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Golf Proves Profitable for Washington State

By: Jeff Shelley


An economic-impact report provides clear evidence that golf - and its related businesses - is a major revenue source for the state of Washington. Commissioned by GOLF 20/20 for the non-profit group Washington Golf Alliance, the report was prepared by SRI International, a company that has done similar golf-related financial analyses for other states.

The report was initiated because the golf industry in Washington is starting encountering some major tax ramifications in its capitol city of Olympia. Like many other governments, the Evergreen State is facing a giant deficit. A lobbyist commissioned by the Washington State Golf Association informed the organization that there are a couple Senate and House bills now (March 2010) in committee that could eventually make it to the House or Senate Floor for a vote.

The bills (House Bill 1255 and Senate Bill 5911) could prove onerous to both private and public golf facilities, as well as trickling down to related industries, including tourism, services and manufacturing. HB 1255 has been introduced to the Washington State House Finance Committee with the intent to apply a business and occupation tax on initiation fees and dues at private clubs. This would be an average "hit" of $26,000 to every private course in the state, while inflicting other economic impacts on the industry.

The state is not just targeting private clubs. SB 5911 could affect every course that uses surface water (i.e. lakes, rivers, streams) for irrigation. Like HB 1255, this would add another hefty tax on courses that utilize these water sources, potentially putting some facilities - already teetering on the edge - into the abyss and out of business.

With Olympia now in session, these bills - along with others affecting the golf industry - may be forced through to offset the state's deficit.

Though slowly emerging from an economic malaise that has affected all types of businesses around the U.S., golf seems like a perfect target for lawmakers seeking to defray state deficits. After all, isn't the game played by the idle rich who have cash to spare and wouldn't miss spending a few more bucks to help the common cause?

Though trite, irresponsible and useless, such stereotypes still play out across the nation when, in fact, golf has never been more accessible to everyone, including those from all economic strata, sexes and skin colors. In the case of Washington State, the game is not only a viable recreational outlet played by thousands of its citizens, but a major revenue generator for many diverse businesses as well as state, county and local governments.

Indeed, if the lawmakers get their way with these two bills, they'll be hurting a major economic building block for the Evergreen State. As Jack Webb of "Dragnet" fame said so succinctly, "Just the facts Ma'am."

Generation of Direct Revenue from Golf

In 2007, Washington's golf industry generated a direct economic impact of $1.2 billion. Golf brings visitors to the state, drives new construction and residential development, generates retail sales, and creates demand for a myriad of goods and services. When the indirect and induced effects of golf-related activities are considered, Washington's golf economy supported approximately $2.5 billion of economic activity, including $116 million in tax revenue, and over 29,000 jobs with $796.3 million in wage income.

With $1.2 billion in direct annual revenues, the golf industry supports economic activity comparable to several other important industries in the state: ship and boat building ($0.9 billion), wheat production ($1 billion), and seafood preparation and packaging ($1.6 billion).

The study divided the golf industry "cluster" into two main categories: core industries and enabled. The golf industry cluster begins with the golf facilities themselves and with those other core industries that produce goods and services used to operate facilities and play the game: golf equipment and golf apparel manufacturers, golf course architects and course builders, turf maintenance equipment and service providers, and club management services.

The $1.2 billion direct economic impact brought to the State of Washington by golf consisted of $679.5 million in core industries and $515.9 million in enabled industries.

The largest component is the revenue that flows through a golf facility from green fees, membership fees, golf cart rentals, lessons, and associated spending on food and beverages. This revenue, in turn, spawns a host of supply sectors including golf equipment manufacturers, food and beverage providers, and turfgrass equipment and maintenance service providers.

Washington's 280 golf courses, 29 standalone ranges, and 28 miniature golf facilities generated over $451.1 million of revenues in 2007. Golf's core revenue generation - $679.5 million - is more than all other spectator sports in the state combined, including professional or collegiate football, baseball and basketball. These other spectator sports generated revenues of $474.3 million in 2002, or $545.4 million in 2007 inflation-adjusted dollars.

Additionally, golf facilities generate economic impacts beyond operational revenues through investments to upgrade and maintain facilities and infrastructure, and through the construction, expansion, and renovation of courses. These investments create employment in the construction and maintenance industries and often involve the purchase of significant amounts of equipment and supplies from companies within the state.

Together, in 2007, Washington's golf facilities made $101.2 million worth of capital investments in 2007; $47.8 million of investments at existing facilities and $53.5 million for the construction of new courses and facilities.

Washington golfers spend significant sums on golf balls, golf clubs, golf apparel, and golf media (books, magazines, DVDs). In 2007, dollar sales of golf merchandise in Washington State were fairly robust. The U.S. recession did not begin until December 2007, and Washington's economy grew by an impressive 4.4% in 2007 compared to 2.1% GDP growth nationally. The economic value that accrues to a state comes from the production of these golf-related goods, as well as retail sales of such items.

Manufacturers & Services Benefit Too

Washington is home to a number of golf-related companies with manufacturing operations or headquarters in the state - chief among them, the clothier Cutter & Buck, along with custom-club companies like Redbird Sports and Innovex Golf. In 2007, Washington manufacturers' total value-added shipment of golf-related products was approximately $58.6 million.

Washington retailers and golf facilities earned approximately $56.2 million on the sale of $141.1 million of golf equipment, apparel, and media in 2007. In total, the golf-related supplies segment contributed $114.8 million in revenues to the Washington economy.

The Important Role of Golf Associations

Numerous associations represent the game of golf in Washington, including major regional golf associations with headquarters in the state: the Pacific Northwest Golf Association, the Pacific Northwest Section of the PGA, and the Northwest Turfgrass Association.

