Golf course lease approved

It took two votes at the Whitefish City

Council’s Dec. 6 meeting to get a long-term lease approved for city

land used by the Whitefish Lake Golf Club.

Following a public hearing in which one

speaker questioned whether the city was getting enough money from

the golf association, a proposed lease negotiated by City Manager

Chuck Stearns and golf association board members Terry Nelson and

Paul Johannsen failed to be approved by a 3-2 vote. Councilors John

Muhlfeld and Ryan Friel were in support.

But at the end of the meeting, when the

councilors typically raise new topics or discuss their votes,

councilor Turner Askew said he was “disturbed” by his vote and

motioned to reconsider the vote.

As it turned out, while the councilors

unanimously voted to reconsider the vote, Askew was the only one

who changed his vote. The proposed contract was approved by 3-2,

with councilors Chris Hyatt and Phil Mitchell in opposition.

The Whitefish Lake Golf Club has

operated the Whitefish Municipal Golf Course since the 1940s. The

current 20-year lease would expire in 2018, but the golf

association has plans to build a $750,000-plus maintenance facility

and wants a long-term lease to assist in lining up financing for

the project.

As negotiated, the new contract calls

for increasing the base pay to the city from $17,000 to $22,375,

adjusted every five years for inflation, in addition to 3 percent

of the net profit. The lease would be for 30 years with a 20-year

renewal option.

While several councilors had their

doubts ahead of time about the proposed contract, points raised by

Michael Collins during the public hearing may have influenced the

first vote.

Using the golf association’s last

available audited financial statement, from 2008, and using

accepted financial practices, Collins concluded that the city

should collect from $200,000 to $300,000 a year.

Basing the lease on 4 percent of the

land value and the value of the 180 acres of land at $50,000 per

acre, Collins said the city could expect to collect $360,000. He

noted that Whitefish Mountain Resort pays 3 percent of the raw land

value of Big Mountain to the U.S. Forest Service, and shopping

centers could expect to pay 10-15 percent of their land value.

A lease also could be based on gross

revenues, Collins said. The golf association reported in its 2008

audit taking in about $1.6 million in green fees, memberships and

storage or trail fees, another $2.2 million in clubhouse revenue

and $863,943 in golf shop revenue. A lease rate of 6 percent based

on $4.7 million in total revenue would provide the city with

$286,000 per year, he said.

Collins noted that about 0.43 percent

of the golf association’s gross revenue goes to the city lease,

0.27 percent to state income tax and 1.12 percent to federal income

tax. Lowering the depreciation rate, which Collins characterized as

“high,” from $435,000 to $300,000 would free up $130,000 for a

higher payment to the city, he said.

“In summary, there appears to be

significant cash flow to accommodate a city lease payment in the

range of $209,000 to $340,000,” Collins said.

The city has a fiduciary responsibility

to insure it gets a fair value for all city-owned assets, he said.

In addition to providing audited financial statements for 2009 and

2010 and appointing a citizen committee to draft a new lease,

Collins called for annual independent audits and limiting the terms

of the lease to 10 years.

Both Nelson and Johannsen, along with

mayor Mike Jenson, responded to Collins’ numbers and calculations.

Among the many points raised:

• The city has never invested any money

in the golf course, and it failed in the past to manage the

facility.

• The city doesn’t own all the

land.

• The golf course draws large numbers

of tourists, who spend money in town and pay resort taxes.

• Golf course crews maintain the city

cemetery and nearby soccer fields.

• The city and the golf association

jointly hold water rights used at the golf course, which are facing

adjudication.

• Other public facilities owned by the

city, including the O’Shaughnessy Cultural Arts Center, Stumptown

Ice Den, The Wave and the Whitefish Library, are not treated as

revenue sources for city government.

“We’re being penny wise and pound

foolish about this,” Askew said about changing his vote. “I made a

mistake.”

Mitchell, who worked for years building

golf courses and was once president of the Whitefish Lake Golf

Club, proposed amending the contract to eliminate the percentage

take of the net profit, raising the base pay to $30,000 and

requiring annual financial audits.

Hyatt wanted similar amendments, but

when Jenson pointed out that the council can’t amend a contract

proposal, and after Nelson and Johannsen said they wouldn’t accept

the amendments, Hyatt’s motion to table a vote on the lease died

for lack of a second.