GOLF COURSE CASH FLOW AND DEBT


GOLF COURSE CASH FLOW AND DEBT
March 7, 2014
The following explanation regarding the Cypress Head Golf Course cash flow and outstanding debt is being provided in response to questions raised at the March 4, 2014 City Council meeting.
There are three cash accounts associated with the golf course; Golf Course Operating, City Golf Course Clearing and Golf Course R & R. The golf course maintains and controls the Golf Course Operating account. The City maintains and controls the City Golf Course Clearing and R & R accounts.
The Golf Course Operating account is maintained by the golf course and revenues and expenditures from operations run through this account.
The surcharge on each round of golf is transferred from the Golf Course Operating account to the R & R account and qualified expenditures are paid from this account.
The City Golf Course Clearing account receives transfers from the Golf Course operating account and pays certain golf course related expenses from the account with the largest being the cart lease payments to the Fleet Fund and debt payment to the Utilities Fund.
During our review of the Golf Course current and prior year’s operations, we looked at the cash flow in all three accounts for the past six years. In 2008, while the combined cash of the three accounts totaled $238,212, the City Golf Course clearing account was a negative $11,410 as shown on the attached Golf Course Cash Analysis. This probably did not create a concern at the time since the Golf Course Operating account as shown on the analysis has a balance of $98,679 and the two combined provided a positive balance. Fiscal years 2009 and 2010 show positive balances in all three accounts but in 2011 the City Clearing account drops to a negative $151,810 as shown on the analysis. As it was in 2008, when combined with the Golf Course Operating account there is still an overall positive balance. However, 2013 ends with the Clearing account at a negative $130,129 with only $68,414 in the Golf course Operating account creating a combined negative balance.
The first question to be answered is why the City Golf Course Clearing Account would end up with a negative balance if indeed it is simply a clearing account and the answer is a simple one. There have been times in the past that the golf course did not generate enough cash flow from operations to transfer sufficient funds to the City Golf Course Clearing account to cover all the expenditures being paid out of the clearing account. Golf Course revenues are impacted by the seasons and conditions. The thought process probably was that while the transfers may fall short during the slow months, they can be made up for during the busy season. Attached is a summary of cash additions and cash deductions for the City Golf Course Clearing account for the past three years.
City Manager Kisela and I agreed that the practice of allowing the clearing account to fall into a negative balance should not continue and steps should be taken to adjust the current negative balance in the Clearing Account. In order to do this we reversed $148,330 of debt payment transfers that were previously made from the Clearing Account to the Utilities Fund. This returned the Clearing account to a positive balance and increased the outstanding debt by a like amount. This reversal of prior debt payments of $148,330 explains why the outstanding debt shown on the Golf Course Loan Restructure sheet provided at the March 4, 2014 Council meeting is greater than the 9/27/2012 outstanding debt shown on the loan payment history sheet also provided at the meeting. Going forward, if the transfer from the Golf Course Operating account to the City Clearing account is insufficient to cover all related expenditures to be made from the Clearing account , the transfer to the Utilities Fund for the debt payment will not be made until sufficient transfers have been made from the Golf Course Operating account to the Clearing account.


Mayor and City  Council:
See explanation to an adjustment that was made to the monies the golf course owed the water and sewer fund.  As part of the analysis for the workshop last week Wayne Saunders and I reviewed the golf course cash report.   Although it had been past practice neither Wayne nor I was comfortable with showing a significant negative balance in the golf course clearing account.  Consequently, we reversed the debt payment to the water and sewer fund that was originally booked in  FY 2013.  This strengthened the cash balance in the golf course fund and increased the monies owed the water and sewer fund.
Sorry for the confusion.
Greg Kisela
City Manager
 
 

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