Introduction
Sharp Park, which is named after George Sharp, has a long, rich history. Mr. Sharp owned a more than 400-acre estate that he established with a vision for the San Francisco residents to enjoy recreation in a natural setting. When he died together with his wife, the property was left to the San Francisco City Council under strict instructions that it would only be used for recreational purposes. Sharp Park is in California off Highway 1 along the Pacific Ocean, San Francisco. It has existed since 1917; the golf course was established in 1930s. In 1941-internment camp was established in the park that provided medical service, food, shelter and employment opportunities to San Francisco residents. When Pearl Harbor was attacked the government made a decision to incarcerate the enemy aliens with Italian, German and Japanese ancestries. In the following year, permanent intermittent camps for the alien enemies were built whereby Sharp Park was designed as the processing center. After the war activities of the park resumed with the golf course attracting more clients.
Sharp Park is in a 417-acre piece of land, and the San Francisco City owns it. It borders two residential properties, the Pacific Ocean as well as GGNRA properties. A majority of the golf holes are at the ocean side or the Western part of the property. The Park also has an extensive Wetland that is located between the earthen seawall and golf course. The wetland had been dried in the 20th century to make way for the artichoke farm that was later converted to a golf course. The Mackenzie designed course has 18 holes although six of them have been relocated and modified. It generates an average of $200,000 every year. Being a public course, it is relatively inexpensive with 85% of the rounds played in the park at a reduced rate with discounts for both seniors and juniors (San Francisco Board of Supervisors, 2016).
Climate change poses a great challenge to California's coast future. About 80% of the state population occupies the land 30 miles of the coast. Given that climate change is a reality, it is important to estimate its effects to help in planning and avoid more devastating effects. The effects of climate change can be categorized into four. Sea rise and the associated land migration, littoral sediment budget due to nearshore redistribution, littoral budget caused by deep-water changes and changes in sediment supply (Halaburka, 2013). The negative effects of rising sea levels range from social effects, health effects to economic effects. Many people living along the coastal line will be displaced leading to humanitarian crises. Flooding and shortage of clean water for drinking and domestic use may create devastating health challenges including the outbreak of water-borne diseases. Economic impacts, on the other hand, are enormous including disruption of businesses as well as the lack of customers because many of them will have moved from the flooded area.
Sharp Park Statistics
Statistics show that Sharp Golf Course receives about 60,000 resident visitors and approximately 73,000 non-residents. This is a sharp increase given that between 2004 and 2005 there were 30,818 resident visits and 42,548 non-residents. Some years back, golf was not in existence, let alone rounds of golf. When the sport was introduced, it was neither a professional sport nor big business. Golf tournament engagements depended on tour sponsors, resort travel and equipment sales. The residents and visitors only played golf for general enjoyment, as a part of regimes for physical exercise. As the sport became more popular, it became competitive which established the platform for a competition market.
Recent reports show that golf now has a major impact on U.S economy, the golf industry has recently been valued at a net worth of $68.8 billion and contributions totaling about $3.9 billion to charities every year. These statistics exceed the same for any other sport in the country. Revenue generated from the golf course has a considerable impact not only on the local authority but also in the entire state of California. It does not just benefit the city of Francisco, but it benefits the whole community including businesses in the area, which rely on the park such as the food vendors, retailers selling items like shoes and T-shirts, restaurants and real estate businesses (San Francisco Board of Supervisors, 2016). Golf course charges are as shown in the table below
However, studies show that many golfers are willing to pay even more to access the greens. This is the reason why the club has adopted to employed a dynamic pricing strategy whereby prices fluctuate on demand. During the weekend and public holidays, customers are charged slightly higher prices compared to weekdays. The beauty of this kind of strategy is to set the price as high as possible at the right time under appropriate conditions to attract customers but not too high to lose other customers due to competition. The club must take sensibility when applying the concept of price dynamism. The green fee may fluctuate, but other charges must remain constant for example, the cart fee. Due to the increased love for the sport, most of the families are willing to set aside part of the holiday allocation for golf. Given that Sharp Park Golf Course is a public golf course, the residents must be able to enjoy the facility at an affordable price. The golf course must also try as much as possible to offer a variety of services to make the golfers more comfortable because they have different needs.
Although there are other golf courses in San Francisco such as Lincoln Park Golf Course the residents will have to pay an extra $2 in case Sharp Park is closed and an additional $1 computer reservation fee. In addition, the golfers will also incur traveling costs. It may be difficult for average Sharp golfers because they will have to travel every time they wish to play golf. The demand for 17-hole golf course has been on the rise recently, given that it is considered as one of the new sports. The sport is not as challenging as 18-hole golf course and that is why many people have come to prefer it. However, its demand is not as high as that of 18-hole golf because it is still less popular. City of San Francisco will lose a lot of revenue if Sharp Park is closed.
Revenue of the Sharp Park golf course has varied from year to year primarily because of weather conditions. Figures for the fiscal year 2008-2009 and 2009-2010 shows that the golf course generated annual revenue of $50,099. Since then the revenue has been on the rise with the increased number of users. Initially, golf was known to be the sport of the rich but now many people can afford especially the public courses such as the Sharp Park Golf Course that has continued to attract more and more visitors every year. The proximity of the course to the coastline as well as its spectacular design has given it an added advantage over other golf courses in San Francisco. Closure of the facility will not only affect the park but it will hurt the local businesses in the area. The companies that supply golf equipment, food, beverage and accommodation facilities to the visitors will be affected (San Francisco Board of Supervisors, 2016).
