MANCHESTER — Better drainage, tree removal, improved landscaping and paved cart paths are a few of the steps the city's parks and recreation division is taking to reverse declining membership at the municipally owned Derryfield Country Club in hopes of making the golf operation self-sustaining.

Derryfield, one of only three municipally owned golf courses in the state, has operated at a loss since 2007, requiring annual loans from the city that now total $1.1 million. Even if the golf course can be returned to a break-even operation, it's unlikely any of that money will ever be returned to the city's general fund, according to parks and recreation officials.

The golf course is part of the so-called “enterprise operation” the city created in 1998, based on the notion that the country club and city's two ice arenas, JFK Memorial and West Side, should be self-sustaining. Investment in all three operations, and the bonding required to pay for it, has made that goal elusive.

In fact, according to Don Pinard, business service officer for the Department of Public Works, the city has had to subsidize the enterprise operations to the tune of $5.3 million to date.

Pinard, joined by Peter D. Capano, chief of the DPW, and Andrew Vachon, enterprise manager, outlined steps the recreation division is taking to get the enterprise program back on track, but said the $5.3 million is a liability the city will have to deal with.

“The city is owed that money,” Pinard said. “The city is going to have to do something about that IOU because it's just sitting there as a receivable and getting older.”

Options for erasing the debt range from adding it back into the tax base, floating a bond or even selling the golf course, although no one is suggesting that. Pinard referred questions along those lines to city Finance Director William Sanders, who said the city is still holding out hope that some of the debt can be paid back.

“Progress has been made over the past two, three years on reducing the annual increase in the credit,” Sanders said. “I don't see why some of it can't be paid back over time.”

He noted that the city has set aside enough money to account for the debt if that becomes necessary. “We've reserved the entire amount,” he said. “We've taken that as a reduction of the city's fund balance on the bottom line.”

Ultimately, the mayor and aldermen will have to decide what to do about the $5.3 million problem.

“We could draw down the reserve or we could sell assets within the enterprise fund itself. The ice arenas may have some value, and of course you'd have to look at the golf course as well. Maybe it's a combination of several things,” Sanders said. “I would hope using the tax rate to backfill is not really an option that is necessary. I would hope that would be the last option that we would consider and only for some residual amount after the other options have been successful or partially successful. The first step is to get the operations into the black, and then take it from there.”

Turning the corner?

While they can't reverse what's happened in the past, Pinard, Capano and Vachon emphasized in a group interview last week that their goal is to get all three enterprise operations back in the black.

The golf course was profitable until 2007, with revenues exceeding expenses by as much as $330,000 a year in the years between 1995 to 2007.

In 2007, the city entered into an agreement with BLL Restaurant Inc. to construct a new country club complex. The building now houses The Derryfield, a restaurant and function hall, whose owners have a $127,073 annual lease agreement with the city. That number represents 75 percent of the bond's cost spread out over 25 years, and was arrived at because the city uses some of the building for golf course operations and other municipal purposes. Some of the 2007 bond was also used for reconstruction of three greens on the course.

The bond, which the city has to repay on a 20-year basis, is inflating the country club's expenses on the enterprise fund balance sheet, but that's not the only problem. Vachon points out that country club membership has been in decline across the nation, and Derryfield is no exception.

The bond may prove to be a wise investment in the long run, as the popularity of the privately operated restaurant and function hall has helped draw attention to the golf course. In addition, the Parks, Recreation and Cemetery Division, now a part of the DPW, has implemented a plan to reduce expenses and increase revenue at all three enterprise operations, according to Capano.

“We're going in the right direction, and that's why we are going to get back to break-even in golf operations,” he said, pointing to several steps that have already been taken.

More than 100 trees were cut down and removed from the property over the winter to allow for more sunlight and reduce pine needles, which make it hard to keep the greens green. A professional horticulturist was hired to plant flowers and make other improvements along holes and tees. More than 1,000 feet of cart path was paved last spring.

Aggressive marketing

The marketing for the course has also become more aggressive, with a new program of corporate memberships and a “municipal pass” program in cooperation with other municipally owned courses in Concord and Bethlehem. Members at any of the three clubs can play at reduced rates at the other two.

Membership, which hit a low point of 493 at the end of 2011, is already on the rebound, according to Capano, who said the club now has 556 members. There were nearly 1,000 members in 1998.

The biggest problem plaguing the course and affecting membership is flooding, caused by poor drainage on six low-lying holes that makes them unplayable after a rainstorm. To address that problem, the city is about to launch what Vachon called “the southwest drainage project.”

As reported in the Sept. 2 New Hampshire Sunday News, the firm of McFarland and Johnson of Concord was recently selected for a $250,000 engineering contract to address the drainage problem. Engineers will recommend solutions, design plans and assess the cost of permanent improvements to the course layout and topography, which could prove costly.

The plan to improve the course, attract members and generate more revenue will also complicate efforts to get the operation out of the red.

“If we go through with all this, all of a sudden we're saddled with even more debt,” said Pinard.

The city has owned and operated the Derryfield course since 1932.

dsolomon@unionleader.com