Report Final v - countywatchers.files.wordpress.com · Mareth Advisors Project #217 ‐ Union County Golf Final Page 1 Introduction The opening of the new 45,000 +/‐ sf clubhouse

Mareth Advisors, LLC 142 North Abingdon Street Arlington, VA 22203 (571) 214‐9326 www.marethadvisors.com

Final Report

Evaluation of Opportunities and Constraints Related to Organizing Golf under Union County’s Improvement Authority Prepared for

Union County Division of Golf Operations Union County, New Jersey

Submitted by

Mareth Advisors, LLC May 31, 2012 Project No. 217

Mareth Advisors Project #217 ‐ Union County Golf TOC

Table of Contents

Introduction .................................................................................................................................................. 1

General & Limiting Conditions ...................................................................................................................... 2

Review of Golf System Performance ............................................................................................................ 3

Stabilized Year Financial Analysis ................................................................................................................ 13

Evaluation of Golf Revenue Authorities ...................................................................................................... 25

Conclusions and Recommendations ........................................................................................................... 32

Appendix ..................................................................................................................................................... 33

Table of Figures

Figure 1: 2010 and 2011 Operating Statement (Total Dollars) ................................................................... 10 Figure 2: 2010 and 2011 Operating Statement (Dollars per Start) ............................................................. 11 Figure 3: 2010 and 2011 Operating Statement (Dollars per Hole) ............................................................. 12 Figure 4: Green Fee Input Summary – Galloping Hill Golf Course .............................................................. 15 Figure 5: Green Fee Input Summary – Ash Brook Golf Course ................................................................... 16 Figure 6: Consolidated Stabilized Year Pro Forma ...................................................................................... 22 Figure 7: Galloping Hill Stabilized Year Pro Forma ...................................................................................... 23 Figure 8: Ash Brook Stabilized Year Pro Forma .......................................................................................... 24 Figure 9: Galloping Hill Detailed Green Fee and Play Allocation Inputs ..................................................... 34 Figure 10: Ash Brook Detailed Green Fee and Play Allocation Inputs ........................................................ 35 Figure 11: Stabilized Expense Detail – Galloping Hill .................................................................................. 36 Figure 12: Stabilized Expense Detail – Ash Brook ....................................................................................... 37 Figure 13: Key Assumptions – Galloping Hill ............................................................................................... 38 Figure 14: Key Assumptions – Ash Brook .................................................................................................... 41

Mareth Advisors Project #217 ‐ Union County Golf Final Page 1

Introduction The opening of the new 45,000 +/‐ sf clubhouse at Galloping Hill Golf Course in late 2012/2013 will transform its mission from a predominantly green fee‐centric operation to one that is substantially more complex, and includes a significant independent banquet operation, a grill room, and a golfer’s snack bar. Combined with the state‐of‐the‐art practice and teaching facility at the adjacent Golf Learning Center, which contains its own food and beverage operation, it is believed that the flexibility necessary to operate successfully within a competitive marketplace cannot be provided as currently organized.

This study was conducted in March/April 2012 to independently and objectively evaluate the possible shift of Union County’s two 27‐hole golf courses from within the Department of Parks and Community Renewal into the existing Union County Improvement Authority (UCIA). This change in oversight is contemplated to provide the golf operations with a greater degree of operating autonomy that would better enable the facilities to react to changing market conditions and the operational changes anticipated at Galloping Hill.

This report is organized to provide the county’s decision makers with an understanding of the current financial situation of the golf operations; a pro forma analysis of stabilized operations for the entire golf system (including the new Galloping Hill clubhouse); a review of several existing “authority” operators of golf within the U.S. and their insights regarding the opportunities and constraints; and Mareth Advisors’ conclusions and recommendations that consider the following key questions:

• Budget process limitations – Does the state’s two percent limit on budget increases present unnecessary and artificial limitations on the business model?

• Pricing challenges – Can the golf operations effectively price its offerings in a timely and competitive manner?

• Future capital sourcing – Will the improvements have adequate access to capital to preserve or enhance its market position in the future?

• Operational flexibility – Will the operators have free‐market control of labor and materials expenses?


General & Limiting Conditions This study is based on estimates, assumptions and other information developed by Mareth Advisors, LLC (Mareth Advisors) from its independent research effort, general knowledge of the industry, and information provided by and consultations with the client and the client's representatives. No responsibility is assumed for inaccuracies in reporting by the client, the client's agent and representatives, or any other data source used in preparing or presenting this study.

This report is based on information that was current as of March 2012 and Mareth Advisors has not undertaken any update of its research effort since such date.

Every reasonable effort has been made to ensure that the data contained within this report are accurate as of the date of this study. However, factors outside the control of Mareth Advisors do exist and these may affect the estimates and/or projections presented herein.

Because future events and circumstances, many of which are not known as of the date of this study, may affect the estimates contained therein, no warranty or representation is made by Mareth Advisors that any of the projected values or results contained in this study will actually be achieved.

Further, statements that include the words "may," "could," "should," "would," "believe," "expect," "anticipate," "estimate," "intend," "plan," “project,” or other words or expressions of similar meaning have been utilized. These statements reflect our judgment on the date they are made and we undertake no duty to update such statements in the future.

In the production of this report, Mareth Advisors has served solely in the capacity of consultant and Mareth Advisors has not rendered any “expert” opinions and does not hold itself out as an “expert” (as the term “expert” is defined in Section 11 of the Securities Act of 1933).

Possession of this study does not carry with it the right of publication thereof or to use the name of "Mareth Advisors" in any manner without first obtaining the prior written consent from Mareth Advisors.

No abstracting, excerpting or summarization of this study may be made without first obtaining the prior written consent of Mareth Advisors.

This report is not to be used in conjunction with any public or private offering of securities, debt, equity, or other similar purpose where it may be relied upon to any degree by any person other than the client, nor is any third party entitled to rely upon this report, without first obtaining the written consent of Mareth Advisors. This study may not be used for purposes other than that for which it is prepared or for which prior written consent has first been obtained from Mareth Advisors.

This study is qualified in its entirety by, and should be considered in light of, these limitations, conditions and considerations.


Review of Golf System Performance Golf system performance was evaluated by Mareth Advisors to gain a baseline understanding of the gains since KemperSports (Kemper) commenced its management agreement with Union County on January 1, 2010. Noting that the gains have been substantial from a net income perspective, much of this is due to the County’s substantial reinvestment to improve the facilities at Galloping Hill and operating efficiencies gained through the County’s retention of Kemper. These efficiencies include significant shifts in staffing and supply costs that were reallocated under the management agreement. Top line revenues from golf operations are clearly on an upward trajectory toward stabilization; expenses are substantially less so.

While golf operating expenses began to stabilize in 2011, we anticipate they will become much clearer by year‐end 2012. Overall system expenditures, however, will fluctuate substantially upward upon the completion of the new Galloping Hill clubhouse late 2012/2013 and the ensuing ramp‐up of banquet and catering operations. Notwithstanding the limitations of the changing expense profile over the past two years, the data presented herein provide a reasonable basis to extrapolate stabilized system performance currently anticipated around 2016.

Play Sources Play source data for Galloping Hill Golf Course in 2011 highlight the importance, popularity and attractiveness of the “player’s card” program. The resident $45, 7‐day card provides Union County residents with a two‐day tee time booking advantage and a $29 discount on prime time 18‐hole green fees. With a payback of less than two rounds it is easy to understand why these cards accounted for 41.3 percent of total starts.

Non‐card starts (i.e. residents choosing not to purchase the player’s cards, or non‐residents) accounted for 27.0 percent of play while senior Player Card starts generated 17.4 percent of overall play. The remaining 14+ percent of play was distributed widely among the nine remaining categories. Youths were the fourth largest player segment comprising just 2.9 percent of overall play in 2011. Outing starts totaled just 956 rounds or 1.6 percent of total play in 2011.

Total distribution is slightly more weighted toward weekday play at 56.3 percent of all starts. Weekends and holidays generate just under 40 percent of play. Complimentary and high school golf team starts accounted for 4.2 percent of total play in 2011.

Nine‐hole starts were the single largest round type purchased at Galloping Hill in 2011, comprising 38.8 percent of all starts. Morning or “open” 18‐hole play represented about one quarter of the 2011 green fees.

Notable in 2011 was the high number of twilight rates. Over the 2011 calendar year, twilight rates accounted for 9,869 starts or 16.5 percent of play. This unusually high level was due to the substantial impact of Hurricane Irene in late August on both county courses and the repricing of all rounds to the twilight category to mitigate those issues. Mareth Advisors examined play levels for the peak season


from March and through August to better understand the overstatement of twilight rates. During that period, twilight rates accounted for 6.0 percent of play. Had this percentage stayed consistent for the entire year, Galloping Hill would have generated roughly 3,600 twilight starts or 6,200 fewer than actually occurred.

Complimentary and high school play accounted for 4.2 percent of play in 2011.

Galloping Hill ‐ Summary of 2011 Starts Play by Source Weekday Week End Total Weekday Week End TotalPlayer's Card 12,233 12,438 24,671 20.5% 20.8% 41.3%Non‐Card Start 8,919 7,211 16,130 14.9% 12.1% 27.0%Senior Player Card 8,467 1,935 10,402 14.2% 3.2% 17.4%Youth Player’s Card 1,046 680 1,726 1.7% 1.1% 2.9%League 1,319 0 1,319 2.2% 0.0% 2.2%Off‐Season 121 369 490 0.2% 0.6% 0.8%Outing 536 420 956 0.9% 0.7% 1.6%Replay 237 0 237 0.4% 0.0% 0.4%Super Twilight 551 588 1,139 0.9% 1.0% 1.9%Service 224 0 224 0.4% 0.0% 0.4%Total 33,653 23,641 57,294 56.3% 39.5% 95.8%Comp/High Schools 2,507 4.2%Grand Total 59,801 100.0% Play by Type WD WE Total WD WE TotalOpen 6,292 8,515 14,807 10.5% 14.2% 24.8%Mid‐Day 4,855 182 5,037 8.1% 0.3% 8.4%Twilight 6,039 3,830 9,869 10.1% 6.4% 16.5%9‐Hole 13,479 9,737 23,216 22.5% 16.3% 38.8%League 1,319 0 1,319 2.2% 0.0% 2.2%Off‐Season 121 369 490 0.2% 0.6% 0.8%Outing 536 420 956 0.9% 0.7% 1.6%Replay 237 0 237 0.4% 0.0% 0.4%Super Twilight 551 588 1,139 0.9% 1.0% 1.9%Service 224 0 224 0.4% 0.0% 0.4%Total 33,653 23,641 57,294 56.3% 39.5% 95.8%Comp/High Schools 2,507 4.2%Grand Total 59,801 100.0%Note: All starts/rounds assumed to be 18‐hole play unless specifically noted Source: KemperSports Management and Mareth Advisors, 2012

Ash Brooks play distribution is also heavily oriented toward senior and other player card starts. Senior player card starts comprised 22.2 percent of total play in 2011 while total player’s card starts accounted for more than 6 out of every 10 starts.

The 9‐hole Pitch & Putt course at Ash Brook generated 20 percent of all starts in 2011. Starts by persons not holding a player’s card (non‐card) comprised 5.8 percent of play, a level that is roughly half of Galloping Hill’s. This distribution highlights the “local/resident” orientation of play at Ash Brook compared to Galloping Hill.


Play at Ash Brook is slightly less weighted to weekday play (54.5 percent) when compared to Galloping Hill’s 56.3 percent. The corresponding weekend play is relatively similar in its distribution.

The type of rounds sold at Ash Brook is understandably oriented toward 18‐hole starts. The differentiated experience of Ash Brook’s 9‐hole Pitch & Putt course compared Galloping Hills regulation layout on its third nine holes undoubtedly orients the consumer toward that type of purchase.

Similar to Galloping Hill, Ash Brook generated twilight play rates for the year that were more than double the rate generated during the peak golf season. From March through August of 2011, twilight rates comprised 8.0 percent of total starts. For all other times, the percentage play categorized as “twilight” total 44 percent of starts. For the entire calendar year, twilight stars equated to 17.1 percent of play. This equates to roughly 4,100 additional twilight starts that would have been booked in other categories had the peak season play distribution held true through the fall.

Ash Brook Summary of 2011Golf Starts Play by Source WD WE Total WD WE TotalPlayer's Card 7,061 10,047 17,108 15.8% 22.5% 38.3%Non‐Card Start 1,265 1,324 2,589 2.8% 3.0% 5.8%Senior Player’s Card 8,353 1,574 9,927 18.7% 3.5% 22.2%Youth Player’s Card 685 555 1,240 1.5% 1.2% 2.8%9‐Hole P&P 4,716 4,464 9,180 10.6% 10.0% 20.6%League ** 412 0 412 0.9% 0.0% 0.9%Off‐Season ** 122 434 556 0.3% 1.0% 1.2%Outing ** 292 154 446 0.7% 0.3% 1.0%Replay ** 68 0 68 0.2% 0.0% 0.2%Super Twilight 920 0 920 2.1% 0.0% 2.1%Service ** 112 0 112 0.3% 0.0% 0.3%Union County Guest 14 2 16 0.0% 0.0% 0.0%Reciprocal Senior 309 0 309 0.7% 0.0% 0.7%Total 24,329 18,554 42,883 54.5% 41.5% 96.0%Comp/High Schools 1,788 4.0%Grand Total 44,671 100.0% Play by Type WD WE Total WD WE TotalOpen 7,912 10,484 18,396 17.7% 23.5% 41.2%Mid‐Day 4,815 0 4,815 10.8% 0.0% 10.8%Twilight 4,637 3,016 7,653 10.4% 6.8% 17.1%9‐Hole P&P 4,716 4,464 9,180 10.6% 10.0% 20.6%League 412 0 412 0.9% 0.0% 0.9%Off‐Season 122 434 556 0.3% 1.0% 1.2%Outing 292 154 446 0.7% 0.3% 1.0%Replay 68 0 68 0.2% 0.0% 0.2%Super Twilight 920 0 920 2.1% 0.0% 2.1%Service 112 0 112 0.3% 0.0% 0.3%Union County Guest 14 2 16 0.0% 0.0% 0.0%Reciprocal Senior 309 0 309 0.7% 0.0% 0.7%Total 24,329 18,554 42,883 54.5% 41.5% 96.0%Comp/High Schools 1,788 4.0%Grand Total 44,671 100.0%


Note: All starts/rounds assumed to be 18‐hole play unless specifically noted Source: KemperSports Management and Mareth Advisors, 2012

Complimentary and high school play accounted for 4.0 percent of play in 2011, a percentage that is consistent with Galloping Hill’s.