Comparisons of County Beach Attendance
In order to gain estimates of future attendance to Sharp Park, statistics for the attendance at the local beaches was considered. Table A below shows attendance in San Diego County Beaches in Southern California:
The statistics are the most recent and include the breakdown of both the day, and night beach visits. The city officials and Parks and Recreation Department of California provided the data. The overall number of visitors that the area receives in a year is about 8 million. In computing the economic impact there is need to determine the average expenditure per household for the beach goers. On average the households spends $106 on day trips and $505 on night trips. The figure may vary depending on the family size and the economic status of the parents. Further, more beach visits are recorded during summer holidays as compared to other months of the year (King, 2012). Table B shows estimated expenditure for every beach using household average expenditure and attendance:
The table shows the highest attendance has been at Moonlight, followed by Del Mar and Carlsbad City and State. A significant gap of 2088 in attendance averages exists between Moonlight and the attendance at Cardiff which indicates how preference can impact the attendance of the golf courses. Also, it should be noted that the highest attendance averages are concurrent with he highest total expenditures for each location.
In estimating the future attendance of the beaches, several factors must be taken into consideration. First, San Diego and California will experience a notable population increase. Finance Department estimates that in the next ten years the population of San Diego will grow by 1.56% every year while that of the state will grow by 1.42%. On average, the beaches will experience a population increase of 1.49%, given that most of the visitors are local populations. Another key factor is the issue of erosion and overcrowding (King, 2012). According to interviews with geologists, coastal engineers and other consultants the North San Diego beaches will experience erosion at a rate of 3% every year. However, erosion is not uniform it can be unnoticeable at one beach and very severe in another beach. The measures taken by the San Francisco City officials to mitigate the effects of erosion have not been enough that is why the effects of rising sea level, floods and the associated erosion are likely to be felt more. Erosion will affect the golf courses along the coastal strip especially Sharp Park Golf Course that is located very close to the Pacific Ocean (Halaburka, 2013). Table C shows the estimate of elasticity demand
Using the estimates in table B the estimates in table C shows attendance in San Diego County in three different scenarios. First, width of beaches has the same growth rate as the population. Secondly, it shows how attendance will be affected by changes in the crowding levels. For example, if erosion rate remains constant at 3% per year. Because erosion is not always constant, the estimates are conservative and reasonable because of the rapid rate of erosion. The third aspect is that there will be maintenance of current beach width. If the beach width increases with the population increase then the attendance will also increase by 6.4 million that is about 10% (King, 2012). Therefore, overcrowding is a likely problem of the Californian beaches. The issue of dealing with large crowds is likely to cause substantial revenue loss to local businesses, state and local governments. It means that if the state government makes proper arrangements to expand the public golf courses to cater for the ever-growing population it will earn more revenue because when many people visit the beaches there will also be a significant number visiting the golf courses. Demand for golf has been on an upward trend due to the increased number of tourists as well as growing interest by the local populations.
The California Coastline Demographic
California has an extensive 1,250-mile coastline. The state also hosts San Francisco Estuary, which is one of the biggest estuaries in the Pacific. To balance the economic development, environmental, habitat and population growth with the dynamic forces there is need for proper planning to avoid negative effects of climate change. Indeed, rise in the sea level is one of the greatest challenges of climate change in Californian Coastline. Although the seas have been rising, the rate has not been as serious as it is currently. The shift will have adverse effects on the coastline given increased erosion, loss of wetlands and beaches and threats to public and private structures along the coastline. The biggest problem is the average rise in the water levels, wave and storm attacks and shoreline erosion. Apart from the flood risks, the coastal communities will find it difficult to drain storm water and wastewater (Halaburka, 2013).
Wetlands loss is a major concern to both the estuarine and the ocean coastline. Although the wetlands usually adapt to the rise in the sea level through migrating landward, losses will be more severe in the adjacent lands that have steep slopes. For example, the Northern part of California cities rely on the wetlands for the provision of food, quality water and wildlife habitat protection (Halaburka, 2013). The frequent storms and high tide peaks are threatening to overwhelm the Wildlife Sanctuary and Marsh owned by the city because it interferes with wastewater treatment facility. Also, the rise in the sea water level as well as storm may alter the salinity gradient in the estuaries pushing further to deltas thus interfering with the habitat. It may also interfere with the state water supply system.
Most parts of the Pacific Coast are not susceptible to flooding but are vulnerable to erosion. In the near future erosion is likely to cause loss of about 41 square miles or 26,000 acres of land in the Californian coast. Currently there are about 16,000 people living in the area who are at risk of erosion. Additionally, transport infrastructure as well as well as property is also at risk of erosion. In California, the risk of floods exceeds that of erosion but some counties experiences more coastal erosion. For example, large parts of Pacific Coast in the rocky highlands are not susceptible to flooding but are vulnerable to erosion. In areas with high coast erosion higher sea levels may cause an accelerated shoreline erosion because of the increased wave attack. Erosion of dunes and sand pits also the protected areas to flooding (Halaburka, 2013).
