By Tim Fleischer Editor-in-Chief
Saladoans are invited to a public meeting 6 p.m. Aug. 9 at Salado Intermediate School to discuss the possible purchase of the Mill Creek golf course by the Village of Salado.
According to Village administrator Don Ferguson, the meeting “will start with introductions, followed by a brief history and overview of the issue, details regarding the funding options explored and then a question answer session.” Ferguson said he expects the meeting to take an hour.
At issue are the price for the property, funding mechanisms to purchase the property, operations if the Village owns the course and the financial impact on property values if the course closes.
During negotiations for the possible purchase of the property, the parties contracted for an appraisal of the golf course, the old restaurant and Sherrill Park.
According to Ron Gravette, one of the investors in Mill Creek country club, the appraisal was based on the operations of the business rather than the value of the property itself. Because of this, the appraisal came in at $2.54 million.
Gravette told a group of residents last week that the 20 investors in Mill Creek have already put in $4.2 million into the golf course, including its improvements since purchasing the property in July 2013.
Part of the reason the appraisal came in low, Gravette says, is because the income structure for the course since 2013 has been based upon 18 holes. The others, which include the premier holes for the course on the Creek have been closed since flooding in 2008 and 2010.
Those holes, which are signature holes by designer Robert Trent Jones II, opened last month after being rebuilt by the Mill Creek group,
In order to reopen the course to its full playability at 27 holes, the group rebuilt the fairways, damaged greens and washed out bunkers along Salado Creek. The group rebuilt nine holes along Salado Creek. Limestone work was added to prevent future damage to the greens and fairways by future flooding.
In addition, all four wooden bridges were replaced with concrete bridges. The group repaired the pond, lined it, replaced all pumps and installed new irrigation system for the course. It also expanded the cart barn and renovated the swimming pool.
All 27 holes reopened for the Fourth of July weekend. “That’s what we promised to do,” Billy Helm said.
“Some of us are going to take a hit,” Helm said. “We know that.”
But he adds that the group came together five years ago because the investors felt that the community as a whole would take a bigger hit if the course were closed or developed into housing instead of a golf course community.
Communities around the country are feeling this impact on property values as there are about 900 fewer courses nationwide than in the mid-2000s, according to the National Golf Foundation.
In a March 2017 article on golfincmagazine.com entitled “Golf course reduction continues, NGF reports” written by Jack Crittenden, in 2016 alone 230 facilities closed permanently. Most of these courses are public and at the lower end of the spectrum in terms of green fees (less than $40).
However, there have been private courses that have been closed or redeveloped into residential housing and parkland by developers.
Most recently, Double Diamond closed the White Bluff courses at the resort community in Lake Whitney. The developer closed the golf operations after a dispute with the local Property Owners Association over responsibility for the maintenance and upkeep of the course.
This led the local POA in Whitney, seeing property values decline, to organize and purchase the course outright. A search of historic property values in the White Bluff showed that golf course lots sold for $24,900 in 2012. Properties in White Bluff in 2018, according to Zillow, were as low as $7,500 for a quarter acre lot.
In a June 16 2018 posting, Emily Carter Morris announced that “White Bluff will now be solely owned by the property owners — and operated for the benefit of property owners. This is a monumental accomplishment that our Property Owners Board has worked very hard to bring to fruition.”
Mill Creek in Salado, however, does not have a Property Owners Association for the complete development. Instead Mill Creek is made up of about 30 different subdivisions added over the years since opening in the 1970s by different developers.
Mill Creek Community Association is a voluntary association of about 200 property owners. The 30 subdivisions that make up what locals call Mill Creek is about 1,000 properties.
Each subdivision has its own covenants and restrictions. Most of those are duplicated in each subdivision, but as new properties have been developed, the local developer may add to or take away from the restrictions.
Salado Village Voice had the Bell County Appraisal District prepare an analysis of appraisal values on properties that are on or near the golf course.
Addresses that were included in that analysis by Bell CAD included properties on the following streets:
Mill Creek DR, Southridge DR, Bishop, Club Circle, Bluff Circle, Chisholm Trail, Fairway, Winners Circle, Smith Bluff, Smith Bluff ETJ, Chaparral, Elizabeth Circle, Hilltop, Jones Circle, Ambrose DR, Hester Way, Hester Way ETJ, Tallwood, OW Lowrey, Arnold Palmer, Mackie DR and Old Mill Rd.
The total BellCAD appraised value for those 492 properties is $103,874,402. Editor’s note: This is a corrected amount, as BellCAD sent a correction after the print edition was distributed.
