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April 2019

Course Lessee Proposes Innovative Solution to Capital Expenditure

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By Steve Eubanks

Golf’s capital expenditures are like wisdom teeth. They’re big, you know they’re there, and you know you have to do something about them. But the dread, pain, expense and the time necessary to take care of them makes it much easier to put them off.

No capital project invokes more procrastination than replacing an irrigation system. Not only is a new system always shockingly expensive, but ripping up fairways and collars to replace pipes and heads also tears out of a chunk of the business season. Then, unlike new bunkers, renovated tee boxes or redesigned greens, when an irrigation replacement is over, the customer can’t immediately see the improvement. So, too often, operators let the system slide until it’s too late. 

That’s exactly what happened in Meridian, Idaho, at the city-owned Lakeview Golf Course. Built in 1978 by a local developer who donated the course to the city, a good portion of Lakeview’s irrigation system hasn’t been touched since it went in the ground 41 years ago. As a result, at a city council meeting in February, Erik Oaas, who leases Lakeview from Meridian, called the course’s irrigation system, “a catastrophic failure now.” 

Just like with wisdom teeth, everyone knew the day of reckoning would come. But for years, everyone in Meridian pushed the problem away. Oaas assumed the lease in 2005 under the same terms as the previous lessees: He pays $6,000 a year in rent and assumes all maintenance and operational expenses, but he keeps the operating profits.

In February, because of the irrigation failure and the estimated $2.5 million needed to replace the system, Oaas went to the city council with an intriguing proposal. If some of the land around the course could be designated as a “community infrastructure district,” a CID, bonds could be issued to cover the cost of the irrigation system. But in order to qualify as a CID, Oaas needed the city to give him 10 acres to develop as high-end condominiums for adults over 50 years old. Each condo would have a fee. Those fees would be used to relieve the bonds. 

It’s a convoluted plan, but one other lessees should watch closely. If Oaas’ condo project is successful, he not only can use the funds from the assessments to pay off the bond, he has submitted a plan to the city to refurbish tee boxes and renovate the clubhouse. He will also have residents adjacent to the course, which could provide a built-in base of players.

Necessity sparks all manner of innovation. This creative financing plan might fail. But if it succeeds, it could set an example for municipal lessees everywhere.

Steve Eubanks is an Atlanta-based freelance writer and New York Times bestselling author.

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