In-Depth: Why hasn’t River Bend’s $1.7 million loan been repaid to the City in 20 years?

In October 2004, city council approved a request for the loan by the Society for a clubhouse renovation and expansion project to add a banquet hall, increase the size of the kitchen, add storage and more, to be repaid in annual increments of $140,000 over a 20 year period. Council approved the loan bylaw in 2007.

According to Sarah Tittemore, General Manager of Community Services for the City, only one payment, the first, had been made in 2007, with various amendments made since then to defer all other payments.

In October 2022, council approved first reading, recommended by administration, to defer the loan payments, principle and interest, of 2022 and 2023 to recommence in 2024.

“I do support the principle of ensuring and setting up these, at arm’s lengths, societies and organizations with the City for success and I just question whether or not we’re doing that by deferring and deferring and deferring in perpetuity,” said Councillor Lawrence Lee in October, who initially severed the item to be debated. “It’s not a community solution to continually defer.”

“I always feel my hands are tied,” said Councillor Dianne Wyntjes during that meeting. “We want to certainly support this jewel in our community but at the same time recognizing the challenges that this bylaw makes not only to that society who are entrusted to the operations but along with the impact that it has to our operating budget.”

Councillor Cindy Jefferies, who was a council member from 2004-2007, said, at the time, the recommendation by administration made sense. She says the funds requested were to be used to allow River Bend to increase their revenue streams to then pay back the loan through expansion of the clubhouse, new infrastructure and upgrades to the irrigation systems. However, in hindsight, she says she now has questions as to why River Bend was treated differently compared to other City-Society relationships like that of the Kerry Wood Nature Centre.

Found in the City archives, a letter by then-Society Chairman Terry Herbert in 2004 reads “we are confident that the society has the financial resources to fund this project over a 20-year period […]” adding that the City agreed upon reviewing the financial statements and revenue and expenditure projections.

October 4, 2004 Red Deer city council agenda (Red Deer Archives p. 198-207)

Jefferies said she recalls the finances as being in a positive position at the time; however, noted River Bend had gone through various general and interim general managers with conflicting goals for the area, some who may have had a desire to position the golf course as a higher level playing area.

“My opinion, looking back, is that really, they had people stepping in to manage what was then mostly a golf course facility who didn’t really come with that professional golf course management background,” she said.

A complete list of 2004 Society members could not be found.

Councillor Vesna Higham, who currently sits as council representation to the Society Board, acknowledged the “frustrations” by council in October. However, she also said on Monday that the loan should have not been given in the first place as the River Bend clubhouse is a City owned facility, comparable to the YMCA, run by an independent board like the Society but irresponsible of building-related capital projects.

She also believes the existing operating agreement remains an issue in the backdrop.

“In this last year, I’ve reviewed the books, our financial statements, and there is very little capacity to finance that loan at the current present time which is why the Society, for the last 10-12 years, however long it’s been, has raised concerns around their capacity to actually make these obligations,” she said.

THE OPERATING AGREEMENT

The Operating Agreement outlines the relationship between the City, as the owner of River Bend, and the Society, as the non-profit association in charge of managing, operating and maintaining the area and amenities.

Typically in multi-year terms, the 2016 agreement was set to expire in Dec. 2020 but was extended one year due to pandemic disruptions, and extended until 2022 to await the completion of the draft River Bend Golf and Recreation Master Plan (Master Plan), and again until 2023 for the same reason, according to Tittemore. City Chief Financial Officer Ray MacIntosh says administration is currently working on a new agreement for 2024-2029.

READ: Council extends River Bend agreement with report on the way

Current Operating Agreement between the City of Red Deer and the River Bend Golf & Recreation Society. (Supplied)

Some main definitions in the 2016 agreement (Schedule D) include:

Capital Asset Responsibilities (Schedule I): the City is responsible for the “replacement, betterment and rehabilitation” of all recreation/non-golf amenities, including the clubhouse’s structure (roof, deck stairs, railings, HVAC and electrical), while the Society is responsible for all golf amenities, including the Clubhouse’s flooring, paint, furnishings, contents and kitchen equipment. All assets belong to the City.
Fee for service (Schedule J): The City pays the Society as compensation for their operating and maintaining of the recreation amenities. Fluctuating each year, former Society Treasurer Kit Richmond says the fee, however, has not been adjusted for inflation.
License Fee (Schedule K): the Society pays the City a percentage of Gross Golf Revenue
Reserves: following expenses, the Society is permitted to place $25,000 in an operating reserve and $125,000 in a mobile equipment reserve, for a total of $150,000
Annual Surplus Distribution: following expenses and reserve funding but not including depreciation, 50 per cent of revenue net surplus is distributed to the City. The remaining 50 per cent kept by the Society is to be reinvested back into golf course improvements, as per non-profit regulations
Financial Statements: the Society is to provide the City with monthly financial updates

The Operating Agreement has been amended numerous times over the years:

2006: the License Fee was three per cent of annual Gross Revenue from pro shop and food concession sales and 13 per cent of annual Gross Revenue from all other sources including admissions, seasons passes and rentals
2010: the License Fee changed to two per cent of annual Gross Revenue from pro shop and food concession sales and 10 per cent of annual Gross Revenue from all other sources including admissions, season passes and rentals
2011: Fee for Service began at $140,000 per year until 2013, increasing as of 2014
2016: License Fee changes to 0.5 per cent of Gross Golf Revenue, increasing each year, and addition of Annual Surplus Distribution Payment

THE FINANCIAL STATEMEMTS

rdnewsNOW spoke with the Society’s current Board Chair Brian Johnson, River Bend General Manager Rob MacPherson and Tittemore to discuss the 2020-2021 financial statements.