[table “91” not found /]The list above is not inclusive of all of the Mill Creek area, but only of those properties closest to the golf course.
For a more accurate appraisal of Mill Creek values, we can turn to March 22, 2017 reporting by Salado Village Voice during the 2017 disannexation election: “Marvin Hahn, chief appraiser of BellCAD, stated that the market value of the property in the proposed disannexation area is $170,082,524.” The disannexation area was almost entirely Mill Creek properties.
The appraised values determined by County Tax Appraisal Districts have historically been lower than the true market values.
The real estate market is always affected by local issues. Because of that, I called local Realtors® to get an idea of how close BellCAD values are to the actual market value of residential properties.
One Realtor® told me he sold a Mill Creek home recently for $80,000 more than the Tax Appraisal value. The Realtor® told me that the county tax appraised value of homes are under market value the majority of the time, but determining a percentage for comparison would be difficult if impossible for an area as large as Mill Creek.
“Each property will be different,” another Realtor® told me. “If the property has been recently sold, the tax appraisal will be much closer in value.”
That Realtor® conservatively estimated the difference between appraised values and market values for residential properties in Mill Creek to be 15 percent.
At this rate, the disannexation property would have a market value of almost $200 million. The 500+ properties adjoining the golf course would have a market value of almost $125 million.
Impact on home values when a course closes
Few people will argue that the closure of a golf course has no impact on the values of real estate adjoining it.
However, determining the impact of a golf course on the value of nearby properties is difficult and will depend upon the specific issues of the surrounding community.
Salado Village Voice has found some comparisons based upon well-funded and conducted studies by professionals.
Sarah Nicholls, of Michigan State University and John L. Compton, of Texas A&M University published a 15 page study in the Journal of Sport Management in 2007 entitled: “The Impact of a Golf Course on Residential Property Values.” The abstract states that the study examined 305 sales transactions in a golf course subdivision in College Station. It found that “The premiums on lots adjacent to the golf course were $61,074 and $45,759, based on sales prices and assessed valuations, respectively. These premiums represented 25.8 percent of the average sales price of the homes, and 19.2 percent of the average assessed value. Prices and assessed values were also found to decline significantly with distance to the country club (by $8–10 per foot from the entrance).
More recently, Brian Bonnenfant with the Center for Regional Studies, College of Business at the University of Nevada, Reno conducted an intensive study “Golf Course Closure Impacts on Home Values-Washoe County, NV.”
The 2015 study found the following for the D’Andrea Golf Course, with 184 single-family homes adjacent to the course that closed in 2012: “The comparison of prices per square foot before and after the golf course closure between the golf course homes and surrounding regions indicates that the closure caused property values to decrease by $32.00 per square foot compared to Spanish Springs home sales, $27.23 per square foot compared to City of Sparks home sales, and $26.77 per square foot compared to Washoe County home sales. The analysis shows that the closure of the D’Andrea Golf Course significantly decreased property values of the homes on the golf course.”
For the Northgate Golf Course, however, the difference was minimal. “There are 126 single-family homes adjacent to the golf course land as of March 2015. The Northgate Golf Course closed in January of 2009 by the Reno-Sparks Convention & Visitors Authority due to the inability of the golf course’s revenues to cover its expenditures. The very small change in differences between the comparison of prices per square foot before and after the golf course closure indicates that the closure of the Northgate Golf Course did not significantly affect property values of the homes on the golf course.”
From this difference between the closure of a private golf course (D’Andrea) versus the closure of a public golf course (Northgate), one can surmise that a private golf course has more impact on the surrounding real estate than a public course.
Closed courses redeveloped
Oftentimes when a course closes, it is redeveloped for housing. Salado Village Voice found countless examples of this around the country found in reporting by community news outlets.
In one report on courses closing in Orlando, Florida, values plummeted for golf course properties. In the reporting by Local 6 in Orlando, the Orlando Realtor Association gave examples of the loss in values of golf course properties. Single family homes that sold for $400,000 in 2006, sold for $215,000 in 2011. Condos plummeted even more from a high of $225,000 when the course was open to a low of $30,000 in 2010.
Bloomberg, in an Aug. 15, 2016 report “America’s Golf Courses are Burning” revisited the D’Andrea golf course in Nevada. What happened there was “both insult and injury,” according to reporter Patrick Clark. The course owner asked the local HOA to pay an additional $28 per month for course upkeep. The HOA refused and the course was shuttered. According to Clark’s story, “the clubhouse became a magnet for vandals, who posted graffiti on its stucco walls and eventually burned it down.”
