05-28-2002 Council Packet - Laserfiche WebLink

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ORONO GOLF COURSE EXECUTIVE SUMMARY Page 2 - OPERATIONAL AUDIT • Volume Projections. The length and design of the two opening holes has forced management to operate with a ten minute interval tee time system. In a 200 day season, the ten minute system provides 11,888 tee times while an eight minute interval system would provide 15,102 tee times. Changing to an eight minute system would provide 3,214 additional tee times each year, an increase of 27 percent. In terms of future projections, a shift to an eight minute interval system is assumed once hole renovation is complete in June of 2003. Assuming tee time utilization rates consistent with past history, round projections inaease an additional 2,000 to 3,000 rounds at>ove past annual averages starting in 2003 and stabilizing in 2004. • Rata Structure. A methodology has been develop^ for future rate establishment (page 20). The base nine hole green fee will increase in one dollar increments every two years. Percentage relationships to the base fee are also established for all other premium and discounted green fees. • Operating Rasulta. The chart below summarizes projected operating results beginning in 2003. the first year of projected debt service. 2003 2004 *2005 2006 2007 Rtvanue 284.094 306.692 315.820 331.663 340.272 Operating Expense 108.956 204.925 211.072 217.405 223.927 Capital Improvement 21.000 25.000 33.000 15.000 25.000 Net Cash Flow 64,138 76.767 71.748 99.258 91.345 Debt Service 42.215 42.215 42.215 42.215 42.215 Debt Coverage Ratio 1.52 1.62 1.70 2.35 2.16 Net Income 21.923 34.552 29.533 57.043 49.130 Cumulative Income 21.923 66.475 86,006 143,051 192.181 * SUbliuuon r>omi tor Vohmw and Optraiing Margin • Financing. The project cost of $410,000 is assumed to be 100% financed through either internal financing means or gross revenue bonds. In either scenario, debt service is calculated at a 15 year term with 6 percent interest. Annual debt service equals $42,215. Based on net cash flow projections, the project has a supportable loan amount of $573,000 (rounded). After appropriate deductions for financing costs and construction period interest, the supportable construction cost of the project is $544,000 (rourrded). • Community Benefits. Investing in appropriate upgrades to both the golf course and clubhouse accomplishes several things for the City of Orono. From a recreational perspective, the City is able to increase the level and quantity of golf product offered to Hs residents. The end result is more value for the resident's golf dollar and an improved recreational asset. From a financial perspective, an increase to net ir>come from golf course operations occurs on an annual basis. By year five of the business timeline, annual net income exceeds ^0,000. In addition, the City increases its golf course asset value. Currently, business valuation of the facility is approximately $450,000 dollars. Ten years from expansion completion, the business valuation more than doubles to over 1.1 million dollars. McMwiMt C«ir Uc. 1M2