by Matt Rosenberg February 19th, 2013
A recently-issued report from Washington State Auditor Troy Kelley says the City of Tumwater is breaking state law by continuing to fund its money-losing golf course with revenues from its utility fund which are paid back so slowly the loans are a “permanent diversion” of taxpayer monies. The public facility owed nearly $2 million as of December but the city says it won’t change its practices because keeping the land open and green is crucial to connecting regional recreation assets, and the course will eventually see an uptick in revenues from hoped-for redevelopment of the adjacent Brewery District. Tumwater’s response stands in sharp contrast to that of two other Washington cities recently faced with similar audit findings about public golf courses beset by red ink. Lynnwood in Snohomish County is exploring contracting out the operation of its golf course or selling it, and Sumner in Pierce County says it will seek to sell its facility.
In the accountability audit report, Kelley’s office says Tumwater has been propping up the city owned Tumwater Valley Golf Club with loans from the city’s utility fund since 2000 and that as of December 1, 2012 the balance owed to the fund was $1.9 million. “The significant delay in repaying the inter-fund loan constitutes a permanent diversion of funds. Permanent diversions of restricted funds violates state law,” the audit says. Kelley’s spokesman Matt Miller confirmed the audit is alleging the city is in violation of state law. He added that all the auditor’s office can do is highlight the problem, and continue to monitor the situation.
State law says such loans are okay if they are formally approved by local officials; if they are temporary; and if a reasonable rate of interest is paid. But Tumwater has been far too slow paying back the loan, and a plan approved in 2011 to repay $185,000 a year plus interest each month isn’t realistic because the facility is losing money, making it difficult if not impossible to cover operating expanses and the debt to the utility fund, the audit says. Expenses for th city golf course in 2011 were $1,318,974 but revenues were just $943,214.
In the audit report the city replies the outstanding balance on the golf course loans from utility ratepayers had actually been reduced to $210,148 in 2008 but badly-needed clubhouse repairs necessitated more loans, with all principal and interest to be paid off “by early 2023.” The city also stresses in its reply that operating the golf course is “a means of preserving open space in the city adjacent to Pioneer Park, (the) city’s major sport and recreation venue.” It will “serve as a vital link” to a planned biking and walking path connecting several city parks with Capitol Lake in Olympia, downtown Olympia and Puget Sound and will complement an envisioned downtown revitalization in Tumwater involving the shuttered Olympia brewery property. This in turn will boost golf course revenues, according to the city. The city also says in its reply the utility fund has sufficient reserves.
However Tumwater faces a series of needed utility upgrades and must pay for them in part, by borrowing. The city’s 2013 preliminary budget states:
“Mandates on the city to address water and environmental quality, along with the need for maintenance and repairs, and to prepare the city’s utlities for growth will result in numerous utility funded projects. Low cost state loans have helped make these projects viable at this time.”
Other cities in Washington have also been cited recently by the state auditor for running an unprofitable golf course and using unrelated city funds to keep them afloat, but have responded differently than Tumwater. The City of Lynnwood in a state audit very similar to Tumwater’s indicated that it would stop borrowing from its utility fund to sustain its golf course and would examine whether to close it or contract it out to a private operator who could turn a profit. Similarly, in a response to a critical state audit, the City of Sumner said it had decided it would try to sell off its municipal golf course. It said “the golf course’s funding challenge” is “long-term;” that envisioned financial self-support 20 years in “is not coming to fruition;” and that the facility is “a constant drain” on the city’s finances.