Golf Courses and Driving Ranges

Golf Courses and Driving Ranges Last Document Review Date: October 8, 2014 Last Legal Review Date: September 3, 2009 TABLE OF CONTENTS Executive Summary... 2 Resources... 2 Compliance Checklist... 3 Valuing Golf Courses and Driving Ranges... 4 General... 4 Practices and Procedures... 4 Income Valuation... 5 Cost Approach... 6 Apportionment... 7 Determining Classification... 8 Transferring the Value to valuebc... 9 Sales Analysis... 9 Mail Outs... 10 Appendix A: Frequently Asked Questions... 11 Appendix B: Occupancy Descriptions... 13 Assessment Practices and Procedures Golf Courses and Driving Ranges 1

EXECUTIVE SUMMARY RESOURCES This document will discuss the valuation, classification, coding, and assessability direction for the uniform assessment of driving ranges, golf learning centres, Par 3, 9-hole, and 18(+)-hole golf courses. Properties identified by actual use 612 Golf are within scope of this document. However, mini-golf operations are out of scope. Mini-golf properties will be valued using a retailgeneral model. Golf courses often hold non-golf components, such as retail, hotel, or parking, which have to be valued separately from the golf course itself. Golf Course Directives Golf Course Income/Expense Analysis and Valuation Guide Golf Course Valuation Spreadsheet Template Marshall & Swift Manuals Assessment Practices and Procedures Golf Courses and Driving Ranges 2

COMPLIANCE CHECKLIST The following is a list of items that must be completed in order to be considered compliant with this document: 1. Golf course are to be value using capitalized NOI except in remote areas where information to support an income valuation is not available. a. Space within a golf course dedicated to generating business income will use a leased income approach. 2. Land value will be determined using a land residual approach. 3. Land devoted to golf play areas are to be placed in Class 8 recreational property/non-profit organization. 4. The land area (footprint) directly beneath improvements not used as an outdoor recreation facility (clubhouse, pro shops, maintenance buildings, etc.) is to be placed in Class 6 business and other. 5. Land used as parking, driveways, and land supporting golf related improvements are to be placed in Class 6. 6. Land used as parking and driveways, used solely to support the outdoor recreation facility (e.g., outdoor driving range), are to be placed in Class 8. 7. Improvements associated with the golf course occupancy are to be placed in Class 6. 8. Structures devoted to non-golf business income are to be 100 percent Class 6. 9. The economic rate must include direct golf revenue (green fees, membership dues, and revenue from the driving range) as income sources. 10. Do not record individual expense amounts. 11. All golf course folios valued with an override must have a current Golf Course Valuation spreadsheet attached to justify the override value. Assessment Practices and Procedures Golf Courses and Driving Ranges 3

VALUING GOLF COURSES AND DRIVING RANGES General 1. Valuation method(s): a. Capitalized NOI. b. Cost method in rural and remote (unincorporated) areas only when information to support an income valuation is not available. 2. Units of measure will be average rate per round. 3. The lease income approach will be applied to space within golf improvements that are dedicated to business income generation. 4. A land residual approach will be used to determine the apportioned land value. 5. As a provincially coordinated property, consistency in the valuation of golf courses is key. Ensure that you have referenced the current year's directives, and contact AVS for any additional guidance. TIP Inability to obtain information in a local market should not be the deciding factor in selecting the cost or DCA methods. Market information for competitive properties in similar communities within the region should first be investigated. Exception: The cost method will be used for properties for which the current use is not the highest and best use. Practices and Procedures Due to the current limitations in the systemization of golf courses in valuebc, golf courses will be valued with an override on the Property viewer/valuation Selection tab. All golf courses with an override must have a current valuation spreadsheet attached to justify the value. Assessment Practices and Procedures Golf Courses and Driving Ranges 4

Income Valuation 1. For each roll year, attach a new Valuation Spreadsheet Template to the Property viewer. 2. In the Valuation Spreadsheet Template/Valuation Input and Analysis 20XX tab, complete the identifying information for the folio (golf course name, roll year, roll number). If a golf course spans multiple folios, you should use a single spreadsheet for the valuation and apportion the value accordingly (see Apportionment section below). Indicate in the Roll Number field which folios are included in your valuation (insert rows as needed) and attach the spreadsheet to the included folios. 3. In the Valuation Spreadsheet Template/Income and Expense Analysis 20XX tab, key the returned income and expense information for the previous three calendar years. Ensure you key only to the yellow fields; all blue fields are calculation fields. Reference the GC Training Documents for assistance keying and interpreting income and expense information. 4. In the Valuation Spreadsheet Template/Valuation Input and Analysis 20XX tab, key the appropriate income and expense information for the golf course. Reference the comments on each field for guidance on what to key, keeping in mind these general principles: a. The gross income for the golf course should reflect the three-year stabilized average number of rounds multiplied by the average rate per round plus any driving range revenue. b. All green fee revenue should be predicated on full public play and private and semi-private courses must have membership play included in the green fee revenue projection. c. Expenses should reflect the golf course operations only and should not include any expenses related to ancillary uses such as pro shops, clubhouses and restaurants. d. Expenses used for each golf course property should be in line with the provincial directives for each year Assessment Practices and Procedures Golf Courses and Driving Ranges 5

