Walters out to prove merit of plan for NW golf course

Diana Sahagun

Tuesday, Oct. 16, 2001 | 9:51 a.m.

Billy Walters, who recently was awarded negotiation rights to operate a golf course in the northwest, is challenging city staff reports that indicate his proposal is inferior to a plan submitted by a Texas company.

With almost no discussion, the Las Vegas City Council on Oct. 3 voted unanimously to negotiate with Walters for a contract giving him the right to operate the Northwest Family Golf Course.

The vote came against the advice of a city evaluation panel, which unanimously recommended that the city begin negotiations with Evergreen Alliance Golf Limited, based in Irving, Texas.

Walters and the council have since taken heat from critics who say Walters, a local golf course developer, was awarded negotiation rights because of his local ties and political influence, and not because he submitted the best proposal.

A city evaluation panel determined that Walters' proposal would have cost $8 million more in city-refunded expenses than the Evergreen proposal. Walters, though, has done his own calculations and on Friday released documents he says show his proposal would raise more revenue for the city than the Evergreen proposal, which would have been operating at a deficit.

Walters is defending his record as one of the leading golf course operators in the Las Vegas Valley, and contends he was treated unfairly by the city evaluation panel, which determined that Evergreen best responded to the city's request for proposals and offered the lowest financial risk to the city.

The city is financing construction of the 78-acre golf course near Gowan Road and Cheyenne Avenue through $12 million in city bonds, but needs a qualified operator to run the course. Revenue from the course will go to the city to pay for the bonds, and the operator will receive a management fee and be reimbursed for money spent on improvements.

Walters operates six golf courses in the Las Vegas Valley, including Desert Pines and Bali Hai. Walters said he typically both builds and operates courses and retains all revenue.

Walters said he would not have submitted a proposal had Las Vegas Councilman Larry Brown not called him two days before the proposals were due. Brown, said Walters, asked him to respond to the city's request for proposals.

Mike Luce, president of the Walters Group, said that he spent 16 hours preparing the proposal prior to the city's deadline.

Walters said the request for proposals was the most "poorly, unprofessional crafted document of its kind," and he had to clear that hurdle, as well.

"They made it extremely difficult to respond with accuracy," Luce said.

Greg Herlean, manager of the city's purchasing division, said the city's request for proposals contained 11 sections to be addressed, including an executive summary, information about the company making the proposal, and a management plan.

The request had "boiler-plate" terms and conditions, but portions were specifically designed to address the golf course, he said. Herlean added that he received no complaints from potential operators -- including Walters -- that the request for proposals was confusing.

A city evaluation panel -- composed of 10 staff members and the manager of the Boulder City Golf Course -- judged both proposals and focused specifically on the 11 sections, said Mark Vincent, the city's finance director.

After reviewing both proposals, the panel found Walters' plan, when compared to Evergreen's, did not include all of the information requested.

According to the panel's reports, Walters' proposal "lacked any definitive response to major proposal requirements, such as a management plan."

Luce says that he addressed every requirement and that the panel's statements regarding the Walters proposal's deficiencies were incorrect. He refuted several of the panel's reports in documents released Friday.

For instance, the panel reported that Walters' proposal offered vague discussion of rebates. Luce maintains that he specifically referenced the Walters Group's local and national ability to get discount pricing and rebates during a presentation to the panel in June.

The panel also reported that Walters' proposal had "little detail with no firm action plans. Oral responses addressed Walters' business approach, with little reflection of interaction with the city."

Luce says the above statement is the panel's opinion, not fact. He points out that in the panel's "Project Evaluation Summary," the members report that Walters' responses "demonstrate a thorough knowledge of the golf business particularly as it relates to the Las Vegas area."

A Sun comparison of both proposals found that the approach by Walters and Evergreen were vastly different. Evergreen's proposal specifically addressed how it would operate and manage the golf course. Much of Walters' information was general and not specific to the northwest golf course.

For instance, Walters' management plan did not specifically address how it would manage the course. The one-page management plan reported the company's experience in the local market, and offered general statements about the role of a management team.

By comparison, Evergreen's nine-page section specifically addressed its marketing plan, accounting procedures, programs and how the company would reach its goals.

The panel ultimately decided that both companies have the "bottom-line technical experience" to run a golf course.

But the one "compelling" aspect was that the proposals differed greatly in terms of cost, according to the panel's reports.

Walters' proposal was estimated to cost the city $8 million more over 10 years than would the Evergreen proposal.

The price comparison projected how much the companies would spend to run the golf course over 10 years; the city would ultimately be required to reimburse the company. Walters estimated that it would cost his company $25.3 million to operate the golf course over 10 years. This includes costs for services and supplies, furniture, fixtures and equipment, improvements and a management fee.

Walters proposed that the city pay him a management fee of $277,675 in the first year. That would increase to $430,765 by year 10. The management fee was significantly higher than that proposed by Evergreen.

Walters had proposed to make more improvements to the golf course over 10 years -- starting at $134,750 for the first year and rising to $392,103 by year 10.

Evergreen estimated that it would cost the company $17.38 million to operate the golf course over 10 years, including costs for services and supplies, furniture, fixtures and equipment, improvements and a management fee.

Evergreen's management fee was proposed as $96,000 for the first year, increasing to $125,258 by year 10.

Evergreen expected to make improvements to the golf course totaling $48,000 in the first year, increasing to $62,629 by year 10.

Evergreen projected lower startup costs than Walters. Evergreen estimated it would need $765,520 from the city for services and supplies, furniture, fixtures and equipment. It did not request that the city pay the company a management fee before the first year of operation.

Walters estimated that it would cost the company $1.9 million in startup costs, including a $169,158 management fee.

Walters, though, claims that the panel ignored the fact that his proposal would have generated an excess of $2.42 million in revenue to the city over 10 years. Had Evergreen been chosen to begin negotiations, the company would have had an operating deficit of $4.2 million over the same period, which would have had to be subsidized by the city, Walters said.

Luce said Monday that because the panel only concentrated on costs to operate the golf course -- and ignored the revenue side of the equation -- it unfairly portrayed Evergreen as having the better financial package.

In making the determination that it would generate extra revenue, Walters' proposal assumes that the course would generate 72,000 rounds of golf per year, at $35 per round.

Evergreen estimated revenues based on 60,000 rounds of golf per year, at $30 a round. The revenue would not be sufficient to cover the company's costs, according to the evaluation panel's reports.

Luce said the Walters Group budgeted higher operating costs because it proposed to spend more money on improvements and maintenance for the golf course. Because the company would spend more money on maintaining the "high-end course," it would attract more players and generate more revenue, Luce said.

Walters said that in responding to the city's request for proposal, he envisioned a "high-end" executive golf course that could compete with other similar courses in the valley. The only way to compete, he said, is to spend more money making improvements to the course that would set it apart from others. By comparison, Walters said Evergreen "low-balled" its bid and would have operated a "low-end" golf course.

Luce said that the panel should have examined the revenue projections when making a final recommendation.

Vincent, the city's finance director, said the panel chose not to address either proposal's projected revenues because of the uncertainty of how the market would react to a new golf course. The panel determined the market would drive the demand for golf and the price per round, Vincent said.

Rather than look at the unknown, the panel focused on expenditures -- costs that would remain constant each year -- regardless of revenue.

"If the market could not absorb 72,000 rounds per year, Walters would end up being subsidized by the city, more than Evergreen would," Vincent said.

Ultimately, the final costs to the city will be determined during negotiations with Walters, Vincent said.

"We don't have any bias against Billy Walters, and we feel we can negotiate with him on a final contract," Vincent said.

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