Many methods can be used to estimate the amount of erosion. Bruun established a method that has been widely used to predict the shoreline recession based on the rise in sea level. The method assumes that water depth remains constant with the rise in sea level and that beach profile always remains the same. It also assumes that there is a known limit of offshore sediment transport. Sediment that maintains the beach profile comes from shore erosion. Using this, shoreline recession is estimated with beach profile readjustment to equilibrium being given as 1.0 to 1.5 meters of the shoreline recession in every centimeter rise in sea level. Although the rule has been widely used, many have criticized it arguing that it makes many assumptions that are not necessarily true. The rule is a two dimensional concept but it is well known that sediment transportation in the coastline is three-dimensional. It also assumes that the shoreline profile is equilibrium an idea that is difficult to verify (Halaburka, 2013). Another key problem of Bruun’s rule is that it predicts that shoreline will recess with sediment transport due to rise in sea level, yet there have been several instances where shoreline accreted with the rise in sea level because the sand onshore move from offshore deposits. Therefore, use of the formula may under or overestimate recession.
A group of engineers and scientists teamed up and established an alternative method for evaluating the risk of erosion. They evaluated the expected future erosion through examination of total water level (TWL) elevation time series. TWL is elevation of water levels as determined by total mean of waves, sea level, El Nino, wave run-up, tides and other storm components. Many researchers have found that erosion accelerates with rise in sea levels as the coastline is also exposed to higher waves. Higher water levels cause greater wave energy that will be experienced at the shoreline as well as in the cliffs and dunes. Californian coastline is complex both geographically and morphologically. Every geologic unit will have a different response to the rise in the sea levels. Shoreline may be classified depending on the geologic formation and type, for example dunes and cliffs. A different method can be used in each coastline to estimate response to rise in sea levels (Klemetti, 2003).
Many development projects including apartments have been developed along Californian coastline and now floods and erosion are threatening to bring them down. Usually homes erected along the coast attract premium prices because of their location. Although a few homes are being protected by the revetments and levees majority of them are clearly unprotected. Also, high value transportation, commercial and industrial facilities are located here. They use the waterfront in waste disposal, to move goods and for commercial activities. The most common coastline facilities include marinas, salt ponds, ports and docks, power plants, waste treatment plants, waste disposal sites, railroad tracks and airports. The investors will lose their property due to the effects of climate change, rising sea levels, floods and erosion (Sidun, 2015).
Estimating the Value of the Golfing Industry
Many municipalities especially in the United States are investing in golf courses in order to ensure that residents enjoy recreational facilities and attract tourists, provide health opportunities and generate income. San Francisco has more than five golf courses providing unique golf experiences. The city has very enthusiastic golf players who play during weekdays and weekends. Tourists who are regular visitors and players of golf also promote the courses. These courses promote youth development in the area by offering free classes for children as well as free round of golf for high schools located within San Francisco. However, golf industry is experiencing many challenges both locally and nationally especially in California. It is trying to maintain its status as the top sporting and leisure for the busy population that may not have much time allocated for leisure or sport.
Despite the impending issues of seawall and coastal erosion, Sharp Park’s location is environmentally desirable for many aspects of tourism and recreation. Because of Sharp Park’s Golf Course design and its close proximity to the ocean, it has the potential of being one of the best public courses. It also has the potential for endowment and public fund raising that can help in remodeling and restoration making it unique and different from any other park in United States. It is a crown jewel for San Francisco Recreation and Park Department with the ability to extol life in the city. A proud heritage that has transformed the lives of many through the charitable works it supports and the unique golfing experience that it offers. If the greens become well managed, Sharp Park can become the best revenue generator, attracting golfers not only from the locality, but also all over the world.
Golf facilities is a central and core part of any golf economy because it generates the highest revenues. Revenue generated from the facilities comes from green fees, golf carts, membership fees, lessons as well as visitors expenditure on food and beverages. This revenue in turn helps in supplies that include golf equipment, manufacturers and apparel designers, turf grass equipment, food and beverages as well as maintenance service providers. In 2011 the California’s 65 miniature golf facilities, 84 ranges that are mostly stand-alone and 921 golf courses generated a total of $3.343 billion, which is an increase of 17.46% from that collected in 2006. This demonstrates that golf is a big industry and it can be more significant when compared to other sports generating considerable revenues. For instance, golf course facilities generate revenue approaching the combined revenue generated by all spectator professional sports in California such as football, basketball and baseball. The spectator sports generated a total of $3.825 in 2011 (Shmanske, 2008).
The golf facilities impacts on the economy even beyond operational revenues because of the new investments aimed at upgrading and maintaining infrastructure of the facilities, construction, renovation and expansion of the courses. Such investments generate employment opportunities for the local population, generate income to maintenance industries and companies selling equipment and supplies. Capital investment of golf courses in California comes in two segments; capital investment in the existing facilities and investment in new courses (Klemetti, 2003). In 2011, the golf courses made a total investment of $144.5 million; $8.4 million for constructing new facilities and 136.1 in the existing facilities (Shmanske, 2008). In comparison, the state had made significant investment in 2006 a total of $325.3 million; $163.6 for construction of new facilities and $161.7 million in the existing facilities. The financial crises as well as economic recession might have been the contributing factors for the sharp decline in the investment in golf industry.
