Pierce County’s Chambers Bay Golf Course lost $1.3 million last year as the recession lingered and fewer golfers played the high-priced course.
County officials recently loaned Chambers Bay $2.5 million to help cover the loss and to pay for course improvements needed to prepare for this year’s U.S. Amateur Championship and the 2015 U.S. Open. It’s the latest in a series of county loans to the golf course.
County officials say Chambers Bay’s financial condition should stabilize this year as the economy improves and publicity from the U.S. Amateur generates business for the course. They say Pierce County will earn enough from the U.S. Open to repay recent loans.
Deputy county executive Kevin Phelps said Chambers Bay’s debts are “a little bit of a noose around our neck right now.” But he believes Chambers Bay will pay for itself and prove to be a valuable community asset in the long run.
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“The debt is significant,” he said. “But you’ve got to remember that’s not forever. At some point in time, that debt goes away.”
But if the economy continues to sputter, Chambers Bay might go deeper in debt before it sees a big payoff from the U.S. Open.
“I think we’re prepared to loan (Chambers Bay money) again if the course comes in below its budgeted (golf) rounds,” said Councilman Terry Lee, R-Gig Harbor, whose district includes Chambers Bay.
HIGH HOPES, LINGERING DEBT
News that Chambers Bay lost money in its second full year of operation is the latest twist for a course that has struggled to make budget even as it has rocketed to prominence in the world of golf.
Pierce County designed Chambers Bay – built on a former gravel mine overlooking Puget Sound – to host national tournaments and cater to affluent golfers.
The idea was to create an elite course to attract tourist dollars and spur construction of other amenities at the county’s 932-acre Chambers Creek Properties in University Place.
The course drew national acclaim when it opened in 2007. Less than a year later, the United States Golf Association picked Chambers Bay to host the U.S. Open and the U.S. Amateur Championship.
It was a stunning endorsement of a fledgling course. The U.S. Open is akin to the Super Bowl of golf and could draw 65,000 people a day for nearly a week.
County officials say the economic impact and national exposure will be tremendous. It could be even greater if – as golf association officials say is possible – the U.S. Open returns to Chambers Bay in future years.
“Our state has never seen a sporting event like the U.S. Open,” Phelps said. “It is bigger than a Super Bowl. It is bigger than a World Series. It’s bigger than hosting the NBA championship. It’s bigger than a World Cup game.”
But Chambers Bay’s national reputation has not translated into financial stability.
The course generated a surplus of just $45,202 on revenue of more than $6 million in 2008 amid the deepest recession in decades.
The recession took a greater toll last year.
Chambers Bay finished 2009 with a deficit of $1.3 million on revenue of $5.5 million.
One reason: fewer golfers willing to pay up to $169 for a round of golf.
According to its latest financial report, golfers played 31,834 rounds in 2009 – 17 percent fewer than the previous year. The course budgeted for 36,372 rounds in 2009.
In addition, food and beverage sales declined 15 percent. Merchandise sales were down 22 percent.
Expenses were up about $823,000 – or nearly 14 percent – because of planning, increased maintenance and course improvements needed for this year’s U.S. Amateur.
BACKED BY TAXPAYERS
The county covered the deficit through a combination of reserve funds and a $2.5 million loan approved by the County Council in November. The loan also will help pay for the course improvements.
The loan came from a county fund that pays for equipment purchases. It is scheduled to be repaid – at 2.5 percent interest – by the end of 2015, when revenue from the U.S. Open will be received.
It’s the latest in a series of county loans to Chambers Bay. The course has received loans totaling more than $4.5 million from county equipment and sewer funds since 2006.
Some of the money was used to pay for expenses before the course opened. Some of it was used to pay for course improvements needed for the national tournaments.
In addition to those loans, the county borrowed $20.8 million to pay for the original Chambers Bay construction. It borrowed another $685,000 to pay for golf course maintenance equipment.
As of last month, Chambers Bay owed $22.7 million on the various loans. Golf course revenues – including income from the U.S. Open – are supposed to repay all of those loans.
If the course doesn’t generate enough revenue, county taxpayers and sewer customers will be responsible for repaying the debts. That could prove difficult at a time when the county has cut millions in spending for law enforcement and other priorities.
County officials say no taxes or sewer bill revenues have been used to support the course to date. To make sure that doesn’t happen in the future, the County Council has pledged to sell or lease land at Chambers Creek to repay the loans, if necessary.
One option: selling a bus facility on the property to the University Place School District.
“We are not going to be using tax dollars to bail out Chambers Bay,” said council Chairman Roger Bush, R-Graham.
But if the course faces more operating deficits, it might go deeper into debt.
“The issue will be, Do we have to borrow money in 2011, ’12 or ’13 while the economy recovers?” said Tony Tipton, the county’s Chambers Bay project manager.
Phelps doesn’t think Chambers Bay will need to borrow more money.
