Gwinnett to repossess golf course, pay its $1.8 million debt

Gwinnett County is back in the golf business, gambling that taxpayers will land on the green and not in the red.

The county sold the 18-hole course 10 years ago to a special public agency that was created to take over the course. But a decade later, that agency hasn’t paid for the course and can’t pay off its new loans, so the county plans to take back the Collins Hill Golf Club – and the additional $1.8 million in debt that comes with it.

“It’s a very nice course,” Roger Herndon said Friday as he prepared to play the course near Lawrenceville. “I hope somehow they keep it going.”

The course is a good deal for golfers – Herndon paid $31.50 for 18 holes and a cart on Friday. But is it a good deal for taxpayers?

Gwinnett is making monthly payments on the course operator’s bank loan and considering whether to get back in the game and operate the course or try to sell it in a troubled market.

The operating agency owes $3.3 million to the county and another $1.8 million to banks. The course hasn’t paid the county in three years and stopped repaying the bank loans last month. Gwinnett began paying the course’s $9,680 monthly bank obligation in July.

Despite Collins Hill’s financial troubles, Gwinnett County and golf course officials say it hasn’t cost taxpayers a dime to date. Yet to repay the bank debts and recoup the taxpayers’ original investment when Gwinnett bought the course in 1988, the county would have to sell the course and make about $4.1 million. Because the 139-acre property is tax exempt, it has not been appraised since 1988 when the county bought it at the appraised value of $3.4 million.

Charles Bannister, chairman of the county Board of Commissioners, said he believes the facility is worth more than it owes and will become an asset to the county.

In the meantime, he said, the money used to pay the $1.8 million bank debt will come from reserve funds.

“Those funds are not budgeted for (park) operations, so none of our programs or services will be adversely affected,” Bannister said.

Still, that’s $1.8 million of taxpayer money the county won’t be able to spend on other needs.

In addition, some wonder why taxpayers are still responsible for the debts of a course the county hasn’t owned in a decade.

“The county sold that. We shouldn’t have been on the hook,” said Sabrina Smith, chairwoman of Gwinnett Citizens for Responsible Government. “It goes back to the decision making of the Board of Commissioners.”

The decision to take back Collins Hill Golf Club‚ previously known as Springbrook Golf Course, and Springbrook Country Club before that‚ is the latest setback in Gwinnett County’s long involvement with the facility.

The county bought the Springbrook Country Club on Camp Perrin Road from a private owner in 1988 to provide affordable golf to local residents. At the time local golfers complained they had to drive to DeKalb County and Atlanta to find public courses.

The decision to buy the course for $3.4 million was controversial. Some residents complained it was a waste of money to buy a golf course at a time when Gwinnett struggled to pay for other services.

County officials borrowed the money to buy Springbrook but vowed it would make enough money from golfers to repay the debt and cover its operating costs.

“If I didn’t think it was a good deal I wouldn’t have voted for it,” Lillian Webb, then-chairwoman of the Board of Commissioners, said at the time.

Springbrook did well initially, but its business gradually declined. Though it covered its operating costs, repaying the debt proved more difficult.

In 1997, a consultant warned that without substantial renovation Springbrook wouldn’t generate enough income to cover debt payments. The consultant recommended the county either spend $1.5 million to upgrade the course or sell it at an estimated $295,000 loss.

In 2000, Gwinnett County paid off the $2.3 million balance on the original golf course debt and sold the course to the Springbrook Golf Commission, a new public authority created by state lawmakers at the request of county officials.

The idea was that the new authority‚ unlike the county‚ could focus solely on running the golf course. County officials again vowed the course would pay for itself.

“It puts to rest where the golf course is going to be,” then-county commission Chairman Wayne Hill said at the time. “It’ll stand on its own two feet.”

But Gwinnett taxpayers were still on the hook.

The county sold Springbrook to the golf commission for $3.3 million. But the money never changed hands. Instead, the commission agreed to pay the county principal and interest payments over 30 years.

The golf course‚ renamed Collins Hill Golf Club‚ also borrowed $1.5 million from a bank to finance a new clubhouse and other improvements. The county Board of Commissioners agreed to back that loan, which later grew to $1.7 million.

Under its new ownership, the course made enough money to cover its operating expenses and pay down the bank loan. It also paid the county about $648,000 in interest from 2001 through 2007.

But Collins Hill never repaid the principal on the county debt. And it hasn’t made an interest payment in three years despite county commission decisions that reduced the interest rate and pushed back scheduled principal payments.

Collins Hill already was struggling to pay its debts when the economy tanked, taking a toll on the entire golf industry. According to the National Golf Foundation, the number of rounds played in the Atlanta area fell 4 percent in 2008 and another 9 percent last year.

The foundation estimates that up to 2,000 public courses nationwide are facing serious financial problems.

