Lean, not green, is the immediate future for Black Canyon course

Mike Robuck

MONTROSE - According to a market analysis, the Black Canyon Golf Club does have a financially viable future, but the downside is it won't operate in the black for at least four to five years.

The city of Montrose and the Montrose Land Company, whose members own the Black Canyon Golf Club, decided to split the cost of a $4,270 market feasibility study last year after members of the Montrose Land Company approached city council in September in regards to the golf course's financial woes. Aurora, Colo.-based THK Associates delivered the market study last month.

Buck Miller, the president of the Montrose Land Company's board, and Steve Skiff, the director of golf operations, have said that the golf course was struggling financially because of increased competition from other courses in the area, which also reflects a state and nationwide trend. According to a previous study by THK Associates, the total number of golf rounds decreased across the nation from 518.5 million in 2001 to 503.4 in 2002. The average number of rounds at public courses in Colorado dropped from 42,768 in 2000 to 40,317 in 2001, although they rebounded slightly in 2002 with 40,370, according to THK's 2004 study.

THK's market study said the Black Canyon Golf Club would lose money over the next four to five years until the population base in the area increases enough to pull the golf course out of its financial tailspin.

The study said the years of operating loss could extend beyond four or five years if the golf course takes on capital improvement projects or makes major equipment acquisitions. The study estimated the golf course would lose approximately $128,041 between this year and 2008 before posting revenues of $7,777 in 2009.

"The thing that struck me is that the numbers aren't as bad as one might think," City Manager John Schneiger said. "We've gotten the crux of what we needed, which is a financial look over the next 10 years and when Black Canyon can operate in the black again. Those are the main issues. The study shows that there may be an oversupply of golf courses right now, but there is a definite future for Black Canyon. Black Canyon should be in the black by 2009, but that doesn't include major capital improvements or equipment purchases."

While there currently is an over-supply of golf course to golfers, the study said Black Canyon is well positioned to capture the niche of golfers who are looking for more affordable options as the population increases.

"We hadn't done anything in terms of what they (THK) did with the population trends," Miller said. "They've taken a look at our target market, which is Ouray, Montrose, and Delta counties, and allocated a market share. They have us at 18.5 percent of the market share, Bridges at Black Canyon projected at 11.1 percent, Cobble Creek at 22.2 percent and Devil's Thumb at 22.2 percent, as well as numbers for others. What's encouraging about that is without increasing our market share, by simply increasing the projected number of golfers in the area, we should be back in the black by five years.

"We don't know for sure what is going to happen with Cobble Creek, but normally the fees go up once all of the lots have been sold. As far as the future goes, our thought was we would regain some of the market share when that happens, but the feasibility study shows that even if that doesn't happen we should be able to muddle though and make it out of the woods."

Skiff said the golf course's equipment needs were "pretty serious," but there were no plans for capital improvements such as changing the layout of the course.

"What they're talking about in the study is that some golf courses spend several hundreds of thousand of dollars for huge renovations to make their courses better," Skiff said. "We have a good golf course; we just need to keep it maintained."

Miller said the golf course raised $80,000 through a debenture program last year with its shareholders, which helped address some of the course's equipment needs.

The market study also suggested the golf course raise its greens fees, which have gone up this year. While the golf course has special rates for seniors and junior golfers, the rate increase this year for 18 holes went up from $28 a round last year to $30 this year while the nine-hole rate increased from $18 to $20. The cost of a yearly membership for an individual went up $100, to $750, while the couple's yearly rate increased to $1,200.

"The simple answer is to raise rates because that brings in more revenue, but at what point are you pricing yourself out of the market?" Skiff said. "We've looked long and hard at what maximizes our revenue, but we still have to stay competitive in the market."

Despite the golf course's financial difficulties, Skiff and Miller said the course was in no way in danger of going under any time soon. Miller said the Montrose Land Company could elect to borrow money if it isn't able to find a solution with the city of Montrose or the recreational district.

Members of the Montrose Land Community, which currently is comprised of 790 shareholders, built the Black Canyon Golf Club in 1960.

In 1987, the city of Montrose approached the golf club about adding nine more holes to the golf course. Several landowners donated the 59 acres needed for the back nine while the city used $300,000 in golf course sales tax revenue bonds to build the back nine.

The land that was donated for the back nine is deed restricted, which means the land must remain a golf course in perpetuity. Black Canyon Golf Club leases the back nine from the city of Montrose. Since the back nine was added, the city of Montrose has helped Black Canyon Golf Club with projects such as paving the parking lot and with irrigation projects, as well as canceling a $10,000 lease payment last year.

"A lot of people think it's the city's golf course and there's the perception that if it's having financial difficulties the city should step in," City Councilor David White said. "From a business standpoint, would you put in money into a losing proposition betting that it will come out of it? The question becomes, 'Should the city bail out a private entity or is it up to the shareholders?' We have a serious issue here from the standpoint that the Land Company is a private entity. They've made the investment of putting an automated sprinkler system on the back nine, but they've kept all of the revenues. I'm open to talking with them and working with them, but they're going to have to give up something."

Schneiger said city staff and city council will be meeting with representatives from THK and members of the Montrose Land Company to go over the market feasibility study. White said he would also like to see the results of the needs assessment survey that the city is conducting with the Montrose Recreational District, which will include questions about the Black Canyon Golf Club. The survey is scheduled to be completed in March.

"I think the general feeling (of city council) is let's see what comes out of that survey," White said. "Not that we're trying to delay a decision, but it has to be a community consensus. I'm not going to cave into one vocal party that has its own agenda. We have to look at what's the best use of the taxpayers' money and what is best for the community."

Contact Mike Robuck via e-mail at miker@montrosepress.com.