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Home News  Taxpayers on the hook for Groesbeck expenses
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Wednesday, April 27,2011

Taxpayers on the hook for Groesbeck expenses

by Jerry Ambrose

Guest columnist Jerry Ambrose is the finance director for the city of Lansing and chief of staff for Mayor Virg Bernero.


In his April 19 City Pulse guest column,
Tim Knowlton expressed skepticism that general tax dollars are necessary
to subsidize the operation of Lansing’s Groesbeck Golf Course.
Unfortunately, Mr. Knowlton wrote his article before concluding his
conversations with city staff. As a result, he materially misstated the
facts about the use of General Fund and Parks Millage tax dollars to
subsidize Groesbeck. Let’s set the record straight:


Mayor Bernero’s administration has never
claimed that City general revenues support Groesbeck to the tune of
$400,000 to $500,000 per year. In his FY12 budget recommendation, Mayor
Bernero stated that “Consideration is also being given to procuring
private management services for the Groesbeck Golf Course and the City’s three cemeteries as
a means to reduce the more than $500,000 annual subsidy from the
General Fund.” The $500,000 figure refers to the subsidy not only for
Groesbeck, but for three City-owned cemeteries as well.


In fact, the operation of Groesbeck has
required a General Fund subsidy of more than a quarter-million dollars
annually for many years. Below, excerpted from the City’s audited
financial statements and accompanying financial records, is a summary of
revenues and expenses related to the operation of the course.


These deficits have been covered
routinely with General Fund and Parks Millage tax dollars, a situation
that Mayor Bernero has challenged his administration to correct. It is
not his goal to close Groesbeck; it is to have the course operate
without the subsidy of Lansing taxpayers, something many golf courses in
the region and state are able to do routinely. And in today’s
challenging economic times, there are far more urgent uses for these
dollars.


The expense figures cited above do
include the much-discussed (and much-misrepresented) “administrative
costs,” which currently range from $69,000 to $72,000 annually.
Questions have been raised repeatedly about what constitutes
administrative costs and why they should be included in the cost of golf
operations. In truth, there is no mystery about it: Administrative
expenses are simply the costs incurred by the City to provide
administrative support to golf course operations.


Administrative costs include routine
functions such as bookkeeping, payroll processing, accounts payable,
technology support, legal advice and building maintenance. In lieu of
charging the golf course directly, their value is calculated through an
indirect cost plan — the same mechanism the City uses to recover
administrative costs associated with state and federal grants, and that
is commonly used in both public and private sector cost accounting. In
the current year’s budget, administrative costs total $72,000, including
charges for Building Maintenance ($20,062); Technology Support
($17,041); Accounting, Payroll, Accounts Payable and Purchasing
($21,722); Financial Audits ($2,976); Legal Advice ($476); Banking
($1,678); and Parks Administration ($8,045). 


In our judgment, these costs are
legitimate expenses to be considered when analyzing the financial
performance of the golf course. Are these functions necessary for the
golf course to be managed and operated?  Of
course they are. Such costs are part and parcel of the operations of
every golf course, public or private. There is no legitimate reason why
they should be excluded from the actual costs of operating Groesbeck.


More importantly, even if one were to eliminate
administrative costs from the analysis, the operation of Groesbeck would
still require a tax subsidy, whether it comes from the City’s General
Fund or the Parks Millage. If these expenses are ignored in both FY09
and FY10, the operating deficit would still have been $170,000 per year.
This $170,000 subsidy represents lost opportunity to use these funds in
other areas of city services, such as police, fire and roads. For the
current year and next year, the subsidies are budgeted to come from the
Parks Millage, which represents a lost opportunity to use these funds
for maintenance and improvements to our city parks.


Notwithstanding Mr. Knowlton’s flawed
assertions, the bottom line is that the operation of Groesbeck Golf
Course has required an operating subsidy of more than a quarter-million
dollars per year. Even without administrative costs, the annual subsidy
is between $170,000 and $200,000 per year. That’s the equivalent of a $7
subsidy for each of the 31,000 rounds of golf played at Groesbeck last
season. It also represents opportunities lost to support more urgently
needed city services.


The potential certainly exists to keep
Groesbeck operating without a subsidy from Lansing taxpayers. And that —
not closing the course — is the ultimate goal of Mayor Bernero’s
administration.

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