It often comes as a rude awakening to renovation committees and other decision-makers that however enjoyable golf is as a game, as a business it is a very difficult and highly competitive enterprise where minor mistakes and overestimations can have serious financial consequences for their course. At private clubs, members are rightly concerned about their stake in the outcome of a renovation and can readily exercise the option of leaving the club if the dues or assessments increase beyond their willingness to pay. Public course golfers also have plenty of options for other places to play. If the downtime for a renovation carries on too long, if the green fees rise too high, or if the outcome of the project isn’t any good, golfers can easily take their business elsewhere.

Case in point: a prominent club that recently committed to an $8 million restoration that will be financed by an assessment of its membership and will entail closure of the course for a full season. Following club bylaws, there was no membership vote, just the mandate of a board decision. The result was the announced resignation of over one-third of its members and the loss of their dues and assessment revenue. That’s not exactly the way to kick off a successful renovation or build a secure club going forward.

It helps to remember that membership in a club or loyalty to a public facility is a consumer preference for a recreational amenity that can easily overstretch its appeal. Boards and committees need to understand that whatever the professed loyalty of their customers might be, poor planning, unrealistic financing and bad results will lead to golfer disaffection. Tee sheets and membership rolls may be packed today, but all it takes is some bad economic news and the decision to join a club or take a golf trip might not have the staying power that people assume.

Like everything else in golf and economics, it all depends upon local market conditions. In parts of South Florida $150,000 initiation fees and monthly dues of $1,600 scarcely guarantee a tee time. While $3 million course upgrades might sound expensive, the industry is seeing many projects run into the $10 million to $20 million range when they involve irrigation replacement, greens and bunker rebuilds, drainage and tree work. But there are still plenty of markets where an investment of $500,000 into a bunker upgrade will seem like a frighteningly large undertaking.

Having been involved in dozens of presentations prior to a vote for a renovation, I have come to appreciate the concern folks have about the cost of a project and how it will impact them. Unfortunately, many private and public course golfers are resistant to the cost and disruption of a renovation because they’re focused on the here and now, not the long-term health and quality of the facility. Invariably, after a 45-minute introduction to the plan by the architect, planning committee or board, the only two questions that really matter to anyone in the room are: “Is my golf going to be disrupted during construction?” and “How much is it going to cost me?”

Golf publications are rife with stories about renovations – everything from architectural trends to bunker construction techniques, issues of distance and putting green contours. But you’ll search in vain for articles that focus on pocket-book concerns like the cost of upgrades or how they are financed. Boards and budget committees have an obligation to explore and detail funding mechanisms and to explain the many options available. Among the various revenue sources that need to be considered in combination are:

Dues: However they are assessed, dues are the largest ongoing stream of capital for private courses and one of two major sources of immediately available additional funding. Dues hikes, because they entail incremental increases over long periods of time, do not seem to incite the same emotional outrage as assessments.

Assessments: This is a major source of additional capital for private course renovations. Assessments can run anywhere from a few thousand dollars into six figures at some clubs. They are usually payable in one lump sum or stretched over a three- to five-year period. To say that assessments are generally unpopular would be an understatement.

Initiation fees: By definition, initiation fee hikes do not generate resentment among existing club members because they only impact new recruits. The rates, which often fluctuate, reflect both regional market conditions and the desirability of the facility in question.

Increased fees and outside event revenue: A better-equipped facility will draw more interest, and presumably higher revenue from green fees, guest play and outside events. Raising fees for daily play, guest play or events can deter some customers, so the success of these strategies depends on market conditions and the desirability of the course. Be careful about assuming you can raise fees in the future to pay for a renovation today because economic conditions can change even if the project is a complete success.

Enhanced facility utilization: Successful investment in a course renovation should generate greater use of the entire facility – including recreation outside golf and clubhouse activity. Food and beverage prices must react accordingly since the restaurant can be a loss leader at many courses.

Capital reserves: Since 2020, many facilities have been able to generate cash reserves due to operating profits. These can be used to defray renovation expenses, or to pay down outstanding debt and thus release monies that can be redirected for the upgrades.

Borrowing: This is always an available source of funding depending upon existing debt, property evaluation and cash flow. However, courses are understandably nervous about borrowing given recent trends in interest rates. Borrowing should never be the primary source of funding; that is way too risky. Debt can burden a course for years into the future unless there are significant revenue increases from the other sources indicated here.

Voluntary contributions: This is a dramatically underappreciated source of revenue for private clubs in particular, and can be highly effective in building a supportive club culture if done in a way that raises money from as many members as possible – ideally under anonymous conditions. I have seen clubs raise as much as one-quarter of the costs for a $4 million project just by opening up a black box and having members hand in checks. This option is also available to public facilities because golfers have strong attachments to all kinds of courses. For example, various municipal courses have recently been able to raise significant amounts of money from private sources for renovations that would have otherwise gone unfunded.

Municipal course funding: Golf courses owned by government agencies have several funding tracks that are unavailable to privately-held entities. Even if operated by third-party private management firms, such facilities have access to government-backed bonds. If tied to a specific project they might be special revenue bonds, or if included under the municipality's overall spending they can qualify at a lower interest rate as general obligation bonds. In a parks and recreation model of direct management, the funding could also come by way of direct budget allocation; or if the course is operated through a quasi-independent enterprise fund the money for renovation could come from accumulated capital on reserve.  

Operational efficiencies: Regrassing can reduce water costs, bunkers that don’t flood or wash out can save labor costs, updating the irrigation system and selective tree management can create various efficiencies. These sources of marginal savings can help a project pay for itself, sometimes in a relatively short period of time. They can also help courses produce a better product that generates more revenue in addition to the savings.

Syndicate loans: This method of private financing can get very dicey, as it usually entails a small group of members bankrolling debt by assuming the risk. While it can create a considerable infusion of capital for upgrades, it creates a “club-within-a-club” group of members who might be perceived (or see themselves) as having potential ownership claims on the property as a whole if the note is not paid. This mechanism is best avoided.

Management, purchase or sale financing: For facilities whose debt structure does not allow for standard bank financing, or for whom the investment is a matter of life and death to revive moribund cash flow, there is always the possibility of non-bank financing through a version of a management/purchase/sale option involving an outside company. This can be a long-term management arrangement that is made in exchange for investment capital, selling debt to a firm at a discount and then they effectively operate the club’s assets, or the outright sale of the facility to a firm that is contractually obligated to invest. These are all complicated steps, involving a complete reorientation of the facility, but some arrangements are much less disruptive than others.

There are, in other words, many different ways to fund a renovation. Most of them involve a combination of sources and need to be calibrated with what the facility’s existing and anticipated finances can tolerate. The point here is that courses considering a renovation should not be shortsighted in what is possible. Nor should they unduly handicap the potential long-term financial benefits of a project by limiting the scope too rigidly at the outset – at least not before exploring options and thinking broadly. Focus on improvements that have a clear long-term return on investment in the form of improved efficiency and a better playing experience. If you can’t justify the costs with measurable benefits, go back to the drawing board before you start pursuing any of the financing plans described above.

Brad Klein is a veteran freelance journalist whose biography, “Discovering Donald Ross,” won the Herbert Warren Wind Book Award for 2001.