It's Not Even About Golf Anymore?

Over the years there's been efforts for a user's fee, pay to play or some other name to make those using the amenities pay every time they went. The first year, 1960 before they started buyers signing facilities agreements, there were discussions of residents paying every time they went to Community Center (Oakmont) along with a number of other ideas. Only about 60% of the residents agreed to pay the voluntary fee.

To DEVCO's credit, in 1961 they came up with the facilities agreement, where everyone buying into the community paid a flat rate. It's worked well all these years as buyers knew before they purchased home what the conditions were. One of the interesting aspects of Sun City is, both the golf courses and the 10 pin bowling alleys were sold/given to the RCSC under different conditions and terms than the other amenities (recreation centers).

People always tell me it's not fair for golf to have to "pay their own way." The best explanation is what i have read in the newspapers of the day where the RCSC leadership was terrified of the potential of massive cost increases because of owning the golf courses. They knew both golf and 10 pin bowling could get crazy expensive and hence the deals were structured to be revenue neutral. The golf purchase agreement says: "It is the intent of the trustee that the golf courses will be managed in such a way to match income derived with the expenses incurred in the operation of the golf courses, there-by making the entire operation attain a break even point."

While golfers argue it doesn't say what it says, the newspapers of the day quote RCSC President Myron Waggoner repeatedly telling the membership will not have their dues increased due to the purchase of the golf courses. I could post the articles, dates and times but it's not really germane to this discussion. We've (the membership) been subsidizing golf for years and years. They just never bothered to tell us how much? That's what i have always resented.

With this latest batch of insanity, we come to find out, the membership is not only subsidizing golf for our members but we know we are also being asked to subsidize golf for those living outside our walls and buying the full play pass. That is insane. Can i be any more clear?

 

I call this the GM’s Ponzi Scheme. He sets a budget, which is based losing millions of dollars annually but doesn’t ever show the total picture. Then each month you tell the members that exceeded projections even though it lost money. You prop up the operation by siphoning off PIF funds and selling annual passes to outsiders for ridiculously low prices while giving them equal privileges as members without having to pay the annual assessment fee.

 

Well said Larry. Hopefully golfers get it and understand how devastating this whole concept is to them in the long run.

 

Damn, just sent my letter to the editor off to Rusty at the Independent newspaper. Hopefully it gets printed this coming Monday. It's the week before the Sept member/board exchange, but when you read it, you will see it why i wanted it posted the week before. Larry is a golfer and other than the handful of those guys who have invited their friends in who live outside the community so they have 30 or more of them, no one living here should be happy with the game being played by management (and supported by the majority of the board).

Board members have always rejected selling our amenities cheap. They've always stood fast on the idea the community and all it offers is for the members. Always. That is until the drift from how we were built finally reached the state we are in now. It's the natural outcome. When you remove the membership from the decision making process, when you strip them of their voice and start listening to the hired help, everything is boiled down to an economic equation.

It's not and it never should be. We aren't in the for-profit business. We aren't in the business of selling our amenity package to outsiders. The RCSC exists for one single purpose: "To do anything and everything lawfully necessary in the interest of the Members of the Corporation." That's it, end of story. Nowhere does it mention benefiting those outside the walls. I would argue what they are doing is a breach of their fiduciary responsibilities.

 

Will information about people running for SC office be posted online?

 

Not until after October 7th when all those running for office are required to turn in their signatures.

 

Upcoming RCSC meetings and forums you may want to attend prior to making your decision to vote for the three open 2023 Director positions:
MEMBER/BOARD EXCHANGE:
Monday, Sept. 12th, 2022
BOARD of DIRECTORS
Thursday, Sept. 29th, 2022
Both at Sundial Auditorium 9 am

CANDIDATE FORUMS
Forum I: Wednesday, October 19th 2:00-4:00pm
Forum II: Wednesday, October 26th 6:00-8:00pm
Both Candidate Forums are held at Sundial Rec Center.

ELECTION DAY: Tuesday: Dec. 13, 2022
8:00am-4:00 pm at Lakeview - Social Hall #2
Online Voting and Absentee Ballots available starting November 7th

Unable to attend the meetings or forums? View RCSC video recordings online usually the same day:
https://m.youtube.com/channel/UCdLy0Uy9sKWCJNLz37tn5ug

 

Thank You.
I will be watching for Oline Voting and Absentee Ballots on November 7
And I might just watch some of the video recordings.
Please post them at that time.
Thank You.

