf partners addressed concerns that have been raised in the community. They stressed that the project would not put up perimeter fencing or pole lights, and that the land would remain accessible for winter activities, like sledding. Nor do they plan to build a banquet center – though they do hope to eventually sell food and beverages on the site, including alcohol. Currently, Huron Hills does not have a liquor license, though the other city course, Leslie Park, does.

Miles of Golf submitted one of only two proposals that were made in response to the city’s RFP, which was issued in September. The selection committee rejected the second proposal, which had been submitted by a group called Ann Arbor Golf. It called for operating Huron Hills as a public, 18-hole golf course via a new nonprofit entity, the Herb Fowler Foundation of Huron Hills. [.pdf of nonprofit proposal]

In an email to The Chronicle, Paul Bancel – one of the leaders of Ann Arbor Golf – said they’d been told by city staff that their proposal was rejected because they hadn’t provided an adequate plan for staffing the golf course, hadn’t identified the roles of the key individuals in their organization and didn’t include any bank references. The group was disappointed the committee did not choose to interview their group, Bancel wrote – they were not asked any questions, nor were they asked to provide any clarifications about their proposal.

Not addressed during Friday’s meeting was a letter sent to the city last month by attorney Susan Morrison, on behalf of a group called Ann Arbor for Parkland Preservation. The letter urged the city to reject the Miles of Golf proposal, saying that it does not comply with city zoning ordinances and the RFP requirements, among other things. [.pdf of letter]

Miles of Golf Presentation

Chris Mile, co-founder and president of Miles of Golf, began by introducing others from the business: Co-founder Doug Davis, who is vice president of golf range operations; Brandon Anderson, golf shop manager; and Dave Kendall, founder of the Kendall Academy, which is part of the Miles of Golf operation.

Mile said they see three options for the city: 1) continue operating Huron Hills as an 18-hole course, subsidized by the city, 2) remake it into a different golf experience, as Miles of Golf is proposing, or 3) remake it into a non-golf use. He said that in speaking with city staff, it seemed clear that this last option would require capital investments that would make it unfeasible at this time. These three options were also outlined in an email that Miles of Golf sent to customers prior to Friday’s meeting, asking for support of their proposal. [.pdf file of email]

As a distance runner, Mile said he spends a lot of time in Ann Arbor’s parks. He notices two things about Huron Hills. One is that the area is stunningly beautiful. But the second thing is that “it’s sort of dead – it has a dead feeling to it.” Their proposal aims to keep the beauty, but bring vitality to Huron Hills, Mile said. He likened it to the transformation he’d observed at the Argo Pond livery. A few years ago, you had the feeling that nothing was happening there, he said. But after the city invested in a new building and landscaping, now it’s vibrant with lots of activity. “That’s what I’d like to see happen at Huron Hills,” he said.

Miles of Golf Presentation: Business Background, Overview

Miles of Golf is a local business, Mile noted, so members of the selection committee and others can talk to people in the community about how they operate. They started the business in 1995, taking over operations of Pat’s Par-3, which had been on that site at Carpenter south of Packard since the 1950s. Why consider moving now? Pittsfield Township – where the business is located – is redoing its master plan, he said, and considers that area important in rejuvenating the Carpenter/Packard corridor. Although there’s nothing imminent planned and they have a lease through 2033, Mile said they can see the writing on the wall.

Mile described the business, saying it has three parts: 1) a facility for driving and short game practice, such as putting; 2) a teaching academy – the largest in the state, he said; and 3) a golf shop. Mile said they really like the idea of adding a golf course to the mix, and they believe their other operations will make the course more successful.

Mile told the committee that the 34 people in the business are all “golf nuts.” “We’re so into golf – if you’re not a golfer, you’d probably roll your eyes.” There are eight instructors, 14 employees in the golf shop, nine at the practice facility, and three in administration. He said they aren’t high-pressure sales people – their goal is to make people better golfers. If they do that, he said, business success will follow.

Their core values are to treat people fairly, honestly and respectfully, Mile said, and they expect to be treated in the same way. “We will do what we say we will do – you can count on us.” The owner of the property they lease would report that they always pay their rent on time, Mile said.

Mile addressed what he called a misconception – that the city would simply hand over the keys for Huron Hills to Miles of Golf, in exchange for payments. “We know that’s not what’s going to happen,” he said. They understand that the city will set standards and retain control over things such as financial reporting and operating hours.

