“So the amount of revenue the city gets for the big golf tournament, the U.S. Open, will be $500,000?”

2008OpenLogo.gifIn the Millard Golf World piece on the USGA and Walter Driver, the Executive Committee's "hands-on" approach (euphemism for conflict of interest) is explored and yours truly weighed in with an "acerbic" remark. In light of Tod Leonard's San Diego Union-Tribune story Sunday, maybe I was not acerbic enough.

From the Millard piece:

Says one current staffer, "The last two administrations have been very hands-on. Personally, I'd say too much. I think they've gone too far."

One current example of this trend is the case of Cameron Jay Rains. Rains is the co-chairman of the 2008 U.S. Open at Torrey Pines. He is also a member (since 2003) of the executive committee. This circumvents the time-honored practice in which local championship chairs report to USGA staff. When asked whether the arrangement presents a conflict, Driver says, "He was the chair of the '08 Open before he came on the executive committee, and we essentially screened him off from any potential conflict." Pressed to admit Rains' dual interests could at least raise some eyebrows, Driver is dismissive. "Doesn't work that way," he insists.

Some observers aren't so sure. "The person negotiating on behalf of the city of San Diego [Rains] is also on the USGA executive committee," says Shackelford. "He's on both sides of the table. So when San Diego [officials] want to know how many hats were sold and what their cut of the revenue is, this isn't a problem? Who is [Rains] looking out for? It's just astonishing."
Oh but now we learn from Leonard that it's just so much worse.
It has been estimated that the '08 Open at Torrey Pines could produce as much as $100 million in gross revenues for the non-profit U.S. Golf Association, which uses its net proceeds from each U.S. Open to fund virtually all of its other championships and programs for the year.

By contrast, the city will receive $1.2 million from its contract with the Friends of Torrey Pines LLC, the organization formed to be the negotiating entity between the city and the USGA.

Only $250,000 of that will be in a cash payment, due in January of next year. Another $250,000 is going to the city from merchandise sales in the Torrey Pines pro shop, for total revenue of $500,000.

Oh just wait, that's the positive news!
Beyond that, the Friends of Torrey Pines agreed to spend $350,000 on course work related to the Open and $350,000 for public safety services such as police and paramedics during the week of the tournament. It is spending an additional $100,000 on a practice facility for the Open.

Meantime, the city's golf enterprise fund will make no direct money from the U.S. Open, while about $3 million has been spent on projects related to the Open, according to Golf Manager Mark Woodward. That work includes the acquisition and installation of one million square feet of kikuyu turf, the moving of trees, repainting the clubhouse and restrooms, and the construction of new cart paths to minimize damage to the grass.

So the city is losing money on this deal. You say, big deal! The tax revenue will be worth it. The branding will be out of this world. And...uh, maybe not.

With part or all of the North Course to be shut down from April to August of next year because of corporate hospitality for the Open, the city will incur significant, as-yet untold losses in green-fee revenue. While Woodward estimated in a budget hearing on May 23 that the city's green-fee earnings will increase by $2.9 million in the 2008 fiscal year, he said last week that number will have to be lowered for the final budget.

Woodward said $3.5 million is being spent on the renovation of the main parking lot and the course's maintenance facilities, neither of which is being directly tied to the Open, though both projects will be complete when the tournament arrives.

“The percentage of compensation is unconscionable. I feel like there's a stinginess on the USGA's part in the face of this big bonanza,” said Paul Spiegelman, a founder of the San Diego Municipal Golfers Alliance, which gathered 1,400 signatures last year in opposition to the city's five-year golf business plan. “The golf enterprise fund should not take a beating because of this Open.”

Okay, and this before we get to the fun part...

Spiegelman spoke at the May 23 budget meeting of the city's Natural Resources and Culture Committee. At the meeting, Councilwoman Donna Frye, who was not on the City Council when the Open lease was approved, referred sarcastically on two occasions to the “wonderful” deal made by former Deputy City Manager Bruce Herring.

With a tone of incredulity in her voice, Frye asked Woodward, “So the amount of revenue the city gets for the big golf tournament, the U.S. Open, will be $500,000?”

Ah, here we go.

In San Diego, the Friends of Torrey Pines is the organizing body that will earn a percentage of corporate hospitality sales.

Jay Rains, a La Mesa attorney who led San Diego's Open bid and raised the $3.5 million from private entities to have the South Course reconstructed in 2001, is the local co-chairman of the tournament and also sits on the USGA 15-member executive committee.

Yes, and that appointment came after negotiating this deal on behalf of his hometown. Or was he really negotiating on their behalf?: 

Rains said this week he believes the Friends of Torrey Pines will receive about $3.5 million from the Open – $2.5 million in corporate sales and the $950,000 the city reimbursed it for the South's reconstruction.

Rains said none of that money will be kept by the nearly 30 individuals and businesses that compose the Friends of Torrey Pines.

“The money that comes back will be given to charity,” Rains said. “I don't want anybody to say we made money off a public golf course.”

Would that be we, the Friends of Torrey Pines, or we the USGA? Which side are you speaking on behalf of?

Though Rains said he will leave it up to the individual donors on how they donate their share, he intends to encourage funding a project that will enhance the experience for city golfers. He said he could not be more specific at this time.

Spiegelman said he is opposed to the Friends of Torrey Pines controlling the money earned from the Open.

“I wouldn't begrudge the Friends of Torrey Pines for creating money for charity if the city wasn't taking a beating on this,” Spiegelman said. “I don't think there should be any profits until the city and the golf enterprise fund are fully reimbursed.”

The Open windfall for the golf enterprise fund will come in the future, when in 2011, for example, residents will pay $73 and tourists $218 on weekends to walk one of a handful of public courses ever to hold the U.S. Open.

Actually, now I know who Rains is negotiating for. And it isn't his hometown.