Potential Bidders Eye Huron Hills Golf

About a dozen people attended Monday afternoon’s pre-bid meeting for those interested in responding to the city of Ann Arbor’s request for proposals (RFP) seeking a public/private partnership for the Huron Hills Golf Course.

Anyone who plans to submit a response to the RFP was required to attend the meeting, which lasted 30 minutes and was followed by a field trip to tour the course. Among those attending were Doug Davis and Chris Mile of Miles of Golf, Doug Hellman of KemperSports, Joe Spatafore of Royal Oak Golf Management, and William Arlinghaus of Greenscape.

Also attending were several citizens who have publicly opposed the RFP process, including Ted Annis, Nancy Kaplan, Myra Larson and Paul Bancel. Some are involved in the citizens group Ann Arbor for Parkland Preservation (A2P2).

The meeting, led by city parks manager Colin Smith, was a chance for potential bidders to ask questions or request additional information. The deadline to submit proposals is Oct. 29. [.pdf file of Huron Hills RFP]

Overview of RFP Process

Smith began by apologizing for a mix-up in the meeting time – two websites had posted two different start times, and some people had been waiting an hour. He also explained why the room might have felt stuffy – last Friday, HVAC for the entire city hall building had been turned off as part of an ongoing renovation of the structure, and there won’t be any air-conditioning or heating for at least three weeks.

Smith then reviewed some points in the process, and said that until Oct. 8 he’d accept questions or requests for information by email. His replies would be sent out to everyone who signed in at the pre-bid meeting, Smith said, so that everyone would receive the same information.

After the Oct. 29 deadline, responses will be reviewed by a selection committee, which Smith has previously said will consist of city staff, and representatives from the city’s golf task force, park advisory commission and city council. Interviews would begin in mid-November. If the selection committee makes a recommendation, it will then be reviewed by the golf task force and park advisory commission. Final approval would rest with city council.

Smith also reviewed some of the general information and scope of the RFP. [For an extensive report on the RFP, as well as public commentary about the project, see The Chronicle's report of the park advisory commission's Aug. 17, 2010 meeting: "Public Turns Out to Support Huron Hills Golf"]

The 18-hole, 116-acre golf course is located on the city’s east side and is split by Huron Parkway, with seven holes on the north and 11 holes to the south. Designed in 1922 by the golf architect Thomas Bendelow, Huron Hills is a 5,071-yard, par 67 course with a slope rating of 107, according to the RFP. The city’s ownership dates back to 1949, when the University of Michigan deeded the lower nine holes of Huron Hills Golf Club to the city – plus $10,000 – in exchange for Felch Park. The city bought an adjacent 57.5 acres in 1951.

The city is asking for proposals that “maximize the recreational golf opportunities” at Huron Hills. The RFP states that the city will retain ownership of the property and buildings, as well as any improvements that might be made. Beyond that, they are looking for proposals that follow four general principals:

• A commitment to growing the game of golf.
• Conduciveness to entry level golfers.
• Accessibility and affordability of recreational golf opportunities, especially for children and seniors.
• To better serve the Ann Arbor golf community.

Questions from Potential RFP Responders

This article reports the questions organized thematically.

Questions: Finance

Doug Hellman of KemperSports asked the most questions during the 30-minute meeting, and led off by requesting financial data about the golf course’s performance. Smith clarified that as an enterprise fund, the revenues and expenses are reported separately – that is, they aren’t wrapped into a larger departmental budget. [Enterprise funds are operations that are expected to be self-sustaining.] He agreed to provide financial data for the past five or six years, as well as information about the number of rounds played.

Some of that financial information is available in the RFP:

Huron Hills Golf Course

             FY2007     FY2008     FY2009

Starts       13,913     15,558     21,229
Net loss  ($145,845) ($195,514) ($276,164)

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Smith had also given an update on the financial performance of Huron Hills at the Sept. 21, 2010 meeting of the park advisory commission, which resulted in some discussion among commissioners. From The Chronicle’s coverage of that meeting:

The golf enterprise fund includes operations at Huron Hills and Leslie Park golf courses. In total, the fund reported revenues of $1.122 million for the year, with $1.645 million in expenses – for a $523,529 total loss. Huron Hills revenue of $304,541 was 19% higher than expected, while expenses were lower than budgeted by nearly 8%.

At Leslie Park, revenue of $817,638 was 1.5% higher than budgeted. Expenses of $1.067 million were on par with budget.

Commissioner Tim Berla asked how many rounds of golf were played last year, and was told about 30,000 rounds at Leslie and 20,000 rounds at Huron Hills. Berla then calculated, based on the roughly $500,000 loss, that the city is paying about a $10 subsidy for each round of golf. He noted that this was his perspective and that others look at it differently, but he found it troubling. It seems out of balance to subsidize something that only a small percentage of residents use, he said. It might be the case that more people play soccer, Berla said, but the city pays perhaps 10 times as much for its golf courses than it does for its soccer fields. “I just wanted to note that, that’s all.”