Cost Approach (discussed in the golf course conference calls and recorded here). 5. Ancillary uses must be valued separately from the golf course use, using the appropriate model for the use (e.g., pro shops should use a retail model, etc.). Key the area of each nongolf use into the Valuation Input and Analysis 20XX spreadsheet/food and Beverage/Retail/Misc section. Key the appropriate rent, vacancy and expenses according to the use. 6. Key a capitalization rate for the entire property in accordance with the golf course directives for the current year. Do not attribute separate CAP rates to the different uses on the property and ensure that any CAP rates outside the range indicated in the directives are justified. 7. Key non-assessables to reflect the RCNLD of the course equipment. Reference the comment on this field in the spreadsheet for standard amounts by course type. All golf course folios should have cost information keyed to the Commercial Building viewer, regardless of the valuation method. For properties valued on the income approach using the valuation spreadsheet, this cost will be used to calculate the split between land and improvements. For properties valued on the cost approach (see Exception section above), this information will contribute to the assessed value. 1. Link a blank Commercial Building viewer to the property record for the golf course folio. 2. Key the appropriate Keypane information: a. Pred Bldg Type = Golf Course b. Pred Building Occupancy = 745 Golf Course c. Other identifying information as you would with any commercial costing 3. In the Commercial Cost tab, key the appropriate cost information for all improvements. While improvements such as pro shops, equipment buildings, and restaurants can be costed within valuebc, the actual golf components are not available for costing within valuebc. Reference section 67 of Assessment Practices and Procedures Golf Courses and Driving Ranges 6

Apportionment the Marshall & Swift (M&S) manuals to determine the appropriate costs per hole and key these as additional features. 4. For properties valued on the cost approach, add separate land components for each property class on the Property viewer/land tab. Use rate codes specific to golf course land (it is recommended that these be created at the area level). The land value should reflect the development costs of creating a golf course, including: o Clearing and grading of land o Installation of drainage systems o Planting of trees o Construction of greens, tees, and fairways 1. The value split between land and improvements should be determined using a land residual. In order to ensure accurate calculation of the residual in the spreadsheet, key the RCNLD of all improvements into either the Valuation Spreadsheet Template/Valuation Apportionment section/less Improvement Value Class 6 field or the Less Improvement Value Class 1 field. IMPORTANT: Always use valuebc to calculate the RCNLD of improvements. This ensures that appropriate depreciation is reflected each year. 2. In order to apportion the calculated land value between the appropriate property classes, key the number of acres associated with: a. Class 06 uses to the Less Class (6) Component line b. Class 01 uses to the Less Class (1) Component (if any) line c. Class 01 ExTax Code 13 uses to the Less Class (1) ExTax Code 13 Component (if any) line See Determining Classification section below for more details on determining property class for different uses on a golf course. Assessment Practices and Procedures Golf Courses and Driving Ranges 7

3. The spreadsheet will use the land sizes keyed to calculate the split between the appropriate property classes. 4. If a golf course operation spans two or more folios, you should use the Optional: Value Apportionment for Multiple Folios section to calculate the appropriate split between each folio. For each folio: Determining Classification a. Key the number of acres for each property class as in step 2 above. b. Key the RCNLD for all improvements on the single folio as in step 1 above. Ensure that you have used the most recent calculations from valuebc to account for the current year's depreciation. 1. All land used for golf play areas or as parking and driveways to support the golf use is to be placed in Class 08. Examples of Class 08 uses: o Fairways o Practice areas o Tee-boxes o Bunkers o Driving range o Parking used solely for golf activities 2. Land underneath improvements used for non-golf purposes is to be placed in Class 06 unless it meets the requirements for a different property class (e.g., residential uses should still be placed in Class 01). Examples of Class 06 uses: o Clubhouses o Maintenance buildings o Pro shops o Restaurants o Parking used for non-golf activities 3. Improvements should be placed in Class 06 unless they meet the requirements for a different property class. Class 08 is Assessment Practices and Procedures Golf Courses and Driving Ranges 8