River Bend’s current General Manager Rob MacPherson says as the above financial statements show only two years, they do not reflect the struggle the Society had in previous years. “There were short falls in previous years that didn’t allow for reinvestment in capital equipment that RB [River Bend] is responsible for and we need this trend of profitability to continue to replenish our equipment on a yearly basis,” he said.

Tittemore said from the 2016 operating agreement, the Society’s first license fee payment was roughly $7,000, gradually increasing to $34,755 in 2020 and $41,889 in 2021. She says the City allocated the 2021 funds towards the community engagement research portion of the Master Plan.

Tittemore also said the Society was unable to pay their share of annual surplus distribution until 2020.

MacPherson attributes the financial struggles to various golfing trends. He says the industry was doing well in the 1990s and levelled off in the early 2000s, gradually declining. Following the first loan payment in 2007, he then says the 2008 recession also had a negative impact.

“2015-2020, there’s no way we could’ve paid, and it wasn’t an expectation to, because even prior to that we weren’t making any money and city council knew that,” said Johnson.

During this time, Richmond confirms the Society has received various unsecured cash advancements at no interest from the City since 2012. He says all of them have been repaid, including the outstanding Operating Advances of $150,000 through the surplus distribution in 2021. As well, a $100,000 operating loan was given to the Society by the City in 2019 for a Human Resource operations restructuring, which was paid in the designated three year installments by 2021, he says.

Tittemore confirmed that the Society, as a non-profit, can only loan up to $150,000 externally from banks, which Johnson says they have done in the past and repaid; therefore, making the City one of their only options for funding.

MacPherson says while the pandemic closed Discovery Canyon for 2020, it revived the sport of golf. According to the Master Plan, the golf course was seeing roughly up to 26,000 rounds played per year prior to 2019. In 2020, that number increased to 35,000 and nearly 40,000 in 2021, with residents commenting there were not enough tee times to satisfy the demand.

“2021 we budgeted for net revenue of $130,000,” said Johnson. “Starting the year with uncertainty and not having any idea how COVID would play out for us and the fact that we finished with more than that, was again, exciting and unexpected news for us but that allowed us to then pay down the loans, to profit share with the City and, for the first time, set some money aside in reserves.”

The excess of revenue over expenses before other items such as amortization and reserves was $477,540.

Johnson said the cross country ski demand also increased, although not bringing in much revenue as ski rentals are the only stream.

The Society received a few federal grants during the pandemic, including a $236,000 grant from the City in 2020.

At the November council meeting, Councillor Jefferies also said the two positive pandemic years does not necessarily mean a drastic increase in revenues as golfers may have used seasons passes.

According to the financial statements, admissions increased by $150,058 from 2020 to 2021 and seasonal passes increased by $88,446 that same year.

FUTURE OF RIVER BEND

In 2021, $5.37 from an average household’s municipal taxes of $2,365.06 went towards the Fee for Service funding to the Society for operations of the park node, according to Barb McKee, the City’s Recreation Superintendent. Tittemore pointed out that the Society, while not paying income tax as a non-profit, does pay property taxes, $90,765 in 2021.

The lingering question of whether the Society will pay off the loan remains to be determined due to the new upcoming operating agreement. MacIntosh said to council on Oct. 24 that although he has only been in the position for one year and doesn’t know the reasons as to why the Society was unable to pay this year’s installment, the City expects the loan to be repaid in full, with the possibility of it taking another 20 years to do so.

Johnson, a cross country skier and high school teacher, hopes to see more synergy in the new operating agreement between the City and Society, and less separation between golf and recreation responsibilities.

“I’ve seen that change in the Society in the four years that I’ve been on the board. We are a very diverse mix in the board members of our recreation, golf and both who sit in the middle,” he said. “I’ve heard comments from others that 15 years ago, the Society board members were golfers.”

MacPherson says the Society has managed their costs as much as possible by temporarily reducing services like Discovery Canyon in 2020, as per the City’s request due to the pandemic, having reduced clubhouse and operations hours in past winters, and other methods.

“My goal would be to be self-sustaining. Where we can contribute to our capital needs and share our profits with the City as a good partner so we’re not going with our hands out for loans here and there; that would be my focus. We don’t want to be a pain to council. We want to be a positive asset to the city and I think we’re well on our way to being there; just a few bumps in the road we have to get sorted out,” he said.

Council also approved the Master Plan on Nov. 21 with a few amendments. The Plan proposes $9 million in renovations over a roughly 20 year period to the golf course following a professional review.

READ: Red Deer city council accepts amended River Bend Master Plan

MacPherson believes as annual rounds played begins to decrease to more optimal levels between 32,000- 35,000 with more activities opening back up post-pandemic, the renovations could help prevent the golf course returning to low unprofitable numbers. He says this year, roughly 34,000 rounds were played.

“Sports tourism is high on Red Deer’s list. As you can tell, our facilities are second to none and draws people to Red Deer for different high level competitions,” he said. “It’s going to draw more people higher out and possibly higher level events.”

by Alessia Proietti

In-Depth: Why hasn’t River Bend’s $1.7 million loan been repaid to the City in 20 years?

What's Trending