Revenues Operating revenues are currently derived almost wholly from golf and golf‐related activities. Play levels at Ash Brook decreased from 49,336 starts in calendar year 2010 to 44,671 in 2011, inclusive of Pitch & Putt starts. Galloping Hill play levels decreased from 62,300 starts in 2010 to 58,260 starts in 2011. Overall, the system produced roughly 10,000 fewer starts, decreasing from 111,636 in 2010 to 101,971 in 2011. This is attributed to a combination of economic issues, some disruption from construction activities, and most importantly, from the disruption caused by Hurricane Irene in late August 2011 that substantially impacted play at Ash Brook and to a lesser degree at Galloping Hill. As noted earlier, green fee pricing at both courses was reduced to twilight rates following the hurricane for the remainder of the year.

Despite the lower play levels and weather impacts, total revenue still increased from a total of $3.91 million in 2010 to $4.04 million in 2011.

Revenue Performance 2010 to 2011 2010 Calendar Year 2011 Calendar Year

Galloping Hill

Ash Brook

Total Galloping Hill

Ash Brook

Total

Revenues Green Fees $1,370,824 $1,070,486 $2,441,310 $1,361,758 $959,390 $2,321,148Carts 375,020 192,855 567,875 394,774 164,001 558,775Player’s Cards 137,504 74,010 211,514 203,000 137,270 340,270Range 314,102 ‐ 314,102 415,774 ‐ 415,774F&B 174,538 103,449 277,987 173,901 109,149 283,050Lessons 77,078 5,085 82,163 97,756 8,061 105,816Rentals & Other 6,183 7,178 13,361 10,786 5,650 16,435Gross Revenue $2,455,249 $1,453,063 $3,908,312 $2,657,748 $1,383,520 $4,041,268Source: Union County Recreation Department and Mareth Advisors, 2012

The changes in revenue performance were not shared equally between Galloping Hill and Ash Brook. Galloping Hill’s revenue performance improved between 2010 and 2011 by roughly $200,000 while Ash Book’s decreased by $70,000. While the core green fees (and carts at Ash Brook) were off at both facilities, secondary sales were up nearly across all other categories.


Changes to Revenue Performance 2010 to 2011 Galloping Hill Ash Brook Total Green Fees $ (9,066) $ (111,096) $ (120,163) Carts 19,754 (28,854) (9,100) Player’s Cards 65,496 63,260 128,756 Range 101,672 ‐ 101,672 F&B (637) 5,700 5,063 Lessons 20,678 2,976 23,654 Rentals & Other Income 4,602 (1,528) 3,074 $ 202,499 $ (69,543) $ 132,956 Source: Kemper Sports Management and Mareth Advisors, 2012

The severity of impact to Ash Brook from Hurricane Irene is highlighted by these results. While the majority of the financial impact was due to changes in volume, the pricing changes that occurred cannot be overlooked. For example, had the 15,000 or so “extra” twilight starts been booked at a $4 higher price (the current spread between open and twilight rates), over half of the decreased green fee revenue would have been eliminated.

Yields changes per start that occurred between 2010 and 2011 highlight the enhanced performance metrics under Kemper Sports oversight. Galloping Hill’s average revenue per player increased from $39.41 to $45.62 per start (inclusive of comp and high school starts). The $6.21 increase is from a variety of source including green fees, carts, player card sales, and range (noting the near completion of the Learning Center).

The $1.51 increased yield per player that occurred at Ash Brook despite the decreased green fee yield is attributed predominantly to enhanced player card sales and F&B sales.

Yield per Start or Round 2011 Galloping Hill Ash Brook Total Green Fees $1.37 $(0.22) $0.68 Carts 0.76 (0.24) 0.34 Player’s Cards 1.28 1.57 1.41 Range 2.09 ‐ 1.23 F&B 0.18 0.35 0.26 Lessons 0.44 0.08 0.29 Rentals & Other Income 0.09 (0.02) 0.04 $6.21 $1.51 $4.25 Source: Kemper Sports Management and Mareth Advisors, 2012

Expenses As noted earlier, the commencement of the management agreement with Kemper in 2010 resulted in a significant reshuffling of costs from the county back to golf operations over the past two years. Unallocated operating expenses captured within the golf P&L statement increased from $1.26 million in 2010 to $2.54 million in 2011. Fixed charges for insurance and management fees increased from $111,434 to $190,725.


Total Expenses 2010 Calendar Year 2011 Calendar Year

Galloping Hill

Ash Brook Total Galloping Hill

Ash Brook

Total

Unallocated Expenses Labor $468,578 $307,309 $775,888 $853,124 $561,064 $1,414,187Benefits & Taxes 85,408 44,592 130,000 192,354 111,809 304,163F&B 8,663 3,012 11,675 889 891 1,780Course Maint. 9,447 656 10,103 184,990 89,560 274,550Maint. 3,259 4,533 7,791 11,264 5,811 17,075A&G 84,709 48,409 133,117 209,673 72,233 281,906Utilities 4,448 3,471 7,919 8,696 1,991 10,687Range 234 0 234 1,907 0 1,907Pro Shop 11,681 13,092 24,773 22,446 17,302 39,749Marketing 33,486 13,099 46,585 50,789 20,464 71,252Carts 56,616 56,616 113,231 63,240 63,240 126,480Total Unallocated Expenses $766,528 $494,789 $1,261,317 $1,599,371 $944,365 $2,543,736

Fixed Charges Management Fee $84,000 $ ‐ $84,000 $171,069 $ ‐ $171,069Insurance 14,946 12,488 27,434 11,709 7,948 19,656Total Fixed Charges $98,946 $12,488 $111,434 $182,777 $7,948 $190,725

Source: Union County Recreation Department and Mareth Advisors, 2012

Key contributors to the increased expense profile were labor, course maintenance, and administrative and general costs.

Expense Changes 2010 to 2011 Unallocated Expenses Galloping Hill Ash Brook Total Labor $384,545 $253,754 $638,299 Benefits & Taxes 106,947 67,216 174,163 F&B (7,775) (2,120) (9,895) Course Maint. 175,543 88,904 264,447 Clubhouse Maint. 8,005 1,278 9,284 A&G 124,964 23,824 148,788 Utilities 4,247 (1,480) 2,767 Range 1,674 ‐ 1,674 Pro Shop 10,765 4,210 14,976 Marketing 17,303 7,365 24,668 Carts 6,624 6,624 13,249 Total Unallocated $832,843 $449,576 $1,282,419

Fixed Charges Management Fee $87,069 $‐ $87,069 Insurance (3,238) (4,540) (7,777) Total Fixed Charges $83,831 $(4,540) $79,291



On a dollar‐per‐hole basis, spending was ramped up more rapidly at Galloping Hill as Kemper moved the course into a marquee position. The 9‐hole Pitch & Putt course also demand less spending than the additional nine regulation holes at Galloping Hill.

Changes in Spending per Hole 2010 to 2011 Expenses Galloping Hill Ash Brook TotalLabor $14,242 $9,398 $11,820 Benefits & Taxes 3,961 2,489 3,225 F&B (288) (79) (183) Course Maint. 6,502 3,293 4,897 Clubhouse Maint. 296 47 172 A&G 4,628 882 2,755 Utilities 157 (55) 51 Range 62 ‐ 31 Pro Shop 399 156 277 Marketing 641 273 457 Carts 245 245 245 Total Expenses $30,846 $16,651 $23,749

Fixed Charges Management Fee $3,225 $‐ $1,612 Insurance (120) (168) (144) Total Fixed Charges $3,105 $(168) $1,468

Total Operating Expenses $33,951 $16,483 $25,217


A more detailed set of 2010 and 2011 financial statements for Galloping Hill and Ash Brook are presented on the following pages.


Figure 1: 2010 and 2011 Operating Statement (Total Dollars)

Galloping Hill Ash Brook Total Galloping Hill Ash Brook TotalRevenuesGreen Fees 1,370,824$ 1,070,486$ 2,441,310$ 1,361,758$ 959,390$ 2,321,148$ Carts 375,020 192,855 567,875 394,774 164,001 558,775 Players Cards 137,504 74,010 211,514 203,000 137,270 340,270 Range 314,102 ‐ 314,102 415,774 ‐ 415,774 F&B 174,538 103,449 277,987 173,901 109,149 283,050 Lessons 77,078 5,085 82,163 97,756 8,061 105,816 Rentals & Other Income 6,183 7,178 13,361 10,786 5,650 16,435 Gross Operating Revenue 2,455,249$ 1,453,063$ 3,908,312$ 2,657,748$ 1,383,520$ 4,041,268$

F&B COGS 60,016$ 40,432$ 100,448$ 54,074$ 40,903$ 94,977$ COGS % 34% 39% 36% 31% 37% 34%

Net Operating Revenue 2,395,233$ 1,412,631$ 3,807,864$ 2,603,674$ 1,342,617$ 3,946,291$

ExpensesLabor 468,578$ 307,309$ 775,888$ 853,124$ 561,064$ 1,414,187$ Benefits & Taxes 85,408 44,592 130,000 192,354 111,809 304,163 F&B 8,663 3,012 11,675 889 891 1,780 Course Maint. 9,447 656 10,103 184,990 89,560 274,550 Maint. 3,259 4,533 7,791 11,264 5,811 17,075A&G 84,709 48,409 133,117 209,673 72,233 281,906Util ities 4,448 3,471 7,919 8,696 1,991 10,687Range 234 0 234 1,907 0 1,907Pro Shop 11,681 13,092 24,773 22,446 17,302 39,749 Marketing 33,486 13,099 46,585 50,789 20,464 71,252 Carts 56,616 56,616 113,231 63,240 63,240 126,480 Total Expenses 766,528$ 494,789$ 1,261,317$ 1,599,371$ 944,365$ 2,543,736$

Fixed ChargesManagement Fee 84,000$ ‐$ 84,000$ 171,069$ ‐$ 171,069$ Insurance 14,946 12,488 27,434 11,709 7,948 19,656 Total Fixed Charges 98,946$ 12,488$ 111,434$ 182,777$ 7,948$ 190,725$

EBITDA 1,529,758$ 905,355$ 2,435,113$ 821,526$ 390,304$ 1,211,830$ EBITDA % 64% 64% 64% 32% 29% 31%

Interest ‐$ ‐$ ‐$ ‐$ ‐$ ‐$ Capital 26,900$ ‐$ 26,900$ 53,719$ 7,368$ 61,088$

Income after Interst and Cap Ex. 1,502,858$ 905,355$ 2,408,213$ 767,807$ 382,936$ 1,150,743$

Labor % of Net Revenue 20% 22% 20% 33% 42% 36%Benefit Burden (% Labor) 18% 15% 17% 23% 20% 22%

Note: Gal loping Hi l l includes Learning Center revenue and expensesSource: Union County, KemperSports Management, and Mareth Advisors , 2012

2010 Calendar Year 2011 Calendar Year


Figure 2: 2010 and 2011 Operating Statement (Dollars per Start)

Galloping Hill Ash Brook Total Galloping Hill Ash Brook TotalRevenuesGreen Fees 22.00$ 21.70$ 21.87$ 23.37$ 21.47$ 22.55$ Carts 6.02 3.91 5.09 6.78 3.67 5.43 Players Cards 2.21 1.50 1.89 3.48 3.07 3.31 Range 5.04 ‐ 2.81 7.14 ‐ 4.04 F&B 2.80 2.10 2.49 2.98 2.44 2.75 Lessons 1.24 0.10 0.74 1.68 0.18 1.03 Rentals & Other Income 0.10 0.15 0.12 0.19 0.13 0.16 Gross Operating Revenue 39.41$ 29.45$ 35.01$ 45.62$ 30.97$ 39.26$

F&B COGS 0.96$ 0.82$ 0.90$ 0.93$ 0.92$ 0.92$ COGS % 34% 39% 36% 31% 37% 34%

Net Operating Revenue 38.45$ 28.63$ 34.11$ 44.69$ 30.05$ 38.34$

ExpensesLabor 7.52$ 6.23$ 6.95$ 14.64$ 12.56$ 13.74$ Benefits & Taxes 1.37 0.90 1.16 3.30 2.50 2.95 F&B 0.14 0.06 0.10 0.02 0.02 0.02 Course Maint. 0.15 0.01 0.09 3.18 2.00 2.67 Maint. 0.05 0.09 0.07 0.19 0.13 0.17 A&G 1.36 0.98 1.19 3.60 1.62 2.74 Utilities 0.07 0.07 0.07 0.15 0.04 0.10 Range 0.00 ‐ 0.00 0.03 ‐ 0.02 Pro Shop 0.19 0.27 0.22 0.39 0.39 0.39 Marketing 0.54 0.27 0.42 0.87 0.46 0.69 Carts 0.91 1.15 1.01 1.09 1.42 1.23 Total Expenses 12.30$ 10.03$ 11.30$ 27.45$ 21.14$ 24.71$