There are also issues that can be stipulated in the partnership agreement, like prohibiting perimeter fencing. There’s no reason for perimeter fencing, he said, and they don’t want it. The same goes for pole lighting and domes, he said.

Even if the city wasn’t entering into a partnership agreement, there are ways to control what’s built on the site, Mile noted. Local governments have control over building in their jurisdictions, to ensure that the buidings are appropriate to the site, he said. That would be true for their project as well.

Mile also noted that this project wasn’t unusual – nationwide, about 100 other municiple golf courses are exploring public/private partnerships to manage the public courses.

Miles of Golf Presentation: Kendall Academy

Mile introduced Dave Kendall, noting that he grew up in Jackson and has been very involved in the Michigan PGA (Professional Golfers’ Association) – he just finished up a two-year term as president of that organization. Kendall has won both the Michigan Senior Open and the Michigan Senior PGA championship.

Kendall came to the podium, and described how he started the academy when he was the only instructor. He’s now been in business 14 years, and offers a wide range of programs, from beginners to advanced. The instructors don’t tell people what to do, he said – the approach is to help people understand their current golf game, figure out where they want to be, then look at what steps they need to take to achieve their goals. The idea is to give people a better understanding about golf, he said.

Kendall characterized golf as a family game. His father put a club in his hand when he was a boy – his father is now 87, and they still play together. That’s one of the great things about golf, Kendall said – you can play it forever.

The academy also offers women’s programs and fitness programs, Kendall said, and there are a lot of programs that would work well at Huron Hills, such as family golf, drop-off programs for kids, or a “first tee” program for youth to teach golf and life skills.

Because of the convenience of having a course as part of the same facility, they could better customize their instruction, Kendall said. The course isn’t lengthy or intimidating – it’s a great place to learn to love the game, or for senior citizens who get pushed out of the game because of the difficulty of some courses. The academy also has a synergy with other parts of Miles of Golf, Kendall said. That includes the golf shop, which he likened to a candy store for golfers.

Kendall closed by saying that they built the business on relationships, by becoming a resource and advocate for golfers – that’s what brings people back. He promised that they’d always do their best to be a source of pride for the community.

Miles of Golf Presentation: Golf Course and Facilities

Doug Davis spoke next. Mile had introduced him by noting that he attended Ypsilanti High School and had then gone to the University of Michigan, where he became captain of the UM golf team. Davis is enthusiastic about junior golf, Mile said – both of Davis’ daughters also played on the UM golf team.

Davis began his part of the presentation by saying that they had researched the original golf course designed in 1922 by Thomas Bendelow – they had wanted to respect that design, he said. They looked at historic photos, and discovered that the original course doesn’t exist today. None of the original 9 holes or the property is still in use, he said.

Davis then described the three phases of the Miles of Golf proposed transition. Phase I would be to operate the current 18-hole course, with no physical changes to the property. They understand the physical beauty of the land, he said, adding that the vistas are phenomenal. They would undertake some improvements – most significantly, they’d cut down the 25-foot wall of buckthorn and other scrub brush along the railroad tracks to the north of the property, which now blocks the view of the Huron River. They’d also try to mask the lime-green maintenance building using landscaping, and possibly transferring some trees that are now near the 7th hole.

In Phase II, which would be about three to five years out, Miles of Golf would move its operations to Huron Hills. They’d construct a tee line and building on the site, with the driving range facing east onto what’s now the front seven holes of the current course. There’s no need for pole lighting, Davis said – there’s ample natural light during the summer for the business. The site would also include an area for golfers to practice their short game – putting, chipping, sand trap playing, and pitching.

They wouldn’t need the current No. 6 green on the east end of the property, Davis said, and they’ve approached Project Grow and Food Gatherers to see if those local nonprofits are interested in using the land for community gardens.

Another idea they’re considering for this phase is to build a three-hole practice site for the public. It would be especially good for families – Davis said that golf’s governing bodies haven’t done a great job at growing the sport.

The final phase would include tearing down the existing maintenance building and clubhouse. The proposal calls for adding a new maintenance building and clubhouse.

Regarding the city’s current staff at Huron Hills, Davis said they’d be glad to talk to employees to see if there’s interest in coming “under the Miles of Golf umbrella.” The city employs two full-time workers at the course.