B.J. Van Gundy, chairman of the five-member Springbrook Golf Commission, said golfers stayed home or sought deals at more upscale courses that were discounting their prices to attract business. Flooding that caused $400,000 worth of damage at the course last October also hurt.

“We would have been fine without the flood and the (poor) economy,” Van Gundy said. “But (experiencing) both didn’t work.”

In 2008, the golf course commission sought additional help from the county. And in February 2009, the Board of Commissioners voted 4-1 to back a new $250,000 line of credit.

That meant the county would pay the debt if the course defaulted. The idea was to give Collins Hill time to get its finances in order and increase the chances the county debt would be repaid.

Commissioner Mike Beaudreau voted against the move. “I felt like they had a failing financial model,” he said. “It wasn’t self-sufficient.”

In May 2009, auditors expressed “substantial doubt” about the golf course’s ability to stay afloat. They repeated that warning in May.

Last month, the county learned that Collins Hill could no longer pay its bank debts. The course still owes about $1.5 million on one loan and $250,000 for a line of credit.

Ultimately responsible for the bank debts, the county began making the $9,680 monthly payments in July.

Gwinnett community services director Phil Hoskins said the county will continue to make the payments until the county takes possession of the course in the next few months.

Hoskins said that despite its financial ups and downs, the golf course has not cost the county any money to date.“What we will obtain is the land, which has more value than the amount owed,” Hoskins said.

To break even, the county would have to recoup about $4.1 million — the $1.8 million for the bank debt and the $2.3 million the county spent to pay off its original debt in 2000.

Hoskins said a value of $30,000 per acre “is not unreasonable.” At that price, the property would be worth about $4.1 million.

The Springbrook Golf Commission still runs the course, which will remain open while the county explores its options.

The county could operate the course itself or seek another contractor to operate it for the county. It could also sell the land. Bannister said the staff is preparing a request for proposals to gauge private interest in the property.

Van Gundy said the county is getting a facility that’s in much better shape than the one the Springbrook Golf Course Commission inherited a decade ago. He hopes it will remain a golf course.

But Beaudreau said he doesn’t think the county should be in the golf business if it means spending taxpayer money. “We have to be in the business right now of making difficult choices,” he said.

Bannister said the county staff will study the options and make a recommendation.

He declined to second guess past commission decisions regarding the golf course.

“I am not interested in evaluating the decisions of the elected officials who voted on several of the actions associated with the Springbrook Golf Commission and the golf course,” Bannister said. “I trust they made the best decision available to them when it was presented.”

Springbrook/Collins Hill Golf Club timeline

1988: Gwinnett County buys the Springbrook Country Club for $3.4 million. County officials borrow money to pay for it and vow it will generate enough money to pay for itself and cover the debt.

1997: Amid a steady decline in business, a consultant warns that without substantial renovation the course won’t generate enough money to cover debt payments. The consultant recommends the county spend $1.5 million to upgrade the course or sell it at an estimated $295,000 loss.

2000: Gwinnett County sells the course to the Springbrook Golf Commission, a new public authority created by state lawmakers at the county’s request. The golf course is renamed Collins Hill Golf Club. The new commission agrees to pay $3.3 million for the course.

2001: The Springbrook Golf Commission borrows $1.5 million to pay for a new clubhouse and other improvements. The county Board of Commissioners agrees to pay the debt if the golf course defaults.

2004: The Board of Commissioners reduces the interest rate paid by the golf course on the debt it owes the county. The board also agrees to postpone scheduled principal payments.

2009: The Board of Commissioners agrees to back another $250,000 line of credit for the golf course, which is struggling to balance its budget during the economic recession. Later, auditors express “substantial doubt” about the golf course’s ability to stay in business.

May 2010: Auditors again warn the county about the golf course’s financial condition.

July 2010: The golf course cannot make the payments on its bank debt, so the county picks up the $9,680 monthly cost.

August 2010: The county confirms plans to repossess the course and pay the course’s $1.8 million bank debt.

-- David Wickert

Other public golf courses with financial problems:

  • The Fairways of Canton, a public-private partnership between the city of Canton and a private golf management company, closed recently because of financial trouble. Nearby residents worry the closure will affect the value of their property. The course will remain closed while the city and the company, Laurel Canyon Golf, decide what comes next.
  • A disagreement over whether Forsyth County should buy the Lainier Golf Club has split the Board of Commissioners and the public. Under a proposed deal, the county would spend $12 million on the course and a private firm, Affiniti Golf Partners, would chip in $3 million in return for a long-term lease to operate the course. Opponents say the course is worth far less than the asking price.
  • Earlier this year a private firm fell behind on lease payments for Douglasville's West Pines golf course. City officials gave the company, HMS Golf of Woodstock, more time to pay.

--  Christopher Quinn