Fixed ChargesManagement Fee 1.35$ ‐$ 0.75$ 2.94$ ‐$ 1.66$ Insurance 0.24 0.25 0.25 0.20 0.18 0.19 Total Fixed Charges 1.59$ 0.25$ 1.00$ 3.14$ 0.18$ 1.85$

EBITDA 24.55$ 18.35$ 21.81$ 14.10$ 8.74$ 11.77$ EBITDA % 64% 64% 64% 32% 29% 31%

Interest ‐$ ‐$ ‐$ ‐$ ‐$ ‐$ Capital 0.43$ ‐$ 0.24$ 0.92$ 0.16$ 0.59$

Income after Interst and Cap Ex. 24.12$ 18.35$ 21.57$ 13.18$ 8.57$ 11.18$

Total Starts (inc. P&P @ AB) 2010 2011Ash Brook 49,336 44,677Galloping Hill 62,300 58,260Total Starts 111,636 102,937

Source: Union County, KemperSports Management, and Mareth Advisors , 2012



Figure 3: 2010 and 2011 Operating Statement (Dollars per Hole)

Galloping Hill Ash Brook Total Galloping Hill Ash Brook TotalRevenuesGreen Fees 50,771$ 39,648$ 45,209$ 50,435$ 35,533$ 42,984$ Carts 13,890 7,143 10,516 14,621 6,074 10,348 Players Cards 5,093 2,741 3,917 7,519 5,084 6,301 Range 11,633 ‐ 5,817 15,399 ‐ 7,700 F&B 6,464 3,831 5,148 6,441 4,043 5,242 Lessons 2,855 188 1,522 3,621 299 1,960 Rentals & Other Income 229 266 247 399 209 304 Gross Operating Revenue 90,935$ 53,817$ 72,376$ 98,435$ 51,241$ 74,838$

F&B COGS 2,223$ 1,497$ 1,860$ 2,003$ 1,515$ 1,759$ COGS % 34% 39% 36% 31% 37% 34%

Net Operating Revenue 88,712$ 52,320$ 70,516$ 96,432$ 49,727$ 73,079$

ExpensesLabor 17,355$ 11,382$ 14,368$ 31,597$ 20,780$ 26,189$ Benefits & Taxes 3,163 1,652 2,407 7,124 4,141 5,633 F&B 321 112 216 33 33 33 Course Maint. 350 24 187 6,851 3,317 5,084 Maint. 121 168 144 417 215 316A&G 3,137 1,793 2,465 7,766 2,675 5,220Util ities 165 129 147 322 74 198Range 9 0 4 71 0 35Pro Shop 433 485 459 831 641 736 Marketing 1,240 485 863 1,881 758 1,319 Carts 2,097 2,097 2,097 2,342 2,342 2,342 Total Expenses 28,390$ 18,326$ 23,358$ 59,236$ 34,976$ 47,106$

Fixed ChargesManagement Fee 3,111$ ‐$ 1,556$ 6,336$ ‐$ 3,168$ Insurance 554 463 508 434 294 364 Total Fixed Charges 3,665$ 463$ 2,064$ 6,770$ 294$ 3,532$

EBITDA 56,658$ 33,532$ 45,095$ 30,427$ 14,456$ 22,441$ EBITDA % 64% 64% 64% 32% 29% 31%

Interest ‐$ ‐$ ‐$ ‐$ ‐$ ‐$ Capital 996$ ‐$ 498$ 1,990$ 273$ 1,131$

Income after Interst and Cap Ex. 55,661$ 33,532$ 44,597$ 28,437$ 14,183$ 21,310$

Source: Union County, KemperSports Management, and Mareth Advisors , 2012



Stabilized Year Financial Analysis This effort was undertaken to provide the decision makers and readers of this report with a better understanding of the potential cash flow that would be contributed by the golf operations to UCIA. We expect that this data will be separately evaluated against UCIA’s anticipated financial performance to gain a more complete picture of that organization’s capacity to not only absorb the golf operations, but also to fund reserves against unforeseen economic downturns that will undoubtedly occur at some point in the future.

The financial analysis presented herein is based on review of current performance as previously described, evaluation of budgets and projections prepared by KemperSports Management, and discussions with Union County representatives. The term “stabilized year” used herein represents what we believe will be the longer term average, with fluctuations year‐to‐year. The revenue and expense amounts calculated are based on the stabilized demand levels using current year (2012) value dollars without any assumption of inflation.

Short descriptions of key revenue and expense assumptions are presented below and presented as tables for each course in the Appendix.

Revenues

Rounds Stabilized rounds or starts were estimated at 65,000 at Galloping Hill and 45,000 regulation starts at Ash Brook. Based on the current distribution of play between regulation and pitch and putt stats at Ash Brook, the total number of starts inclusive of the short course in a stabilized year is estimated at 50,500. Achieving this level of play will require continued improvements at Galloping Hill and successful introduction of the new clubhouse into the market. Ash Brook’s enhanced performance will require continued general improvements occurring under Kemper as well as specific improvement to the clubhouse and restroom facilities, and more importantly course drainage.

Pricing Pricing is based on current levels with no adjustments for published rate categories. Unpublished league, outing, replay, super twilight, and service (NJSGA and public safety) green fee price inputs are the actual 2011 average yield per start.

Green Fee Revenue Green fee revenue is derived from adjusting the percentage of play in each start type and multiplying that times the stabilized starts level and again by the pricing inputs. Key adjustments made in the distribution of play include the following:

• Decreased twilight rounds share of total starts by between 8.0 and 9.0 percent to address the artificially high amount due to unique situation caused by Hurricane Irene

• Increased weekday outing play levels at Ash Brook from 0.7 to 1.0 percent of play to reflect better capture of this premium yield source


• Increased outing play levels at Galloping Hill from 0.9 to 1.9 percent of play weekdays and from 0.7 to 0.8 percent of total play to reflect better capture of this premium yield source

• Redistributed demand within the key player’s card, non‐card holder, senior player’s card, and youth player’s card segments to redistribute unusual levels of twilight starts in 2011 back into “open” and “mid‐day” rate categories, while keeping overall segment totals equal to 2011 levels.

Green fee revenue is estimate at $1.53 million at Galloping Hill and $1.25 million at Ash Brook in a stabilized year. System‐wide green fees are estimated at $2.78 million. These figures compare to $1.36 million generated at Galloping Hill and $0.96 million at Ash Brook in 2011. Average green fees per start are estimated at $23.54 at Galloping Hill, a small increase over the $22.78 generated in 2011 and reflective of our belief that increased revenue will result primarily from additional play. Ash Brook’s average green fee calculates to $22.03. This compares to $21.48 generated by the course in 2011.

Summarized play allocation assumptions are presented on the following pages. A more detailed schedule with pricing inputs is presented in the appendix.

Mareth Advisors Project #217 ‐ Union County Golf Page 15

Figure 4: Green Fee Input Summary – Galloping Hill Golf Course

By Source WD WE Total WD WE Total WD WE Total WD WE Total WD WE Total WD WE TotalPlayer's Cards 13,325 13,520 26,845 20.5% 20.8% 41.3% 20.5% 20.8% 41.3% 21.7% 19.5% 41.2% 0.0% 0.0% 0.0% ‐1.2% 1.3% 0.1%Non‐Card Starts 9,815 7,605 17,420 15.1% 11.7% 26.8% 14.9% 12.1% 27.0% 16.2% 10.8% 26.9% 0.2% ‐0.4% ‐0.2% ‐1.1% 0.9% ‐0.1%Seniors 8,645 2,015 10,660 13.3% 3.1% 16.4% 14.2% 3.2% 17.4% 13.8% 3.0% 16.8% ‐0.9% ‐0.1% ‐1.0% ‐0.5% 0.1% ‐0.4%Youth 1,170 715 1,885 1.8% 1.1% 2.9% 1.7% 1.1% 2.9% 2.0% 1.0% 3.0% 0.1% 0.0% 0.0% ‐0.2% 0.1% ‐0.1%League 1,430 0 1,430 2.2% 0.0% 2.2% 2.2% 0.0% 2.2% 2.9% 0.0% 2.9% 0.0% 0.0% 0.0% ‐0.7% 0.0% ‐0.7%Off‐Season 130 390 520 0.2% 0.6% 0.8% 0.2% 0.6% 0.8% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.2% 0.6% 0.8%Outing 1,235 520 1,755 1.9% 0.8% 2.7% 0.9% 0.7% 1.6% 1.1% 0.7% 1.7% 1.0% 0.1% 1.1% 0.8% 0.1% 1.0%Replay 260 0 260 0.4% 0.0% 0.4% 0.4% 0.0% 0.4% 0.4% 0.0% 0.4% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%Super Twilight 585 650 1,235 0.9% 1.0% 1.9% 0.9% 1.0% 1.9% 1.3% 1.4% 2.7% 0.0% 0.0% 0.0% ‐0.4% ‐0.4% ‐0.8%Service 260 0 260 0.4% 0.0% 0.4% 0.4% 0.0% 0.4% 0.4% 0.0% 0.4% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%

36,855 25,415 62,270 56.7% 39.1% 95.8% 56.3% 39.5% 95.8% 59.8% 36.4% 96.2% 0.4% ‐0.4% 0.0% ‐3.1% 2.7% ‐0.4%Comp/High Schools 2,730 4.2% 4.2% 3.8% 0.0% 0.4%Grand Total 65,000 100.0% 100.0% 100.0% 0.0% 0.0%

By Type WD WE Total WD WE Total WD WE Total WD WE Total WD WE Total WD WE TotalOpen 8,905 11,180 20,085 13.7% 17.2% 30.9% 10.5% 14.2% 24.8% 14.7% 17.6% 32.3% 3.2% 3.0% 6.1% ‐1.0% ‐0.4% ‐1.4%Mid 6,370 195 6,565 9.8% 0.3% 10.1% 8.1% 0.3% 8.4% 11.2% 0.3% 11.5% 1.7% 0.0% 1.7% ‐1.4% 0.0% ‐1.4%Twilight 2,990 1,885 4,875 4.6% 2.9% 7.5% 10.1% 6.4% 16.5% 4.1% 1.9% 6.0% ‐5.5% ‐3.5% ‐9.0% 0.5% 1.0% 1.5%9‐Hole 14,690 10,595 25,285 22.6% 16.3% 38.9% 22.5% 16.3% 38.8% 23.7% 14.5% 38.2% 0.1% 0.0% 0.1% ‐1.1% 1.8% 0.7%League 1,430 0 1,430 2.2% 0.0% 2.2% 2.2% 0.0% 2.2% 2.9% 0.0% 2.9% 0.0% 0.0% 0.0% ‐0.7% 0.0% ‐0.7%Off‐Season 130 390 520 0.2% 0.6% 0.8% 0.2% 0.6% 0.8% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.2% 0.6% 0.8%Outing 1,235 520 1,755 1.9% 0.8% 2.7% 0.9% 0.7% 1.6% 1.1% 0.7% 1.7% 1.0% 0.1% 1.1% 0.8% 0.1% 1.0%Replay 260 0 260 0.4% 0.0% 0.4% 0.4% 0.0% 0.4% 0.4% 0.0% 0.4% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%Super Twilight 585 650 1,235 0.9% 1.0% 1.9% 0.9% 1.0% 1.9% 1.3% 1.4% 2.7% 0.0% 0.0% 0.0% ‐0.4% ‐0.4% ‐0.8%Service 260 0 260 0.4% 0.0% 0.4% 0.4% 0.0% 0.4% 0.4% 0.0% 0.4% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%

36,855 25,415 62,270 56.7% 39.1% 95.8% 56.3% 39.5% 95.8% 59.8% 36.4% 96.2% 0.4% ‐0.4% 0.0% ‐3.1% 2.7% ‐0.4%Comp/High Schools 2,730 4.2% 4.2% 3.8% 0.0% 0.4%

65,000 100.0% 100.0% 100.0% 0.0% 0.0%

Note: Peak Season defined as period from March through August (prior to Hurricane Irene)Source: Mareth Advisors, 2012

