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$63 Million Dollars and a Good Walk Spoiled

As Printed in the San Diego Daily Transcript; February 28, 2008

Erik Bruvold

Thursday, February 28, 2008

For the $63 million Carlsbad taxpayers paid, at least “The Crossings at Carlsbad” turned out to be a beautiful golf course. Its clubhouse looks like a Tuscan castle – more like those found at high-end gated communities than at city-owned municipal golf courses. At least those were my impressions last Sunday when I got a chance to play 9 holes at what is one of the region’s most troubling examples of a municipal project gone bad.

Probably because it is in North County, away from the epicenter of local media, little attention has been paid to what the North County Times believes to be to be the most expensive municipal golf course project in the history of the United States. To put the $63 million dollar price tag in perspective, according to the Cities Annual Report issued by the State Controller, in FY 2004-2005 the City of Carlsbad received $205 million in TOTAL revenue and spent $18.7 million on police, $9.9 million on fire protection and $17.9 million on park and recreation services. That’s right. For the cost of the golf course the City could have paid for more than three years of police services!

Moreover, “The Crossings” is not an affordable golf course for regular Carlsbad residents. Green fees on the weekend for City residents are $80 – 16% higher than the rate Encinitas residents pay to play Encinitas Ranch. Kemper Sports, which operates The Crossings for the city, estimates that to meet financial projections and avoid the golf course becoming a drain on Carlsbad’s general fund, half of the play at the golf course will come from non-residents, who pay significantly higher green fees.
The reasons for the course’s astronomical costs are well documented. Environmental constraints forced at least 10 different redesigns of the course. The need to avoid sensitive wetlands and avoid storm water degradation added millions to construction costs. Permitting delays caused the city to lose years during which the land sat fallow and nothing progressed.

Whatever the excuses, the stark reality is that Carlsbad is now the proud owner of a golf course whose cost overruns, according to the City’s finance director, will largely have to be absorbed by Carlsbad’s general fund –robbing resources that could go toward other, more vital services.

Particularly troubling is that the city’s projections presume that the course will be frequently used. Yet according to recent industry reports, the number of rounds of golf played in the United States has significantly declined over the past 8 years. Several courses in San Diego have experienced significant financial hardship. If demand for play does not materialize and/or green fees have to be significantly lowered, taxpayers at Carlsbad could be looking at not only missed bond payments but a need to subsidize operating expenses at the course.

There are some instructive lessons to be learned from this $63 million dollar white elephant

First and foremost, it is vital that citizens demand that government focus on its core competencies. North County has numerous daily fee golf courses. From Encinitas Ranch to Arrowhead in Oceanside to Eagle Crest, Pala Mesa and the Vineyards on the I-15 corridor, North County golfers can find a remarkable number of golf courses that are at least on par with “The Crossings.” In Carlsbad itself, Aviara and, in the afternoons La Costa, are open to public play. There is absolutely no reason to conclude that “golf” is being underprovided in the North County and that government must step in and “do something.”

It is also clear that failsafe mechanisms need to be put in place with municipal projects so that if costs skyrocket, capital projects can get reexamined and cancelled if necessary. Originally the Carlsbad municipal golf course was projected to cost $10 - $15 million. In 2005 when the Carlsbad City Council finally went ahead and moved forward with final construction, they were told the project’s costs would be $37 million. When actually completed late last year and opened for play, the costs had ballooned to $63 million.

Undoubtedly there would have been criticism about the money already spent on the project if the council had pulled the plug. However, government has to learn that it is too easy to not question chasing sunk costs. To paraphrase Kenny Rogers, sometimes you have to know when to walk away from a project and sometimes you have to know when to run.

One way to do this is through the use of independent citizen oversight committees which can serve as watchdogs and issue warnings if construction costs seem to be ballooning beyond budgeted costs. Their objective reports can provide cover for politicians not wanting to disappoint small interest groups who want, irrespective of cost, for a project to be done. They can also serve to check municipal hubris – reminding policymakers when the original justification for a project is no longer true and when costs have far exceeded benefits.

Third, taxpayer groups and think tanks, including this one, have to do more to build capacity to keep up with these projects and call attention to them much earlier in the process. Far better to stop a boondoggle early on when few expenses have been incurred rather than later, when momentum is rolling and it is hard to convince decision makers to rethink a project.

In the next few years North County will face other major public sector capital projects – including the double tracking of the Coaster, the extension of the Mid-Coast trolley to University City, the expansion of SR 78 and public infrastructure improvements in Oceanside. It is vital that, at the front end, policy makers think about an exit strategy so that it is possible to stop a project if costs skyrocket or regulatory processes bog a project down so much that it threatens the rest of the public’s purse.

Government resources are stretched to the breaking point. Long term economic trends are pushing up the cost of labor and this puts local governments, which are ultimately in the service business, in a squeeze between cost pressures and a public that is frustrated by the level of taxation it has to endure. Seeing $63 million spent on a pretty golf course that serves few critical needs does nothing to convince the public that their tax dollars are being wisely spent.