Municipal Golf – Unfair Competition?

For years, the debate has raged over whether municipal golf courses represent unfair, subsidized competition for privately owned, for-profit golf course facilities.  The golf course industry continues its contraction and courses compete for market share in an ever-shrinking market.  On the municipal side, local governments, feeling the pressure from ever tightening budgets and declining golf course revenues face political pressure to shed subsidized assets.

Municipal golf began in America in 1895 with the opening of the Van Cortland Golf Course in New York City as a part of their Parks Department.  In those days, the vast majority of golf courses in the United States were exclusive, private clubs and golf was considered a game for the wealthy elite.  Now, roughly 75% of all golf courses in the US are either daily-fee or municipally owned and welcome public play.  Many municipal golf courses (about 16-17% of the US total) were developed by communities seeking to provide a recreational amenity for their residents while possibly generating an economic profit.  As golf has become more competitive, and in some cases where municipalities exercised poor management, these facilities have developed financial deficits, become a drag on the public budget and unpopular political footballs.  Additionally, these municipal courses don’t contribute to local tax revenues since most are exempt from local real estate taxes, and possibly other tax burdens.  Depending on the lease arrangements, sometimes the local government subsidizes the lessee for a period of time.

Municipal golf courses are operated either by the local governments, contract third party management or leased to private operators.  Therefore, the private sector is now involved in an increasing number of municipally owned golf courses.  Should those facilities be exempt from real estate taxes?  Real estate taxes for golf courses can often constitute a major expense, depending on the local tax rates in effect.  It’s not uncommon for some courses to have six figure annual tax bills.  If a course generates 25,000 annual rounds and pays $125,000 in real estate taxes, that requires them to charge $5 per round just to pay the taxes.  In areas with lower tax rates, or as compared to tax exempt municipal courses, that creates a competitive disadvantage.

To those opposed to municipally owned Golf courses, theaters, pools and recreation centers as government enterprises built for the sake of recreation they perceive each as examples of government unfairly competing against the private market, using taxpayer dollars, in order to provide non-essential services to the public.  To those in favor of municipal involvement in these activities, they are perceived as improving the quality of life in the community and making a better place to live.  Is it worth the cost?  Does this violate free enterprise by raising the bar for private operators, making it harder for them to compete?  Those opposed ask: At a time of multiple tax increases and constant discussions about the perceived lack of funding for education (and other things), why are local governments competing against private providers who could be supplying additional property tax dollars?  In many areas, especially big cities, municipal golf is the only alternative to costly private club membership, which is out of the reach of most people.  It is those munis that are often the homes of local First Tee facilities and where non-country club kids can get access to the game.  That’s just as important as the (admittedly legitimate) argument that municipal golf competes unfairly with private enterprise.

Golf needs more “affordable” facilities.  If municipalities supply that, they serve a purpose.  Does it hurt competing golf course owners?  Absolutely.  But, it may help the growth of the game in the long run.  Time will tell and whether the competition is unfair will be determined on a case by case basis.