Input Summary

Input Summary Variance to Peak

Variance to Peak

2011 Full Year

2011 Full Year

Variance to 2011

Variance to 2011

2011 Peak Season

2011 Peak Season


Figure 5: Green Fee Input Summary – Ash Brook Golf Course

By Source WD WE Total WD WE Total WD WE Total WD WE Total WD WE Total WD WE TotalPlayer's Cards 9,306 12,371 21,677 16.4% 21.8% 38.2% 15.8% 22.5% 38.3% 16.3% 21.6% 38.0% 0.6% ‐0.7% ‐0.1% 0.1% 0.2% 0.2%Non‐Card Starts 1,872 1,703 3,575 3.3% 3.0% 6.3% 2.8% 3.0% 5.8% 2.9% 3.0% 5.9% 0.5% 0.0% 0.5% 0.4% 0.0% 0.4%Seniors 10,100 1,872 11,972 17.8% 3.3% 21.1% 18.7% 3.5% 22.2% 17.9% 3.3% 21.2% ‐0.9% ‐0.2% ‐1.1% ‐0.1% 0.0% ‐0.1%Youth 907 1,078 1,985 1.6% 1.9% 3.5% 1.5% 1.2% 2.8% 1.8% 1.5% 3.3% 0.1% 0.7% 0.7% ‐0.2% 0.4% 0.2%Pitch & Putt 6,071 5,674 11,745 10.7% 10.0% 20.7% 10.6% 10.0% 20.6% 11.8% 10.5% 22.3% 0.1% 0.0% 0.1% ‐1.1% ‐0.5% ‐1.6%League 567 ‐ 567 1.0% 0.0% 1.0% 0.9% 0.0% 0.9% 1.0% 0.0% 1.0% 0.1% 0.0% 0.1% 0.0% 0.0% 0.0%Off‐Season 170 567 737 0.3% 1.0% 1.3% 0.3% 1.0% 1.2% 0.0% 0.0% 0.0% 0.0% 0.0% 0.1% 0.3% 1.0% 1.3%Outing 567 170 737 1.0% 0.3% 1.3% 0.7% 0.3% 1.0% 0.8% 0.3% 1.0% 0.3% 0.0% 0.3% 0.2% 0.0% 0.3%Replay 113 ‐ 113 0.2% 0.0% 0.2% 0.2% 0.0% 0.2% 0.2% 0.0% 0.2% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%Super Twilight 1,192 ‐ 1,192 2.1% 0.0% 2.1% 2.1% 0.0% 2.1% 1.9% 0.0% 1.9% 0.0% 0.0% 0.0% 0.2% 0.0% 0.2%Service 170 ‐ 170 0.3% 0.0% 0.3% 0.3% 0.0% 0.3% 0.2% 0.0% 0.2% 0.0% 0.0% 0.0% 0.1% 0.0% 0.1%Union County Guest ‐ ‐ ‐ 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%Reciprocal Senior ‐ ‐ ‐ 0.0% 0.0% 0.0% 0.7% 0.0% 0.7% 0.6% 0.0% 0.6% ‐0.7% 0.0% ‐0.7% ‐0.6% 0.0% ‐0.6%

31,035 23,435 54,470 54.7% 41.3% 96.0% 54.5% 41.5% 96.0% 55.5% 40.1% 95.7% 0.2% ‐0.2% 0.0% ‐0.8% 1.2% 0.3%Comp/High Schools 2,270 4.0% 4.0% 4.3% 0.0% ‐0.3%Grand Total 56,740 100.0% 100.0%

By Type WD WE Total WD WE Total WD WE Total WD WE Total WD WE Total WD WE TotalOpen 12,369 14,754 27,123 21.8% 26.0% 47.8% 17.7% 23.5% 41.2% 21.4% 26.4% 47.8% 4.1% 2.5% 6.6% 0.4% ‐0.4% 0.1%Mid 6,866 397 7,263 12.1% 0.7% 12.8% 10.8% 0.0% 10.8% 12.5% 0.0% 12.5% 1.3% 0.7% 2.0% ‐0.4% 0.7% 0.3%Twilight 2,950 1,873 4,823 5.2% 3.3% 8.5% 10.4% 6.8% 17.1% 5.1% 3.0% 8.0% ‐5.2% ‐3.5% ‐8.6% 0.1% 0.3% 0.5%Pitch & Putt 6,071 5,674 11,745 10.7% 10.0% 20.7% 10.6% 10.0% 20.6% 11.8% 10.5% 22.3% 0.1% 0.0% 0.1% ‐1.1% ‐0.5% ‐1.6%League 567 0 567 1.0% 0.0% 1.0% 0.9% 0.0% 0.9% 1.0% 0.0% 1.0% 0.1% 0.0% 0.1% 0.0% 0.0% 0.0%Off‐Season 170 567 737 0.3% 1.0% 1.3% 0.3% 1.0% 1.2% 0.0% 0.0% 0.0% 0.0% 0.0% 0.1% 0.3% 1.0% 1.3%Outing 567 170 737 1.0% 0.3% 1.3% 0.7% 0.3% 1.0% 0.8% 0.3% 1.0% 0.3% 0.0% 0.3% 0.2% 0.0% 0.3%Replay 113 0 113 0.2% 0.0% 0.2% 0.2% 0.0% 0.2% 0.2% 0.0% 0.2% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%Super Twilight 1,192 0 1,192 2.1% 0.0% 2.1% 2.1% 0.0% 2.1% 1.9% 0.0% 1.9% 0.0% 0.0% 0.0% 0.2% 0.0% 0.2%Service 170 0 170 0.3% 0.0% 0.3% 0.3% 0.0% 0.3% 0.2% 0.0% 0.2% 0.0% 0.0% 0.0% 0.1% 0.0% 0.1%Union County Guest 0 0 0 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%Reciprocal Senior 0 0 0 0.0% 0.0% 0.0% 0.7% 0.0% 0.7% 0.6% 0.0% 0.6% ‐0.7% 0.0% ‐0.7% ‐0.6% 0.0% ‐0.6%

31,035 23,435 54,470 54.7% 41.3% 96.0% 54.5% 41.5% 96.0% 55.5% 40.1% 95.7% 0.2% ‐0.2% 0.0% ‐0.8% 1.2% 0.3%Comp/High Schools 2,270 4.0% 4.0% 4.3% 0.0% ‐0.3%

56,740 100.0% 100.0% 100.0% 0.0% 0.0%

Note: Peak Season defined as period from March through August (prior to Hurricane Irene)Source: Mareth Advisors, 2012

Input Summary 2011 Full Year 2011 Peak Season Variance to PeakVariance to 2011

Input Summary 2011 Full Year 2011 Peak Season Variance to PeakVariance to 2011


Player’s Card Passes The sale of player’s cards was attributed to each course based on the current number of sales and discussions and review with Kemper. The stabilized card sales level is estimated at 6,200 per year, slightly above the 6,048 cards sold in 2011, but reflecting continued and ongoing improvements effected by the County and Kemper. The distribution of sales among the various categories of resident, non‐resident, senior, junior and 14‐day vs. 7‐day pass types reflects the 2011 pattern with the reallocation of sales for the discontinued categories.

Cart Revenue Estimated cart revenue was determined by calculating segment utilization for each type of round and then applying those to the estimate for stabilized demand segmentation (described earlier in the calculation of green fee revenue) at 2012 pricing levels. The calculated utilization levels are 65.0 percent at Galloping Hill and 34 percent at Ash Brook.

Range Revenue Range revenue is comprised of two elements – income from golfers playing golf and those just there to practice. Income from golfers playing golf is calculated at $1.00 per start or $65,000 in a stabilized year. Practice or non‐golf use of the range is input at $500,000 in a stabilized year. This input is about 25 percent higher than the $415,000 generated in 2011 and reflects increased business expected with the introduction of the Taylor Made Performance Lab and a general ramp‐up of business anticipated by Kemper.

Miscellaneous Golf Revenue This category includes miscellaneous revenue from golf handicapping, club rentals, lessons, and other minor income sources. Miscellaneous income is estimated at $2.50 per start or $162,500 at Galloping Hill to recognize the concentration of lesson activities there. Ash Brook’s miscellaneous income is estimated at $0.25 per start or $12,600 in a stabilized year. Total miscellaneous income equates to $175,100 per year or $1.52 per start.

Food and Beverage Income Food and beverage estimates for Galloping Hill’s new clubhouse was estimated for each outlet or anticipated source of business. Distinct sources of business include: golf outings, daily fee golfers, outside users (i.e. general public), and banquets. Distinct outlets include each course’s grill/snack bar/on course cart service, Galloping Hill’s banquet facility, and the Learning Center’s soon‐to‐open clubhouse.

Kemper estimates were reviewed and key assumptions evaluated and several were incorporated into this analysis to reflect Kemper’s expertise and understanding of F&B operations.

F&B spending by golfers while playing golf is estimated at $3.42 per start at Galloping Hill and $2.75 per start at Ash Brook. This includes on course spending, spending at the turn, and spending before a round. Post‐round spending is captured within the broader general public use to reflect both the reduction of any time constraints and to better align this input with Kemper’s buildup of F&B revenue. For comparison purposes, Galloping Hill and Ash Brook generated $2.98 and $2.44 per start, respectively


in 2011. The nominal enhancement at both courses reflects our belief that spending patterns will not change or that the predominantly middle class consumer will simply lessen their spending levels should pricing change significantly (i.e. a higher per capita spending may be possible, but will be offset by a lower number of purchasers).

Outing F&B sales are estimated at an 80 percent utilization level of outing starts at Galloping Hill. Average pricing is estimated at $22 per patron. Ash Brook’s outing F&B revenue is estimated at a 60 percent utilization rate of outing rounds at a $16 price point.

Non‐golf or general public use of Galloping Hill’s food and beverage outlets is estimated at $682,500 in a stabilized year. This includes a $525,000 food component and a 30 percent beverage‐to‐food ratio component to calculate the total. These sales are exclusive to Galloping Hill, as Ash Brook’s outside food sales is calculated at $0 per year to reflect our belief that the older clubhouse and course will cater exclusively to golfers. This sale level is consistent with Kemper’s more detailed buildup of restaurant sales estimated in 2016.

The Learning Center at Galloping Hill will provide an additional source of food and beverage sales. Food sales are estimated $175,000 annually. Total sales, including a 30 percent beverage allocation, are estimated at $227,500 in a stabilized year. This level of activity was discussed with Kemper and is believed to represent a realistic target given the expected level of activity and market orientation of the facility.

Banquets represent the largest source of income for Galloping Hill’s new clubhouse. These sales are estimated at 240 annual events at an average of 80 persons per event at average revenue of $80 per plate. Anticipated events within these totals are a mixture of smaller meeting as well as larger, more expensive weddings and Mitzvahs. This mix, consistent with current Kemper estimates, generates total banquet revenue of $2.33 million, inclusive of a 21 percent service charge on banquet and outing events.

Total food and beverage revenue is estimated $3.39 million across all outlets, accounting for 43 percent of the $8.54 million in gross golf system revenue in a stabilized year.

Cost of Goods Sold (COGS) Cost of goods sold was estimated by outlet and facility. Ash Brook’s COGS was estimated at 35 percent of F&B revenue, consistent with the improved food cost ratios under Kemper. The same percentage was applied to the non‐banquet F&B sales at Galloping Hill. Banquet operations are estimated at a lower 30 percent COGS ratio to reflect the more controllable nature of banquet expenses over ala carte dining. Total COS for the entire system is estimated at $1.05 million or 33.8 percent of F&B sales in a stabilized year.


F&B COGS Input Ratios F&B Cost Galloping Hill Ash Brook Banquet/Outing Event F&B COGS % 30% 30% Grill/Snack Bar Learning Center F&B COGS % 40% 35% Source: Kemper Sports Management and Mareth Advisors, 2012

Net Operating Revenue Net operating revenues are estimated at $7.43 million in a stabilized year.

Expenses As noted earlier, the expense profile within the system, while stabilizing at the golf enterprise level, will undergo significant shifts with the opening of the new clubhouse and the costs associated with its operation.

Expense inputs were reviewed and discussed with Kemper to best align their expectations and staffing profiles with the modeled inputs. Costs associated with highly variable aspects of the business opportunities (e.g. banquets) were set up as ratios. We would expect these ratio inputs to vary substantially as the business opportunities ramp up to the stabilized levels.

Detailed inputs are presented in the Appendix. Key expense assumptions are as follows:

Course Maintenance

Course maintenance expenditures are estimated at $1.32 million annually for both courses. This is calculated using current staffing levels and manpower rates (both salaried and hourly) with slightly higher supply costs to address the higher utilization levels anticipated upon stabilization. This total amount includes $788,300 of course maintenance costs at Galloping Hill and $528,700 at Ash Brook.

Clubhouse Operations Manpower and staffing costs associated with clubhouse operations include pro shop and F&B labor costs. Total expenses are estimated at $2.23 million in a stabilized year. Galloping Hill, with its new clubhouse is estimated to generate expenses of $1.85 million in a stabilized year. Ash Brook is estimated at $383,000.

Key labor, food cost and overhead (A&G) expenses for the food and beverage outlets are presented in the table below. Galloping Hill expense ratios are sourced to Kemper’s 2016 budget while Galloping Hill’s are based on current (and improved) performance metrics from 2011. Detailed labor buildup of the clubhouse and other expense assumptions are presented in the Appendix.


F&B Labor Input Ratios F&B Cost Galloping Hill Ash Brook Banquet/Outing Event Labor % 38% 40% Grill/Snack Bar/Learning Center Labor % 45% 40% Source: Kemper Sports Management and Mareth Advisors, 2012

Cart Leasing and Range Supplies Cart leasing expenses are based on an 80‐cart fleet at both Galloping Hill and Ash Brook at the current cost of $750 per cart. Total cart leasing and range expenses are estimated at $60,000 per course inclusive of $10,000 in miscellaneous range expenses. Total cart expenses are estimated at $140,000 in a stabilized year.

Management Fees Management fees are calculated on a base fee of $65,000 per course plus a 1.0 incentive fee calculated on net revenues. System‐wide stabilized year management fees are estimated at $202,000.

Real Estate Taxes No taxes are calculated.

Net Income before Reserve Net income before a reserve for replacement is estimated at $2.15 million at Galloping Hill, equating to 32.4 percent of gross operating income. Ash Brook’s net income before a reserve is estimated at $476,100, equating to 25.2 percent of gross operating income. System NOI is estimated $2.62 million, equating to 30.8 percent of gross operating income in a stabilized year.

Reserve for Replacement Reserve for replacement of capital items is calculated at 4.0 percent of gross operating income. While this item is not currently reserved in the system’s income statement, we believe that this set aside should be included in future planning. System‐wide, this set aside amounts to $330,000 in a stabilized year.

