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July 28, 2014

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Desert Pines Golf Course developers seek extension of lease, but issue is in murky water for council

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Steve Marcus

Developer Billy Walters is shown at the Royal Links Golf Club on Sunday, Feb. 5, 2006.

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Desert Pines Golf Club

Since opening in an east Las Vegas neighborhood in 1996, the Desert Pines Golf Course has played an important role in the revitalization of the area while offering residents an affordable place to play a round.

Built by prominent golf developer Billy Walters on 98 acres of city-owned land near Bonanza and Pecos roads, the initial agreement included a 50-year lease for Walters' company, Nature Golf Inc., to operate the course.

Fifteen years into that agreement, Walters and his partners are now seeking an extension that could keep them in control of the land through 2088. The issue was scheduled to be discussed during Wednesday’s Las Vegas City Council meeting but was delayed until next month at the request of Councilman Bob Coffin.

In a May letter to the city, a Walters representative argued that the current length of the lease makes it difficult to acquire the needed financing to continue upgrades of the course, which have included millions of dollars spent on reconstructing greens, upgrading the practice facility, and improving the clubhouse and restaurant.

“The Las Vegas banking community has been very badly damaged in the last few years and the availability of credit, even for good borrowers, has been hurt,” Michael Luce, president of the Walters Group, wrote in the letter. “Golf courses, especially on ground leases, have always been hard to finance, and today it is much worse. The fact that the remaining life of our lease is under 35 years makes it impossible.”

The company is requesting a lease extension of 15 years, resetting the agreement to its initial length of 50 years, plus the option for a 25-year extension. City staff has countered with a proposal of its own, forcing council members to consider how long to continue a deal that is costing the government hundreds of thousands of dollars annually.

Although the golf course owners cover all of the operation and maintenance costs, when it was initially built, the city agreed to provide reclaimed “grey” water to irrigate the course, requiring the construction of a $7.9 million wastewater reclamation facility.

The city spends about $650,000 annually to operate the facility, which serves only the golf course, and is expected to lose $19 million on operations and maintenance over the remaining 35 years of the current lease. To try and cut costs, the city began construction on a $12 million pipeline to pump the reclaimed water directly from its main water treatment plant.

When the pipeline is completed in 2016, the existing water facility at the golf course will be shut down, saving the city at least $9 million, including the cost of construction, over the remainder of the lease.

The city’s counter-proposal to the course managers would increase the amount charged for the reclaimed water, saving the city an additional $2.2 million.

Coffin, whose district includes the golf course, said Desert Pines has had a positive impact on the neighborhood, driving up property values and beautifying the area.

“It’s central to the well-being of the east side of the city. It’s the only publicly owned municipal golf course on the east side of town,” he said. “I know the value of it to people. I’ve seen them out there playing. They’re proud of it.”

Coffin said he sees the lease extension and water pipeline as two separate issues.

Providing water was always part of the agreement, he said, and it’s not unusual for the city to subsidize recreational venues such as parks, community centers or golf courses.

“It was understood from the very beginning. We guaranteed the water. We built the facility. That means you guarantee the facility that’s sending the water there,” he said.

As for the lease, Coffin said he thinks the current managers have held up their end of the contract so far by being good stewards of the land and investing in improvements.

Although he’s open to reconsidering the terms of the lease with a possible extension, Coffin said he asked to delay the vote by a month to iron out some legal issues.

“It’s about getting more substantial answers on provisions in the lease extension, typical things that come up at the last minute,” he said.

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