It’s Masters’ week in Augusta Georgia, so let’s talk about golf.

Earlier this week, the Provincial Government converted a $4.8 million loan to Royal Oaks Golf
Course to equity in return for a promise that a 50% share of the golf course’s profits will be paid to the Government until the loan is fully repaid.

As I understand it, profits in this case do not include real estate development and that seems strange.

Local media reported this transaction as a $4.8 investment in the golf club. That’s wrong.

Ten years ago, the Government of the day provided Royal Oaks with a $3.3 million loan “guarantee”. A loan guarantee requires the guarantor to repay the loan in the event the borrower defaults on the loan. In 2002, the Conservative Government of Bernard Lord paid off that loan and its accumulated interest, resulting in Government ownership of the loan.

It would appear that something happened this week to trigger a crisis at Royal Oaks that would have forced the golf course into a hole that in turn would have caused the Government to lose any chance of recovering its outstanding loan and interest due. The Government took the only action it could and that was to convert its loan to equity (a common practice in business restructurings) in order to preserve some hope of cash recovery.

This begs the question “should governments be in the business of financing golf courses?”

The knee-jerk reaction is to say no but there are circumstances that justify such investments when they can be shown to generate economic development and/or to create demand for a tourist destination.

Prince Edward Island is a good example of a destination province that has consciously invested in golf course infrastructure to create visitor demand for the Province. Some of the golf courses lose money but the net benefit to the economy has been positive because while people travel to the Island specifically to play golf, they leave dollars behind for hotels, food and beverage, gift purchases, car rentals, etc. It’s not much different than the City of Moncton guaranteeing the financing for a major rock band that might come to Magnetic Hill.

Royal Oaks and Fox Creek are world-class golf courses. Both have received publicly financed loans from the government.

In 2005, the Lord Government advanced a $2 million forgivable loan to the Fox Creek Club in Dieppe. Kingswood Park in Fredericton and the Algonquin course in St. Andrews are also world-class.

The Algonquin course has a $4.3 million dollar government loan. There are others in the province, Restigouche, Mirimachi, Gowen Brae and perhaps more that have received government funds under rural development programs.

What’s missing in all of this is a government policy that says we will invest in golf courses for these reasons.

There is another problem. Dozens of golf courses in this province live on the edge. They are financed by members and private investors. They have to compete for golfers with these publicly financed golf courses.

Some of them could be economic generators if properly funded but many if not most of them, by virtue of location are not able to generate the traffic needed to make them net contributors to the provincial economy.

There are an estimated 14 golf courses within an hour of downtown Moncton. They compete with Royal Oaks and Fox Creek for golfers but none of them compete at a world class level when measured in terms of design or course quality.

A few of them including the Moncton Club, Lakeside, Magnetic Hill and Pine Needles, by virtue of their locations have the potential to become world class but realization of that potential would require investments of $3 to $5 million each.

This begs the question; should there be a business financing program that could be made available to all golf courses on the basis that they are small business operators and job creators?

Should there be a more focused program designed to create golfing destinations for tourists? Many will say “no way, we need that money for healthcare and education”. In my opinion, it’s not an either/or situation.

If one can make a solid business case for a golf destination that justifies government loans or grants on the basis of real economic potential, why should it be treated any differently than a call-centre or a paper mill that needs a loan for equipment upgrades?

I suspect that a five million dollar investment in the Moncton Club would yield higher returns than the Royal Oaks conversion.

Government should not be selecting the winners or the survivors. Government should be creating the policy that rationalizes golf course investment in New Brunswick on the basis of economic development potential.


W.E. (Bill) Belliveau is a Shediac resident and Moncton business consultant. He can be contacted at bill.bellstrategic@nb.aibn.com Atlantic Insight is a published Blog inventory of opinion articles published weekly in New Brunswick's print media as written by W.E. (Bill) Belliveau, who is a resident of Shediac, New Brunswick, and small business owner, operating his Moncton-based marketing consultancy, Bell Strategic. He can be reached by e-mail at mailto:bill.bellstrategic@nb.aibn.com