Trump goes with his gut on Ferry Point
Thursday, January 19, 2012
NEW YORK - Donald Trump’s proposed management contract of the Ferry Point Golf Course here has met plenty of scrutiny lately. The developer is being scorned as the beneficiary of what critics call a sweetheart deal that would come at the expense of city taxpayers. But the opposition, while enjoying a certain tabloid plausibility, also is misplaced and overlooks some key aspects of the proposal. Meanwhile, the substantive questions that need to be asked concern not Trump but the city’s Department of Parks & Recreation that’s behind the development.
Ferry Point is a 222-acre parcel on the southern tip of Bronx County, N.Y. It sits under the northern side of the Whitestone Bridge and includes shoreline along the East River. For decades, it was an open dump, used in the 1960s for household trash and in the ’70s and ’80s as a dumping ground for construction debris. Plans for a capped landfill to include a golf course have circulated in city planning offices since the early 1990s.
The project finally went to public bid in 2008, with the design contract awarded to the team of Jack Nicklaus and John Sanford. Both are golf course designers, with Nicklaus, the game’s leading major champion, having a legendary worldwide portfolio, and Sanford having done much work on land remediation, including conversion of a Boston-area dumpsite for the “Big Dig” into public-access Granite Links Golf Club at Quarry Hills.
The idea behind Ferry Point has been for the city to add to its existing supply of 13 municipal golf courses and to do so on a level that would make a big splash. There’s certainly a demand for golf, with tee sheets booked steadily through the year and rates attractive and affordable, in the $40 range in peak season.
Which isn’t to say that Ferry Point is a sensible financial investment. The initial budget for the project was $22 million, with plans then calling for a private developer to assume all costs of construction and operation and to pay the city an annual fee of $1.25 million. That developer eventually bowed out, and in the absence of an alternative private entity, the city undertook the project itself. Along the way, the budget grew to $97 million for the golf course, plus an additional $87 million for a waterfront community park.
Interestingly, the city never actually distinguished in its budget how much money would go toward landfill closure and stabilization, which would have been required regardless of any golf course plans, with no promise of a revenue stream. It also never explored what it would have cost to convert the site into a full parkland – though of course that would not have generated any revenue either. At least with a golf course, there’s some revenue stream. How much revenue might be feasible isn’t clear, though it’s impossible to imagine any golf course covering construction costs of $97 million or even the marginal share of that directly attributable to the golf course, separate from the landfill and park.
Like so much else in sports development these days, this project seems to be undertaken for prestige and reputation. The project was touted heavily by then-Mayor Rudolph Giuliani and then by his successor, current Mayor Michael Bloomberg. Both are avid golfers, and they have understood the need to develop Ferry Point from an eyesore and an environmental embarrassment into a public amenity.
Doing anything on a major scale in New York City often courts controversy, especially in tough economic times such as these, when city budgets are under added scrutiny. Bloomberg himself acknowledged that “golf courses don’t make money.” Instead, the focus on Ferry Point has been all about intangibles. As Vickie Karp, a spokeswoman for the Department of Parks & Recreation, said about the golf project, “Our goal is to provide a public service, not to seek a return on an investment.”
Now comes the controversy about the management contract. It’s clear that the city cannot manage such a facility on a day-to-day basis if it’s to even manage a reasonable operating budget. The city’s Franchise and Concession Review Committee thus put the management of the course out to bid. Final, formal approval won’t take place until Wednesday, but already it’s clear from city officials that of the bids submitted, the Trump organization’s is the most compelling. Trump, 65, a business magnate and reality-TV star, already has experience operating an international stable of upscale private, resort and public courses. This would be the organization’s first municipal deal.
Public criticism focuses on the likely green fee, estimated at $125, making it three times more expensive than the other city courses. This one is likely, however, to be much better maintained, as well as less crowded, with tee times spaced out enough to allow for a round in the 4 1/2-hour range - relatively speedy by municipal terms.
Attention also has focused on the payment schedule, with Trump agreeing to waive any fees for the first four years and then paying the larger of $300,000 or 7 percent of annual gross revenue, with the payments gradually scaled up in Year 20 to $470,000 or 10 percent of gross revenues, whichever is greater.
Trump, however, is not just operating the course. According to Ron Lieberman, vice president of special projects for the Trump Organization, Trump’s company also would be investing in the start-up of the facility’s golf course. That includes $10 million for a clubhouse, plus maintenance costs in the range of $1 million-plus for at least two years simply in managing the grow-in before the course opens and before any revenue stream were to develop.
For his part, Trump is understandably excited about the prospect of being part of a New York City landmark. “It’s a spectacular piece of land, a major-championship site literally right next to everything, on the city,” he told Golfweek. “It’s important for golf. Golf has been suffering lately, and it’s major course in the biggest city in the world.”
For such projects, Trump says he doesn’t need to do a detailed cost-benefit analysis. “My feasibility study is my gut,” he said.
That might be a way to manage a golf game. And it might be how he sees a prestigious project such as Trump Golf Links at Ferry Point Park. But that’s not enough for sound municipal decision-making. Prestige and allure are expensive. They also can be elusive.