Smith pointed out that the subsidy came from the general fund, not out of the parks and recreation budget – though he conceded that if the city council decided to change the accounting for golf, it would significantly impact the parks and recreation budget. But regardless on your perspective about a subsidy to golf, Smith said, both courses as budgeted were doing a fantastic job in an overall market that saw declining revenues and rounds played statewide.

Berla asked Smith to remind them of where the courses stood in terms of the long-range plan that had been laid out by a consultant hired to assess the city’s golf operations. FY 2010 was the second year in a six-year forecast, Smith said. For that year, the forecast had anticipated a $519,000 loss for the courses. So they’re on track with the forecast, he said, adding that the courses were never expected to eliminate their losses completely over that six-year period.

Gwen Nystuen recalled that PAC had recommended Huron Hills not be an enterprise fund. Smith confirmed that of the two courses, Leslie was more likely to be self-sustaining. Nystuen pointed out that the rest of the parks weren’t self-sustaining, and the city is willing to subsidize them. Do they calculate how much it costs someone to walk across a park? she asked. The city shouldn’t put something into an enterprise fund if the operation can’t support itself. Smith replied that the golf courses “will be part of very robust discussions come budget time.”

PAC chair Julie Grand, who serves on the city’s golf advisory task force, noted that the strategy right now for Huron Hills is to make rounds affordable so that they can draw in seniors and youth, by making play more accessible. And David Barrett pointed out that Leslie now has a liquor license – he asked if revenues from alcohol sales were “baked into” the total revenues for Leslie. Smith replied that total revenues did include alcohol sales, which were about $40,000 out of $79,000 in concession sales at Leslie during the year. Barrett asked if the liquor license had been a plus for Leslie, and Smith said that it was, especially for bringing in more leagues, outings and traveling golf groups.

At Monday’s pre-bid meeting, Paul Bancel asked for information on the municipal service charge that the golf course pays, including a breakdown of what the charge entails. Smith clarified for others that the municipal service charge is a charge that all non-general fund entities in the city pay – it covers the cost that the city incurs to provide services for the enterprise funds, he said, including administrative overhead. For Huron Hills, it’s about $87,000 annually.

Ted Annis said it was his understanding that Huron Hills would break even if the municipal service charge weren’t a factor. Smith said that wasn’t true – it would still lose money. Responding to another query, Smith said Leslie Park Golf Course – also owned by the city – wasn’t making money either. Why then was Huron Hills singled out for this RFP? That was based on direction given by the city council, Smith said.

Later in the meeting, Hellman requested financials for Leslie Park Golf Course as well.

Questions: Ownership

Bancel asked a series of questions related to ownership of facilities on the golf course. Smith clarified that the city would own the land and the facilities. [A list of assumptions provided in the RFP includes a statement that the city "remains the owner of the Huron Hills property, its buildings and appurtenances."]

As a hypothetical, Bancel described a scenario in which a contractor spends $2 million to build a facility on the property – how does the city contemplate assuming ownership? How would the city handle a transfer of ownership? Smith said it would depend on the proposal – that’s something that would have to be negotiated.

Hellman confirmed with Smith that the maximum term of the agreement is 20 years.

Questions: Labor

In response to a question about whether the city uses volunteers for the course, Smith said that there are some volunteers and neighborhood activists who do things like maintain flower beds, but the ranger service is done by a seasonal paid worker.

Later in the meeting he clarified that there are living wage requirements, which are outlined in the RFP. [For background on the city's living wage ordinance, see Chronicle coverage: "Living Wage: In-Sourcing City Temps"]

Bancel asked what the union situation was, and Smith said there are two workers at Huron Hills: The course supervisor, Andrew Walton, is a member of the Teamster’s union, while the course superintendent, Mark Wanshon, is a member of AFSCME. Asked whether the city anticipated that those workers would remain unionized, Smith said the RFP speaks to that. From the RFP:

4. Management and Oversight. The proposal must provide a detailed business plan that recognizes the City’s role in oversight of City land, and identifies how the existing two full-time employees may be incorporated.

Hellman asked that they be provided with a staffing chart showing the employees’ hourly rate, as well as resumes or background information for the current staff. [Walton attended Monday's meeting, but did not participate in the discussion.]

Questions: Relationship with Leslie Park Golf Course

Bill Newcomb, a member of the city’s golf task force, asked whether the city could reject a proposal that included Leslie Park Golf Course. Smith replied that as long as it met all the requirements of the RFP, it wouldn’t be rejected just because it incorporated both courses.

Hellman asked whether the two golf courses shared resources, such as equipment or personnel. No, Smith replied, the only thing that’s shared are the golf passes, which can be used at either course.

