MONTROSE – Montrose is now in the golf business, following Montrose City Council’s unanimous vote Tuesday for the city to assume operations of the Black Canyon Golf Course, and purchase the course from the Montrose Land Company for municipal use and preservation.
Council approved a lease-and-management agreement between the two parties transferring all 18 holes, equipment and the clubhouse to the city. Planning has begun for a $675,000 buyout of MLC’s assets, debt and real-estate-closing obligations. Council approved a lease of the city-owned back nine to MLC, and a management agreement whereby the city will manage all 18 holes. A contract for purchase of the front nine from MLC transferring ownership of all 18 holes to the city is pending.
There was no public comment before the decision; documents sealing the agreement were signed for public display.
According to Ryan Callahan of Conerly and Callahan, the law firm representing the MLC, the need for the lease and management agreements address "requirements of MLC to obtain shareholder approval of the contract for sale."
Under Colorado law, when a Colorado corporation proposes to sell “all, or substantially all, of its assets,” shareholder approval is required.
"The board of directors for MLC will bring forth a proposal for sale of the front nine to the shareholders, and if the proposal is approved by the shareholders, the corporation will dissolve, having no assets or debt," Callahan said.
The lease and management agreements take effect immediately, giving the city and MLC up to five months to prepare the final sale with a May 31 deadline, although "if we can close in March we would be thrilled," said Montrose City Attorney Stephen Alcorn. The MLC is expected to present the deal to its 1,300 shareholders Friday, Feb. 7 at 7 p.m. The five-month interim between Jan. 7 and May 31 will be covered by the lease and management agreement so that golfers can continue to play its 18-hole rounds.
The MLC will lease the back nine of the golf course for $1 a year, for possession of all 18 holes, and then “transfer management rights to the city until the sales contract closes," said Callahan.
The list price on the sale is $635,500, but with the city agreeing to pay for title, appraisal and closing costs comes closer to $690,000. Alcorn said the MLC "paid some bills" in December, bringing that price down to an estimated $675,000. Funds for the purchase will come from the city’s reserve fund, which is currently at a surplus, according to City Manager Bill Bell.
"MLC does not have the money to satisfy obligations which will require payment while the parties await final closing of the sales contract for the front nine,” Callahan said. “As course manager, the city will satisfy these obligations in exchange for the city’s retention of any profits made during the management period,"
Both the lease and management agreements terminate in the event that either the sales contract terminates, or at closing, and both are designed to expire on Dec. 31.
"The lease agreement and management agreement are not designed to be for a year,” Callahan said. “Rather, they are designed to fill in any gap in time while the parties await closing of the sales contract. This was done for the benefit of the residents of the City of Montrose. It was our goal for city residents to always have an 18-hole course to play while this transaction closes. Both MLC and the city strongly believe that a seamless transition of the 18 hole course is important.”
Over the years, the MLC has asked the city for financial contributions to help maintain the city's back nine. The course has struggled financially, and this agreement prevents the possibility of bankruptcy.
"I think we got the best deal that we could,” said Montrose Land Company President Brad Oberto. “I think the majority of people are going to want, and are most concerned about, having an 18-hole golf course in the future...they just want to be able to play golf." In September, the MLC asked the city to double its annual contribution for maintenance costs, from $50,000 to $100,000, and for yet another for $150,000 for capital improvements. The city declined, but following that announcement, at a well-attended public forum at the Montrose Pavilion, enthusiasts maintained that the course must be saved “at all cost.”
"The public comment, including the session at the Pavilion, was integral in completing this transaction,” Callahan said. “It became clear to both parties during the Pavilion session that the public desires unified ownership and continuation of the 18 hole course.”
Findings and ideas from those public meetings were prominent in closed-door meetings between city staff and MLC to reach a deal. Details from those meetings are protected by executive session rules, but both the MLC and the city characterized the negotiations as positive in nature.
"Basically, without the city's help for the past five years we wouldn't have made it this far," Oberto said.
In December 1987, the city signed binding contracts with seven back nine landowners and the land was to be maintained as a golf course and no structures other than bathrooms and rain shelters could be built. Fences running through the property were prohibited and weed control and lawn maintenance would be the responsibility of the city. These covenants were included in the agreement before the landowners deeded their property over to the city. The situation has become more complicated because not all of the agreements with the landowners say the city is responsible for maintaining the area as a golf course.
"It's in two separate worlds, what [the city] can do in a municipal setting and what a private corporation can do. And everybody is layered with covenants, restrictions and contract provisions on their various properties but yet they’re trying to run it as a unified whole, it needed to be under common ownership," said Mindi Conerly, of Conerly and Callahan.
New for Golfers
Part of the agreement's language includes a mandate that the land be protected as a golf course for a period of 15 years.
"We don't know what our residents will want for recreation down the road," Alcorn said for the decision to set an expiration date.
Although the course has operated at a loss for years, Alcorn said that, beginning in 2014, the course will see have some significant changes to how it does business.
"We don't expect to operate at a loss," Alcorn said. "It will be run differently. I would expect things such as a limited menu in the restaurant …the beer cart will continue to function perfectly."
One such saving is the $19,000 in property taxes, which the city would not have to pay.
Other savings include using city equipment and city staff to perform maintenance on the course (only one current employee of the Black Canyon Golf Course, course superintendent Tom Young, will now become a city employee, said Alcorn).
The Montrose Land Company was first formed in 1961 for the purpose of bringing golf to Montrose and opened and operated the Black Canyon Golf Club as a nine-hole golf course until 1986. It was then, at the request of the Montrose Economic Development Corporation, a set of landowners donated land to the City of Montrose. The city accepted the donation and, along with the issuance of $300,000 in general revenue bonds, the course’s back nine holes were built. The city leased the back nine holes to the Montrose Land Company and it has operated the full 18-hole golf course since that time.
For awhile, the Black Canyon Golf Club was the only 18-hole golf course in the region, but in 1999 the Cobble Creek golf course was built and in 2003 the Bridges golf course opened. The new golf competition in the Uncompahgre Valley reduced the revenue the Black Canyon Golf Club was used to getting.
"The pie has gotten a lot smaller," Oberto said.
Sales of annual golf passes to the club have been suspended pending the shareholder vote. If approved, passses will be availiable for purchase.