He said it was an incredible deal, and so far Oro Valley Mayor Satish Hiremath is right. Incredible would be the operative word to describe the purchase of the El Conquistador Country Club and Golf Course by the Town of Oro Valley.
According to the Merriam-Webster Dictionary, incredible is defined as:
Full Definition of INCREDIBLE
1. too extraordinary and improbable to be believed (making incredible claims)
2. amazing, extraordinary (incredible skill) (an incredible appetite) (met an incredible woman)
A review of the numbers shows that the promised costs for – and benefits to – residents were improbable. In fact, it was the seller, Humberto Lopez and HSL Properties, not the buyer, the Oro Valley taxpayers, who made an amazing deal.
Three golf courses and a Community Center for a mere $1,000,000? Who could pass that up? Short answer: anyone who has ever had to maintain assets over any period of time. Time was key to Oro Valley’s. The deal had to be rushed for a number of reasons and there simply wasn’t time to review it. There is now and after the first five months of ownership evidence shows that the forecasts were optimistic.
View the Town of Oro Valley El Conquistador Purchase 12-3-2014 presentation
View the Town of Oro Valley El Conquistador Purchase 12-17-2014 presentation
Let’s add up the numbers the Town provided in their December 3rd and December 17th presentations, then look at the costs the Town is incurring to see if this is a great deal for Oro Valley residents:
| Purchase price | $1,000,000 |
| Golf Losses FY 15/16 – FY 18/19 | $1,741,430 |
| Golf investments thru FY 18/19 | $2,983,000 |
| Facilities Capital Improvementsthrough FY 18/19 | $2,581,000 |
| Facilities Capital shown as “later” in the December 3rd presentation but missing on December 17th | * $4,475,000 |
| Total | $12,780,430 |
* The $4,475,000 was queried in the Parks Board Dec 9th meeting and the Town identified the following necessary items that were parked in the “later “column then omitted in the 12/17 final presentation to the Town Council.
· replace piping and mechanicals
· rebuild 15 tennis courts to proper concrete base
· replace the entire 30 yr old air conditioning
· roof repairs & electrical safety hazards
· knock down racket ball court walls to create open spac
So the $1,000,000 purchase is looking more like a down payment with the Town assuming HSL losses and additional necessary investments approaching $12,000,000. We have actual performance budgets for May – July and FY 15/16, so let’s see how this deal is playing out.
| Town takes possession May 2015 | Actual Golf losses |
| May | ( $203,567)** |
| June | ($408,527) |
| July | ( $403,127) |
| Total | ( $1,015,221 ) |
Let’s then add to these three months the Town’s budgeted losses for August, September and October to look at the 1st 6 months of Town Ownership.
| May-July Actual | ($1,015,221)** |
| Aug, Sept, Oct Budget | (747,973) |
| 1st 6 mo loss | ($1,763,194 ) |
So in the 1st 6 months the Town/ Troon team will lose $593,352 more than the ($1,169,842) full year loss forecasted in the December purchase recommendation. Recall in the Town’s presentation recommending the El Conquistador purchase golf losses were projected to decline as follows:
| Total Year Loss ** | |
| FY 15/16 | ( $1,169,842) |
| FY 16/17 | ( $ 637,517) |
| FY 17/18 | ( $ 151,120) |
| FY18/19 | +$ 217,049 |
| Total Years 1-4 loss | ( $1,741,430) |
The story was that by better management by Troon and Oro Valley, plus investing and upgrading the courses Oro Valley would reach profitability in year four where the Hilton Resort lost $1,500,000 each year. A closer look at the 1st 6 months “best case” loss of ($1,763,194 ) shows that it exceeds the ($1,741,439) loss projected by the Town in the 1st 4 years of operation above.
Further on a full 12 month basis the Town’s loss will exceed the $2.0mm sales tax increase. That’s bad because the sales tax receipts will only cover losses and not pay for the investments the Town needs to upgrade the courses to meet their 4 year “break even” promise.
A catch 22 -the El Con deal is losing so much Oro Valley can’t upgrade the courses to improve results. So we can expect losses of $1,500,000 to $2,000,000 /year.
The Town will soon be looking for other income sources to salvage their golf operation. Likely choices are another “loan” from the reserve fund, raise the sales tax again or propose a “sports and entertainment district” bond shown as a revenue option in the Town’s 2015 Strategic Plan.
** source -Town of Oro Valley financial results and Budget data
