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if they did not agree the Interior Department would appoint a third. We had no money with which to get an appraisal made, and the Interior Department insisted also that they had no money for it.
Mr. YATES. What would the cost of the appraisal be?
Mr. YATES. Would it not seem advisable to have your own appraisal made?
Mr. SCHWAB. Yes, sir, when we have the funds with which to do it before we take over.
Mr. YATES. In other words, you think it would be a good idea to have your own appraisal made?
Mr. SCHWAB. Yes sir, we do, because we think his appraisal is away out of line. We are predicating this request upon the book value plus a reasonable additional amount, I think 25 percent for appreciation.
Mr. YATES. The book value of what?
Mr. SCHWAB. That was determined by an audit by the Interior Department and that is definite.
Mr. YATES. Is that based upon his cost or upon the cost of reconstruction?
Mr. SCHWAB. On the actual cost.
Mr. SCHWAB. We do not think he will get much new in the way of reproduction cost because his equipment has been purchased mostly since the war.
SAVINGS TO BE MADE IN OPERATION OF PUBLIC GOLF COURSES
have to pay
Mr. YATES. The statement was made by Mr. Christiansen that you contemplate saving $88,000 in the costs of operation now incurred by Mr. Leoffler. Where will those savings be, if any?
Mr. SCHWAB. I think Mr. Christiansen had a slip of the tongue there, Mr. Yates, when he said he expected a profit of $88,000. That would consist of some $33,000 in savings we would make in the way of taxes and various things that, as a Government agency, we do not
Mr. YATES. How much would the savings in taxes be? Do you have a breakdown of that figure, please?
Mr. SCHWAB. Yes, I have it here, sir.
Mr. CHRISTIANSEN. The $88,000 is the difference between operating expenses and income.
Mr. BATES. How much would it take off of the District tax rolls? Mr. Schwab. I would not have that figure; would you have it?
Mr. FOWLER. We have it in the total, as to what portion is District, and what portion is United States taxes.
Mr. SCHWAB. I have no District taxes in here, it is all United States. The interest expense amounts to $5,344.52.
Mr. YATES. That is on equipment purchased?
Mr. SCHWAB. No, sir, when Mr. Leoffler advanced this money it was supposed to be without interest to the Government, according to the original letter, but he charged interest, and these figures are based upon his statement. Therefore, when I say savings, it is savings from his statement, on the audit they took. That interest
amounts to $5,344.52, insurance, $9,993.30, legal and sundry expenses, $6,237.25, and taxes, $11,920.04, making a total of $33,495.11, from which we deduct District tax, beer license, $1,669.08, leaving a net savings of $31,826.03.
Mr. YATES. Where does the estimated net profit come from?
Mr. SCHWAB. These are figures furnished by the auditor of the Interior Department, estimated on the number of ticket sales in 1948, and in 1949 they had a considerably better year. They increased the rates on tickets, and that increase in rates was supposed to increase the revenue by $60,000, based upon the 1948 sales.
Mr. YATES. And also, considering the increase in expenses you expect a $60,000 profit as a result of the increase in rates?
Mr. SCHWAB. Yes.
Mr. Yates. Certainly the expenses went up a little bit. Was that taken into consideration in computing that figure?
Mr. SCHWAB. I am not certain, Mr. Yates, whether the auditor did that or not. These are his figures that we are using here.
Then, in addition, there is nonrecurring expenses that year of $16,648.17, making a total of $108,474.20. Now, those figures were from statements of Mr. Leoffler given to the auditors of the Interior Department.
The $88,000 figure, however, is from what we estimate our expenses will be, and what we estimate the income will be based upon the business that has been done in 1949.
NET PROFIT IN 1949
Mr. YATES. How much net profit did Mr. Leoffler make last year? Mr. SCHWAB. That is still undetermined. These figures are up to
The auditors, I do not think, have yet come to an agreement with Mr. Leoffler as to what was to be charged and what was not to be charged. While I have not read their audit report, I understand that the General Accounting Office said that Mr. Leoffler's books were the worst set of books they have ever seen, and from the amount of difficulty the auditor had I would say they must
have been. Mr. Yates. We probably should put some Treasury or incometax auditors on them.
Mr. SCHWAB. They went down there.
Mr. FOWLER. We increased the charge to the people for playing golf on the courses on the theory that they were losing money in golf.
Mr. SCHWAB. Yes; that was the theory. Mr. YATES. What is the last statement of his which you have seen which would show either his profit or loss?
Mr. SCHWAB. He shows a loss of $1,600.
Mr. Schwab. For 1949, but, as I say, that is an awfully involved thing to explain.
Mr. Wilson. We probably should take into consideration the tremendous rate of depreciation for some of this new equipment.
Mr. SCHWAB. Also a number of other things developed, and we apparently are not going to learn, or cannot say whether he made a loss or not last year. The rates were based on the supposed fact that he was losing money.
Mr. YATES. Well, the difficulty I have in following your testimony is this: I am trying to determine how you come to the conclusion
that you can make a $88,000 profit in the face of the fact that apparently Leofller has suffered a $1,600 loss.
Mr. Schwab. The reason for that is having neglected the courses for so long the rehabilitation cost had to be exceptionally heavy in 1949.
Mr. YATES. In what amount?
Mr. SCHWAB. He spent thirty-thousand-and-some-odd dollars. Over a 5-year period, 3 years of which were war years, in which there were comparatively small profits, they had available for rehabilitation $67,000, for management and salaries to the partners, Mr. Loeffler and his partners.
Mr. Yates. How many partners were there?