Golfers in California also spend a considerable amount on golf media, golf apparel, golf clubs and golf balls. The state benefits economically due to production and sale of these items. The state is home to the leading companies in design and manufacture of golf equipment, golf cars, accessories and golf apparel such as the Yamaha Golf Car, Adidas Golf, Cleveland Golf, Callaway Golf and Acushnet. It is estimated that every year manufacturers spend more than $800 million on value-added shipment of products that help in playing golf. California retailers as well as golf facilities earns approximately $200 million on the sale of golf equipment, media and apparel. In total the segment of golf-related supplies generates a total revenue of an approximately $1 billion to the California economy.
There are several associations representing the sport of golf in California, one of the largest state in U.S in terms of golf participation, economy and population. Thus, golf organizations are divided into Southern and Northern California chapters. Examples of these associations include Southern and Northern Golf Association and Golf Course Owner’s Association. There are also active women and junior associations. The 17 chapter first Tee in California is targeting values of golf and youth games. Tiger Woods Foundation also helps by supporting youth programs through scholarships. In 2011, the associations generated an expenditure of about $69.5 million.
Every year, golf courses in California host more than 20 tournaments generating an approximately $250 million excluding the broadcasting costs and tournament purse. This is a sharp increase given that in 2011 it only hosted 12 tournaments that generated $112.05 million. Golf industry also makes considerable contribution to charity. In 2011, the Northern Trust Open made $1.6 million and benefitted many Los Angeles charities like the Foster Family Picnic, Los Angeles First Tee, Ready to Learn and others. Since 1937, AT& T Pebble Beach has managed to raise more than $100 million for charity to fund environmental and community programs, arts, human services, health, education and youth development projects. Again, in 2011 El Camino Hospital held a golf tournament that generated $650,000 to help support the hospital’s cancer center. In total golf gives about 3.9 billion every year to charity that is almost double that which it was contributing in 2011.
Golf is a key component of the real estate business because it is one of the amenities that help developers attract home buyers. Construction of residential homes has been on the rise where it peaked in 2005 where there was also sale of many homes. However, in 2007 to 2009 the real estate business suffered a great blow due to economic recession. Even with the steady economic recovery, California has recorded the lowest rate of home construction since economic recession. The opening of new golf course facilities has, however, changed the narrative leading to the steady increase since 2011. Today, construction of real estate related to golf generates approximately $580 and in 2011, there were 242 golf communities (March, 2013). The premium that comes with the sale of development projects such as real estate is approximately $243.5. These premiums are additional money that buyers pay for homes located within golf communities. The premiums have been increasing for the last five years because more and more people are buying properties within the golf communities because of the associated benefits (March, 2013).
Golf also supports the hospitality or tourism industry by a larger extent because many travelers and tourists are attracted to the sport. In California, it is one of the most important components of tourism together with other recreational activities such as skiing, sailing, biking, hiking, and visits to parks and beaches. The golf resorts attract business meetings, conferences, professional as well as amateur tournaments. The tourism expenditures on golf-related activities alone was estimated to be about $2 billion per year, which reflects a sharp increase as compared to the expenditures generated for 2011, which were estimated at approximately $1.329.
The impact of the golf industry on California’s economy involves both direct economic impacts as well as the impact on the golf-enabled industries. The concept of the multiplier in economics assumes that any change in the economic activity in one industry also affects other industries in the economy. For instance, a percentage of money spent in the golf course is in turn spent on buying goods and services by the golf courses for operation purposes. Additionally, the golf course staff spent their disposable income in buying goods and services, which stimulates economic growth in other industries. The overall economic impact involves employment and income from wages for people working in golf-related industries, secondary employment and income through purchase of goods and services. In 2011 alone, the $6.345 billion golf industry in California made an impact of $13.132 through direct and induced impacts, created 128,300 employment opportunities and income wage of $4.060.
California Golf and Environmental Sustainability
It is also imperative to employ technological solutions in water management systems. A key concern of most golf courses is maintenance and improvement of sources of irrigation as well as water control and distribution systems. There are several technologies used in irrigation management; for example, the central control computers and on-site weather stations. The technology helps determine water and power demands in different seasons. In addition, moisture sensors and soil monitoring systems help to avoid overwatering by providing real time data. A combination of these technologies with use of growth regulators, wetting agents and systems that improve uniformity can considerably reduce water usage (Selhorst, 2011).
Sharp Park and other local golf courses have been increasingly using recycled water. The proximity of these golf courses to water treatment plants put them at a better position to use the recycled water. Planting drought resistant grass, especially Bermuda grass, in some parts of the golf courses can help to conserve water. Also, coordination with the local communities and the community-based organizations dealing with environmental conservation is considered as very important (Shmanske, 2012). For instance, about 33 golf courses in California are now certified sanctuaries due to their efforts in engaging the community in conserving natural resources and improving wildlife habitats.
Another key factor in golf business is the management of customer expectations. Nowadays, many customers are demanding for a natural landscape because it provides a more natural and serene environment for playing golf. Turf grass specialists as well golf course superintendents are highly educated on water and land conservation issues. They participate in regular training and education programs on conservation, water management, pests control and turf management using various technologies. To get the latest and most current information they interact with water resource agencies, turf grass organizations and university agriculture departments. They are also part of the state and local committees addressing environmental concerns (Selhorst, 2011).
