Open Letter from SGCC BOD to Somersett Residents

Open Letter from SGCC BOD

Dear Somersett Community Residents and Members,

As everyone knows, Somersett with all of its neighborhoods is a master planned golf community. Located in its heart, the Somersett Golf and Country Club (SGCC) golf course is comprised of 222 acres or 15% of the developed and to-be-developed acreage in the community. Approximately 500 home sites back up to, or are on, the golf course, with many more homes having golf course views. Residents benefit from the $20 million investment in the golf course infrastructure via its watering, turf grass and drainage systems. These systems serve as a filter for runoff to control flooding and dust and pollen in the community and provide a cooling effect for the surrounding property. The course benefits the local environment and serves as a fire break for the entire community. (Water from the lake on the 14th hole was used to extinguish fire hot spots during the Peavine fires.) In addition, the golf club spends in excess of $700,000 per year to maintain this infrastructure at no cost to Somersett non-club member residents.

The golf course also supports home values and community growth to the benefit of all the residents. Studies dating back to 1895 show that open space and natural beauty are extremely important in home buying decisions and can have anywhere from a 7% to a 30% positive effect on home and property values. If, for example, homes today are worth an average of $300,000 in our community, it can be argued that from $21,000 to $90,000 of value is attributable to the golf course and open spaces, which adds from $58 to $250 per month in amortized home value per home owner in Somersett. An example of how a golf course supports home values is the recent closure of the D’Andrea golf course in Sparks. One only has to look at the fall in home values at D’Andrea since that course has closed.

For background, the members of Somersett Golf and Country Club agreed to an early exchange of ownership with the developer in October 2010 to preserve the golf course and minimize any negative effect that a potential developer bankruptcy and/or the course going brown would have on the community and its home values. The equity members received the golf course and attendant water rights free and clear of any liens (the club remains debt free) plus $1.2 million in operating funds. Seeking options to secure the future, the Board first adopted new membership programs. Second, the board restructured the operations of the club and reduced costs significantly while maintaining the viability and growth potential of the golf facilities. Third, the board considered partnering with casinos (ala RedHawk) and other area golf clubs. Last, the board considered taking the golf course public and maintaining the golf course at minimum playable standards. The board believed that this option would introduce significant non-resident (strangers) traffic into our community, detract from Somersett’s overall attractiveness and negatively impact our community.

The board also considered options in which SGCC would not be able to control the outcomes and impact on the community. The club could sell the course to another golf provider whose interest would be to make money versus sustaining Somersett community values and appearances (ala the Town Square or the Arrow Creek golf course which is reportedly in decline and detracting from community values there). Or, the club might simply walk away from the golf course, in which case it could turn brown, the property could revert to the developer who could then either resell it or further develop it for uses which may or may not be in the best interests of Somersett residents.

SGCC openly shared its options with the SOA Board and proposed to open up the golf course and its existing amenities to the community. These presentations and discussions were held in the open forums of the SOA Finance Committee 2012 budget meetings and SOA Board meetings. From the Club’s perspective, the resultant Agreement is balanced, as it provides new community amenities to all Somersett residents, which SGCC installs and maintains at its expense, while providing SGCC a modest source of revenue over the three year term.

Thus far in 2012, SGCC incurred costs in excess of $200,000 of the committed $300,000 in delivering amenities to the community. The SunSett Grill was introduced this April with a full kitchen and expanded seating capacity. Respected Executive Chef Colin Smith was engaged as a consultant to assist the club in delivering a quality breakfast, lunch and dinner dining option to the community at affordable prices within 5 minutes of home. The club opened its driving range to the community as an amenity until the resident driving range was completed and opened Memorial Day weekend. By July, the Club finished and opened up new bocce ball courts, and stocked the pond located near the Town Center with 1,500 brim and 500 bass to complete the new fishing amenity. Lastly, the club is planning to spend approximately $100,000 on constructing a putting course for the residents on club property to be available by June 30, 2013.

Community residents have access to these benefits plus the opportunity to play golf for no increase in their homeowners’ dues. Compare this to a social membership at Hidden Valley Country Club which provides access to their facilities, excluding golf, for an entrance fee of $1,000, $75 per month in dues and a $900 annual food and beverage minimum; or to a social membership at Thunder Canyon which calls for a $500 entrance fee and $100 per month in dues. Even compare benefits to the non-resident social membership that SGCC offers at $25 per month in dues plus another $70 for driving range access.

There are currently 145 residents (over 8% of the community) with golf memberships and a total of 291 club members. Somersett residents are increasingly taking advantage of the club with 724 uses in June and 1,810 uses during the first 6 months of this year, including over 300 rounds of golf. The club has become a great place to socialize and launch lasting community friendships.

As to financial terms, the SOA pays $15 per month per dues paying residence to SGCC for a period of 3 years. At present, this is a monthly payment of $36,165 to the club for a total of $1,301,940 over the 36 month contract period. On this basis, the SOA provides less than 20% of SGCC’s annual revenue.

The SOA has a two fixed price options to renew the agreement; one for an additional 3 years and one for a 4 year period thereafter, both at a monthly dues of $12 per dues paying SOA member. Under these independent options, the SOA monthly payment would reduce to $28,932 for a total payment of $1,042,000 over the first 3 year option period and $1,390,000 over the final 4 year period. If the SOA exercise both of its options with no other changes to the number of dues paying members, it would pay a total of $3,732,228 over the next ten (10) years for access to the amenities as described while SGCC bears the costs of providing these amenities.

In summary, the SGCC board believes that Somersett is an amazing community with wonderful amenities. We wish to thank the residents for their support as we work together in support of the SOA’s efforts to continue to improve the community at every turn and protect the Somersett brand.

On behalf of the Somersett Golf and Country Club’s Board of Directors,

Rich Oster