SalemNews.com, Salem, MA

March 10, 2014

Golf club company's revenue figures have holes

Monthly reports to city left out totals

BY PAUL LEIGHTON
STAFF WRITER

---- — BEVERLY — When recommending that the city renew the management contract for the Beverly Golf and Tennis Club, Mayor Mike Cahill and club commissioners cited the management company’s strong performance as the main reason.

One thing Cahill and the commission didn’t mention is how much money that company is making by running the city-owned club.

Cahill and the commission chairman acknowledged they did not know Golf Facilities Management Inc.’s annual gross revenues before recommending that the city extend the company’s contract for another five years.

Those recommendations are now before the City Council, which must approve the contract extension. The city also has the option of putting the contract out to bid again.

“We could travel a different path, but the reality is that for the first time in a long time there’s a high degree of satisfaction on the city’s part, the commission’s part, and members’ part that this is a management company that’s doing an outstanding job,” Cahill said.

The city signed a five-year contract with GFMI in 2010. The deal called for the company to pay the city an average of $340,000 per year in exchange for the right to manage the club and keep most of the revenue above that fee.

The contract also has an option for the city to extend the contact for five more years beginning in 2015, with the average annual payment to the city increasing to $400,000.

The contract requires GFMI to report gross revenues to the city on a monthly basis. Those figures must include revenue from golf operations as well as from the club’s pub, restaurant, function rooms and tennis courts.

But Cahill said the reports submitted by GFMI do not include gross revenue totals. He said city officials are working on obtaining those numbers in order to present them to the City Council tonight.

Preliminary figures compiled by the city at the request of The Salem News showed that the Golf and Tennis Club produced just over $1.5 million in gross revenue for 2013. As of Friday afternoon, the city did not have complete figures available for the other three years under GFMI’s management.

According to a report by the Massachusetts Office of the Inspector General on municipal golf course management contracts, cities and towns should know how much money vendors are making before they enter into any agreements.

In a letter introducing the report, then-Inspector General Gregory Sullivan said, “Many municipalities appear to have no assurance that they are receiving a fair share of revenue from vendors.”

“Knowledge of a facility’s financial status is critical for municipalities,” the report said. “It is one of the best methods to ensure the course is being operated properly and in the taxpayer’s interest.”

Golf Facilities Management co-owner Chris Carter said he submits monthly reports to the Beverly Golf and Tennis Commission that break down the number of rounds played and the revenues from the club’s 19th Hole Pub. But he said the reports do not total the monthly revenue.

Carter estimated annual revenues have gone up “5 to 10 percent” since 2010 when the company first took over.

“It’s not an easy industry to spit out a formula and see what it’s worth,” he said. “It’s highly affected by weather.”

Beverly Golf and Tennis Commission Chairman Bill Lowd said the commission does not know the company’s annual revenues, but recommended its contract be renewed based on their performance.

“They’ve been terrific,” Lowd said. “The course itself, the overall facility, has made tremendous strides in coming back to one of the better golf courses on the North Shore.”

The commission voted 7-0 to recommend that the city exercise the option for GFMI’s contract extension, saying the commission has “worked very well” with the company.

That cooperation is a contrast from the city’s relationship with the two previous companies that managed the golf course. The city is still trying to collect payments from Bass River Golf Management and also had several legal battles with Johnson Golf Management.

Staff writer Paul Leighton can be reached at 978-338-2675 or pleighton@salemnews.com.

 

 

GFMI’S PAYMENTS TO CITY

Under current contract Option for next five years
  • 2010: $310,000
  • 2015: $380,000
  • 2011: $325,000
  • 2016: $390,000
  • 2012: $340,000
  • 2017: $400,000
  • 2013: $355,000
  • 2018: $410,000
  • 2014: $370,000
  • 2019: $420,000