Net Operating Income after Reserve Net operating income after reserve is estimated at $2.29 million for the golf system in a stabilized year, equating to 26.8 percent of gross revenue. Galloping Hill is estimated to contribute $1.89 million or 28.4 percent of gross revenue, while Ash Brook and estimated $400,500 or 21.2 percent of its gross operating revenue.

Debt Service Payments No debt, according to Union County officials, is currently held or assigned to golf operations. Future assumptions, for financial modeling purposes, are assumed to include the take‐out bond financing of short‐term construction debt related to the ongoing improvements Galloping Hill Golf Course.


These construction activities are currently financed using short‐term obligations authorized under Union County Ordinances 687 and 713. These obligations total $13.39 million. Down payments by Union County of $669,500 reduced the total to $12.72 million.

This debt is currently scheduled for conversion to permanent long term bond financing. The process is just commencing and as such, assumptions regarding the likely terms this debt are based on input from county staff. They include a 3.0 percent interest rate and 20‐year term. While these items will ultimately be negotiated between the county and the issuer, they are believed to be representative of the current financing environment and reasonable for planning purposes.

Total financed debt of $13.36 million assumed by Mareth Advisors also includes a 5.0 percent contingency to address issuance and other unforeseen costs, lending a slightly conservative bias to the estimate. Based on this amount and the aforementioned terms, annual bond payments would total just under $900,000 per year.

Debt Service Estimate Ord 687 O Ord 713 O Total Design & Construction Construction Short‐Term Debt Authorization $ (4,120,000) $ (9,270,000) $ (13,390,000)Down payment $ 206,000 $ 463,500 $ 669,500Outstanding Short‐Term $ (3,914,000) $ (8,806,500) $ (12,720,500) Issuance/Contingency Costs @5.0% $ (636,025) Anticipated Long‐Term Debt $ (13,356,525) Annual Payment * $ 897,768 * 3.0% interest rate over 20 year term Source: Union County and Mareth Advisors, 2012

Net Operating Income after Debt Net operating income after debt and reserve is estimated at $1.39 million for the golf system in a stabilized year, equating to 16.3 percent of gross revenue.


Figure 6: Consolidated Stabilized Year Pro Forma

Total % $ per Start $/HoleRevenuesGolf RevenueGreens Fee Revenue 2,780,400$ 32.6% 22.84$ 51,489$ Pass Revenue 497,400 5.8% 4.09 9,211 Cart Rentals (incl. pull carts) 829,200 9.7% 6.81 15,356 Driving Range 565,000 6.6% 4.64 10,463 Proshop Merchandise ‐ 0.0% ‐ ‐ Miscellaneous Revenue 176,700 2.1% 1.45 3,272 Total Golf Revenue 4,848,700$ 56.8% 39.83$ 89,791$

Food and Beverage RevenueGrill Room/Snack (Golfers/Bev. Cart) 416,000$ 4.9% 3.42$ 7,704$ Grill Room/Snack (Outside Sales) 682,500 8.0% 5.61 12,639 Golf Outings 36,300 0.4% 0.30 672 Learning Center F&B 227,500 2.7% 1.87 4,213 Banquets and Weddings 1,920,000 22.5% 15.77 35,556 Service Charges 410,800 4.8% 3.37 7,607 Total F&B Revenue 3,693,100$ 43.2% 30.33$ 68,391$

Gross Operating Revenue 8,541,800$ 100.0% 70.16$ 158,181$

Less Cost of Goods SoldPro Shop Sales ‐$ 0.0% ‐$ ‐$ Grill/Snack/Beverage Cart F&B 431,600 39.3% 3.55 7,993 Learning Center F&B 91,000 40.0% 0.75 1,685 Banquets and Outings 586,900 30.0% 4.82 10,869 Total COGS 1,109,500$ 33.8% 9.11$ 20,546$

‐ Net Operating Revenue 7,432,300$ 87.0% 61.05$ 137,635$

ExpensesCourse Maintenance 1,317,000$ 15.4% 10.82$ 24,389$ Clubhouse Operations 2,238,400 26.2% 18.39 41,452 General and Administrative 903,400 10.6% 7.42 16,730 Cart Lease & Range Supplies 140,000 1.6% 1.15 2,593 Management Fees 204,400 2.4% 1.68 3,785 Real Estate Taxes ‐ 0.0% ‐ ‐ Total Expenses 4,803,200$ 56.2% 39.45$ $88,948

Income before Reserve 2,629,100$ 30.8% 21.60$ 48,687$

Reserve for Replacement $341,600 4.0% 2.81$ $6,326

Net Operating Income after Reserve 2,287,500$ 26.8% 18.79$ 42,361$

Debt Service Estimate 897,800$ 10.5% 7.37$ $16,626

Net Operating Income after Debt 1,389,700$ 16.3% 11.41$ $25,735

Note: Dol lar amounts rounded to nearest $100Note: COGS percentage i s calculated from i ts related revenue sources , not tota l expensesSource: Mareth Advisors , LLC


Figure 7: Galloping Hill Stabilized Year Pro Forma

Total % $ per Start $/HoleRevenuesGolf RevenueGreens Fee Revenue 1,530,300$ 23.0% 23.54$ 56,678$ Pass Revenue 299,900 4.5% 4.61 11,107 Cart Rentals (incl. pull carts) 561,200 8.4% 8.63 20,785 Driving Range 565,000 8.5% 8.69 20,926 Proshop Merchandise ‐ 0.0% ‐ ‐ Miscellaneous Revenue 162,500 2.4% 2.50 6,019 Total Golf Revenue 3,118,900$ 46.9% 47.98$ 115,515$

Food and Beverage RevenueGril l Room/Snack (Golfers/Bev. Cart) 260,000$ 3.9% 4.00$ 9,630$ Gril l Room/Snack (Outside Sales) 682,500 10.3% 10.50 25,278 Golf Outings 30,900 0.5% 0.48 1,144 Learning Center F&B 227,500 3.4% 3.50 8,426 Banquets and Weddings 1,920,000 28.9% 29.54 71,111 Service Charges 409,700 6.2% 6.30 15,174 Total F&B Revenue 3,530,600$ 53.1% 54.32$ 130,763$


Less Cost of Goods SoldPro Shop Sales ‐$ 0.0% ‐$ ‐$ Golfers Grill/Beverage Cart F&B 377,000 40.0% 5.80 13,963 Learning Center F&B 91,000 40.0% 1.40 3,370 Banquets and Outings 585,300 30.0% 9.00 21,678 Total COGS 1,053,300$ 33.7% 16.20$ 39,011$

Net Operating Revenue 5,596,200$ 84.2% 86.10$ 207,267$

ExpensesCourse Maintenance 788,300$ 11.9% 12.13$ 29,196$ Clubhouse Operations 1,848,900 27.8% 28.44 68,478 General and Administrative 616,100 9.3% 9.48 22,819 Cart Lease & Range Supplies 70,000 1.1% 1.08 2,593 Management Fees 121,000 1.8% 1.86 4,481 Real Estate Taxes ‐ 0.0% ‐ ‐ Total Expenses 3,444,300$ 51.8% 52.99$ 127,567$

Income before Reserve 2,151,900$ 32.4% 33.11$ 79,700$


Net Operating Income 1,885,900$ 28.4% 29.01$ 69,848$

Note: Dol lar amounts rounded to nearest $100Note: COGS percentage i s calculated from i ts related revenue sources , not tota l expensesSource: Mareth Advisors , LLC


Figure 8: Ash Brook Stabilized Year Pro Forma

Total % $ per Start $/HoleRevenuesGolf RevenueGreens Fee Revenue 1,250,100$ 66.1% 22.03$ 46,300$ Pass Revenue 197,500 10.4% 3.48 7,315 Cart Rentals (incl. pull carts) 268,000 14.2% 4.72 9,926 Driving Range ‐ 0.0% ‐ ‐ Proshop Merchandise ‐ 0.0% ‐ ‐ Miscellaneous Revenue 14,200 0.8% 0.25 526 Total Golf Revenue 1,729,800$ 91.5% 30.48$ 64,067$

Food and Beverage RevenueGril l Room/Snack (Golfers/Bev. Cart) 156,000$ 8.2% 2.75$ 5,778$ Gril l Room/Snack (Outside Sales) ‐ 0.0% ‐ ‐ Golf Outings 5,400 0.3% 0.10 200 Learning Center F&B ‐ 0.0% ‐ ‐ Banquets and Weddings ‐ 0.0% ‐ ‐ Service Charges 1,100 0.1% 0.02 41 Total F&B Revenue 161,400$ 8.5% 2.84$ 5,978$


Less Cost of Goods SoldPro Shop Sales ‐$ 0.0% ‐$ ‐$ Gril l/Snack/Beverage Cart F&B 54,600 35.0% 0.96 2,022 Learning Center F&B ‐ 0.0% ‐ ‐ Banquets and Outings 1,600 29.6% 0.03 59 Total COGS 56,200$ 35.1% 0.99$ 2,081$

Net Operating Revenue 1,835,000$ 97.0% 32.34$ 67,963$

ExpensesCourse Maintenance 528,700$ 28.0% 9.32$ 19,581$ Clubhouse Operations 389,500 20.6% 6.86 14,426 General and Administrative 287,300 15.2% 5.06 10,641 Cart Lease & Range Supplies 70,000 3.7% 1.23 2,593 Management Fees 83,400 4.4% 1.47 3,089 Real Estate Taxes ‐ 0.0% ‐ ‐ Total Expenses $1,358,900 71.9% 23.95$ $50,330

Income before Reserve 476,100$ 25.2% 8.39$ 17,633$


Net Operating Income 400,500$ 21.2% 7.06$ 14,833$

Note: Dol lar amounts rounded to nearest $1,000Note: COGS percentage i s ca lculated from i ts related revenue sources , not total expensesSource: Mareth Advisors , LLC


Evaluation of Golf Revenue Authorities

Introduction To better understand the opportunities and constraints related to the operation of Union County’s golf courses under the direction of its Improvement Authority, Mareth Advisors conducted interviews with executives of several authorities that operate golf courses throughout the United States.

Operation of public recreation facilities, including golf courses, within an authority structure is relatively uncommon within the United States. According to the National Golf Foundation data base of 15,728 courses within the U.S., just 52 of the 2,430 municipally owned golf courses have an ownership record with the word “authority”. This group includes seven with multiple‐course portfolios and 15 with just one course. Five of the six multi‐course owners are located in the Washington, DC PMSA.

Golf Courses with “Authority” Owners 1 Huron Clinton Metropolitan Authority 9 2 Montgomery County Revenue Authority 9 3 Fairfax County Park Authority 7 4 Baltimore County Revenue Authority 4 5 Prince William County Park Authority 4 6 Northern Virginia Regional Park Authority 3 7 Middlesex County Improvement Authority 3 8 City of Atlanta and Fulton County Recreation Authority 1 9 City of Crawfordsville Golf Course Authority Board 1 10 Clay County Rural Development Authority 1 11 Cook County Economic Development Authority 1 12 Dauphin County General Authority 1 13 DuPage Airport Authority 1 14 Encinitas Ranch Golf Authority 1 15 Hammond Port Authority 1 16 Hinton Economic Development Authority 1 17 Lycoming County Recreation Authority 1 18 March Joint Powers Authority 1 19 Moon Township Recreation Authority 1 20 Tucker County Development Authority 1 21 Tuscaloosa County Parks & Recreation Authority 1 22 Woburn Golf and Ski Authority 1 Total Facilities 54 Source: National Golf Foundation data base of U.S. golf facilities

Of the seven multi‐course operators, Mareth Advisors interviewed four to better understand their history, organization, and importantly the opportunities and challenges of operating within an authority structure. A fifth, Prince William County, is currently in the process of decommissioning its park authority and transferring its golf courses back into a more traditional parks and recreation department.

In addition, Mareth Advisors interviewed the executive director of the Atlantic County Improvement Authority (ACIA) to better understand its relationship to Green Tree Golf Course in Egg Harbor. And,


while it was discovered that ACIA only manages the facility, we conducted additional interviews with the golf course general manager to better understand any perceived benefits of management within a structure that is a hybrid situation to ownership. In addition to these completed interviews, Mareth Advisors sought an interview with the Middlesex County Improvement Authority (MCIA), the only authority in New Jersey that currently owns golf. Our requests were denied for MCIA‐internal reasons. A summary of the organizations and the contacts for our interviews are as follows:

• Montgomery County Revenue Authority (MCRA) Keith Miller, Executive Director • Baltimore County Revenue Authority (BCRA) Joe Rhanis, Director of Golf Operations and General Manager of Greystone Golf Club • Fairfax County Park Authority (FCPA) Cindy Messinger, Executive Director Peter Furey, Manager Golf Enterprises • Huron‐Clinton Metro Parks (HCMP) Greg Almas, Deputy Director • Prince William County Park Authority (PWPA) Jay Ellington, Executive Director • Atlantic County Improvement Authority (ACIA) John Lamey, Executive Director John Hammer, Golf Course Manager

Overview of Authorities A public authority is a special public corporation whose obligations are payable solely from its revenues or property, or both, without recourse to taxes and special assessments. Often, an authority is created to construct, improve, equip, furnish, maintain, acquire, operate, and finance projects to be devoted wholly or partially for public uses, good or general welfare. Authorities differ slightly from “Districts” whose budgets include a source of dedicated tax dollars, though they often operate with a higher degree of autonomy than would a parks and recreation department.

Since an authority’s economic survival depends on its own earnings, rather than upon legislative appropriations, this naturally demands a greater degree of operating efficiency to achieve success. As a corporate entity, the authority not only permits speed and flexibility in administration, but also places legal liability on the enterprise itself. With an independent ability to raise capital, typically through revenue bond offerings, authorities are not bound by the statutory debt limits that can preclude government borrowing. This, in effect, provides government with a source of credit or capital dollars that does not place an undesired burden upon the taxpayer.