 

Larry referred to it as a "Ponzi Scheme," i'd be a little less caustic and call it "smoke and mirrors." This is the boiler plate pap we have been fed, and exactly why everyone living in Sun City thought golf was more than holding its own: "The Recreation Centers of Sun City, Inc. (RCSC) ended July 2022 within its operating and capital budget year to date. All Divisions except Food & Beverage have met or exceeded their net operating budget projections year to date."

This has been the standard line we have been reading for at least the past 15 years. Let me be clear, the RCSC has become a virtual revenue generator with more than 2000 home sales per year generating more than 8 million dollars per year. In addition, with 27,500 rooftops, the vast majority are paying the full $496 lot assessment, whether there is one person there or two. The other dynamic that is helping the RCSC generate revenue beyond projections is the huge number of rental units. Some call it double dipping, because both the home owner (paying the lot assessment) and the renter buying privilege cards.

Those aren't bad things when it comes to putting money in the bank. The RCSC is in a great financial position and able to do almost anything. What i'm really focused on here is helping readers understand what it means when they tell us "divisions exceeded their net operating budgets." Most people hearing that assumes they are breaking even or making money. That's the intent, for you to assume we are doing well.

In fact, what it means is the budget (projections for the coming year), have been met. Those projections are simply a historical adjustment and expected utilization and revenue. If you went back and looked at year to year trends, they would be pretty close, some years down a little but most years up a little. One former board member often speaks about how conservative the general manager was when making her forecasts. He's right, when you under-project and you do better, it's easier to pat yourself on the back (they would argue it's better to be conservative and have too much rather than too little).

I would argue, none of that matters. Here's why; budgets are just one side of the equation. Using golf as the classic example; we know they have "met or exceeded their net operating budgets year to date," forever. When you are constantly told that, you assume it's all good. What you have never heard them talk about was the expense side of the ledger. There's a really good reason for that.

The RCSC has historically lost a million dollars (sometimes way more than that) for years. Their expense side hasn't matched up with their revenue side in a very long time. I'm sorry, it just hasn't. They won't tell or show you that. Hell, most board members have been clueless about it as well. They get the same data that is fed the membership regarding revenue meeting or exceeding budgets and think all is well. The simple reality is, that statement is meaningless.

If we were a for-profit corporation, golf would be put under a microscope to try and figure out what we need to do to make it profitable, or at the very least, break even. The good news is, we are a non-profit and we don't have to make money. Subsidizing our amenities isn't unusual, or bad. Golf and 10 pin bowling were unique simply because of the way they were sold to the RCSC. I would argue, we need to subsidize golf; it's too important an amenity not to help prop it up.

What i have absolute and total disdain for is how they have treated the membership regarding golf. Pretending all is well is a fool's game. There isn't an endless pot of money, but when you ignore there are problems, you insure we will just keep throwing money at the problem. That's wrong. Both the board and the community deserve better. Then when you compound it by telling board members they are making money, it gets really ugly. Because the board makes decisions based on bad information.

All of this gets magnified by the decision to sell full play passes to non-residents. If anyone looked at the management report from the end of July, you saw more than 8000 rounds of golf went to full play non-residents. That 7 month total projected out will result in roughly 13,000 rounds played by years end. Many of those are prime time tee times that should have gone, would have gone to RCSC members had those cheap full play passes not been sold to those living outside the walls.

It's not bad enough they haven't been honest with us regarding golf, now they are giving away our amenities to those who have absolutely no right to them.

 

I know, because i have been told repeatedly by my good friends, i write too much. They also tell me i bore people/readers with details about golf and especially with numbers. Yup, guilty as charged. That said, knowledge is power and understanding numbers is important for the discussion that we will begin in earnest next week.

Yesterday i told you the confusion most have regarding golf is due to "smoke and mirrors." That's not very objective and relies on my conjecture. So rather than taking my word for it. let me walk you through the sludge of numbers to help you get your head around where this is going. Unfortunately when the Pandemic hit and organizations that post data were closed, they've been slow to get back up to speed.

