The mayor of Beverly, Mass. and the commission for the city-owned Beverly Golf and Tennis Club are pleased with the club’s performance under the operation of Golf Facilities Management Inc. and want to extend its contract. But questions have been raised as to whether the management firm is paying a fair fee in comparison to the profits it has been making through the arrangement.
When recommending that the city of Beverly, Mass. renew its management contract with Golf Facilities Management Inc. (GFMI) for the operation of the city-owned Beverly Golf and Tennis Club, Mayor Mike Cahill and commissioners of the Beverly Golf and Tennis Commission cited the management company’s strong performance as the main reason for that recommendation, The Salem (Mass.) News reported.
But before proposing that the city extend the operations contract for another five years, the News noted, Cahill and the commission didn’t include details on Golf Facilities Management’s annual gross revenues, which would indicate how profitable its contract with the city has been for the management firm.
The recommendations of the Mayor and commissioners are now before the Beverly City Council, which must approve the contract extension. The City Council was scheduled to meet on the night of March 10, and Cahill told the News that while reports submitted by GFMI do not include gross revenue totals for the management firm, city officials were working on obtaining those numbers in time to present them to the Council for that meeting.
The city signed a five-year contract with GFMI in 2010, the News reported, and 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, the News reported, and those figures must include revenue from golf operations as well as from the club’s pub, restaurant, function rooms and tennis courts.
Preliminary figures compiled by the city at the request of the News showed that the Golf and Tennis Club produced just over $1.5 million in gross revenue for 2013. But as of March 7, the city did not have complete figures available for the other three years under GFMI’s management, the News reported.
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, the News reported.
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.”
Chris Carter, co-owner of Golf Facilities Management, told the News that 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 the reports do not total the monthly revenue, Carter said.
Carter estimated that the club’s 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 added. “It’s highly affected by weather.”
Bill Lowd, Chairman of the Beverly Golf and Tennis Commission, told the News that 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 [Massachusetts] 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.
The city has the option of putting the contract out to bid again, the News reported.
“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 of Beverly had contentious relationships with two previous companies that managed the golf course, the News reported. The city is still trying to collect payments from Bass River Golf Management and had several legal battles with Johnson Golf Management, it was noted.