Golf courses have been identified as a benefit to the local people living in California. The benefits of the greens include green spaces and appealing landscape, provision of recreational and social opportunities. The industry is also responding to the environmental concerns by regulatory agencies, environmental agencies and the local communities (March, 2013). Thus, the community does not only benefit economically but they also enjoy quality air, get access to clean water and other environmental benefits associated with golf courses because most of them have embarked on environmental conservation efforts. It is through efforts of environmental conservation that the negative effects of climate change can be mitigated. There is need for multi-sectoral approach in conservation because there is no single sector with the capacity of ensuring that there is total conservation.
The economic value of the golfing industry is immense with several considerations of a diversity of industry components. Sharp Park, being among the top golf courses in California, has generated a substantial amount of income to the state as well as to the businesses around the area. However, almost the entire Californian coastal strip is at the threat of floods and erosion due to the ever-rising sea levels. The number of people visiting the beaches in the area has been increasing over the last five years but the trend is likely to change because of the likely effects of climate change (Sidun, 2015). Many golf courses are located along the coastal strip and they have attracted both local and external tourists because most of them enjoy playing golf as part of recreation. In case Sharp Park is closed, there will be negative impacts just because of the loss of revenue but also due to other businesses that depend of the golf course for the sale of their products and provision of services. The golfers who are enjoying the cheap golfing facilities of the course will also have to incur additional cost to travel to other nearby golf courses such in San Francisco, which are offering these services at a relatively higher price. Economy of California will benefit the community if the state government take the appropriate measures to mitigate the effects of climate change.
Estimated Future Demand Increase Golfing per Year Over Time
The golfers have expressed a willingness to pay increased prices to access the greens and the demand for golf and the price are projected to increase in California toward 2060. However, Sharp Golf Course only receives toward 60,000 resident visitors and 73,000 non-residents annually, which is an increase from the figures from 2004 and 2005 but insufficient to cover the current costs of Park’s upkeep. The maintenance costs for Sharp Park have exceeded $1.2 million over a period of 5 years, compared to approximately $51,000 in annual revenue which is close to $200,000 less than the operating costs. Further, in 2011, reports showed a reduced demand for golf and an increased demand for trail type recreation at Sharp Park (SPUR, 2011).
The future demand for golfers can be estimated using several different methods that use data from golfing facilities within the state. Recent reports show an increase in demand for golf in California, and a decrease in demand for golf at Sharp Park. Nonetheless, the estimated future demand is calculated as increasing based upon the estimated current demand for 18 hole golf using the averages for the greens fees for Sharp Park resident and non-resident weekday and weekend fees for an annual revenue of $51,000:
Standard weekday/weekend $42/$46 average = $44
Resident weekday/weekend $26/$31 average = $28.50
$51,000/($44+28.50) = 703(2) = 1406 golfers
Based upon previous period demand, the future demand is estimated using
average demand (Current Period) + seasonal factor (current period) = forecasted demand
The figures reflect the estimated current attendance based upon the amount of revenue earned divided by the cost of 1 residential ticket and 1 non-resident ticket. Over the course of 1 year, it is estimated that 1406 visitors played golf at either the residential ticket price or the non-resident price. The estimate is absorbant, in that it excludes considerations for other sources of the revenue at the greens such as food and drink.
The weekend greens fees are an average of $41 at Sharp Park and approximately 85% of the revenue comes from Pacifica and San Francisco residents who pay a onetime $100 resident fee and $28 per visit to use the greens. The majority of the rounds are played at some form of reduced rate for either seniors, juniors or residents at some rate of discount. The green fees from Sharp Park subsidize overhead costs for the city’s recreation department and other services and could mean an increase in taxes for the residents; and some of the services may have to be cut if the alternative uses for the land do not produce sufficient revenue.
If the Park remains a golf course and trail, in the next 4 years, the park can expect a moderate increase in demand that is congruent with annual population growth and other factors that would impact the number of visitors to the park. In 4 years, the weekday attendance will actually be 5 times the average attendance on weekdays; approximately 3 times the average number of visitors on the weekends; and approximately 2.4 times the average number of golfers on holidays. The decrease in attendance on days other than the weekdays may be a reflection of increased prices for other days or a decrease in special events held at the park.
Overall Loss in Consumer Welfare
Consumer welfare is gauged based upon the preferences of the consumer. Here, the consumer loss of welfare will depend upon the number of Sharp Park patrons that prefer 18 rounds of golf rather than a 17 or 16 round game. At the other end of the spectrum, the consumer loss can also be measured based upon those who are not advocates of a golf course as the use of the 417 acres of land. Loomis et al (2009) presented that the demand for golf is inelastic relative to the green fees and transportation costs, which averaged $49 and $8 respectively. The consumer surplus for the same data set was $18.44 for each round of golf which totaled to provide a net economic value of $143 million for the year. The study also discovered a considerable margin of profit associated with age, in which senior or retirement aged golfers accounted for 30% more of the revenue than other age groups.