The latest data we have to work with that is posted is from the 990's for calendar year 2019. That's okay because it will give you a window into how disingenuous this whole picture has been we've (the membership and board) been shown over the years. In fairness, 2019 was one of the most heavily subsidized years by the RCSC for golf, but that's not what i am asking you to look at. I've already agreed, we need to subsidize golf (at least for Sun City residents).

This 990 form was received by the IRS on 6/8/21 and was for calendar year 2019. For some reason 2020 should be up and posted by now, but it's not and 2021 should have been submitted (neither are available).
Part 3. Statement of Services and Accomplishments lists these figures (reported to them by the RCSC).
Golf. Expenses: $8,011,411. Revenue: $5,143,779. (a healthy 2,867,632 dollar difference).

We've posted these figures before, it's not news, but there is a purpose to this exercise. Next i will post the figures from the RCSC website's financials for golf (year ending Dec 2019); 3 categories (pre-paid greens fess, pre-paid green fees, non-resident, daily green fees and surcharge) and adjacent to it their budgeted projections for the year. Stay with me and you will see why this matters.
2019 Year to date actual: $5,230.093.
2019 Year to date budget: $5,295,173.

Oddly, this was one of those years where they under-projected revenues. Golf was falling off and exactly why the pandemic was their salvation, or so they claimed. You can see a 60 plus k shortfall, but certainly not the end of the world. I went back to the January 1, 2020 management report and here is what it said: "The Recreation Centers of Sun City, Inc. (RCSC) has ended December 2019 within its operating and capital budget year to date. All Divisions have met or exceeded their net operating budget projections year to date with total operating income $201k (1%) favorable to budget and operating expenses $691k (4%) favorable to budget. Income favorability is driven by higher than budgeted income in the Building and Infrastructure, Bowling and Member Services Divisions partially offset by lower Golf and Food Services income. Operating expense favorability is primarily driven by lower payroll and utility expense across multiple Divisions slightly offset by higher Repair and Maintenance costs. Year to date operating excess without projects favorability is $858k (22%) favorable to budget."

Here is the point of this exercise. We know from the 990's they lost nearly 3 million dollars in golf in 2019. We know from looking at their year end financials for 2019 they didn't even meet their budget projections on the revenue side. We also know when we read their year end summary "all divisions have met or exceeded their net operating budget projections year to date." Their words, not mine.

The point is when you read what they tell us, why would anyone think golf lost 3 million dollars (that was their worst year by the way, as far back as we can go). The reality is the "smoke and mirrors" of what they are saying and what is real is far removed. I've never been anti-golf, never. What i have been is frustrated by is being lied to, or is just not told all the details?. There's not a nice way to say it, there just isn't.

It's easy to say, well she's gone, things are changing for the better. But, are they? Are we finally being told the truth? Stay tuned as we examine the information we have on hand to see just how 2020 and 2021 were our "salvation."

 

Bill, you don't write too much. Unless an organization provides a current income and expense report compared to current budget, as well as a comparison to prior year(s), a management report like the one provided is useless. Nobody should have to dig through a two year old Form 990 to figure out what's going on. That type of report is not only disingenuous, it fails the responsibility for full disclosure IMO. Maybe I'm missing something, but in my past experience, this is not how we reported our finances as a non-profit organization.

 

It seems to me that this type of reporting to the membership, if not illegal, is certainly unethical. If in fact the board wants full disclosure and transparency, then it’s time to take management to task and start providing complete reports instead of the doctored up pieces of fiction that are presently being supplied.

 

Thanks to both Linda and Larry for their comments. I came from the not-for-profit world where the absence of transparency wasn't all that unusual. Half truths were the norm, spin was a constant and when asked questions, indirect answers were in abundance. Telling people only what they want them to hear was an art-form.

The RCSC has perfected that style of communication. 15 plus years makes those doing it pretty proficient at it. My first real taste of it was back when the now departed gm convinced board members to change the grandfathering terms promised to members in 2003. It was when the members moved from per person assessments to per property. The guarantee was anyone living here would be grandfathered on a per person basis. Included with it was even if they sold and moved to a different home, they would be guaranteed the per person rate.

Somewhere around 2010 the new general manager came to understand, the transition wasn't moving fast enough for her. Often times when a spouse would die, the member would buy a smaller unit and she (occasionally a he) would take the single payment with them rather than paying the full lot assessment. The gm told board members it was never supposed to include sales of existing homes. Board members who passed the grandfathered clause showed up and said it did in fact. It mattered not because what the gm wanted, the gm got. I almost came to blows with one of the board members when i asked him if the absence of truth was in fact a lie?

