County considers leasing golf courses

File Photo Galloping Hill Golf Course in Union is one of two county-owned golf courses the freeholders are considering leasing to recoup, at a faster rate, debt incurred against the courses.
File Photo
Galloping Hill Golf Course in Union is one of two county-owned golf courses the freeholders are considering leasing to recoup, at a faster rate, debt incurred against the courses.

UNION COUNTY – Last week the Union County Improvement Authority explained why they are actively studying the purchase of the county’s two golf courses and how it will benefit taxpayers in the long run.

Although the county currently owns both Galloping Hill in Union and Ash Brook in Scotch Plains, officials are certain there is a more efficient manner of handling these two golf courses. In fact, if the county continues in the direction they are headed, there is a good chance the debt load they are carrying as a result of building the $16 million state-of-the-art clubhouse at Galloping Hill and other improvements to both courses can be paid down faster.

That move would also put all risk in the hands of someone other than the county or the UCIA, according to Union County Public Information Director Sebastian D’Elia, who also sits on the UCIA board.

“One advantage to having the UCIA handle this operation is they are independent, more flexible and have more advantages at their disposal than the county to work with a professional at leasing the courses,” D’Elia said.

“That doesn’t mean the county won’t be getting any revenue,” he added, pointing out this would all have to be worked out between the national company leasing the operations, and the authority and county. But, the UCIA has considerably more leeway when becoming involved in this type of arrangement.

In February 2012 the county retained Mareth Advisors of Virginia to independently and objectively evaluate the possible transfer of the golf courses from the county department of parks and community renewal to the UCIA. The intent, according to the memorandum of understanding between the county and UCIA, was “providing greater autonomy” for the operation of the courses so these facilities could better react to changing market and operational conditions.

UCIA Attorney Jonathan Williams of DeCotiis Fitzpatrick and Cole, LLP explained last week at an authority meeting this type of arrangement was considered because with the new multi-million dollar clubhouse, which cost the county $16 million, and other improvements made to both courses, the county has taken on “a significant amount of debt” to pay down.

At the UCIA meeting last week, Williams broke down exactly why these steps are being taken by the county and how the results will benefit taxpayers.
“We have entered into a memorandum of understanding with the county to move forward with the UCIA purchasing the courses and finding a national company to take over golf operations,” he said, adding the company selected would be involved in a lease agreement, but the county would still have control over setting fees and ensuring the public would still have access to the courses.

“The advantage to this is not only having a private operator from a national company that specializes in golf course management to come in and assume responsibility, but using the lease payments to pay down the outstanding debt,” Williams said, explaining “this shifts all the risk to the private operator, while the county receives the lease payments to pay down the debt on these facilities.

Efforts to secure a vendor like this are well under way since the UCIA already put out requests for proposals across the country and received responses from three well known companies interested in leasing the courses.

“We are about halfway through the process now,” Williams said Monday in an interview, noting the three companies have operated hundreds of golf courses.
“Golf courses naturally lend themselves to this type of lease,” the attorney added, pointing out that aiding the UCIA and county with selecting the right company is critical. The UCIA and county are being aided in this process by the president of Baltusrol Golf Club in Springfield, who is also an attorney.

While any lease negotiated could possibly involve revenue sharing with the county and UCIA, D’Elia said that type of an arrangement would all have to be worked out in the lease agreement.

Williams agreed.
“If this is done properly, and it will be, it will happen without taxpayers expending any money,” the UCIA attorney said, adding this particular type of arrangement is the best scenario for the county to pay down debt associated with the golf facilities.

“We are merely shifting the risk and getting the debt paid down faster,” Williams said.
This is the second time this summer the county has been actively involved in shifting property they own over to the UCIA for outright purchase by the authority or lease by another entity. Prior to the golf course agreement, the county handed over the financially dependent Runnells Specialized Hospital in Berkeley Heights to the UCIA last month. The Runnells move included a similar Memorandum of Agreement two weeks ago.

Williams explained that this move was to seek proposals for possible purchasers so the county could see what the market has available to the county at this point in time. At the June 27 meeting the freeholder board passed a resolution allowing the UCIA to begin marketing the 300-bed facility that sits on 45-acres of county-owned property. This followed a report in 2012 by HealthCare Resources, Inc. that analyzed and evaluated all possible options to reduce costs at the hospital the county has had to subsidize with millions in taxpayer dollars in order to keep the facility operational.

In the last several years the county has subsidized Runnells by more than $20 million because of declining state and federal reimbursements and it is not expected to get any better. According to CHR’s report, it was evident that while there were additional ways to reduce expenses, none would get the county out of the subsidy stranglehold unless the facility was leased or sold.