The Price of Liberty is Eternal Vigilance
Golf Tunnel Loan - A Reality Check
G. Robert George, P.L.S., P.E.
Councilmember, District 12
The City of Charleston
The Post and Courier editorial of Friday, November 26, 2004 discounting the rumored use of the half-percent sales tax revenue to repay the city's $ 1.2 million General Fund Loan to the Municipal Golf Course leaves the impression that this loan will be repaid by the Municipal Golf course within approximately ten years. A review of several recent city audits leaves a very different impression.
In each recent City of Charleston Comprehensive Annual Financial Report (CAFR), the Municipal Golf Course's "Operating Income(Loss)" has been reported in the Balance Sheet and Income Statement for Nonmajor Enterprise Funds. Enterprise accounting protocols are used by the city to manage assets that are operated similar to private businesses in order to track and report individual asset operating incomes, expenses and other changes in fund balances.
Over the last consecutive eight years, these CAFRs reported the audited Municipal Golf Course annual "Operating Incomes" and "Operating Losses" for year ends 1996 through 2003 as a $29,663 loss; $8,844 loss; $57,772 loss; $40,970 income; $100,039 income; $66,256 income; $21,130 income and $30,510 loss, respectively. An analysis of these audited operating incomes and losses over this most recent eight year period yields an average net operating income of only $12,700 per year, significantly less than the net revenues of some $100,000 per year stated in the P&C editorial.
Even with a "zero interest rate", using all of the Golf Course's historically based average net operating income to repay the $1.2 million General Fund Loan would take ninety-four and a half years. If this course of action were to be rigidly followed, there would be no internally generated (Golf Course) net revenues available for needed golf course improvements for almost 100 years. Obviously, neither of these outcomes are realistic or defendable as acceptable financial management practices.
If the City Administration is going to loan the Municipal Golf Course $1.2 million from the General Fund to help pay for construction of the tunnel under Maybank Highway, prudent financial stewardship dictates that there be a formal loan agreement setting forth the customary and necessary terms and conditions as I recommended during a recent Council Meeting. Alternatively, a one-time, lump sum interfund transfer from the General fund to the tunnel's $2.1 million Total Project Budget Account should be approved by Council to formalize this questionable accounting transaction.
As for the use of half-percent sales tax revenue for what is arguably a qualifying transportation-related, greenbelt/recreational project that will receive $823,000 from SCDOT, it is a far more prudent fiscal option than making a "wink & nod" loan from the city's General Fund that will ultimately require significant repayment from other city revenue sources. When seriously considered as an alternative source to repay the $1,200,000 General Fund loan, using revenues from the half-percent sales tax would be a justifiable option from the city's perspective; the full financial burden would not fall totally on the city, but be repaid by all county residents and tourist visiting and buying taxable goods and services in Charleston County.
To leave P&C readers with the impression that the Municipal Golf Course can pay back a $1.2 million loan in ten years from its net operating income, given actual historic financial data, begs a much more serious question than the rumored use of the half-percent sales tax revenue to do so.