John Rhoads, one of those D’Andrea golf course residents, told Clark that home values are already down by $25,000.
In the Bloomberg report, writer Patrick Clark wrote that “for golf course owners, it’s much harder to pull the plug on a failing business; as courses fall into disuse, they become suburban zombies—not quite dead, yet far from alive.”
He further reports that “To some extent, all those course closures are simply a market correction.”
However, he reports that the leisure industry is changing, as well and that golf is down by some 20 percent since 2003.
Some local governments have been able to prevent or postpone development of a golf course into more housing because of zoning and deed restrictions in place.
If a course is zoned Parks or Open Space or Planned Development, it cannot as easily be redeveloped as housing without going through zoning changes. These can take years and in some cases have ended up in court.
According to the most recent Zoning Map for the Village, Mill Creek golf course property is zoned as Single Family Residential, which would make it easier for a developper to cut up the property for residential lots than if it were zoned as open space or parks.
Further, Mill Creek deed covenants and deed restrictions, say nothing about the development of the golf course property itself.
What does it mean to us
What does this mean for Mill Creek and for Salado?
Helm told me that if the sale to the Village fails to go through, that the owners group will pursue other buyers. “They will determine whether Mill Creek will stay open and if it does whether it will be as a 27-hole, 18-hole or nine hole course.”
Salado is unique in many aspects from other communities that have seen courses close and felt drastic impacts on their values. Among those differences are these
• Mill Creek does not have a true POA with mandatory fees and/or assessments that could be used to purchase and operate the golf course.
• Mill Creek and the golf course were not built during the overbuild of golf. Many of those courses that are closing are doing so because of the glut of courses that are nearby and often in the same community. Much of Mill Creek is established but it continues to grow at a steady pace through diffreent economic times.
• Mill Creek is known throughout the state. The Robert Trent Jones II designed course was once called “The Most Beautiful Golf Course in Texas” and was named by Golf Digest as a Place to Play.
Can this reputation and value be recaptured? Should it be? At what cost and how?
Paying for the course
The Village administrator has given us no indication of how the course could be purchased and funded.
He may bring that information to the Aug. 9 meeting. The meeting tonight may have some answers about funding for the purchase, operation and improvement of the golf course property.
Among those options may be formation of a Public Improvement District (PID). PIDs are special districts that can levy an assessment against the property owners within the boundaries of the PID.
According to Texas Municipal League legislative counsel Bill Longley, PIDs are formed by the property owners in the area who bring a petition signed by owners that constitute more than 50 percent of the total area within the PID to the Village.
“First, the city council must provide notice and hold a public hearing prior to establishing a PID and levying assessments. TEX. LOC. GOV’T CODE § 372.009(a). The city council must make findings by resolution as to the nature, advisability, and cost of the improvement, the boundaries of the district, the method of assessment, and the apportionment of costs between the district and the city as a whole,” according to Longley.
After the cost and methodology of assessments are determined, the council files the assessment roll and a public hearing is held. The city can then levy the assessment through ordinance.
According to Longley, PID assessment funds may be spent on the following kinds of improvements: landscaping; fountains; lighting; signs; street and road acquisition, construction, and repair; sidewalks; right-of-way acquisition; pedestrian malls; art; libraries; parking facilities; mass transportation facilities; water and wastewater facilities; drainage facilities; parks; and the “development, rehabilitation, or expansion of affordable housing.”
“The statute also recognizes the acquisition of real property in connection with an improvement, special supplemental services for improvement and promotion of the district,” according to Longley.
This was done when Cimarron Hills golf course in Williamson County was first developed in 2003. The original PID for Cimarron was some $17.5 million and included the golf course, streets, water and sewer infrastructure. The annual assessment for Cimarron Hills PID property owners, according to the PID documents were these: Class A – $3,400/lot/year (Platted Lots with Certificate of Occupancy); Class B -$680/lot/year (Platted Lots without Certificate of Occupancy); $99.73/acre/year (Unplatted Acreage) and $49.58/acre/year (Golf Course and Club Facilities).
Later, the developer formed a Municipal Utility District to fund infrastructure for major expansions to Cimarron Hills.
Formation of a PID to purchase an existing golf course is rare. We found a case in Joplin, MO where Briarbrook residents did just that in 2010. Those residents have a tax levy of about $0.475 per $100 valuation for the PID ($475 per every $100,000 valuation). Every property owner in the PID there has unlimited access to the pools and tenniscourts and low green fees. The PID is overseen by its own board of directors elected from its residents.