“I certainly haven’t had any restless nights thinking that we’re going to have to borrow money in the future,” Phelps said. “We think we can get it turned around.”
NATIONAL GOLF WOES
Chambers Bay isn’t the only golf course struggling.
Jim Kass, research director for the National Golf Foundation, said two recessions in the last decade have taken a toll on the golf industry. An oversupply of courses also has hurt.
According to the foundation, the number of golf courses nationally grew 3 percent to nearly 16,000 over the last decade. But the number of golf rounds played fell 6 percent.
“There aren’t enough rounds to go around to all these courses,” Kass said.
As a result, about 140 golf courses closed last year nationwide (although 50 courses opened).
One bright spot: upscale courses like Chambers Bay have fared better than others. Kass said that’s because golfers tend to have higher incomes and can afford to play, even during a recession.
Kass said the industry also might get a boost as more baby boomers retire.
“But not all baby boomers are going to be able to afford Chambers Bay, either,” he said.
Chambers Bay was supposed to be above the ups and downs of the typical golf course.
Former County Executive John Ladenburg wanted to build an elite course suitable for national tournaments. He pitched it as a money-maker that would pay for itself and other amenities at Chambers Creek. And he dismissed concerns about the larger golf economy.
“This is not your everyday golf course,” he said when the course opened in 2007.
Not everyone shared Ladenburg’s vision.
Many county residents have questioned why a course like Chambers Bay is publicly funded. Doubts lingered even after the course landed the U.S. Open.
Joe O’Brien is a Tacoma resident and retired zoning and land-use attorney who served as legal chairman for the Kemper Open at Congressional Country Club in Maryland, which will host next year’s U.S. Open.
In the 1980s, O’Brien explored developing an exclusive private golf course in Maryland. But after studying the market, he realized it would be hard to persuade banks to support the project. He abandoned it.
O’Brien said that kind of market discipline was lacking in the planning for Chambers Bay.
“What allowed Chambers Bay to happen was easy access to taxpayer money,” he said. “There was an absence of restraint normally imposed by commercial lenders.”
In the long run, O’Brien doesn’t think Chambers Bay will attract repeat local business or the “high-roller” out-of-towners it needs to cover its costs.
“From my perspective, they really misjudged the market,” he said.
Ladenburg still believes Chambers Bay will be successful.
“Some years it will make a lot of money,” he said in a recent interview. “Some years it won’t. During the U.S. Open year, it’s going to make a lot of money.”
Phelps echoed Ladenburg’s enthusiasm. He said the two national tournaments will give Chambers Bay a major boost.
The county expects 15,000 to 20,000 people to attend the U.S. Amateur Championship in August.
Phelps said the county will break even or perhaps earn a little money on the tournament, which will cost about $900,000. He said publicity from the Amateur should generate more business and help stabilize Chambers Bay’s financial condition.
The real payoff should come when Chambers Bay hosts the 2015 U.S. Open.
The United States Golf Association will pay Pierce County $2.5 million to lease Chambers Bay for the tournament – money it already has begun to pay.
In addition, the county will get a share of the proceeds from hospitality packages and some food, beverage and merchandise sales from the U.S. Open. Tipton said that should generate at least another $2.5 million.
Tipton said the U.S. Open should generate enough revenue to repay the recent $2.5 million loan plus a $600,000 internal loan from last year.
United States Golf Association officials already are talking about the U.S. Open returning to Chambers Bay in the future. Phelps said the impact of multiple U.S. Opens would be huge.
“We don’t think it’s a pipe dream,” he said.
Phelps said Chambers Bay’s debts are a short-term problem. But he said the golf course will be a long-term community asset.
Since it opened, the course has generated about $1.7 million in sales taxes and other tax revenue. Most of that money has gone to the state or to University Place. But the county has collected about $142,000 in tax revenue from the golf course.
More important, Phelps said, nongolfers also have benefited from the construction of Chambers Bay.
In conjunction with the golf course, Pierce County built the 2-mile Soundview Trail, two sprawling meadows and an off-leash dog park. A pedestrian bridge – largely paid for by the state – will open access to more than two miles of Puget Sound beach when it’s finished this fall.
Phelps said the golf course made the other amenities possible.
“You think the state’s going to give us money to build a bridge over the trestle if it was just one of the parks where people go and throw a Frisbee?” Phelps said. “That whole vision only worked strategically if you had some kind of economic engine to justify putting that kind of investment in there.”
One day, when Chambers Bay’s debts are paid, Phelps said, Pierce County residents will still be enjoying a facility he compared to New York’s Central Park.
“They’re going to say, ‘Wow, somebody had an amazing vision, and I’m glad they did it,’” Phelps said.
“Every great vision has a certain amount of hard lifting,” he said. “Small visions are easy to do. Big visions are difficult.”
David Wickert: 253-274-7341