Much of the revenue from golf course greens fees come from higher prices charges to senior citizens that are retired and visitors from other regions. Such price discrimination strategies help to boost the revenue for California golf courses with greens fees that are based upon the assumption that non local visitors will display a higher willingness to pay as the opportunity to play golf on the greens is less flexible for non locals. The demand for the 17-hole golf course has been on the rise as a new sport. The 17 hole sport has been deemed as not as challenging as 18-hole golf course and thus, many people have come to prefer it. However, the consumer demand for a 17 hole course still, is not as high as that of 18-hole golf because it is still less popular. Figures for 2008-2009 and 2009-2010 showed annual revenues of $50,099. Since then the revenue has been on the rise with an increasing number of users.
Economically, the lost of one hole would equate to a loss only to the percentage of patrons that do not care to play on a 17 or 16 hole course. To determine the consumer welfare loss the amount each type of golfer is willing to pay to play golf at Sharp Park was multiplied by the number of golfers. The total number of golfers that visit Sharp Park annually is 133,000 annually, 60,000 resident golfers and 73,000 non resident golfers.
The table shows the amount of the fee for golfers by category. In addition to the fees for using the golfing facility, reports show that significant amounts of revenue are also collected in the form of special membership fees, rental fees for the use of golf carts and lockers, and Food & Beverage expenditures at golf course restaurants (SRI, International, 2013).
Klemetti (2003) presented that capital investments in golf courses are in the form of capital investment in the existing facilities and investment in new courses; thus the golf facilities impact the economy beyond operational revenues due to new investments in order to upgrade and maintain the infrastructures, construction, renovation and expansion of the golf courses. The investments also generate local employment opportunities, income for the maintenance industries and to companies that sell golf equipment and supplies. Statistics show that some of the older golf courses in California have been successfully recovered and generate profit revenues while others remain stalemated as potential white elephants. The fate of most of the aged golf courses in California is intertwined with the impact of the golfing industry upon other golf-enabled industries in the state such as tourism or hospitality. Other indicators of the future golf economy for the state were the golf facility operations, real estate, capital investments, tourism and hospitality, and golf related products. The golf course management can expect impacts on the economic value that stem from capital investments into expansions, repairs and renovations to the infrastructure and facilities (SRI International, 2013).
Present Value of Golfing
The present value of the golf activities at Sharp Park are projected configuratively here, based upon an assumed $200,000 in revenue annually with all holes in service; $170,000 annually with the loss of hole 3; and $140,000 annually with the loss of holes 3 and 7 using the discounted present value formula:
DPV =FV x (1+R+100)-t
The decrease in golfers for each hole is assumed at 15% per hole or: Hole 3: 200,000 - 15% = 170,000; Holes 3 and 7: 200,000 - 30% = 140,000. The present value is calculated in increments of 10 years, toward the year 2060:
10 years
In the first 10 years, the present value of the golfing revenue for Sharp Park decreases from $181,057.39 to $126,740.17 at a discount rate of 1%. At 3%, all of the holes will be valued at $148,818.78, all of the holes except hole 3 at $126, 495.97; and all of the holes except holes 3 and 7 at $104,173.15. At a discount rate of 5% the present value of the golfing revenue decreases substantially from $122,782.65 to $85,947.86. The following table shows the present value in 20 years based upon the same initial $200,000 in golfing revenue:
20 years
In 20 years, the present value of the golfing revenue for Sharp Park decreases from $163,908.89 to $114,736.23 at a discount rate of 1%. At 3%, all of the holes will be valued at $110,735.15; all holes except hole 3 at $94,124.88; and all holes except holes 3 and 7 at $77,514,61. At a discount rate of 5% the present value of the golfing revenue decreases from $75,377.90 to $52,764.53 The following table shows the present value in 30 years based upon the same initial $200,000 in golfing revenue:
30 years
In 30 years, the present value of the golfing revenue for Sharp Park decreases from $148,384.58 to $103,869.21 at a discount rate of 1%. At 3% the present value of the course with all of the holes will be valued at $82,397.35; all of the holes except hole 3 at $70,037.75; and all of the holes except holes 3 and 7 at $57,678.15. At a discount rate of 5% the present value of the golfing revenue decreases from $46,275.49 to $32,392.84. The following table shows the present value in 40 years based upon the same initial $200,000 in golfing revenue:
40 years
In 40 years the present value of the golfing revenue for Sharp Park decreases from $134,330.63 to $94,031.44 at a discount rate of 1% . At 3% the present value of all of the holes would be $61,311.37; all of the holes except hole 3 at $52,114.66; and all of the holes except 3 and 7 at $42,917.96. At a discount rate of 5% the present value of the golfing revenue decreases substantially from $28,409.14 to $19,886.40.
The figures indicate that with the appropriate upgrades and readjustments, the park could produce the required revenue to sustain the operating costs at a discount rate of 1%. In neither instance will the park be able to sustain its operating costs at a discount rate of 5% with the lost of hole 3 and/or the lost of holes 3 and 7. The number of people visiting the beaches in the area has been shown as increasing over the last five years, which encourages assumptions of increased activities at surrounding area parks (Sidun, 2015). However, with the threats of climate change and with considerations of inflation and increased costs of living in California, after 20 years, Sharp Park will not be able to sustain its operations at a 3% discount rate or a 5% rate, even with all of the golfing holes in operation and a significant adjustment to its budget.