Mr. SCHWAB. There were four of them, and there was $111,000, and a total profit of those years of $187,000, so if you will add the managment to the total profit you have a total of some $298,000 and, practically, gentlemen, that was for 2 years, because of the fact that 3 of those 5 years were war years.
DIVISION OF PROFITS
Now, the profit at that time was divided with the Department of the Interior, with the Federal Government, and their share in 1948 and 1947 was about $28,000 each year that they got it.
Mr. Wilson. He has increased the rate from 40 to 60 cents, I believe?
Mr. SCHWAB. Yes; and that is where the $60,000 comes in, Mr. Yates.
Mr. CHRISTIANSEN. He has made a number of increases in rates-
Mr. CHRISTIANSEN. I think I have a copy of them here. In fact, I think they are attached to the bottom of that typed letter that I gave you.
Mr. Yates. I think it is important to put them in the record, because you contemplate charging the rates now in existence, and to show that you believe you can make $88,000 on the basis of those rates.
Mr. CHRISTIANSEN. All right.
Driving range, 35 balls, 50 cents; miniature golf, 18 holes, 35 cents.
Mr. SCHWAB. Referring to salaries, Mr. Leoffler at the present time gets $11,500, and each of his partners gets $6,500, and then in addition to that they get $3,500 pro rata of profits. When the profits are determined Mr. Leoffler gets $3,500 and then the balance is split with the Federal Government.
OPERATIONS IN OTHER MUNICIPALITIES
Mr. YATES. I would like to ask Mr. Christiansen this question: Were you on the trip that was made to Minneapolis, Chicago, and the other cities?
Mr. CHRISTIANSEN. Yes, sir; I was.
Mr. YATES. In those cities did you find a uniform pattern of operation with respect to cafeterias and pro shop facilities being concessioned out or not?
Mr. CHRISTIANSEN. I will tell you what we did find.
In Akron, Ohio, there is no private operation, the county operates everything, that is, the golf and everything.
In Chicago golf is operated directly and food is let out on a concession.
Mr. YaTEs. Certain county courses.
Mr. CHRISTIANSEN. Yes; I am referring to the situation in the city itself.
In Milwaukee they operate all of the golf and incidental services to golf.
In Minneapolis, which is probably the oldest of the cities in the way of administration of these facilities, it operates everything, the sale of food and merchandise, instructions and the golf playing itself.
Mr. Yates. Did you find out whether the courses are being operated at a profit or a loss in those cities?
Mr. CHRISTIANSEN. Minneapolis is operating at a profit; Milwaukee is operating at a profit; Chicago is operating at a profit; and Akron, Ohio, about breaks even.
Now, Baltimore has a little different set-up. The city of Baltimore, through the park department, operates the golf courses direct, but sublets the concessions to the pro. The pro is responsible for all of the sale of merchandise and lesson instructions, and so forth, and what he takes in is his.
Mr. YATES. So that in none of the cities that you visited did you find any of the public courses were being operated at a loss?
Mr. CHRISTIANSEN. No, sir.
HIRING OF PROFESSIONALS
Mr. Yates. What do you intend to do about hiring professionals at these courses?
Mr. CHRISTIANSEN. They have some part-time instruction, and most of those course pros have an arrangement with the present operator whereby they split fees with him. Mr. Leoffler gets one half of the instruction fee and the pro gets half of the fee. That is a
situation we would have to give some study to because some of the courses feel that there is not enough instruction at the courses.
Mr. YATEs. Did you say you contemplate keeping that in existence?
Mr. CHRISTIANSEN. I would say that we want to study the present scheme to see if we could improve on it. We think there would have to be instruction furnished.
EXPERIENCE IN FOOD CONCESSIONS
Mr. Yates. Now, is the recreation department in the food business in any of its facilities now?
MR. CHRISTIANSEN. We sell what we call short-order stuff at many of the units, Coca-Cola, ice cream, and some candy in some places.
Mr. YATES. Have you had any experience in the food business at all, such as running cafeterias and restaurants?
Mr. CHRISTIANSEN. Not extensively, no, but we have handled many special parties; we have many community parties where we have meals, mostly foods that are served on an ordinary basis, not any fancy stuff at all.
Mr. YATES. Why do you want to serve that yourself rather than concessioning it out?
Mr. CHRISTIANSEN. Well, we may want to concession it out later, Mr. Yates, but at this particular point, based on our observations made in the city of Minneapolis, which I consider one of our outstanding leaders in that field, there is considerable profit in the dispensing of the food services. There is considerable difficulty in having two parties under the same roof administering two different services. In other words, you have here one primarily concerned with the sale of hot dogs, Coca-Cola, and so forth and next to them you have a person selling tickets for golf and golf merchandise and handling the lockers.
Mr. YATES. Do you feel that you have sufficient experience in that field to operate your concessions?
Mr. CHRISTIANSEN. Yes; I am sure that we have, because the foods that are served are not the fancy kinds of foods. They are just shortorder stuff, that is all it amount to. I would say this as a follow-up to that, Mr. Yates, that if the Board feels in the next few months or weeks, after further study, or following experience, that we are not doing a good job we are in a position to sublet it out to somebody else.
AGREEMENT BETWEEN THE DISTRICT AND THE DEPARTMENT OF THE
Mr. YATES. Will the proposed agreement between the District and the Department of the Interior be made a part of this record, when you have concluded it?
Mr. CHRISTIANSEN. We know there can be no operation unless and until the agreement is satisfactory to the District Commissioners and the Recreation Board.
Mr. SCHWAB. We cannot actually conclude the agreement with the Interior Department until we have finally come down to terms with Mr. Leoffler. We can get the agreement, and have it in such form that it will be ready to be signed when we have the money, and so