Rio urges judge not to interfere with golf course operation

Bill Gang

Tuesday, Dec. 22, 1998 | 11:25 a.m.

Is a public golf course truly public if the green fees are so high that neighborhood residents won't play there?

If that's the case, can a court step in and set the green fees, or should that be left to the owners who spent $34 million building the facility?

Those are the daunting decisions facing District Judge Mark Gibbons at this week's trial to resolve a class-action lawsuit by residents of Henderson's Seven Hills development.

Those residents want to play at the Rio Secco golf course next to their homes, and originally were told they would have access to what was described as a public facility when they bought their houses. Developers joined in the lawsuit, because they were also under the impression the course would be open when they marketed the homes.

But the financially strapped original developer sold the course to the Rio hotel-casino, which tried to close it to all but hotel guests and casino patrons.

Gibbons already has ruled that it must remain open to the residents, because the master covenants, conditions and restrictions, commonly referred to as CC&Rs, indicated the homeowners would have access to the golf course.

While the lawsuit was pending, the Rio opened the course to the public, setting green fees for $300 to non-guests. Guests of the Rio pay $190 to play.

"They arbitrarily set a fee of $300 to keep homeowners out," charged attorney Steve McKinley, who represents Helmer Development.

"The Rio's play policy is solely for the purposes of increasing gaming revenue and to attract the highest of rollers," McKinley said during opening statements. "They don't want anyone else to play."

He said his golf course expert has determined the rate should be between $100 and $150 a round.

But Rio attorney Richard Levy countered that "when someone puts up $34 million in risk capital in this country, they get to decide how to run that business."

Levy said the court shouldn't intervene unless the green fees were set "in bad faith," such as $5,000 per round, which would obviously show an intent to privatize the course.

He said a Rio-hired expert conducted extensive studies before determining the $300 rate was reasonable and justifiable at Rio Secco.

But McKinley emphasized that only 36 non-guests played Rio Secco at the $300 rate between November 1997 and the end of July.

Levy said Rio Secco has been declared one of the top 10 courses to be built in 1997, and he expects it will be listed among the top 100 courses to play in the next few years.

He indicated the facility is comparable with the Pebble Beach Golf Course in California, which charges $325 a round.

In Southern Nevada, Rio Secco is the second most expensive course, behind only Steve Wynn's exclusive Shadow Creek course with its $1,000 green fees.

Levy cautioned Gibbons that if he sets green fees at Rio Secco, he must consider a plethora of issues, such as the intervals between golfers, opening and closing times, whether golf carts are included in the price, wear and tear on the course from overuse and the seasons of the year.

He pointed out that water costs alone comes to between $15 and $20 per round.

Levy added there was a conscious decision by the Rio to limit the number of players and maximize the experience for each golfer, who has access to a caddy at no cost except a tip.

"The Rio should have the right to establish its own standards for its own capital investment," he argued to the judge. "Should you tell the Rio there should be 50,000 rounds a year when it believes 30,000 should be the maximum?

"This is an amenity of the hotel," he explained, contending that if the hotel profits as a result of owning the course, that should be the criteria.

Golf course expert Gene Krekorian, who was hired by the homeowners and developers, said his analysis of the Rio Secco's first year showed the course would be lucky to make a 1 percent profit, when the industry standard return is 10 percent.

"From what I observed, this course may never be profitable" if operated as an independent business, Krekorian said.

But he added that the Rio's intent may be to operate it to maximize casino profits.

The non-jury trial is expected to conclude Wednesday.