With Hillcrest Golf Club in sound financial shape, it has received the green light to work with the Royal Bank of Canada (RBC) to expand its clubhouse.
The expansion is expected to cost $400,000, so RBC would act as the loan provider and cover 90 per cent — or $360,000 — of the expenses. The loan would be open-ended and could be paid off any time with no penalty. The club is pursuing a repayment plan of maximum 10 years, with the goal to pay off the loan within five years.
The current annual payment for a five-year loan is $84,480.
During its Nov. 12 regular meeting, city council voted 6-1 to approve the club’s request to enter into a financial loan agreement with RBC.
Furthermore, the City of Moose Jaw would not be held liable for the loan repayment and would not be named in the contract between the golf club and RBC. Meanwhile, city administration would be authorized to provide the letter of consent on behalf of the golf club and would amend the lease agreement between the municipality and Hillcrest Sports Centre Inc. to reflect the prorated value of the building improvements. This amendment would be provided to council for consideration once the final construction costs are determined.
The loan would not affect the municipality’s debt limit or be considered debt of the city. The golf club has a 35-year lease agreement with the municipality for the land.
Coun. Dawn Luhning was opposed.
Financial history
According to documents provided by the club to council:
- The golf club generated $2,905 in profit in 2017 and transferred $10,278 into a capital reserve, which led to an operating deficit of $7,373.
- It earned $89,603 in profit last year and transferred $15,751 into a capital reserve, leading to an operating surplus of $73,312.
- Up to Sept. 30, 2019, the club showed a net profit of $365,115, which is an improvement over last year’s amount of $276,063 during the same period. The club projects a surplus of $200,000 this year that would be set aside and applied to the loan repayments during the first two years. This would give it the chance to fundraise and increase club profits to help fund the remaining three years of repayments. Any additional revenues would be put toward repaying the loan.
The club also has $201,591 available in a low-interest GIC account that could be allocated toward the project or used to fund any unexpected project costs.
Council discussion
Luhning was concerned about the municipality being held liable should the golf club default on its loan. She wondered if city administration had sought a legal opinion on the issue, since a default would mean the municipality would take over the property and buildings.
“I’m wanting to protect our interests,” she said, adding there were other unanswered legal questions, such as whether the club’s board of directors has insurance.
The parks department did consult with a lawyer, who said the most likely scenario in a default situation would see RBC take over operations of the golf course and the municipality cancel the lease agreement, explained parks director Derek Blais.
“I think we should be cautious here,” Luhning replied, adding this was a big deal since $400,000 was a large amount of money.
Luhning introduced a motion to table the issue until council saw a written legal opinion. However, council voted 6-1 against the motion.
Other councillors were supportive of the golf club’s proposal.
“Their financials are really healthy and strong. They are up from the year before,” said Coun. Crystal Froese. “I think this will be a great thing, not only for the golf course, but Moose Jaw (as well).”
The next regular council meeting is Nov. 25.
