New golf courses unlikely in Southern Arizona as costs rise, appeal fades

Fewer players, rising water costs are top reasons, developers say
2013-04-07T00:00:00Z 2014-12-03T23:03:18Z New golf courses unlikely in Southern Arizona as costs rise, appeal fadesCarli Brosseau Arizona Daily Star Arizona Daily Star
April 07, 2013 12:00 am  • 

For decades, Tucson's growth traced the edges of golf course after ever-longer golf course as developers sought premiums on lots adjacent to a sea of rolling emerald turf.

But that's history.

Largely because of changing demographics and rising water costs, real estate experts say the golf mecca of Southern Arizona has likely seen its last new course.

David Mehl, president of Cottonwood Properties, is among the last to directly benefit from the formula that helped define Southern Arizona as a golf vacation and retirement destination.

He has between 300 and 500 lots left to sell at Dove Mountain and reports the premiums for lots right along the fairways are rising as their scarcity increases.

For a new course to open, "not only would you need an economic recovery, you would need something dramatically different in golf economics," he said. "Everything is going in the wrong direction. It's not going to go away."

By "everything," Mehl was referring to golf play decreasing, club membership declining, and fewer players willing to pay daily greens fees - all of this as water rates continue to climb.

The developer at both Dove Mountain and Westin La Paloma said he would not build another golf community. He's considering incorporating open space in its place.

other amenities

Mehl is not an outlier. While most developers shy away from ruling out golf completely, they agree that making a new course viable would take special - and increasingly rare - circumstances.

A discussion paper recently co-authored by Rancho Sahuarita developer Bob Sharpe for the Urban Land Institute summed up the pervasive post-recession view: "Amenity packages in the future should be well thought out to be sure the maintenance costs are relatively inexpensive. Stay away from golf courses."

Sharpe himself took that advice. There is no golf course in Rancho Sahuarita, though there are several nearby. Instead, there is an aquatics center, among other amenities.

The paper, "Residential Futures: Thought-Provoking Ideas on What's Next for Master-Planned Communities," collected perspectives from prominent developers. The topics were broad, but not so much the outlook on golf.

In another passage, the authors wrote: "Certainly golf courses have continued to slide as a required amenity, confirming a 30-year trend and the family market's historical low ranking of golf as a recreational preference."

What will be built will be based on painstakingly careful market studies, said Bill Kelley, chief financial officer at Diamond Ventures.

"It's going to be more selective in how it's done and the benefit to the community," he said.

Whatever goes in will certainly feature more desert landscaping, Kelley predicted. "No one's ever going to build a Tucson Country Club again."

Conversions likely

Existing golf courses have been cutting down on irrigation and will likely continue, experts say.

Transition areas have been left to brown, with drought-tolerant plants eventually added in their place.

Within two years the water savings might not be enough to keep courses solvent, predicts Jerry Hawkins, a longtime local commercial real estate broker with CBRE Inc.

"As the market recovers and people see that the golf market hasn't really recovered, you'll see people having to face these really difficult decisions," he said.

Hawkins anticipates that some courses will shorten holes or even switch some or all holes to alternative uses.

Ideas being batted around now include urban gardens, walking and birding trails and water retention basins.

One closed golf course in the Phoenix area was transformed into an apartment complex and commercial center.

Such a transformation is unlikely here because most courses are lined with houses, and the neighbors would have to accept a rezoning.

But more than one developer has gotten out a pencil to consider how one of Tucson's struggling municipal courses might be converted into homes or stores.

Varied challenges

The forces putting pressure on golf are not new. Courses never were the cash cows they were supposed to be, developers and course managers said.

The golf building boom in the 1990s was fueled by Wall Street speculation that made assumptions about golf based on resort trends, but the costs of operating a course have long been enormous.

Southern Arizona courses were encouraged to use treated effluent known as reclaimed water to irrigate their greens as early as the 1980s.

Some courses got specially negotiated rates, but the standard rate has risen about 40 percent over the past 10 years.

That's despite a yearly subsidy from potable-water customers that in the past decade has ranged from 3 to 28 percent of the cost of providing the reclaimed water.

The proposed subsidy for the fiscal year beginning in July amounts to more than $2.2 million, or 19 percent of the service's cost, Tucson Water officials said.

At the same time, fewer people are playing golf.

Rounds played at Pima County courses declined about 1 percent from 2007 to 2011, according to Pima County Assessor's Office records.

More recent records were incomplete, but they show about one-third of the area's courses had a decrease of more than 10 percent from 2007 to 2012.

The players who do show up are, in general, paying less, operators say.

Several high-end resort courses have opened to the public at least part of the time, forcing beleaguered public courses to compete with Westin La Paloma, for example, which benefits from hotel revenues to pay summer maintenance costs and recently invested $30 million in renovations, including nearly a half-million to import fine white sand from San Juan Capistrano.

"What happens when you go to Ventana and see the conditions, then you go to Randolph?" asked Mike Hayes, Tucson's deputy parks director, referring to a Catalina Foothills resort and the most financially successful of the municipal courses.

There are cultural changes, too. Few young people play golf. Fewer corporations invest in golf activities, and nine-hole specials are popular because they cut down on the hours invested.

"One of the reasons that I don't play so much is that it takes so much time," said Rob Longaker, senior project manager for Desert Springs, a proposed Oro Valley real estate project that recently canned its golf course plans.

Of the existing courses, Tucson's municipal ones are perhaps the closest to possible closure, racking up an $8 million deficit the City Council has said it's tired of covering.

City reviewing bidders

In searching for solutions, the city has begun reviewing the qualifications of bidders interested in managing its five golf properties.

But even a contract won't necessarily save all of them.

"The majority of bidders will probably take the top two or three," said Craig McDonald, director of golf operations at Southern California Golf LLC, one of almost two dozen organizations interested in the contract. "Management doesn't like taking the dogs."

His company, like virtually all golf operations these days, describes its focus as "trying to create more golfers."

That means reduced prices for junior golf, expanded training programs and more family friendly events held at golf courses.

Even Troon, a top-tier management company, has opened some of its courses to alternative uses, from walking nights to Tough Mudder competitions.

Because of market oversaturation, "we're just having to think differently," said Tom Enders, the company's vice president of sales. "There's no one thing that's going to turn the industry or a club around."

Contact reporter Carli Brosseau at cbrosseau@azstarnet.com or 573-4197. On Twitter @carlibrosseau

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