Since that day, i have questioned almost everything they did. I watched in horror as they buried numbers and no one seemed to care. As long as the lot assessment didn't increase, everything was good. It was the benchmark. Think about it; they've been shoveling money into golf yet they've still increased our assets. Apparently that's all that matters. We know the terms and conditions golf and 10 pin bowling were purchased under.

Over the years, the gm simply never acknowledged them. She quietly and confidently kept pouring money into them. As i have said repeatedly, we should subsidize golf, its that important an amenity in Sun City. On the other hand, we should never subsidize golf for those living outside the walls. But, i digress.

My sincere hope was, when the gm retired, the new one would have the capacity, the urgency for a better understanding of the truth; the whole picture, not just the portion they want you to see. He actually got fairly high grades when he showed us the sorry state of technology. When he dealt with Viewpoint Lake like he did. When he presented the long range planning budget (as fractured as it was).

Then it all turned to shit...at least for me. He told me point blank, "golf saved out butts during the pandemic." That was the end of last year (2021). Then this year he stood in front of the board and an angry crowd and told us golf made money in 2021. Without any data to back any of it up, we are left to our own devices. It's not that i don't trust him, but when it comes to golf, i want to see those figures. Sorry, but i need to verify.

It's why i have been hoping to see the 990 for 2020. In fact, i would even more like to see the ones from 2021. Here's why: In 2019, we know the expense side the RCSC reported to the IRS was a touch over 8 million dollars. We know inflation the past two years has been off the charts. Costs have increased 5-10% depending on the items being purchased. Does anyone reading this believe the expense side of the ledger went down the past two years?

Let's say, the RCSC pulled off the miracle of a lifetime and the expense side stayed at 8 million dollars. When we add up every dollar taken in by the RCSC for golf in 2020 and 2021, they never showed more than 7.2 million dollars for each year. The good news is, they collected way more than budgeted. So what? They still lost a ton of money.

We know the pandemic increased the rounds of golf played. That's a good thing. They went from roughly 300,000 rounds to 350,000. We know those living outside Sun City liked the prices they were paying for a full round cost of golf, those numbers increased as well because they were cheaper than most other courses around us. In Sun City the winter rate was $46; in Sun City West $75 and in Sun City Grand, over $100. Our rates were also cheaper than any of the three country clubs in Sun City. Those are all good things.

The bad news came when the pricing on full play non-residents was so freaking low and avid golfers started buying them. They clogged our courses and were paying (by the RCSC's admission) $20 per round. Then when you factor in the golf car that one golfer could buy for $500 and charge his buddy to jump in the car with him, it came out to as little as a $5 golf car rental fee (that was guaranteed to be there for them BTW). Then compound it by letting them bypass the lottery by joining a group of 30 with a small charge and it was the perfect storm. Members had a harder time to access prime time tee times.

Think about it...it's mind numbing.

 

It dawned on me yesterday, trusting what i say without numbers is much like taking the RCSC at face value. So rather than just telling you what i think, i'll take a moment here and show you data, first from the past three years of the 990's the RCSC filed with the IRS and then the last two years of financials from golf off their own pages. It will give you an idea on the expense side of the ledger (we've never seen), and the year end totals that are often lost on the revenue side.
Expenses from 990's filed with the IRS Part 3.
2015: $6,632,002.
2016: $7,334,931.
2017: $7,802,129.
2018: $7,729,191.
2019: $8,011,784.
This is sadly the last year posted, but gives you a snapshot of how expenses have increased.

On the other side of the ledger is revenue, these figures are taken directly from the RCSC's financial pages. I am going to post every line item.
December 31, 2020:
Prepaid green fees (members): $1,818,144.
Prepaid green fees (non-resident): $$148,450.
Daily green fees & surcharge: $4,076,461.
Range fees: $273,451.
Cart rental: $$387,296.
Merchandise sales: $160,948.
Total: $6,864,750.

December 31, 2021:
Prepaid green fees (members): $1,915,571.
Prepaid green fees (non-member): $229,447.
Daily green fees surcharge: $4,130,823.
Range fees: $295,688.
Cart rental: $457,114.
Merchandise sales: $161,413.
Total: $7,190,056.