Estimated Trail Value if Trail Kept as Golf Course Erodes (no loss to trail)
The preferences of the demographic for a specific area tend to evolve over time along with the evolution of technology and new sources of entertainment. It has also been discussed that due to the economic concept of the multiplier, that provides that changes in the economic activity in one industry also affects other industries in the economy, the impact of the golf industry on the local economy involves both direct economic impacts and the impact of golf-enabled industries. Weinstein, Sherrod, Fearon & Perez (2007) presented that the scope of the coastal trail is important in terms of size, location, permanent and temporary enclosures, storm water drainage capacities, and the mitigation of damage to the wildlife and their habitats. The coastal trail uses for walking, biking, and hiking typically generates a significant amount of grant funding and are maintained by city maintenance, prison labor, volunteers, and adopt-a-trail programs. The trail maintenance budget consists of a general fund, estimating budget, and renovation project allocations and the following table shows the estimated useful life of a nature trail based upon its primary components (Weinstein et al 2007):
According to the table, only the concrete components of the coastal trail are expected to have a useful life of 50 years, as all other components will require renovation or replacement in 5 to 30 years from the date of construction. The useful life of all of the site equipment averages 15 years, which does not justify a loss of the trail in 2030. The Sharp golf course provides the local residents with the benefits of green spaces; appealing, natural landscapes; and the provisions of recreational and social opportunities. The sustainability of the Sharp golf course requires the environmental stewardship of water and land resources. Maintenance of the nature trail will include vector control, erosion control, repair to retaining wall, wood structure renovations, and simple maintenance such as graffiti removal and sign maintenance (Weinstein et al 2007).
Survey responses of the San Francisco residents indicated that walking and trails and hiking were more in demand than golfing activities, which prompted considerations of retaining the Park Trail and ending the golfing activities (SPUR, 2011). Weinstein, Sherrod, Fearon & Perez (2007) presented that trails improve the quality of life, promote safety, healthy lifestyles, recreation, prevention of obesity and diabetes, restoration of wildlife habitats, and increases property values. Sharp Park has been deemed as underutilized against industry standards for public recreation use. However, to make the transition from a golf course and trail to only the coastal trail, the removal of the green infrastructure can cost between an estimated $9 million and $22 million in addition to the subsequent disruption of the habitats for the local wildlife (SPUR, 2011).
Which makes more sense, let the trail disappear or let the golf course lose 2 holes?
The problems that plague Sharp Park are both economical and environmental. The City of Pacifica has traditionally outsourced golf course operations, which resulted in the City not having to sufficiently fund any of the leaseholders, contractors, or the Department for capital improvements and primary facility maintenance (San Francisco Board of Supervisors, 2006). Any profits that were realized by the golf course was accumulated in the City’s General Fund. A private funding model emerged in 1999. Each year, California golf courses host more than 20 golf tournaments that generate an approximately $250 million in gross revenues.
In San Francisco, the primary economic issue is that the Sharp Park golfing revenue is considerably less than its operating costs. It appears that the recreational preferences of the Pacifica demographic have changed. According to a 2006 Budget Analyist’s Office report, the Golf Fund was unable to recover operating costs and debt repayment costs from Sharp And Lincoln golf courses, which were referenced as “substandard” with decreasing play (San Francisco Board of Supervisors, 2006). It might also be noted that Sharp Park is not an isolated case, as Lincoln Park, Harding and Fleming, and Golden Gate State Park were also considered by the City of Pacifica for similar issues. A consideration was made in 2004 to consolidate Sharp Park and Lincoln Park into one contract and soliciting private funds to renovate both courses San Francisco Board of Supervisors, 2006). The opportunity cost of the renovation of Harding Fleming Golf Course was the availability of funds to refurbish Sharp Park.
The seawall and coastal erosion must not override the observation that Sharp Park’s location is environmentally attractive for tourism, hospitality and recreation industry revenue due to the park’s golf course design and close proximity to the Pacific ocean. However, the environmental concerns for the area have been major contributors to municipal talks to end the golf course despite the protests of the golfing community. The trajectory of the rise in sea level indicates a significant degree of erosion; however, the precise amount and intensity of the erosion remains ambiguous (SPUR, 2011). Flooding and changes in salinity for Laguna Salada also pose threats to the wildlife habitats. Researchers agree that erosion will likely eliminate hole 3 in 2030 and yet another hole, number 7, in 2060. The costs to reinforce the seawall between the beach and Laguna Salada have been projected to run between $7 million and $10 million.
Consideration of the economic impact of a lost hole must include the significance of the industry standard 18 hole golf course, as opposed to a 17 hole course and eventually a 16 hole course. The options for the Sharp Park Golf Course include an adjustment to a 17 and then 16 hole course, transformation of a 9 hole course into an 18 hole course, or the recreation of holes 3 and 7 elsewhere on the property. The golfers have expressed that an adjustment of the 9 hole course to an 18 hole course is not desirable. Further, Crownover (2016) contributed that the average 18 hole golf course spans between 150 and 200 acres; thus, a 417 acre parcel of land should suffice to create 2 new holes elsewhere on the property to compensate for the lost holes due to erosion.
