Yorba Linda City Council takes actions to put Black Gold Golf Course on surer financial footing

Yorba Linda City Council members on a unanimous vote have taken actions intended to put the city-owned, 20-year-old Black Gold Golf Club on a surer financial footing in future years.

The council's key decision is to cancel all interfund loans due the city's General Fund and Special Reserve Fund from the Black Gold Golf Course Fund, totaling about $18.8 million.

Included in the loan forgiveness is a waiver of all accrued interest payable on the loans – about $1.4 million – making the entire amount scrubbed a bit more than $20.2 million.

Also, a new $2.3 million loan from the city's Master Plan of Drainage Fund to the Black Gold fund will eliminate the golf course fund's negative cash balance and provide about $200,000 of working capital for the 219-acre facility.

The drainage fund loan is to be repaid over a 10-year period, with variable interest due each year, computed at the rate of return the city earns on its investment portfolio. The drainage fund holds the impact fees the city collects from new development to pay storm drain costs.

Another aspect of the council's action is to establish a budget reserve for the golf fund that would include an operating reserve equal to 20% of the prior year's revenues and a capital reserve sufficient to address needed course improvements for a 30-year period.

The operating and capital reserves are projected to be fully funded by 2038, after which an annual dividend payment to the General Fund would be possible. At the end of the 30-year forecast period, total dividend payments would be about $2.1 million, according to estimates.

In addition, without forgiveness, the city's auditing firm would list the Black Gold loans as “bad debts” on the city's financial statements, as of June 30, since the loan balance in 30 years is projected to be $3.6 million more than the current balance, with little likelihood of repayment.

Of course, the current council is forgiving loans made from one city fund to another, but the 1990s-2000s-era councils that borrowed money for Black Gold construction said the bonds would be paid from golf revenue, not income from the property and sales taxes that make up most of the General Fund.

The General Fund loan to pay off the Black Gold bonds was approved by the council in 2013 to save years of interest payments. City officials state they believe council's latest actions will have “a positive impact on the sustainability of the long-term financial health” of Black Gold.

And council's actions “would likely eliminate any need for the General Fund to make contrib-utions to the Golf Course Fund in the future for operating shortfalls or major capital projects.”

Next on Black Gold's financial agenda is completion of a detailed long-term capital improve-ment program for the golf course and clubhouse facilities, which will be followed, within one year, with an updated long-term financial plan for the golf course fund.