Mayor accuses council majority of failing to show due diligence on $3.4M deal to buy golf club

Oct. 19—WATERTOWN — Five years ago, the city considered putting in a purchase offer of $591,000 to buy the Watertown Golf Club Inc. in Thompson Park, but the deal fell apart following overwhelming public opposition.

On Monday night, the majority of City Council informally agreed to buy the golf club for $3.4 million — more than five times the amount that was considered in 2017 — from developer Michael E. Lundy.

With the deal in the works, City Manager Kenneth A. Mix instructed City Attorney Robert J. Slye to start working on the terms of the agreement with Mr. Lundy's attorney.

Critics were surprised that the deal was happening so quickly to acquire the nine holes of the golf club that Mr. Lundy owns.

On Tuesday, Mayor Jeffrey M. Smith accused the three council members supporting the acquisition of failing to do their due diligence on the deal.

They mayor said the three failed to find out whether the city can run a municipal golf course; how many city employees are needed to work there; and whether city taxpayers would have to subsidize the golf course.

"I didn't know golf courses made money in Northern New York," he said, equating the golf season in the north country to roughly a month longer than running a city pool in the summer for three months.

But Councilwoman Lisa A. Ruggiero said Mr. Lundy allowed her to look at the golf club's financial books. She insisted the golf club makes money after seeing its revenues and expenses.

As for the price, Mayor Smith said he's been getting phone calls from constituents who he says are "utterly stunned" by the $3.4 million price tag.

City assessor Brian S. Phelps, who was asked to determine the value of the golf club after the potential deal surfaced in late August, said Tuesday that the current value of the 63.84 acres that Mr. Lundy owns is $517,700.

Since the deal surfaced, the city also looked into the asking prices for other golf courses in the area that are on the market.

Highland Meadows, an 18-hole course on 146 acres on Route 342, is up for sale for $2.9 million. The nine-hole Bay Breeze Golf Links on 161 acres in Chaumont was listed last year at $625,000, or $950,000 if the offer includes a nearby residential property. The Hidden Valley Golf Club in Whitesboro, near Utica, has 18 holes on 149 acres. It's on the market for $1.299 million.

As for the deal with the city, the club owns holes one through six and 16 to 18 of the course, while the city owns the others, with the club leasing the land on which the remaining holes sit.

Council members Patrick J. Hickey, Cliff G. Olney III and Ruggiero support the acquisition, saying it will protect Thompson Park from ever getting developed. Councilman Olney called it a once-in-a-lifetime deal.

The deal came up after Mr. Lundy became incensed that the city was going to change the zoning for the golf club from residential to open space for park land, which would prohibit building single-family homes on the site.

While Mr. Lundy has discussed developing the land in the past, Councilwoman Ruggiero said she heard he was in talks to sell the property to developer P.J. Simao, the owner of Ives Hill Country Club, for housing.

The zoning change would kill that deal, so Mr. Lundy asked for a meeting with city officials under the guise that he wanted to talk about a way to end litigation involving the golf club, she said. For years, the golf club has been source of legal action by both Mr. Lundy and Mr. Simao.

On Aug. 31, Mr. Lundy and Mr. Simao met with Mr. Mix, Councilwoman Ruggiero and Mr. Slye about the proposal. Mayor Smith reportedly refused to attend the meeting. Since then, council members discussed the proposal twice in executive sessions in recent weeks.

It was unexpected that Mayor Smith decided to discuss the deal in open session on Monday night. And it was even more unexpected that the three council members tentatively agreed to purchase the golf club for $3.4 million.

Under the proposed deal, Mr. Simao would operate Ives Hill as a nine-hole golf course and not pursue legal action against the city in the future. The city would operate the golf club as a municipal course and Watertown's only 18-hole course.

Mr. Phelps pointed out that the city would buy the golf club's assets, including the nine holes, the clubhouse, 40 golf carts, other equipment, a party tent and the golf cart building and pro shop.

That is a different arrangement than when Mr. Lundy acquired the golf club for about $500,000 in September 2017 as the major shareholder in the business in a stock sale.

The $3.4 million figure more than doubles what Mr. Lundy paid for the club in 2017 and the $700,000 that Mr. Simao bought Ives Hill for in 2007, Mr. Phelps said.

If the deal is consummated, shareholder Nicki L. Kogut also stands to benefit.

If the city purchases the club at $3.4 million, Mr. Kogut would receive about one-fifth of that amount of money because he owns 75 of the 593 shares, he said.

"I'll be happy with it," he said.

He remembered purchasing his shares about 20 years ago from a man who lived near Thompson Park. He saw a sign for a golf cart that was for sale in the man's yard and stopped. The man complained that it was a mess how the golf club was run and he agreed to sell the shares to Mr. Kogut.

Mr. Kogut, who once served on the club's board for about three years, had to fight to keep his shares when Mr. Lundy came forward to purchase the club. Mr. Lundy tried to force him to sell his 75 shares, he said.

Mr. Kogut filed a successful lawsuit to prevent the sale to Mr. Lundy and make the club's officers release its financial information.

He is convinced that Mr. Lundy makes money on the golf club, with all of the tournaments, weddings and other functions that are held there. He also said the previous owners made a small annual profit.

With his knowledge of the golf club, Mr. Kogut said the city would need to hire a greenskeeper, about five or six part-time employees to maintain the course and one or two people to work in the pro shop.

He also believes that the golf club is $650,000 in debt from the time the previous owners ran the club.

In 2017, the council members at the time tried to purchase the club. The city never had a chance to formally submit that purchase offer of $591,000 after the public became outraged. With so much public pressure, the club's board pulled out of the deal.

In 1926, nine men founded the Watertown Golf Club with nine holes on the southwest side of Thompson Park. They built a clubhouse, pro shop and maintenance building. It was known as the "Working Man's Club."

In 1965, the course grew to 18 holes when the owners signed an agreement with the city to lease 66.3 acres in the park.

Editor's note: An earlier version of this story misstated the offered sale price for Bay Breeze Golf Links.