A public authority in the U.S. is typically organized in one of three ways: (a) by special act of the State legislature establishing a specific corporate instrumentality for a particular purpose (e.g. construction and operation of a bridge); (b) by a permissive general statute authorizing the incorporation of an improvement authority in areas of a given population to accomplish a variety of purposes, as is the case with Union County’s Improvement Authority; or (c) by a general statute enabling the electorate of a defined geographical area to incorporate as a public corporation by vote at a special election, as is the case of Huron Clinton Metropolitan Authority that is further described herein.

Authorities generally have the following characteristics:

• Authorities are "public benefit corporations," endowed with either a limited or perpetual corporate existence


• Membership to the directorate or board of trustees is appointive for fixed periods • The power of appointment and the corresponding power of removal is typically vested in the

governor, the mayor of a city, the county executive, or some other governing executive body • The directors or board of trustees receive no compensation other than recovery of reasonable

expenses incurred during the course of official business

Authorities are typically empowered with the rights or abilities to:

• Sue and be sued • Establish and use a corporate seal • Hold and acquire real and personal property • Establish the by‐laws for management of its assets and regulation of its affairs • Enter into contracts • Lease, as a lessor • Exercise eminent domain proceedings, in certain instances • Sell or otherwise transfer property to its government • Fix, charge, and collect tolls, rates, rents, and other charges for the use of its facilities • Incur debt and issue bonds, which may be sold at public or private sale, although in some

instances the total issue may be limited to a certain fixed amount • Operate without liability for real property tax; though some enabling legislation does provide for

an alternative payment‐in‐lieu‐of‐taxes (PILOT) • Convey to its enabling government all of its right, title and interest in any project if the revenue

bonds or revenue refunding bonds have been paid and retired

Enabling legislation expressly immunizes the city, county or state governments from liability on the authority's debt, and the bonds of the authority are specifically exempted from state taxation.

The New Jersey legislature adopted the County Improvement Authorities Law in 1960 that enabled each county within the state create such an authority. Unlike other authorities, which once established become essentially independent, New Jersey improvement authorities are required to obtain the approval of the county governing body prior to the acquisition or construction of any public facility by the authority. This enables the county to reap the advantage of the flexibility and financing opportunities established under the Improvement Authorities Law while maintaining a slightly higher degree of control over the types of activities an authority undertakes. This also helps diminish the fear that an improvement authority will become an enterprise unto itself and difficult to control as it becomes successful.

While the preceding broad descriptions do not fully detail the complexities that underlie the specifics of an individual authority’s enabling legislation, they highlight the important aspects that make the use of authorities attractive for the operation of revenue producing activities.

Within the discussions that follow, Baltimore County Revenue Authority (BCRA) and Montgomery County Revenue Authority (MCRA) are perhaps the most analogous to the operation of Union County’s


golf courses under UCIA. Unlike the other authorities reviewed, neither receives any form of direct public assistance or tax dollars and must wholly rely on proceeds from its operations.

How Golf Arrived The Authorities we interviewed were not originally created for the purpose of golf, but rather golf became their purpose at some point. BCRA’s (Baltimore) history is typical. In 1995, Baltimore County was seeing the third wave of national golf course development going on around it and wanted to build two courses. Its existing courses were under‐maintained and capital for golf was generally not available. The cash‐rich revenue authority created to own and operate city‐developed parking proved to be the perfect marriage, providing both the capital source and stability from the parking revenue.

A similar story evolved in Fairfax County, Virginia. The county was seeking a vehicle in 1950 to hold bequeathed or gifted land to develop parks throughout the county. The legislation enabling authorities provided that structure. Golf was not even a consideration. The first course was not constructed until 1965 and today there are eight courses in their system.

Montgomery County’s Revenue Authority was established under state law in 1957 to operate financially self‐supporting facilities and to finance public facilities. In 1992, State legislation authorized Montgomery County to establish the revenue authority in local law. In December 1992, the County Council enacted legislation that recreated the revenue authority in local law (Montgomery County Code Chapter 42), and the operations of the existing authority were assumed. Its major assets include the Montgomery County Airpark, a general aviation facility, and nine golf courses. Golf was defined early on as a conforming activity and MCRA developed its first course, Falls Road, in 1960. MCRA went on to develop another four courses on its own and then in 2006 assumed leasehold (30‐yr) control of the four courses developed by Montgomery County’s Department Parks and Recreation Department. At that time, the county was losing over $1.0 million per year, a loss that was largely attributed to golf. This loss, however, has not been realized by MCRA. The terms of MCRA’s leasehold agreement requires approval of capital projects, a feature that is included within New Jersey’s authority enabling legislation.

The Huron‐Clinton Metropolitan Authority was established by Public Act 147 of 1939, to allow the Detroit area counties of Oakland, Wayne, Washtenaw, Macomb and Livingston to join in a metropolitan district for the purpose of planning, promoting, developing, owning, maintaining, and operating parks and recreational facilities for the use and benefit of the public, connecting drives, and/or limited access highways. The authority benefitted from a dedicated tax stream that is levied annually. This full‐spectrum park organization is perhaps the least analogous to the organizational and financial structure, but does provide some insights into scale and other operational benefits.

Prince William County Park Authority was created in 1977 as the preferred vehicle to provide recreation services to the residents of the county. This timing was closely aligned with the opening of the county’s first owned course, Prince William Golf Club, in 1978. Subsequently, PWPA developed and opened two additional 18‐hole layouts in 1996. Funded through a combination of facility‐generated income and tax dollars, the county’s contributions continued to rise, but with little government control. To stem those outflows, the county bid out management of its golf courses. As of this year, the county


continued to contribute approximately 50 percent of the operating budget. Finally, the cash‐without‐control situation caused the county to work with the authority to dissolve its existence. This required the county to absorb the authority’s debt and legally return the land. Following the land transfer in June 2012, the operations will officially be placed within a more traditional Parks and Recreation Department. This structure will likely provide greater and more direct oversight by its County Board of Supervisors. Operation of the golf courses by Billy Casper Golf Course Management is not expected to be impacted during its contractual term.

Atlantic County Improvement Authority’s foray into the golf management business was not by design, but by opportunity. The effort to get into the golf business was guided by John Lamey, ACIA’s current executive director. Not by coincidence, Mr. Lamey was also the golf course manager between 1993 and 2000. Following Mr. Lamey’s departure, golf course performance lagged. In 2007 the county solicited competitive bids to operate the clubhouse with course maintenance continuing under the county. ACIA won that competitive bid and later, in 2010, assumed control of golf course maintenance functions as well. With complete control, golf cash flows have improved reportedly by $100,000.

Key Benefits Each of the representatives Authorities interviewed by Mareth Advisors were asked, “What do think are the key benefits of operating under your organizational structure as compared to others operating either privately or wholly under public oversight.” Those factors consistently cited by interviewees as key benefits are listed below, with the factors viewed as most beneficial at the top of the list.

• Operational flexibility/decision making • Price setting • Procurement • Staffing/labor costs • Economies of scale • Financing

Operational Flexibility Operational flexibility was uniformly identified as a key advantage of operating within an authority or under authority oversight. This overarching benefit included the ability to set prices and adjust manpower requirements with a more direct route to the decision makers, namely their boards. Decisions are proposed and acted on in a more timely fashion. The ability to make decisions that support the success of the business enterprise, knowing that success provides opportunities to reinvest toward future success, could not be over stated by those interviewed.

Price Setting Price setting was handled in a variety of ways among the interviewed organizations. Several established high price points and were relatively free to adjust pricing downward through specials and other discounting mechanisms. Atlantic County Improvement Authority, which only serves as the golf course manager, can establish discounted pricing for 90‐day periods without having to get approval of a new price‐setting ordinance, as is typical under New Jersey rules that also establish prices at Union County’s


golf courses. Authorities operating park systems, like Huron Clinton and Fairfax County, have a greater emphasis on restraining pricing to create more affordable recreation opportunities for their citizens. Huron Clinton, however, maintains a greater sensitivity by setting its pricing to a level that does not undercut its private sector competitors.

Procurement The Authorities interviewed by Mareth Advisors are all held to local procurement rules. This includes dollar amount thresholds for requiring RFPs, contract amounts that require approval of the board vs. signatory authority of the Authorities executive director, sole‐sourcing of contracts, and multiple bid requirements. While the standards did vary by locale, the primary benefit was speed at which items could be sourced and purchased without having to deal with multiple layers of approval. Clinton Huron uniquely utilizes a cooperative purchasing group – MyDeal, established by the State of Michigan – to purchase capital items and operating supplies.

Staffing The ability to set staffing levels and pay rates varied among the Authorities interviewed. Those that operated within a park system environment often had legacy ties with their public employment standards and thus continued to wrestle with issues of affordable wage standards. Fairfax County recognizes that their wages run about 20 percent higher than their private sector competitors and are comfortable with that tradeoff. Authorities that operate with more autonomy expressed pride in their ability to keep labor costs under control. Clinton Huron maintains just 1.4 full time staff per golf course across their 10‐course system.

Financing Opportunities While an obvious source of capital, the practical application of Authorities bonding capacity varied widely. Some opted to rely on operating capital reserves while others were very careful in their deployment of their financing capacity. Overall, this was not perceived as a key benefit, but rather a source of financial comfort that could be relied upon if the need demanded. BCRA is the most aggressive user of bond capital among those interviewed, constructing two courses, reinvesting in others, replacing two irrigation systems, purchasing a new cart fleet, and building a new clubhouse at its Woodlands Golf Course. The degree to which these Authorities have deployed their bond capacity, in our opinion, is related to the overall structure of the authority and the degree to which they have other regular income sources. BCRA has a substantial source of income from its parking operations that helps underwrite those offerings.

Noted Constraints Each of the representative authorities interviewed by Mareth Advisors were asked, “What do think are the key challenges or disadvantages of operating under your organizational structure as compared to others operating either privately or wholly under public oversight?” While very few challenges were noted, two areas were mentioned .

• Continued perception of operation by local government/separating the marketing message • Procurement


Marketing Message Two items were noted under the subject of marketing by the Authorities interviewed. Fairfax County noted that its marketing message was lost within the clutter of the county’s website. Changes to the website require levels of approval that are not easily obtained. This does not appear to be an issue with Union County and its web presence for both golf courses.

Baltimore County noted a continuing challenge with educating the public user of the political separation of BCRA from the county government.

Procurement Baltimore County recently replaced the chairman of the authority board as a result of poor procurement practices. According to news reports, the chairman entered into a sole‐source agreement for golf teaching services that did not follow the necessary procurement steps. It is important to note that this one‐off issue highlights poor decision‐making and not a structural deficiency of the organizational structure. This type of issue could occur anywhere where the appropriate checks and balances are not in place.

Conclusions from Authority Interviews The success of Authorities, beyond the day‐to‐day effective management and operation of the individual assets, is one that relies on both geographic and operational diversity. While Union County will not benefit from the 5‐county distribution of assets as the case with Clinton Huron, it will have a diversity of income streams afforded by the existing structure of Union County’s Improvement Authority and the business it currently operates. The golf economy will rise and fall over the years. This diversity will undoubtedly help smooth those cycles and create a more stable, long‐term environment.

The relationship between the golf operator and the authority board is vitally important. The board must recognize its strengths and limitations and provide the support and freedom that enables the full benefits of the organizational structure to manifest.


Conclusions and Recommendations Based on the research and findings, Mareth Advisors believes that strong consideration should be given to moving Union County’s golf assets under Union County’s Improvement Authority. The benefits, with sufficient checks and balances, appear to well outweigh any negative impacts.

The ability to provide continued political oversight on capital spending will help ensure that the authority will remain focused on its core missions. The structure will provide the flexibility to operate the golf and clubhouse businesses in a manner that can best react to changing business patterns and market conditions.

Our estimates of cash flow highlight what we believe is market possible with the ongoing and other assumed improvements. These cash flows can be substantial, even after the estimated debt‐service related to current and planned capital improvements. Downturns and unforeseen economic events, however, will occur. Having a more diverse economic base under UCIA will help smooth those cycles and reserve against them.


