Bold debt retirement plan keeps Rio Verde Country Club \‘in bounds\’
The likelihood of a near-global economic collapse was the furthest thing from their minds in 2006 when Rio Verde Country Club’s membership voted to retain Tom Lehman and his golf course design team to renovate its two 18-hole championship courses. Cost estimates for revitalizing the club’s 36 parkland-style fairways and greens over the three-year life of the project was a hefty $6 million. With a loan agreement negotiated with Wisconsin-based Johnson Bank, the project was launched amid enthusiastic expectations of the active adult golfing community’s nearly 500 golfing couples and singles.
Although Rio Verde, like the majority of Arizona’s private country clubs, had been experiencing a decline in new memberships since the beginning of the new millennium, the club’s board of directors believed it could eliminate its bank debt with new member initiation fees. For the first year or so that notion, while somewhat tenuous, worked. But by the summer of 2008, with the housing market collapsing, new memberships had all but evaporated and servicing the bank debt necessitated drawing down the club’s reserve funds. Depleting that resource without any relief in sight was disquieting to the board and club membership but, in the absence of new memberships, few options were available.
By the summer of 2010 the board, realizing the club was nearing a financial precipice, diligently evaluated every reasonable option – along with a few radical ones – to resolve its debt obligations. Among options considered and promptly dismissed was what the board determined would constitute a full-scale membership assessment. But with mounting interest and principal bank payments nearing $1 million, hemorrhaging club reserves, and no imminent resurgence of new memberships, time was not on the board’s side.
The most pressing question for the club’s leadership was: Could the board possibly come up with a timely, workable plan to honor its fiduciary commitment, not just to its golfing members but to the Rio Verde community at large? That was a tall order. Any failure of the golf club, while catastrophic unto itself, would send shock waves throughout the entire community demoralizing residents and further depressing property and personal net worth values.
During the summer of 2010, board president Arillus Holcomb, armed with an innovative – and to some a bold – plan, judiciously solicited the opinions of numerous influential Rio Verde residents whose support would be essential to the plan’s acceptance and success. He called the plan the Patron Program. If the distinctive campaign earned the endorsement of those whose opinions he respected the debt load might conceivably be eliminated. If, on the other hand, the program failed to gain traction with the membership, the probability of defaulting on the bank loan was extremely high and the survival of Rio Verde Country Club at serious risk.
There was never any doubt among the membership that the bank loan should eventually be repaid in full. These are folks who migrated to Arizona from the cultural crossroads of the Midwest where a handshake remains a time-honored custom. To them, collectively, the club’s loan agreement represented a moral obligation, one to be honored come hell or high water. While other financially challenged golf clubs were walking away from debt obligations, Rio Verde Country Club absolutely would not. It would remain true to its moral compass.
But what most envisioned as a marathon turned into a sprint as details of the Patron Program were disclosed. For openers the fund-raising campaign would be totally voluntary and, to the surprise of many, conducted within a 90-day time frame with a December 31, 2010 deadline.
Once the program was launched, Holcomb and his solicitation team created a full-blown communications campaign with military precision and all the earmarks of a multi-level marketing enterprise. In the process early Patrons were converted to willing solicitors while neighbor-to-neighbor discussions propelled the initiative.
The Patron Program sought voluntary member contributions of $100,000 (Platinum), $50,000 (Gold), or Silver ($25,000). In return, Patrons were extended prepaid club credits for golf shop purchases, cart fees, dining room charges, catered events, entry fees for major invitational tournaments and other club amenities. At each contribution level, $15,000 represented an outright member gift to the club with the balance available as club credits.
In the final days of the fund-raising effort a companion initiative, the Tee-to-Green campaign, generated an additional $860,000 in gifts from current and former members and non-golfing Rio Verde residents. It was the blending of both resources that satisfied the debt obligation.
The success of the Patron and Tee-to-Green campaigns not only eliminated the $5.6-million bank debt, sidestepped a crippling member assessment, and protected home values; it also saved the club a minimum of $5-million in interest. The program succeeded because Rio Verde is remarkably blessed with abundant human talent and resources. It is a community with an uncommon blend of sophistication and small-town intimacy that attracts residents like Arillus Holcomb who choose to live and play there and to step up and work hard to solve problems.
Today, Rio Verde boasts two exceptional championship golf courses totally renovated and absolutely free of long-term debt. It remains one of Arizona’s premier destinations for active adults whose passion for life, fellowship, golf and the love of the area’s natural resources is first and foremost. While its scenic location remains its engine, it is the game of golf that drives it.
Upon completion of the three-year project, Tom Lehman put the makeover in perspective, saying: "Rio Verde is a friendly place where the clubhouse and amenities are ideal, the social activities are varied and the golf is fun or as challenging as you want it to be." He also noted that those who live and play there are pretty remarkable people as well.