Questions: Liquor License

Smith clarified that Huron Hills doesn’t have a liquor license. When asked why Leslie Park Golf Course had one but Huron Hills does not, Smith said the consultant had recommended having one at Leslie. He said it would be possible to pursue obtaining a liquor license at Huron Hills as well. Someone asked if there was one available, and Smith said he wasn’t aware of one.

Hellman later asked about a reference to alcohol in the section outlining uses of the premises and property. From the RFP:

No alcohol will be served on the Premises at Contractor-sponsored events or private rental events, or otherwise consumed on the Premises, without the written approval of the Community Services Area Administrator. Section 3.2 of Chapter 39 of the City Code authorizes the City Administrator to issue permits to allow the consumption of wine and beer in areas which consumption would otherwise be prohibited. The City Administrator hereby delegates to the Community Services Area Administrator the authority to issue such permits for the moderate consumption of wine and/or beer on the Premises. When so approved in writing, moderate consumption of alcohol (wine and beer only) may be permitted. All other use of alcoholic beverages on the Premises is prohibited.

Who was the community services area administrator, he asked, and does this refer to a liquor license? Smith clarified that the community services area administrator is his boss, Sumedh Bahl. The section was referring to a permit that could be obtained for special events, not a regular liquor license. He again stated that it would be possible to pursue getting a liquor license for Huron Hills, if one were to become available.

Questions: Misc.

Hellman asked what prompted this RFP – what are the city’s goals? “That is a long answer, over many years, perhaps,” Smith replied. He summarized by saying that entities in an enterprise fund are supposed to be self-supporting, and that’s not been the case for a long time with the golf courses. The city brought in a consultant in 2007 – James Keegan, managing principal of Golf Convergence – to analyze the courses and make recommendations. [More detailed background is provided in The Chronicle's report of the Aug. 17, 2010 meeting of the park advisory commission. See also coverage of PAC's Nov. 19, 2009 meeting, which included an update on golf operations by Doug Kelly, the city's director of golf.]

Huron Hills has improved since then, Smith said, but it’s still operating at a loss. During the most recent budget cycle, everything was on the table, and the city council gave direction to the staff to issue a request for proposals (RFP) for a possible public/private partnership at Huron Hills. As for the city’s goals, Smith said they wanted it to remain a course that’s accessible to the public, while providing financial relief to the city.

Hellman asked whether the city was committed to moving forward with outsourcing or a public/private partnership. When Smith hesitated, Hellman quipped, “Well, it is the city council!” Smith said that the city was “certainly interested enough to issue the RFP.” Acceptance would depend on the nature of the proposal, and the outcome of review by the selection committee, golf task force, park advisory commission and city council, he said.

Ted Annis confirmed that the city attorney has signed off on the RFP. Annis also submitted a list of nine questions that he asked Smith to answer. Smith requested that the questions be emailed to him, so that he could send the questions and his responses to everyone who attended the pre-bid meeting. The questions are:

1. Tasks I and II call for a study and recommendations but the bids are being evaluated on a financial basis. [Task I requires a "thorough assessment of current operations" at the golf course. Task II is a proposal of services and financial plan.] How can the bids be evaluated before the completions of Tasks I and II?
2. City staff recommended to Council on 25 January 2010 that a driving range was the City’s best choice. Why isn’t a driving range mentioned in the RFP? If the Respondent proposes a driving range, is that the City’s preference and will it receive a higher score than say, miniature golf or a conference center?
3. The RFP says that the City will own the new facilities. How does this work with bank financing if the buildings are mortgaged to the Contractor?
4. Will the City indemnify and defend the Respondent (Contractor) in the event of a lawsuit alleging an illegal transaction between the City and the Respondent?
5. Will the City indemnify and defend the Respondent (Contractor) in the event of a lawsuit alleging damages in the form of decreased property values as a result of the transaction between the City and the Respondent?
6. There are government organizations (other than Ann Arbor’s PAC with its access to Greenbelt millage funds) that acquire natural lands for long-term preservation. An example is Natural Washtenaw and its Natural Area Preservation Program (NAPP). Is there a problem, legal or otherwise, if NAPP were to bid on these development rights for Huron Hills?
7. What is the zoning?
8. What are the development issues surrounding natural features protection, wetland preservation, and 100-year flood plain?
9. Prior to 25 January 2010, the City received proposals with plans and financial data from one and likely two private businesses regarding the privatization of the current City-operated golf operation on the Huron Hills parkland. Who at the City, City Council, and PAC have seen these plans and data? Who at the City, City Council, and PAC are in possession of these plans and data? What notes were taken from these plans and data?

The meeting concluded and Smith gave directions to the course, for a mandatory tour. He offered to schedule other tours until Oct. 8, for people who couldn’t go that day. As the meeting was breaking up, some people noted that anyone trying to enter into a partnership with the city would likely face opposition. If that hadn’t been apparent previously, it would have been clear on the trip to the golf course, where signs protesting the development of Huron Hills are in several front yards along East Huron River Drive, near the course.