State-level golf associations include the Washington State Golf Association, regional chapters of the Golf Course Superintendents Association and Club Managers Association, the Washington Women's Public Links Association, various seniors and junior golf associations, the Washington Junior Golf Association and the First Tee chapters of Columbia Basin (Richland), Greater Seattle, Olympia, and Yakima aim to introduce youth to the game and values of golf.

In 2007, Washington golf associations generated total revenues of $7 million.

Tournaments Big & Small

On the professional-tournament front, Washington hosts the Boeing Classic, a Champions Tour event held in late August at the TPC Snoqualmie Ridge 25 miles east of Seattle. In 2007, the Boeing Classic generated approximately $4.3 million in direct tournament-related expenditures, excluding the tournament purse and costs for TV broadcasting.

In 2010, the Robert Trent Jones II-designed Chambers Bay near Tacoma will host the U.S. Amateur Championship. It will also hold the 2015 U.S. Open, the first time that major championship will ever be held in the Pacific Northwest.

Aside from these big events, many amateur events are held every year that generate significant tourism revenues and economic impact for local economies because of the number of players, officials and golf enthusiasts they bring to a state.

In the charitable-giving department, golf, as it does throughout the U.S., is a huge contributor; indeed, it's the biggest in all sports. For example, the Boeing Classic has generated $3 million in proceeds its five-year history, benefiting the Heart Institute at Virginia Mason Medical Center and other charities.

Locally, Washington State golf clubs host several events in support of numerous local, state and national charities each year. Benefiting organizations include the Alzheimer's Foundation, the Fred Hutchinson Cancer Research Center, Children's Hospital, Multiple Sclerosis of Washington, Pacific Northwest Environmental, Boys and Girls Clubs and YMCAs across the state, in addition to several others.

Golf course owners, operators and golf professionals are happy to serve as access points for fundraising by local service organizations. In total, SRI estimates that the amount of charitable giving attributed to the game of golf in Washington to be $36.3 million in 2007 alone.

Enabled Industries

The game of golf further enables a number of other industries, such as golf-related real estate development and tourism.

Real Estate

Real estate developers use amenities to attract new home buyers, and golf is a key amenity in many areas of the state. The development of new golf communities in Washington followed the rise in the national real estate market, which peaked in 2005 in terms of new home starts and existing home sales.

In 2007, many golf communities were midway through build out, yet golf-related residential construction still represented a sizable segment in the Washington golf economy. The new golf community developments offer a mix of single-family homes and townhomes/condos. Examples of active golf community developments include: Bear Mountain Ranch, a Lake Chelan golf community with a public-access 18-hole course ranked as one of six favorite new courses in the country by PGA professionals; Tumble Creek at Suncadia, a private golf community featuring a Tom Doak-designed course adjacent to Suncadia Resort near Roslyn; Mountain View Meadows at Deer Park and West Terrace at The Fairways Golf Course, both located near Spokane.

New golf-related real estate construction generated $137.1 million in 2007. Furthermore, in 2007 there were more than 46 golf communities in Washington, and the estimate of "golf premium" associated with the sale of homes in these developments to be $17.6 million. (The premium is the additional amount a buyer is willing to pay for a home or property located on a golf course or within a golf community.)

Hospitality/Tourism

Across the country, golf has enjoyed increasing popularity among travelers, whether it is the primary motivation for a trip or connected to other recreational time spent with friends and family, or business colleagues. In Washington, golf is an important tourism segment, as noted on the state's tourism website http://www.ExperienceWA.com, which also features other outdoor and recreational activities.

Washington's golf resorts help the state attract conferences and business meetings, and both amateur and professional golf tournaments draw people to courses in different parts of the state. Washington State tourism will get a big boost (preliminary estimates range from $70 million and $125 million) in 2015 when the state hosts the U.S. Open Championship at Chambers Bay.

In 2007, SRI estimates golf-related tourism spending in Washington was $361.2 million. This is based on the following estimates of golf trips and associated expenditures by Washington residents and nonresidents: 579,000 day trips, with the average golf trip spending of $63; and an estimated 680,000 overnight trips, with average trip spending of $478.

Golf's Ultimate Economic Impact in the State of Washington

Golf's impact on the Washington economy includes both the direct effects of economic activity in the core and enabled golf industries, as well as the indirect and induced (or multiplier) effects on the overall economy. In economics, the idea of the multiplier is that changes in the level of economic activity in one industry impacts other industries throughout the economy.

For example, a fraction of each dollar spent at a golf course is, in turn, spent by the golf course to purchase goods and services for golf course operations; these are indirect effects. In addition, golf course employees spend their disposable income on personal goods and services, and this stimulates economic activity in a myriad of other industries; these are induced effects.

Therefore, golf's total (direct plus multiplier) economic impact includes both the direct employment and wage income of those employed in golf-related industries, as well as the secondary employment and wages supported in other sectors of the economy through subsequent purchases of goods and services by golf industry employees.

In 2007, the $1.2 billion Washington golf industry generated:

* A total economic impact of $2.5 billion for the state of Washington including the indirect and induced economic impacts stimulated by golf sector activity;

* A total impact of $116 million in tax revenue;

*A total impact of over 29,000 jobs with wage income of $796.3 million.

The numbers don't lie, and for officials to place financially burdensome hurdles in front of the Washington State golf industry is short-sighted and fiscally irresponsible.

Due for release in spring 2010, the full version of the Washington Golf Economy report will be available in April at www.thewsga.org.