The primary environmental issues currently consist of the long term rise in sea level, coastal erosion, and winter storm events due to climate change that threaten the stability of the Pacifica coastal habitats. Also, Animal Rights activists have initiated lawsuits to protect the endangered species that have habitats in Sharp Park and that are protected by the Endangered Species Act, namely the California red legged frog and the garter snake (SPUR, 2011). Further, environmentalists have charged that the golf operations of pumping fresh water and mowing are harmful to the endangered species.
In 2006, records show that plans were sought to estimate capital improvement cost requirements and time schedules for both Sharp And Lincoln Parks as well as possible sources of funding to address the needs of the parks. Ultimately, the golf course may recover the two lost holes in other ways, thus the trail should be preserved. Also, the reports show that the Sharp Park golf course and restaurant have the potential to accumulate much higher revenues with the appropriate changes to management and some degree of repair and renovation.
Sensitivity Analysis
The golfer attendance and estimated values of the course in 30 years at different discount rates have been varied in order to measure the impact of such changes on the statistics for Sharp Park. In the first table, the seasonal factor is increased in order to measure the change in potential revenue toward 4 years:
With a seasonal factor of 64 toward 4 years, the weekday attendance was 312, weekends, 368, and 429 on holidays. With a seasonal factor of 90 toward 4 years, the weekday attendance increases to 416, weekends to 472, and holidays to 533. The increase in attendance with the change is not as significant as expected, which indicates that even with a significant increase in visitors to the golf course, without an increase in price, the park would still draw enough revenue to cover operating costs.
A second sensitivity analysis is conducted in terms of the present value of the park. The initial calculations for the present value of the golf toward 2060 consisted of a decrease in golfers for each hole assumed at 15% per hole or:
Hole 3: 200,000 - 15% = 170,000 Holes 3 and 7: 200,000 - 30% = 140,000
Here, the present value is calculated based upon an assumed 25% decrease per hole or:
Hole 3: 200,000 - 25% = $150,000 Holes 3 and 7: 200,000 - 50% = 100,000
At 2030
At 3% the present value with all holes except hole 3 was at $70,037.75; here, the present value with all holes except hole at 3% is $61,798.01.All holes except holes 3 and 7 was valued at $57,678.15; here, the value is $41,198.
At a discount rate of 5% the present value of the golfing revenue decreased from $46,275.49 to $32,392.84 without hole 3; here it decreased to $34,706.62. Here, without holes 3 and 7, the present value decreased to $23,137.74. Based upon a base figure of $200,000 in annual operating costs, the values for the present values for the Sharp Park golf course are not optimistic, relative to the future increases in costs for maintenance of the facility, with or without the coastal trail.
Conclusion
Research has confirmed that the solution that would preserve the Sharp Park golf course in its entirety, a seawall, would eventually eliminate the beach and possibly the coastal trail. The City of San Francisco holds that most of the land outside of the San Francisco City limits supports critical infrastructures such as jails, airports and water systems rather than legacies that demand specialized maintenance to serve constituents that do not reside in San Francisco (SPUR, 2011). The objective in resolutions of the Sharp Park issues include the achievement of a revenue positive or at best, revenue neutral budget in addition to renovation plans that will maximize the recreational use of the property while providing protection for the endangered species.
California golfers spend considerable amounts of revenue on golf media, golf apparel, golf clubs and golf balls which benefits the state economically through the production and sale of these items (SPUR, 2011). Each year golf product manufacturers spend over $800 million on value-added shipments. California retailers and golf facilities earn an estimated $200 million on sales of the golf equipment, media and apparel and the golf-related supplies segment generates approximately $1 billion.
Golf is a significantly large part of the international image for the state of California. Several associations represent the sport of golf in California, one of the largest states in U.S in terms of golf participation, economy and population along with active women and junior associations. In 2011, the golfing associations generated an expenditure of about $69.5 million (SPUR, 2011). Every year, golf courses in California host more than 20 tournaments generating an approximately $250 million excluding the broadcasting costs and tournament purse. This is a considerable rise as in 2011, the state only hosted 12 golf tournaments that generated $112.05 million. The golf industry also makes considerable contributions to charity.
As of 2011, the dilemma of how to move forward with the issues of Sharp Park produced three possible outcomes that would address the environmental, economic, and community interests in different ways. Option 1 is a proposal to move holes 3 and 7 eastward to the other side of the highway, install an enlarged lake with an outlet to the Pacific ocean, and to dredge Laguna Salada (SPUR, 2011). The outcome addresses the need to offset the flooding and the endangerment of the wildlife habitats. Option 2 supports that there has been a decline in golfing at Sharp Park over the past 10 years, and thus the administrators should end the golf activities and strictly promote trail based recreation (SPUR, 2011). This option supports recent studies that indicate the demographic preferences have changed and that the San Francisco residents have asserted that they prefer the option for biking and hiking trails to golfing. Lastly, option 3 is a proposition to lease the Sharp Park golf course to San Mateo County or any other interested party for the next 30 years (SPUR, 2011). Sam Mateao County has expressed an interest in the management and restoration of the Park and plans to competitively raise greens fees, promote youth golf programs, and endorse other activities such as hiking and walking. This option addresses the County’s lack of funding to finance the continued upkeep or renovation of Sharp Park and the logic of seeking external investors.
References
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