Mile returned to the podium, saying that he was speaking on behalf of Casey Baker, vice president of golf shop operations. Baker is 33 years old, a graduate of Pioneer High School who was mentored by Herb Fowler, Mile said. Baker is one of the top five amateur golfers in Michigan, Mile noted. Though some of the other partners are older, Mile said the proposed 20-year agreement is well within the span of Baker’s career.

Mile started to describe the golf shop, which Baker runs, when loud construction noise from work adjacent to council chambers disrupted the presentation – city hall is being renovated, in conjunction with construction of the new municipal center. Mile attempted to continue, but an audience member asked that someone try to stop the noise, as the presentation was impossible to hear at that point. Abigail Elias of the city attorney’s office, who attended the meeting, left the room, and within five minutes the noise had stopped.

Mile continued by describing the 11,000-square-foot building they hope to construct – larger than their current facility, which is about 9,000 square feet. The building would house the golf shop as well as teaching studios that would open onto the driving range – there’s demand for that, Mile said. He characterized the size of the structure as “not a monstrosity,” noting that there are homes in the area that have a larger footprint.

They’d like to do something with food and beverage, Mile said, but it’s not yet clear what that might be. They left that open in the proposal, he said, but it’s something that could be developed in the future. Mile said they’d like to see community gardens on about seven acres of land that won’t be used for the driving range.

He also addressed concerns about whether Huron Hills would be open for winter activities, like sledding. There’s no reason why that can’t continue, Mile said, and it’s something that could be stated explicitly in a partnership agreement.

Miles of Golf Presentation: Financial

Mile then walked the committee through the proposed financials. [.pdf file of Miles of Golf financial proposal]

In the first phase, Miles of Golf would invest about $40,000 in landscaping and upgrading the golf cart paths. If annual golf revenues exceed $575,000, the city would get 10% of anything over that amount. [Revenue from Huron Hills during the last fiscal year was just over $300,000.]

During the second phase, starting in three to five years, Miles of Golf would build its driving range and golf shop at Huron Hills, and relocate its operations there. They estimate this would cost $3.25 million, Mile said. Miles of Golf would pay $250,000 of that amount, with the city covering the rest. Mile said they assumed the city would issue a bond for the project – Miles of Golf would make the bond payments in their entirety, he said, plus an additional percentage above that amount.

The proposal presents several scenarios, based on different interest rates. For example, at a 3% rate over 20 years, Miles of Golf would pay the city 5% in years 1-5, 6% in years 6-10, 7% in years 11-15 and 8% in years 16-20. The proposal indicates that if interest rates are above 7%, the financial viability of the project is questionable, and they would have be reconsider it.

To further illustrate the financial return to the city, Mile said that with a 4% interest rate on the bond, over the 20-year payoff period the city would receive about $1.2 million more from Miles of Golf than the original $3 million from the bond.

Mile also made a comparison to illustrate the difference between operating Huron Hills as an 18-hole course, and taking out the bond for the Miles of Golf project. Over a 20-year period, assuming that the city subsidizes golf operations at Huron Hills by $250,000 annually, the city would be paying $5 million to continue current operations, he said. They would save that amount through this partnership. In addition, the city could receive roughly $1 million in payments from Miles of Golf, above the amount to repay the bond. The net result is $6 million in savings and revenue for the city, he said – and the city owns the building.

From the city’s perspective, the $3 million bond is the big question, Mile said – the city will need to ask if it’s worth the risk. “There’s a $6 million reason why you’d want to take that risk,” he said.

In wrapping up, Mile said that when Dave Kendall teaches golf, he identifies the weakest part of your game, then works to make it the strongest. In life, it’s powerful to take the same approach, Mile said. Huron Hills is a gorgeous chunk of land that’s the weakest link in the parks system. If you take that weakest link and make it a gem, imagine what that would do. “I think our proposal can do that,” he said, and at the same time provide $6 million to invest in other city parks.

“If you decide you want to do this,” Mile concluded, “we’ll be a very good partner for the city.”

Selection Committee Questions

The Q&A portion of Friday’s meeting lasted about 30 minutes, and most questions focused on the financial aspect of the proposal. For this report, questions and answers are organized by topic.

