Modesto will end its relationship with FM Golf, the company it hired less than a year ago to run two of its golf courses and slice the city's financial support of the facilities in half.
City officials say FM Golf is in breach of its contract because it owes the city $231,511, which FM's attorney says is not true. City Manager Greg Nyhoff sent the termination letter April 11. The city has to give FM six months' notice of its intent to cancel the contract.
Modesto is considering its options regarding what it will do once FM Golf no longer manages the two courses, said Julie Hannon, director of parks, neighborhoods and recreation.
"It's hard to say now how it will affect golfers," Hannon said. "It's one of those future options that we are exploring."
She declined to give specifics on the city's plans.
Modesto entered into a two-year contract with Sue Fiscoe of FM Golf effective July 1 of last year to run Dryden and Creekside golf courses. The Del Rio Country Club Foundation and The First Tee a youth golf organization operate the city's third golf course, the nine-hole Modesto Municipal Golf Course. ValleyCrest maintains the three courses.
Fiscoe runs the two courses on behalf of the city, but the contract gives her a free hand to set green fees, annual pass rates, daily specials and discounts without city permission.
The city hoped Fiscoe's expertise as a golf professional would reverse several years of declining play and revenues brought on by the recession.
Overall decline in funding
As revenues have dropped, the city's general fund has filled the gap. But general fund revenues also have declined, and the fund is under stress from competing demands.
The general fund provided a nearly $1 million golf subsidy from 2007 to 2012, with about half of that coming last year. The city says golf revenue and play dropped 20 percent from 2007 to 2012.
The city says golf fund revenue was $1.173 million from July 1 through March 31, the first nine months of its fiscal year. That's a nearly 9 percent drop compared with the first nine months of its previous fiscal year.
Under its contract with FM, the city provides a $250,000 annual subsidy to the golf fund, with FM responsible for expenses over that amount. The city says that as of March 31, FM had exceeded the subsidy by $231,511.
The golf fund has a nearly $2.3 million budget, but that includes about $500,000 for the annual debt payment on the bonds issued to build Creekside about two dec- ades ago.
Fiscoe declined to speak at length.
"The city gets to do whatever it wants," she said. "They own the golf courses."
But in a March 20 letter to the city, Fiscoe's attorney, Lawrence Beaver, said his client did not owe the money, the city was in breach of contract for failing to maintain the heating and air conditioning system at Creekside, and it had overstated expenses and understated revenue.
"Additionally, the best income months for Modesto golf have yet to come," Beaver wrote. "For all the above reasons please be advised that your letter is premature and incomplete and the contentions therein are unequivocally rejected."
Beaver is out of the office this week and could not be reached for comment.
Nyhoff denied Beaver's claims in his April 11 termination letter.
Bee staff writer Kevin Valine can be reached at email@example.com or (209) 578-2316.