Based on the IRS 990 filings, not every line item is included in the revenue column. I suspect because range balls, cart rental and merchandise sales all have related costs with selling them that washes profits down to near break even numbers. Rather than argue that point, i am including every nickle they show on their financials. Short of one year, 2018, where they had a reduction in costs, every other showed modest year to year hikes. The real bugger was the composite 5 year bump where the spread ($6.6 million to a little over 8 million was significant).

What we know is the pandemic drove up the number of golfers; as stated that's a good thing. What we also know is that inflation over those same years, 2020 and 2021, was crazy. Even if they miraculously had no increase in expenses, they still lost money. I suspect some wonder why i am such a zealot when it comes to this topic? It's not hard to understand, i simply am tired of the half truths we've been fed. I have a number of friends and acquaintances that golf and they continually tell me golf is making money.

I don't blame them. I've watched for the past 15 plus years the game being played. If Bill Cook is going to be successful, he has to stop playing the former gm's game. Rigorous honesty is essential, not because i say so, but because that's what the membership should both expert and demand. If you haven't been paying attention, then it's time you start. Water is going to become more scarce every year. The state is going to force us (the RCSC) to spend a fortune to make our courses more water user friendly.

In the letter that will appear in the Independent this Monday (i hope), you will see a number you will first look at, read and say, "that's impossible." I suspect the RCSC will tell you it's not possible. It's really simple to prove it one way or the other. Open the books and show us. And to be clear, no more hiding golf course buildings under the amenity side of the ledger. Put every number out there so we know who is right or wrong.

The whole point of this exercise and more importantly of the letter i sent has little to do with golf or the subsidies we will have spent by 2027. This is purely a reflection point where we get honest with the entire membership and come to grips with the failed logic of giving away the amenities we have all paid for. It simply makes no sense.

 

"It's elementary my dear Watson." That was the phrase Arthur Conan Doyle penned when Sherlock Holmes used explaining how he came to understand what happened to his good friend and associate Dr. Watson. Basically he was telling him it was easy to understand what happened. Corny? Not really, and in the case of what is happening on Sun City golf courses and why members are angry, it is elementary.

Like most things, the answers are right before our eyes. The problem is for the past 15 years we've been trained not to look. The only things that mattered were; did the RCSC raise our yearly lot assessment? And the secondary concern did every department work within their yearly budgets. We know now, it mattered little because they were just figures they put on paper with no relationship to reality.

What happened in April of this year still stuns me. Long time members of the golfing community spoke out. They were frustrated by not being able to get tee times. They gave the RCSC a chance to fix it; their solution was to proclaim it really wasn't a problem. To try and pacify golfers they passed a small increase in the cost of the full play non-resident passes. They initially proposed it for the end the year, but in July they hurried it along. The price for non-member full play pass with golf car went from $2500 to $2750 and without golf car $2000 to $2250. Didn't mean much because in July they sold a couple more passes than the previous July.

The real issue isn't the increase (or the revenue), it's the fact these non-residents are taking tee times from members. That's always been the problem. The fact they pay less than members is foolishness, but even more troubling is their ability to access the courses and the prime time tee times on equal or better footing is insanity. I've said all of this before, but now let me help you all understand why this has become such a butt-ugly issue.

The simple reality is it's all captured in the numbers below:
Year-end revenue for non-resident full play golf passes:
2017: $82,726.
2018: $97,542.
2019: $124,739.
2020: $148,450.
2021: $229,447.
2022: $117,103. (through July of 2022).

There was no increase in the cost of the pass until July of this year, the numbers simply reflect the exploding number of passes sold. Every additional pass puts more stress on securing prime time tee times for members. Worse yet, if they are joining small groups of 30 or more, they are by-passing the lottery completely.

Not hard to understand is it? In fact, dare i say; "elementary my dear Watson."

 

I know this has been an ordeal if you've stayed with it and followed the bouncing ball. My apologies, but it's how i like to break down problems, in a linear fashion using data to make or break my case. I also was trained to be able to think through the arguments from the other side, be prepared to respond and rebut them when they do come.