The selection committee includes Colin Smith, the city’s parks and recreation manager; Julie Grand, chair of the park advisory commission; Doug Kelly, the city’s director of golf; Ward 2 city councilmember Stephen Rapundalo; former city councilmember Mike Reid; Ed Walsh, a real estate developer and member of the city’s golf advisory task force; and Sumedh Bahl, the city’s community services area administrator.

Selection Committee Questions: Revenues

Stephen Rapundalo began questioning by noting that Miles of Golf forecast an increase in revenues in the first few years of operation. He wondered how those revenue increases would be achieved – by increasing rates, increasing the number of rounds played, or in some other way?

Chris Mile explained that for the first two years – 2011 and 2012 – the forecast assumed they’d see the same revenue growth that Huron Hills has experienced over the past year: 15% each year, on the 18-hole course. [That projection would put revenues at $392,228 in 2011 and $454,354 in 2012.] In 2013 and 2014, they dropped that forecast growth to 4%. In 2015 – the first year with only a 9-hole course – projected revenues show a 33% drop to $345,722, but are projected to grow 4% in each of the subsequent years.

Golf lessons are the only revenue source that’s not projected to drop off when the course is converted from 18 to 9 holes. Revenue from lessons offered by the city brought in $21,942 in fiscal 2010, and are projected to grow to $32,913 in 2011 and $41,141 in 2012, with slower but steady growth forecast in each of the subsequent years.

Mile said they were most concerned about the period prior to moving their entire operations out to Huron Hills, but that they felt comfortable with their estimates. He noted that they also plan to cut employment costs and other expenses associated with the city operation. Mile said that when they convert from 18 to 9 holes, their profitability doesn’t get alarmingly worse, because expenses – such as maintenance – decrease as well.

Julie Grand noted that one of the city’s goals is to keep golf affordable. How much will it cost to golf on the 9-hole course, she asked, and will the cost of golf instruction align with what the city now charges?

The cost of playing on the course will be dictated by market conditions, Mile said, and Huron Hills is charging market rates. It won’t stay that price forever, he added, because market conditions will change. Regarding golf lessons, he said the private lessons offered through the Kendall Academy will be the same as what’s offered now. He noted that Dave Kendall provides a community-based instruction program for Pittsfield Township, though he wasn’t sure exactly what would be offered at Huron Hills. Whatever they offer, it would need to be responsive to community needs, he said, or it wouldn’t work.

Colin Smith clarified that the 10% revenue sharing would only come from revenues generated by the golf course, not from the other operations on site, like the driving range, lessons or concessions. He also observed that in their financial projections, Miles of Golf isn’t forecasting that they’ll reach the level of revenues that would activate the 10% revenue-sharing.

Selection Committee Questions: Bond

Ed Walsh, a Ward 2 resident, said that as someone who lives near the course, he has a high level of interest in maintaining it as a golf operation. One thing that jumped out at him, he said, was the high level of uncertainty in making financial projections three to five years out. If bond rates exceed a certain level – and that’s a possibility, he noted – would Miles of Golf be prepared to scrap the idea of moving over their entire operations, and be willing instead to simply operate the 18-hole golf course?

Mile said that if interest rates spike and make it unreasonable for the city to issue the bond for construction, they’d have to evaluate how the golf course is doing on its own. If it’s not doing well, “we’d have to sit down and talk,” he said. But if it’s performing well, they could continue operations and see how things go. Much of their financial forecast is based on their current operations at Miles of Golf, Mile said. The uncertainty is the golf course. They know what their costs are now, and what it will cost to move, and they feel they can afford it, Mile said. “But if interest rates go crazy, there’s going to be a problem.”

Mike Reid asked how the bond payments flowed into the financial projections. Mile responded that the payments are included in the G&A (general and administrative) line item – they aren’t broken out separately.

Reid then asked if G&A expenses specific to the Huron Hills course were separated from the overall G&A. Mile said they were co-mingled. He said he understood Reid’s conerns – Miles of Golf has been operating for 15 years, and they know how the driving range, pro shop and academy perform. What’s not predictable is the golf course, he added, but they can absorb some of those expenses if they know that they’ll have a home for their business for the next 20 years.

Selection Committee Questions: Alcohol

Reid asked Mile to expand on the need for food and beverage at the course, especially the addition of alcohol. Mile noted that the RFP speaks to that, but he clarified that his business partners don’t have any experience in food and beverage operations.

