Would You Purchase This Apple Valley Business? (March 13, 2013)

Apple Valley, Ca — Private business leaders will tell you that business is measured through revenue growth in five year plans or that the survival of a business often depends on just having enough revenue to get past that magic first five year mark. This is not how the public sector measures program success however. The public sector measures enterprise only in terms of longevity with exponential growth of program size and scope. Profitability is optional.

It’s been five years since the Town of Apple Valley first decided to purchase the Apple Valley Country Club (AVCC). Hard to believe it’s been that long but it is time to measure the success of the decision that divided members of the Council and the public for three of the first five years. The decision to buy made in November of 2008, was immediately followed by the casing for the water well serving the AVCC failing one month after the decision to buy was made. What followed was years of fighting over water rights the AVCC was supposed to own, that the High Desert Community Foundation claimed they owned. Why didn’t the town just abandon this mess then? Councilman Scott Nassif refused to give up even after the well failed. A private water company, Apple Valley Ranchos has been providing the water ever since. Cha-ching! Escrow only just closed on August 8, 2011.

Private business does its due diligence before making business decisions. A private business would have looked at AVCC and determined that the facility was an aging sixty year old needing a major facelift, but with no revenue to do it with after reviewing the books. Even though the water rights were estimated to be worth about $2.9 million, the club had two high interest notes against the property totaling $1.4 million with Desert Community Bank. It was a private club with an aging and shrinking membership that was bankrupt. What idiot pays top dollar for something like that? A government that has its Council living around it or with friends living around it, that’s who. Think of the property value destruction should the course go brown! Many, including this writer, thought buying a private golf course was an idiotic decision that government shouldn’t get involved in. Undeterred, the Council voted to buy what they thought was a silk purse, and ended up with a sow’s ear. How badly would this Council, or should I say ultimately, the taxpayers, be hornswaggled?

You can get Asst. Apple Valley Town Manager and Finance Director Marc Puckett’s financial statements concerning the renamed Apple Valley Golf Course at the Town of Apple Valley website. If you want the actual numbers though, you’ll need to keep reading this. When the town won the water rights, it cost them $750,000 to settle with High Desert Community Foundation and attorneys fees for the town’s legal team of Best, Best, and Krieger totaled $633,423. You won’t find those costs in any of Mr. Puckett’s financials because like the men digging tunnels out of German Stalag’s, dirt is never noticed when you spread it out a little at a time. Those charges were accounted for in the town’s Wastewater Fund. The country club, when it was private, went bankrupt for a reason. People weren’t playing enough rounds of golf to break even against expensive water payments and maintenance. Nassif and others swore they could do better. The town has lost money every year since they purchased. You can use Mr. Puckett’s reports for this. It’s not that his accounting is wrong — it’s just portrayed differently from how I’m doing it! The two DCB notes on the property are also not clearly accounted for in the Apple Valley Golf Course Fund. Add another $1.4 million. Expenses exceeded revenues by $4,968,520 for the last five years. The grand total is $7,751,943 in losses!

Why do Mr. Puckett’s financials show much lower losses? He is injecting cash into the revenue side of the Apple Valley Golf Fund, or uses cash transfers from other accounts to hide the losses. I previously caught him using the General Fund to pay Landmark Golf $400,000 for the contractual fees and maintenance agreements they had with the old country club. I discovered it when I noticed Mr. Puckett’s numbers for maintenance reported in the Golf Fund, didn’t match the commercial warrants being paid to Landmark. It is accounted for — but not in the Golf Fund, instead in the General Fund. Who is telling him to do this? When I brought it to the attention of the Council at a public meeting they brushed it off.

Puckett has transferred $6,666,572 in cash from the General Fund primarily or Wastewater funds. Within those cash injections was what accountants lovingly refer to as capitalization of expenses — using $2.9 million worth of water rights assets as revenue. I immediately wondered if the the town had sold those hard fought for water rights without notifying their bosses — the public? I checked the Mojave Water Agency Watermaster report and discovered that they hadn’t permanently sold rights to anyone. The town transferred 650 A.F. to the Apple Valley Ranchos Water Company but under the water wheeling agreement the town has with them dated July 14, 2011, the transfers are free. Please see the attached agreement. So an equal amount of water used to water the golf course must be returned to the AVRWC for free in exchange for reduced water rates at the club, and the revenue is just an accounting placeholder or number backed by water rights that by my count are encumbered by no less than three different and separate deals the town has made. The Wastewater account is owed $1.3 million and change for the legal fees and settlement, the wheeling deal owes at least 400 acre feet to water the golf course, and the Apple Valley Golf Fund used $2.9 million to capitalize expenses. How many times are we going to use them? Mr. Puckett also increased the capital value from $2.9 million according to his financials, to around $3,650,000. Remember this isn’t cash, because nothing was sold!

It just so happens that at the Town Council meeting Tuesday March 12, 2013, public hearings will be held because our Wastewater and Solid Waste fees are mysteriously increasing, while the people got nothing for their water rates they paid so much for. The Apple Valley Golf Club is part of the Enterprise fund that includes Wastewater and Solid Waste in what they call Proprietary business funds! This can only be described as business, public sector style.

Source: David Mueller, TheLibertyPoint.com