So, just for shits and giggles, let's make their argument for them. Here it is in a nutshell: "We need the money." Those full play non-resident passes generate a lot of revenue and by selling them, we can keep the cost of golf low for the members." Utter and complete nonsense. Selling cheap golf to outsiders is a non-starter. Let's start with the most basic of concepts; the RCSC hasn't cared about golf being self-sustaining in years. If you think that's not true, why have they failed to show the expense side of the equation ever; let me shout it, EVER. Had they, we would have known how much we were subsidizing the game. We didn't; they simply didn't care.

There's an even more compelling argument and one that is backed up by the numbers. I'll simply use their financial data to support my position using one line item:
Year-end revenue for daily green fees and surcharge:
2017: $3,334,471.
2018: $3,280,615.
2019: $3,343946.
2020: $4,076,461.
2021: $4,130,877.
2022: $3,115,949. (through July, 2022).

For those who don't know, these figures represent all of the golf rounds sold that aren't coming through the full play passes (both resident and non). What you are seeing is a steady and significant increase of revenue from golfers, both inside and out, who are paying more for their rounds of golf. The surcharge (available only to members) is an interesting concept, because you are buying a yearly card and every time you play, you pay a reduced rate (dependent on the time of year).

The point of this exercise is to help you understand, golf did make a resurgence during the pandemic. What it also tells us, more golfers were willing to pay full price for golfing on Sun City courses. Why? Because our full price rates are lower than other courses around us. Our rates are cheaper than the 3 country clubs and cheaper than either Sun City West and Sun City Grand (by a lot). Our courses are a bargain price, even when playing the full outside rate by non-residents which is $46 public/non-guest (Nov 1 to April 30) and $27 the rest of the year.

This is an odd time to talk about prime time tee times. Summers are the wild, wild west for golfers. Almost every golf course in the Phoenix area runs summer special rates. Open tee times are in fact, lost revenue. For those that don't know, there's virtually no open tee times in season. Starting in November and running through mid April, the RCSC runs a lottery system to get those desirable tee times. Those tee times should belong to the members. Let me repeat that loudly: THOSE TEE TIMES SHOULD BELONG TO MEMBERS!

They don't, simply because of the increased number (150 plus) non-resident full play passes sold. The outsiders can join in the lottery via the web portal; just like a member. Worse yet, until someone tells me otherwise, they can join small groups of 30 and bypass the lottery system completely. The easy question to ask is; how often does that happen? Do you think, come the September member/board exchange meeting they will have the answer to that question?

As you follow along, you quickly come to see the folly of outside golf sales for bargain basement prices. The prime time tee times they are taking would have easily been filled by members; the rightful owners of them. It's also clear, non-members are buying open tee times and paying the going rate; which is $46 Nov-April 30), and $27 the rest of the year. That's a good thing, because it does help pay for the courses.

The real question becomes, not how much revenue we would have lost if there were no full play outside resident passes sold, but how much more would we have gotten if members had been able to get those prime time tee times and the subsequent sale of full priced golf on those remaining open tee times? Was it lost revenue or would we have made even more?

All of which is really a moot point. This discussion isn't nor should it ever be about revenue, but the simple fact the amenities belong to us, the membership. Tomorrow you will see and read exactly why. It will blow your mind.

 

I can't even imagine what those numbers would do to golf's deficit, maybe they would help?

I have heard the argument that you, Bill, are wrong because of depreciation Now, admittedly, I'm not a financial guy, but I'm thinking if the buildings aren't associated with the game of golf, then depreciation would not have a great effect? If the buildings aren't included then what's left to claim depreciation on, lost golf balls and aging golf carts?

Like I said, I'm no financial guy, but perhaps some knowledgeable person could shed some light on this and straighten me out? Seems to me, moving the buildings to the same side of the ledger and claiming depreciation would only help the numbers, but what do I know!

 

Tomorrow you will see and read exactly why. It will blow your mind.

Bill,

Are you referring to your Letter to the Editor likely to be published in the Sun City Independent, Wednesday, September 7, 2022 edition?

Most Sun City residents get the free tossed paper delivered on Tuesdays. You must be “special” to get yours on Mondays!

If you post about your submission here on TOSC on Monday, perhaps you can include the letter? Then we’ll know what you’re talking about! Can hardly wait to read it!

Thanks for your consideration.

 

I do get mine Monday morning as do many of those living in the northern section of Sun City. I'll post it tomorrow and would love to hear your feedback.