Doug Kelly asked whether serving alcohol was essential. Mile responded, saying that everyone they’ve talked with in researching this project has considered the ability to serve alcohol as a key ingredient. That’s why it’s included in their proposal, he said.

Kelly also asked a question that he said was intended to dispel rumors: Was Miles of Golf planning to open a banquet center on the site? No, Mile said.

Rapundalo noted that Huron Hills is different from Leslie Park, the city’s other golf course – which has a liquor license. Huron Hills is more family- and community-oriented, and attracts more junior golfers. How does having a liquor license there align with the goal of keeping Huron Hills as this kind of community resource?

Mile said that Leslie Park also has children there, as do a lot of facilities that serve alcohol. The people managing it need to be responsible, he said. The RFP asked about food and beverage concessions, Mile said, so they included it. But details would have to be ironed out in a partnership agreement, he added.

[The RFP asked respondents to include responses to a series of topics. This section relates to food and beverage: "Financial Return to the City. The proposal must demonstrate a financial benefit to the City taking into consideration golf operations, pro-shop operations, food and drink concessions, sale of merchandise, instructional programs, and off-season recreational activities." .pdf file of full RFP]

Selection Committee Questions: Building

Walsh wondered whether an 11,000-square-feet building would be large enough to accommodate everything that Miles of Golf wants to offer. Doug Davis said they inherited their current building, and have tried to make it work. The new building would be designed for customer convenience.

Walsh also noted that in hearing from residents, there are two primary concerns: 1) the size of the building, and 2) the city’s financial commitment. Given that construction is likely three to five years in the future, how has the business addressed potential inflation of costs – what happens if the proposed $3 million construction budget is too low? Would Miles of Golf cover the overages, or would the city pick up that cost?

Davis said that they ran their projections by Bill Wheeler, Ann Arbor’s former director of public services who now works on a contract basis for the city, including as project manager for the new municipal building. Their projections included a 10% buffer for expenses, and Davis said Wheeler was ok with those calculations. Davis added that Miles of Golf has done its own construction in the past, so they are familiar with how these projects work. Still, he said he couldn’t say what would happen in three to five years. Mile added that it could end up costing more than projected.

Selection Committee Questions: Environmental Factors

Walsh pointed out that a creek runs through the middle of the golf course, in the section that would be converted into a driving range. How would the proposed changes affect that creek?

Davis said the creek is at about the 175-yard range, and it’s one of the most beautiful sections of the property. They have no plans to change it, though they might add some kind of barrier to help keep golf balls out of it. Golfers want to practice on land that emulates where they’ll actually be playing, Davis said, and the lay of the land in that part of the course is ideal – there’s no need to change the topography, or to change that tributary in any way.

Colin Smith brought up a related issue later, asking how much construction would be needed on the land to create the driving range. He noted that there were several older trees on the property, and that driving ranges are typically level. Davis said the only area they’d want to level is the tee, which runs north/south on the property. Their plan saves the trees, he noted – there’s one cluster of a half-dozen crabapple trees that they might want to move, but that’s not critical, he said. Trees add character to the range, and customers like that, Davis said.

Kelly asked about the $50,000 detention pond that’s mentioned in the proposal. Davis said the pond is required to handle runoff from the parking lot – it’s required by the city any time impervious surface is added to a site.

Rapundalo noted that they’d probably need to conduct an environmental study on the site, but he didn’t see anything in the budget for that expense. Would the city pay for it? Davis didn’t respond directly to that question, but said the business was very “green-friendly” and planned to stay that way. Doing an environmental study isn’t something they’d run from, he said.

Next Steps

Just after 11 a.m., Sumedh Bahl, who chaired the session, brought the meeting to a close. Colin Smith told the group that questions submitted by members of the public during the meeting would be posted online, along with answers, sometime in the next couple of weeks.

At the November meeting of the park advisory commission, PAC chair Julie Grand had outlined steps in the process. Now that the interview has taken place, the selection committee will make a recommendation to the city’s golf advisory task force, which in turn will make a recommendation to PAC. PAC could hold a public hearing, likely in December or January, and make its own recommendation to council. The city council would have the final decision about whether to accept the proposal. If council took that step, it would authorize city staff to negotiate a partnership agreement with Miles of Golf, formalizing the proposal.