Monday, July 10, 2017

Links Magazine’s Take on Who Should Pay for USGA National Championships

An article in Links Magazine (Schupak, Adam, “Pay to Play,” Summer 2017) asked who should pay the costs incurred in hosting a USGA National Championship?   The article argues the USGA should ease the burden on host clubs by increasing its subsidy to tournaments.  The argument however is not supported by cogent reasoning or empirical analysis.  There is no doubt that the costs and revenues of USGA tournaments are in need of review.  This article does not provide that examination as explained below. 
    
The article focused on the costs incurred by the 2015 Men’s Mid-Amateur Championship held at the John’s Island Club in Florida.  It also mentioned a couple of other tournament, but did not describe those in depth.  Such a small sample size limits the credibility of the article’s position.  The article did state the 2013 Men’s Mid-Amateur cost the Country Club of Birmingham $300,000, but two years later John’s Island Club spent $650,000. The article is silent on what caused the $350,000 increase in costs.  It would have been important to review the contract between the USGA and John’s Island Club to determine which expenses were required by the USGA and which were optional expenses incurred at the Club’s discretion.

The article describes the current state of hosting costs:

The cost of running even one of the USGA’s 10 amateur championships has grown exponentially.  The starting price can be as modest as roughly $150,000 for the U.S. Women’s Mid-Amateur, balloons to $750,000 for the Walker Cup, and gets close to $1 million for the U.S. Amateur when a larger footprint for worldwide media an television compounds are factored in.

There is no reference to where these cost numbers come from.  This is a serious omission since the high costs are an essential part of the argument for increased USGA financial support.  If high costs are not documented, the article’s thesis cannot be proven.

The costs are purported to have risen exponentially, but the article only presents longitudinal data for the Gold Mountain Golf Club in Washington.  The cost of the Amateur Public Links was $150,000 in 2006.  Five years later the cost was $180,000 for the 2011 U.S. Junior Amateur.  That is only a 4 percent annual increase in current dollars and less than that in real dollars (i.e., costs adjusted for inflation).   The example from Gold Mountain was presented to demonstrate the escalating costs, but actually did just the opposite.

Now costs may have risen dramatically at other events or in years past 2011.  The article, however, presents no evidence to that effect or any explanation of why costs have exploded.  Has the USGA placed more requirements on the host club?  Or have host clubs increased the costs by trying to one-up previous host clubs?   These are important questions that go unanswered.

The article assumes the USGA places an inequitable burden on host clubs and suggests the USGA should pay more of the cost.   Mark Mulvoy, Chairman of the John’s Island Championship Committee makes the following argument:

Why does a non-profit (the USGA) have over $300 million in the bank?  Our members help fund educational programs and build museums and wings of hospitals.

Mulvoy’s complaint is not compelling.  The combined net worth of the members of the John’s Island Club dwarfs the USGA’s cash reserve. So why should the USGA subsidize the top 1 percent on the economic ladder?  It does not help matters that Mulvoy spent $100,000 on a “lavish gala” (as described in the local paper) for former Mid-Amateur champions in February 2016 when the tournament was still seven months away.   In the end, the John’s Island Club Mid-Amateur Committee only donated $7,500 to a junior golf organization.
   
Lacking any empirical evidence to support the article’s thesis, the author went to David Fay, former Executive Director of the USGA for support.  Fay came up with a platitudinous solution to a problem that may not exist.  Fay suggested the USGA should guarantee that no club that hosts one of its championships is ever put in a financial bind.  Fay’s proposal has two serious flaws.  First, if the USGA guarantees no financial harm it creates a moral hazard.  That is, clubs would not have an incentive to guard against risk because they would be protected from the consequences.  Second, Fay’s proposal would require the USGA to approve and monitor expenses.  If the USGA is to ensure host club is not put in dire financial straits, it must make sure the expenses are both reasonable (e.g., no strippers for the after-party) and legitimate (i.e., no charging the tournament account for steak when hot dogs are served).  This is essentially a forensic accounting exercise the USGA should avoid.

If the article’s thesis is correct and more USGA financial support is required, there should be a shortage of clubs vying to host tournaments.  This is not the case as the article concludes:

…Despite the watered down media exposure and fan interest, and overall lack of attention, top clubs continue to line up to host the USGA’s non-remunerative championships…

In essence, there does not appear to be a problem with the USGA’s current level of financial support.   This raises the question of why the article was written.  Was it to be a paean to the 2015 Mid-Amateur (Comments such as “even the Russian judge would give it a 9.9,” and”Sammy Schmitz made a stunning hole-in-one” were not essential to the article’s objective and should have been removed in editing)?  Was it to lay the blame on the USGA rather than on tournament director Mulvoy for the budget overrun?  Was it to cajole the USGA into increasing the subsidy to a future tournament where members of the Links editorial staff have an interest?  The answers to these questions are not known.  What is known is the article does not meet the high editorial standards associated with Links

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