Appendix 1. Galloping Hill 2011 Revenue Details 2. Ash Brook 2011 Revenue Detail 3. Learning Center 2011 Revenue Detail 4. Detailed Galloping Hill Green Fee and Play Allocation Inputs 5. Detailed Ash Brook Green Fee and Play Allocation Inputs 6. Stabilized Expense Detail – Galloping Hill 7. Stabilized Expense Detail – Ash Brook 8. Key Assumptions Summary – Galloping Hill 9. Key Assumptions Summary – Ash Brook

Appendix

Figure 9: Galloping Hill Detailed Green Fee and Play Allocation Inputs

Galloping Hill Rack 2011 YE 2011 Peak Model Inputs # Starts

Weekday

Player's Card Open (until 11AM) $29.00 3.8% 5.5% 5.0% 3,250Player's Card Midday (11AM‐ 3PM) $27.00 3.9% 5.1% 4.2% 2,730Player's Card Twil ight (3PM ‐ Close) $25.00 4.0% 2.4% 2.5% 1,6259‐hole Player's Card Holder $14.00 8.8% 8.7% 8.8% 5,720Non Card Holder Open $56.00 1.6% 2.3% 2.2% 1,430Non Card Holder Midday $49.00 2.3% 3.3% 3.1% 2,015Non Card Holder Twilight $43.00 2.2% 1.0% 1.0% 6509‐hole Non Card Holder $17.00 8.8% 9.6% 8.8% 5,720Senior Player's Card Open $18.00 4.9% 6.7% 6.3% 4,095Senior Player's Card Midday $16.00 1.9% 2.6% 2.3% 1,495Senior Player's Card Twilight $14.00 3.8% 0.7% 1.0% 6509‐hole Senior Player's Card $14.00 3.7% 3.8% 3.7% 2,405Youth Players Card Open $18.00 0.1% 0.2% 0.2% 130Youth Player's Card Midday $16.00 0.2% 0.2% 0.2% 130Youth Player's Card Twilight $14.00 0.1% 0.1% 0.1% 65

9‐hole Youth Player's Card $10.00 1.3% 1.5% 1.3% 845League ** $24.59 2.2% 2.9% 2.2% 1,430Off‐Season ** $22.20 0.2% 0.0% 0.2% 130

Outing ** $34.43 0.9% 1.1% 1.9% 1,235

Replay ** $15.00 0.4% 0.4% 0.4% 260Super Twil ight $18.00 0.9% 1.3% 0.9% 585Service $32.65 0.4% 0.4% 0.4% 260

56.3% 59.8% 56.70% 36,855Current Pricing WeekendPremium over Weekday $2.00 Player's Card Open (until 11AM) $31.00 10.0% 12.5% 12.3% 7,995Premium over Weekday $4.00 Player's Card Midday (11AM‐ 3PM) $31.00 0.0% 0.0% 0.0% 0Premium over Weekday $1.00 Player's Card Twil ight (3PM ‐ Close) $26.00 3.9% 1.0% 1.6% 1,040Premium over Weekday $1.00 9‐hole Player's Card Holder $15.00 6.9% 6.1% 6.9% 4,485Premium over Weekday $4.00 Non Card Holder Open $60.00 2.4% 2.9% 2.8% 1,820Premium over Weekday $11.00 Non Card Holder Midday $60.00 0.0% 0.0% 0.0% 0Premium over Weekday $2.00 Non Card Holder Twilight $45.00 1.8% 0.7% 1.1% 715Premium over Weekday $1.00 9‐hole Non Card Holder $18.00 7.8% 7.1% 7.8% 5,070Premium over Weekday $13.00 Senior Player's Card Open $31.00 1.8% 2.2% 2.1% 1,365Premium over Weekday $15.00 Senior Player's Card Midday $31.00 0.0% 0.0% 0.0% 0Premium over Weekday $10.00 Senior Player's Card Twilight $24.00 0.5% 0.1% 0.1% 65Premium over Weekday $1.00 9‐hole Senior Player's Card $15.00 0.9% 0.7% 0.9% 585Premium over Weekday $0.00 Youth Players Card Open $18.00 0.0% 0.0% 0.0% 0Premium over Weekday $2.00 Youth Player's Card Midday $18.00 0.3% 0.3% 0.3% 195Premium over Weekday $0.00 Youth Player's Card Twilight $14.00 0.1% 0.1% 0.1% 65Premium over Weekday $0.00 9‐hole Youth Player's Card $10.00 0.7% 0.6% 0.7% 455

League ** $0.00 0.0% 0.0% 0.0% 0Off‐Season ** $30.79 0.6% 0.0% 0.6% 390

Outing ** $36.01 0.7% 0.7% 0.8% 520

Replay ** $0.00 0.0% 0.0% 0.0% 0Super Twil ight $18.00 1.0% 1.4% 1.0% 650Service $0.00 0.0% 0.0% 0.0% 0

39.5% 36.4% 39.10% 25,415

Employee Comp $0.00 1.56% 1.5% 1.5% 975High Schools $1.52 1.06% 0.9% 1.1% 715Other Comp $0.00 1.57% 1.5% 1.6% 1,040

4.2% 3.8% 4.20% 2,730

Total 100.0% 100.0% 65,000

Galloping Hill Composite Daily Green Fee $23.54Weekend Play 43.30%Weekday Play 56.70%

** Input based on 2011 actua l yield per s tart

Appendix

Figure 10: Ash Brook Detailed Green Fee and Play Allocation Inputs

Ash Brook Rack 2011 YE 2011 Peak Model Inputs # Starts

Weekday

Player's Card Open (until 11AM) $29.00 6.2% 7.6% 7.8% 3,939Player's Card Midday (11AM ‐ 3PM) $27.00 5.1% 6.0% 5.8% 2,929Player's Card Twilight (3PM ‐ Close) $25.00 4.4% 2.7% 2.8% 1,414Non Card Holder Open $56.00 0.9% 1.1% 1.4% 707Non Card Holder Midday $49.00 1.2% 1.3% 1.3% 657Non Card Holder Twilight $43.00 0.8% 0.5% 0.6% 303Senior Player's Card Open $18.00 10.1% 12.1% 12.0% 6,060Senior Player's Card Midday $16.00 4.1% 4.7% 4.6% 2,323Senior Player's Card Twil ight $14.00 4.5% 1.1% 1.2% 606Youth Players Card Open $18.00 0.6% 0.7% 0.6% 303Youth Player's Card Midday $16.00 0.4% 0.5% 0.4% 202Youth Player's Card Twilight $14.00 0.6% 0.7% 0.6% 3039‐hole P&P Adult $5.00 6.5% 7.5% 6.6% 3,333

9‐hole P&P Group $7.00 0.2% 0.1% 0.2% 1019‐hole P&P Senior $6.00 1.3% 1.4% 1.3% 6579‐hole P&P Youth $6.00 2.5% 2.7% 2.6% 1,313League ** $23.12 0.9% 1.0% 1.0% 505Off‐Season ** $20.98 0.3% 0.0% 0.3% 152

Outing ** $37.57 0.7% 0.8% 1.0% 505

Replay ** $15.00 0.2% 0.2% 0.2% 101Super Twil ight $18.00 2.1% 1.9% 2.1% 1,061Service ** $30.00 0.3% 0.2% 0.3% 152Union County Guest $29.00 0.0% 0.0% 0.0% 0Reciprocal Senior $29.00 0.7% 0.6% 0.0% 0

54.5% 55.5% 54.7% 27,626Current Pricing WeekendPremium over Weekday $2.00 Player's Card Open (until 11AM) $31.00 17.9% 19.8% 19.8% 9,999Premium over Weekday $4.00 Player's Card Midday (11AM ‐ 3PM) $31.00 0.0% 0.0% 0.0% 0Premium over Weekday $1.00 Player's Card Twilight (3PM ‐ Close) $26.00 4.6% 1.8% 2.0% 1,010Premium over Weekday $4.00 Non Card Holder Open $60.00 2.0% 2.6% 2.5% 1,263Premium over Weekday $11.00 Non Card Holder Midday $60.00 0.0% 0.0% 0.0% 0Premium over Weekday $2.00 Non Card Holder Twilight $45.00 0.9% 0.4% 0.5% 253Premium over Weekday $13.00 Senior Player's Card Open $31.00 2.8% 3.0% 3.0% 1,515Premium over Weekday $15.00 Senior Player's Card Midday $31.00 0.0% 0.0% 0.0% 0Premium over Weekday $10.00 Senior Player's Card Twil ight $24.00 0.7% 0.2% 0.3% 152Premium over Weekday $0.00 Youth Players Card Open $18.00 0.7% 1.0% 0.7% 354Premium over Weekday $2.00 Youth Player's Card Midday $18.00 0.0% 0.0% 0.7% 354Premium over Weekday $0.00 Youth Player's Card Twilight $14.00 0.5% 0.5% 0.5% 253Premium over Weekday $1.00 9‐hole P&P Adult $6.00 6.5% 6.9% 6.5% 3,283Premium over Weekday n/a 9‐hole P&P Group 0.0% 0.0% 0.0% 0Premium over Weekday $1.00 9‐hole P&P Senior $7.00 0.5% 0.5% 0.5% 253Premium over Weekday $1.00 9‐hole P&P Youth $7.00 3.0% 3.2% 3.0% 1,515

League ** $0.00 0.0% 0.0% 0.0% 0Off‐Season ** $27.80 1.0% 0.0% 1.0% 505

Outing ** $35.69 0.3% 0.3% 0.3% 152

Replay ** $0.00 0.0% 0.0% 0.0% 0Super Twil ight $0.00 0.0% 0.0% 0.0% 0Service ** $0.00 0.0% 0.0% 0.0% 0Union County Guest $31.00 0.0% 0.0% 0.0% 0Reciprocal Senior $0.00 0.0% 0.0% 0.0% 0

41.5% 40.1% 41.3% 20,861

Employee Comp $0.00 0.7% n/a 0.7% 354High Schools $2.37 1.3% n/a 1.3% 657Other Comp $0.00 2.0% n/a 2.0% 1,010

4.0% 4.3% 4.0% 2,021

Total 100.0% 100.0% 100.0% 50,508Total Excluding Pitch & Putt 79.4% 79.3% 40,053

Ash Brook Composite Daily Green Fee $22.03Weekend Play 45.30%Weekday Play 54.70%

** Input based on 2011 actua l yield per s tart

Appendix

Figure 11: Stabilized Expense Detail – Galloping Hill

FTE Per Person Total Positions Labor Cost Expenses

Course Maintenance:Director of Agronomy 0.5 $90,000 $45,000Superintendent 1.0 $70,000 $70,000Assistant Superintendent 1.0 $65,000 $65,000Mechanic 1.0 $50,000 $50,0002nd Assistant 1.0 $40,000 $40,000Foreman 1.0 $32,000 $32,000Year‐Round Crew 1.0 $25,000 $25,000General Labor ‐ Golf Season (8 month hires) 5.0 $14,080 $70,400General Labor ‐ Peak Season (4 month hires) 4.0 $5,760 $23,040

Subtotal 15.5 $420,440Benefits 33% $107,900

Course Maintenance Labor Expense $528,340

Total Water/Pumping Costs 3/ $35,000Services and Supplies $225,000

TOTAL COURSE MAINTENANCE $788,340Cost per Hole (27) $29,198

Clubhouse Operations General Manager 0.5 $100,000 $50,000Club Manager 1.0 $50,000 $50,000Head Pro/Manager 2.0 $38,000 $76,000Assistant Pros/Managers 6.0 $22,000 132,000Food and Beverage Manager/Supervisor 1.0 $25,000 25,000Accounting 0.5 $45,000 22,500Sales Manager 0.5 $45,000 22,500Clubhouse/Pro Shop ‐ Golf Season (8 month hires) 2.0 $11,520 23,040Clubhouse/Pro Shop ‐ Peak Season (4 month hires) 2.0 $5,760 11,520Cart/Range/Course Ranger ‐ Peak Season (4 month hires) 7.0 $4,640 32,480

21.0 $345,040F&B LaborGrill Room Labor (45% of sales) $424,125Learning Center F&B Labor (45% of sales) 91,000Banquet and Outing Labor (38% of sales) 897,028Subtotal F&B labor $1,412,153

Benefits (key staff only) ########## $91,700

Total Clubhouse $1,848,900

Other Cart and Range ExpensesCart Leasing Expenses 7/ $60,000Miscellaneous Cart/Range Expenses $10,000

$70,000

TOTAL CLUBHOUSE OPERATIONS $1,918,900

General and Administrative:Labor ‐ General & Administrative (benefits) $133,000F&B Overhead Costs $353,100

Utilities (Natural Gas, Elec., Sewer, Trash) $0 Undistributed Expenses (misc. fees, supplies, mail, etc.) $10,000 Advertising and Promotions $45,000 Legal/Other Accounting $5,000 Contract Services / Equip. Leases $50,000 Insurance $20,000

TOTAL GENERAL AND ADMINISTRATIVE EXPENSES $616,100

Management FeesBase Management Fee $65,000Incentive Management Fee /9 $55,962Total Management Fees $120,962

Other Expenses:Property Taxes 8/ $0Reserve and Replacement Fund $265,980

TOTAL OTHER EXPENSES $265,980

TOTAL MAINTENANCE AND OPERATIONS EXPENSES $3,710,300

1/ Indicates ful l‐time course maintenance employees during an 8 month primary operating season @ $11.00 per hour, no benefits.2/ Indicates ful l‐time maintenance employees during an 4 month peak operating season @ $9.00 per hour with no benefits.3/ Water costs based on inputs from course personnel4/ Indicates ful l‐time proshop employees during an 8 month season @ $9.00 per hour with no benefits.5/ Indicates ful l‐time proshop employees during an 4 month peak season @ $9.00 per hour with no benefits.6/ Indicates ful l‐time cart/range employees during an 4 month peak season @ $7.25 per hour with no benefits.7/ Includes cart lease expense for 80 carts @ $750 per per cart per year.8/ Based on current assessment at other 27‐hole faci lities within New Jersey9/ 1.0% of Gross Revenue.Source: Mareth Advisors, LLC

Appendix

Figure 12: Stabilized Expense Detail – Ash Brook

FTE Per Person Total Positions Labor Cost Expenses

Course Maintenance:Director of Agronomy 0.5 $90,000 $45,000Superintendent 1.0 $50,000 $50,000Assistant Superintendent 0.0 $0 $0Mechanic 1.0 $45,000 $45,0002nd Assistant 0.0 $0 $0Foreman 0.0 $0 $0Year‐Round Crew 0.0 $0 $0General Labor ‐ Golf Season (8 month hires) 6.0 $14,080 $84,500General Labor ‐ Peak Season (4 month hires) 4.0 $5,760 $23,000