only applicable to land and may never be applied to improvements. Transferring the Value to valuebc Sales Analysis Once the valuation spreadsheet is complete, the calculated values must be keyed on the Property viewer/value Selection tab. 1. Select Income as the value method. This is for reference only and does not affect the assessed value. 2. Select Land as the residual. This is for reference only and does not affect the assessed value. 3. Key a separate line in the Override spreadsheet for each of: a. Class 08 land value b. Class 06 land value c. Any land values attributed to a different property class (optional) d. Class 06 improvement value e. Any improvement values attributed to a different property class (optional) 4. In each line, key override comments indicating that the valuation is on the attached spreadsheet (e.g., income valuation on attached spreadsheet ). 5. In each line, set the Exclude NMC flag to True to ensure that NMC is not reported to taxing jurisdictions erroneously. 6. Run the Value Summary to ensure that the values are displaying as you expected. As there are few sales in this property type province-wide, record all sales. Ensure that you have filled in all available information for the benefit of appraisers outside your area who may be relying on the sale. Assessment Practices and Procedures Golf Courses and Driving Ranges 9

In addition to the requirement to key sales on the Master Sales Listing spreadsheet, it is recommended that you complete a Sale Notes form for each sale. These should be saved in the appropriate year's Sales and Listings folder for additional reference. The Sales viewer does not currently accommodate golf course sales, and you do not need to complete a detailed sales edit as outlined in the ICI Sales Editing Process for this property type. Do, however, check off sales as reviewed (by setting the Sales Review Completed flag to True) and consider attaching notes to the sales record for future reference. Mail Outs All golf courses should receive a request for income and expense information each year. These must be generated and mailed from each local field office (this property type is not included in the centralized income and expense mail out process). Assessment Practices and Procedures Golf Courses and Driving Ranges 10

APPENDIX A: FREQUENTLY ASKED QUESTIONS Question 1. Answer How should variations between public and private courses be accounted for in the calculation of the economic rate and total units (average rounds of play per day)? It is necessary to be familiar with the different green fee structures for various types of golf facilities. Courses often have a different full play fee on weekdays than on weekends. Further, reduced rates are charged for seasonal passes, seniors, junior and twilight play (a special rate for play within four hours of dusk and usually found during the summer months). A review of golf research indicates that up to 40 percent of the rounds played are at the reduced rates. Reduced rates are typically 50 percent to 60 percent of the full green fee. Other factors to analyze in selecting the appropriate green fee (economic rate) are course characteristics for the competitive market set. For example, a municipal course generally charges the lowest fees followed by the public courses, the semi-private courses and finally, private courses. Fees are often reflective of the complexity of the course and amenities offered. Generally, the more difficult the course, the higher the fees. When analyzing the number of rounds played at various courses, the appraiser must consider the difficulty (playability) of each course in relation to the subject course. Care must be exercised when analyzing the rounds of semiprivate and private courses. Due to the nature of these operations, the number of potential rounds may be understated. The club collects the same dues whether a member plays one round or twenty rounds a month. Secondly, not all members rounds are recorded because they may start at various points throughout the course, a practice prohibited at public and municipal courses. Assessment Practices and Procedures Golf Courses and Driving Ranges 11

Average daily income from golf can be calculated by multiplying the number of rounds projected for the year by an appropriate green fee, adjusted for seasonal variability in price and level of use. Assessment Practices and Procedures Golf Courses and Driving Ranges 12

APPENDIX B: OCCUPANCY DESCRIPTIONS The following occupancies are for the IncomeDCA viewer (not applicable for golf courses), but are provided as a guide to assist you in determining the appropriate description for different courses and in selecting costs in M&S: Code 1200 Executive/Par 3 Golf Course Holes 9 or 18 Yards Par 3: 1,000 to 3,000 Executive: 4,000 to 5,200 Features Smaller clubhouse facility, or none at all Limited food and beverage service Less challenging course (fewer obstacles, such as sand traps or water) Compact layout (50 to 70 acres for an executive course) Example Assessment Practices and Procedures Golf Courses and Driving Ranges 13

Code 1201 Championship/Regular Golf Course Holes 18 Yards Regular: 5,800 to 6,600 Championship: 6,500 to 7,100 Features Larger clubhouse facility with full range of food and beverage service Challenging course (frequent obstacles) 115 to 130 acres Example Assessment Practices and Procedures Golf Courses and Driving Ranges 14

Code Holes Yards Features 1202 Driving Range N/A N/A Any of: Net enclosure Covered or open practice tee boxes Multi-level stall structure Practice putting/chipping green Café Pro shop Lights for evening practice Heating system for year-round and evening practice Example Assessment Practices and Procedures Golf Courses and Driving Ranges 15