Subtotal 12.0 $247,500Benefits 33% $46,200

Course Maintenance Labor Expense $293,700

Total Water/Pumping Costs 3/ $35,000Services and Supplies $200,000

TOTAL COURSE MAINTENANCE $528,700Cost per Hole (27) $19,581

Clubhouse Operations General Manager 0.5 $100,000 $50,000Club Manager 1.0 $46,000 $46,000Head Pro / Manager 0.0 $0 $0Assistant Pros / Managers 1.0 $32,000 32,000Food and Beverage Manager/Supervisor 1.0 $25,000 25,000Accounting 0.5 $45,000 22,500Sales Person 0.5 $45,000 22,500Clubhouse/Pro Shop ‐ Golf Season (8 month hires) 3.0 $12,800 38,400Clubhouse/Pro Shop ‐ Peak Season (4 month hires) 0.0 $6,400 0Cart/Range/Course Ranger ‐ Peak Season (4 month hires) 5.0 $4,640 23,200

Clubhouse Labor 11.0 $259,600

Clubhouse Benefits (key staff only) $65,300

F&B LaborGrill/Snack Bar (40% of sales) $62,400Learning Center F&B Labor (40% of sales) 0Banquets (40% of sales) 2,160Subtotal F&B labor $64,560

Total Clubhouse $389,500

Cart and Range ExpensesCart Leasing Expenses 7/ $60,000Miscellaneous Cart/Range Expenses $10,000

$70,000

TOTAL CLUBHOUSE OPERATIONS $459,500

General and Administrative: Labor ‐ General & Administrative (inc. benefits) $186,200F&B Overhead Costs $16,100

Utilities (Natural Gas, Elec., Sewer, Trash) $0 Undistributed Expenses (misc. fees, supplies, mail, etc.) $10,000 Advertising and Promotions $20,000 Legal/Other Accounting $5,000 Contract Services/Equip. Leases $30,000 Insurance $20,000TOTAL GENERAL AND ADMINISTRATIVE EXPENSES $287,300

Management FeesBase Management Fee $65,000Incentive Management Fee /9 $18,350Total Management Fees $83,350

Other Expenses:Property Taxes 8/ $0Reserve and Replacement Fund $75,648

TOTAL OTHER EXPENSES $75,648

TOTAL MAINTENANCE AND OPERATIONS EXPENSES $1,434,500

1/ Indicates full‐time course maintenance employees during an 8 month primary operating season @ $11.00 per hour, no benefits.2/ Indicates full‐time maintenance employees during an 4 month peak operating season @ $9.00 per hour with no benefits.3/ Water costs based on inputs from course personnel4/ Indicates full‐time proshop employees during an 8 month season @ $10.00 per hour with no benefits.5/ Indicates full‐time proshop employees during an 4 month peak season @ $10.00 per hour with no benefits.6/ Indicates full‐time cart/range employees during an 4 month peak season @ $7.25 per hour with no benefits.7/ Includes cart lease expense for 80 carts @ $750 per per cart per year.8/ Based on current assessment at other 27‐hole facil ities within New Jersey9/ 1.0% of Gross Revenue.Source: Mareth Advisors, LLC

33% burden

GOLF OPERATING ASSUMPTIONS ‐ Page 1 of 3Project Name: Galloping Hill

Global AssumptionsGreen Fee Tax Adjuster 0.0%Cart Tax Adjuster 7.0%Rounding Factor 2

Green Fee and Round AssumptionsStarts see Green Fee Distribution and Pricing ScheduleStabilized Year (starts) 65,000Group Outing Rounds Percentage (Calculated) 2.7%Group Outing Rounds Played Weekdays (Calculated) 70.4%

Player Cards Price # Sold7‐day Resident 45.00$ 1,8557‐day Resident Senior 35.00$ 5007‐day Resident Junior 35.00$ 15014‐day Resident 275.00$ 1857‐day Non‐Resident 100.00$ 4507‐day Non‐Resident Senior 90.00$ 32514‐day Non Resident 350.00$ 190Association 18 Hole 1 Day 100.00$ 5Association 18 Hole 2 Day 200.00$ 5Association 9 Hole 100.00$ 5Total Player Cards Sold 3,670

CartsRound Type Price Utilization Factor18‐hole $16.00 65.0%9‐hole $9.00 35.0%Senior 18‐hole $12.00 92.0%Senior 9‐hole $7.00 100.0%Outing $16.00 90.0%League Cart $7.84 100.0%Employee Cart $7.00 75.0%Service Employee/NJSGA Cart $10.00 75.0%18‐hole Youth $0.00 0.0%9‐hole Youth $0.00 0.0%Complimentary $0.00 10.0%Pull Carts (Utilization rate applied to all starts) $4.00 5.5%Power Cart Utilization Factor (calculated) 65.3%

Range and ProshopRange Revenue per Round (warm up use) $1.00Range Revenue (practice only) $500,000Pro Shop Merchandise per Start $0.00Pro Shop Cost of Goods Sold 70%Miscellaneous Revenue per Start (includes lessons) $2.50

ASSUMPTIONS ‐ Page 2 of 3Project Name: Galloping Hill

Food and BeverageGolfer Food and Beverage per Start $4.00Service Charges (Banquets and Outings) 21%

Golf Group Outings% Utilizing Banquet Facilities 80%Outing Banquet Revenue per Person $22.00

Non‐Golf F&B SalesGrill Outside/General Public Food Sales $525,000Learning Center Food Sales $175,000Outside Beverage Sales (% of food) 30%

Banquet EventsAnnual Events 240Average Banquet Revenue per Person $100.00Average Banquet Size 80

Operating ExpensesFood and Beverage CostsBanquet/Outing Event Labor Cost % 38%Banquet/Outing Event F&B Cost % 30%Grill/Snack Bar/Learning Center Labor Cost % 45%Grill/Snack Bar Learning Center F&B Cost % 40%

Benefit Burden 33%Primary Operating Season Length of Hire (months) 8Average Peak Season Length of Hire (months) 4

Course Maintenance Rate Benefits FTE'sDirector of Agronomy $90,000 y 0.50Superintendent $70,000 y 1.00Assistant Superintendent $65,000 y 1.00Mechanic $50,000 y 1.002nd Assistant $40,000 y 1.00Foreman $32,000 y 1.00Year‐Round Crew $25,000 y 1.00General Labor ‐ Golf Season $11.00 n 5.00General Labor ‐ Peak Season $9.00 n 4.00

15.50

Other Maintenance Expenses Water/Pumping Costs $35,000 Services and Supplies $225,000

Operations Staff FTE'sGeneral Manager $100,000 y 0.50Club Manager $50,000 y 1.00Head Pro/Manager $38,000 y 2.00Assistant Pros/Managers $22,000 y 6.00Food and Beverage Manager/Supervisor $25,000 y 1.00Accounting $45,000 y 0.50Sales Manager $45,000 y 0.50Clubhouse/Pro Shop ‐ Golf Season $9.00 n 2.00Clubhouse/Pro Shop ‐ Peak Season $9.00 n 2.00Cart/Range/Course Ranger ‐ Peak Season $7.25 n 7.00

22.50

ASSUMPTIONS ‐ Page 3 of 3Project Name: Galloping Hill

Full Time Man‐hours (calculated) 13,532Golf Season Man‐hours (calculated) 9,707Peak Season Man‐hours (calculated) 9,013Total Man‐hours 32,252

Option 1: Set ExpenseOption 2: Percent of Revenue

Select Option # Amount or %Cart Expenses (1=per cart, 2=% revenue) Number of Carts 80 Annual Lease Expense (per Cart or Percentage of Cart Revenue) 1 750.00 Miscellaneous Cart Expenses (energy/fuel, parts, etc.) 1 10,000.00

Select Option #General and Administrative: (1=total amt., 2=% revenue)Labor ‐ General & Administrative (benefits) 1 100,000.00F&B Overhead Costs 2 10.0%

Utilities (Natural Gas, Elec., Sewer, Trash) 1 0.00 Undistributed Expenses (misc. fees, supplies, mail, etc.) 1 10,000.00 Advertising and Promotions 1 45,000.00 Legal/Other Accounting 1 5,000.00 Contract Services / Equip. Leases 1 50,000.00 Insurance 1 20,000.00 Base Management Fee 1 65,000.00 Incentive Management Fee 2 1.0% Property Taxes 1 0.00 Reserve and Replacement 2 4.0%

Source: Mareth Advisors, LLC

GOLF OPERATING ASSUMPTIONS ‐ Page 1 of 3Project Name: Ash Brook

Global AssumptionsGreen Fee Tax Adjuster 0.0%Cart Tax Adjuster 7.0%Rounding Factor 2

Green Fee and Round AssumptionsStarts (includes Pitch and Putt) see Green Fee Distribution and Pricing ScheduleStabilized Year (includes Pitch and Putt) 56,745Starts Excluding Pitch & Putt (Calculated) 45,000Group Outing Rounds Percentage (Calculated) 1.0%Group Outing Rounds Played Weekdays (Calculated) 100.0%

Player Cards Price # Sold7‐day Resident 45.00$ 1,2007‐day Resident Senior 35.00$ 4007‐day Resident Junior 35.00$ 2014‐day Resident 275.00$ 1507‐day Non‐Resident 100.00$ 5007‐day Non‐Resident Senior 90.00$ 15014‐day Non Resident 350.00$ 50Association 18 Hole 1 Day 100.00$ 50Association 18 Hole 2 Day 200.00$ 5Association 9 Hole 100.00$ 5Total Player Cards Sold 2,530

CartsRound Type Price Utilization Factor18‐hole $16.00 29.4%9‐hole $9.00 49.8%Senior 18‐hole $12.00 42.3%Senior 9‐hole $7.00 85.0%Outing $15.65 81.4%League $5.40 100.0%Employee $7.00 3.1%Service Employee/NJSGA $10.00 100.0%18‐hole Youth $0.00 0.0%9‐hole Youth $0.00 0.0%Complimentary $0.00 8.1%Pull Carts (Utilization rate applied to all starts) $4.00 5.4%Power Cart Utilization Factor (calculated) 35.7%

Range, Proshop, and Other RevenueRange Revenue per Round (warm up use) $0.00Range Revenue (practice only) $0Pro Shop Merchandise per Round $0.00Pro Shop Cost of Goods Sold 70%Miscellaneous Revenue (per Start) $0.25

ASSUMPTIONS ‐ Page 2 of 3Project Name: Ash Brook

Food and BeverageGolfer Food and Beverage per Round $2.75Service Charges (Banquets and Outings) 21%

Golf Group Outings% Utilizing Banquet Facilities 60%Outing Banquet Revenue per Person $16.00

Non‐Golf Restaurant SalesGrill Outside/General Public Food Sales $0Learning Center Food Sales $0Outside Beverage Sales (% of food) 30%

Banquet EventsAnnual Events 0Average Banquet Revenue per Person $125.00Average Banquet Size 200

Operating ExpensesFood and Beverage CostsBanquet/Outing Event Labor Cost % 40%Banquet/Outing Event F&B COGS % 30%Grill/Snack Bar/Learning Center Labor Cost % 40%Grill/Snack Bar Learning Center F&B COGS % 35%

Benefit Burden 33%Primary Operating Season Length of Hire (months) 8Average Peak Season Length of Hire (months) 4

Course Maintenance Rate Benefits FTE'sDirector of Agronomy $90,000 y 0.50Superintendent $50,000 y 1.00Assistant Superintendent $0 y 0.00Mechanic $45,000 y 1.002nd Assistant $0 y 0.00Foreman $0 y 0.00Year‐Round Crew $0 y 0.00General Labor ‐ Golf Season $11.00 n 6.00General Labor ‐ Peak Season $9.00 n 4.00

12.50

Other Maintenance Expenses Water/Pumping Costs $35,000 Services and Supplies $200,000

Operations Staff FTE'sGeneral Manager $100,000 y 0.50Club Manager $46,000 y 1.00Head Pro / Manager $0 y 0.00Assistant Pros / Managers $32,000 y 1.00Food and Beverage Manager/Supervisor $25,000 y 1.00Accounting $45,000 y 0.50Sales Person $45,000 y 0.50Clubhouse/Pro Shop ‐ Golf Season $10.00 n 3.00Clubhouse/Pro Shop ‐ Peak Season $10.00 n 0.00Cart/Range/Course Ranger ‐ Peak Season $7.25 n 5.00

12.50

ASSUMPTIONS ‐ Page 3 of 3Project Name: Ash Brook

Full Time Man‐hours 5,205Full Time Man‐hours (calculated) 12,480Golf Season Man‐hours (calculated) 6,240Peak Season Man‐hours (calculated) 23,925

Option 1: Set ExpenseOption 2: Percent of Revenue

Select Option # Ash BrookCart Expenses (1=per cart, 2=% revenue) Number of Carts 80 Annual Lease Expense (per Cart or Percentage of Cart Revenue) 1 750.00 Miscellaneous Cart Expenses (energy/fuel, parts, etc.) 1 10,000.00

Select Option #General and Administrative: (1=total amt., 2=% revenue) Labor ‐ General & Administrative (inc. benefits) 1 140,000.00F&B Overhead Costs 2 10%

Utilities (Natural Gas, Elec., Sewer, Trash) 1 0.00 Undistributed Expenses (misc. fees, supplies, mail, etc.) 1 10,000.00 Advertising and Promotions 1 20,000.00 Legal/Other Accounting 1 5,000.00 Contract Services/Equip. Leases 1 30,000.00 Insurance 1 20,000.00 Base Management Fee 1 65,000.00 Incentive Management Fee 2 1.0% Property Taxes 1 0.00 Reserve and Replacement Fund 2 4.0%

Source: Mareth Advisors, LLC

Report Final v - countywatchers.files.wordpress.com · Mareth Advisors Project #217 ‐ Union County Golf Final Page 1 Introduction The opening of the new 45,000 +/‐ sf clubhouse

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