How to Stop Damaging Diamondhead — Part 1

Five POA directors have again renewed Haslam Management Services’ (HMS) contract according to board minutes.  Why? 

According to available financial information including audits, HMS (dba PRAXIS GOLF) has saved us a grand total of $130,120* in total POA operating losses over four years.  For that return we paid them, per their contracts, over $500,000 counting incentive awards.

The board halved HMS’s fees to $60,000 a year in 2015, but financial statements show that combined operating losses for country club and golf alone increased in 2015 over $100,000 compared to 2014.  That’s through November, with December not yet reported.  Added to the operational losses shown above, the board has spent over $1.5 Million in capital improvements on the golf courses and club. That is a huge amount of money without any apparent improvement in reducing losses.

When HMS first entered the golf management business in the early 2000’s, it “aggressively” added eight courses and expected five or six more to join its portfolio within a couple of months according to Golf Course News.  While it did succeed in contracting with more courses after that, today its courses are back down to eight.  Four of them now have ties to Diamondhead’s development company, Purcell.

Their Purcell ties via Lake Arrowhead have long created cynicism about whose interests the board serves by hiring HMS:  those of dues-paying POA members or those of the Purcell corporation.  Suspicions grew last summer when director Marshall Kyger brought Purcell’s 471 votes to the annual meeting to cast, and intensified as it became known that Purcell named Larry D. Johnson its new president.  Johnson is founder and head of Houston’s Johnson Development Corporation (JDC) which lists Georgia’s Lake Arrowhead, Towne Lake, and BridgeMill as Johnson Development communities.  HMS’s website shows that it currently manages all three of their golf clubs.  In addition, Georgia’s Secretary of State’s office lists James W. Haslam in 2015 as CEO of Town Golf G.P., Inc., and Larry Johnson as CFO and Secretary.

That’s more coziness than most thinking people want between the management company advising our board and the non-dues paying corporation that still owns much land here.  Obviously Purcell and the dues-paying membership do not always have the same interests.  When they differ, the 5,000-plus paying members should be able to feel confident that the interests of the single non-dues-paying corporate member is not outweighing those of everyone else. 

Just five directors favored HMS’s renewal.  Discussion, as recorded in the minutes, was limited to two statements:  “The learning curve for a new company makes bidding a new contract undesirable,” and “The existing contract can be renewed without bidding.”  Clearly these are not reasons for renewing a contract but excuses for avoiding a competitive search.  The vote was Crosby, Harvey, Kyger, McCulley, and Montjoy for renewal; Fletcher, Seitz, Silcio, and Weber against. Schaefer abstained and Johnson was absent.

New amenity proposals and changes or additions to old ones that have popped up ever since HMS’s arrival have not stemmed from widespread membership demand, nor has the board indicated that they been researched to determine whether they are likely to benefit the membership.  Those that have been completed are showing little if any return on investment.  Worse, there’s no incentive to do due diligence since there is constant access to POA dues to spend with no penalties for proposers or approvers of bad decisions.  The penalties fall on Diamondhead itself as its reputation for non-transparency, non-accountability, and excessive cost of living grows and spreads.

It has become almost a mantra among some of our board members that our “amenities” are, by definition, profitless facilities that require the support of our dues.  Sorry, no.  Amenities, by definition, are “features that increase the desirability or value of a property.”  If it’s not doing that, it’s not an amenity at all, it’s simply an expense that has enough board member votes to keep flushing money away on it.  You can measure the desirability and value of Diamondhead pretty easily by simply looking at comparative trends in the region.

Census Bureau figures show that from 2010 to 2014 population decreased in Diamondhead by 2.4%, meanwhile increasing by 2% in Slidell, 2.1% in Biloxi, 4.4% in Long Beach, 5.8% in Gulfport, 15.1% in Pass Christian, and a whopping 23% in Bay St. Louis.  Online realtors’ sites indicate that Diamondhead’s average list prices are in the lower third of all communities in a fifty mile range.  While others in the region have been gaining in population and real estate value, Diamondhead is not keeping up.  Band aids like renovated courses, event lawns, and covered verandas are not going to solve this problem.

Economics has a term for people compelled by government or other collective to pay for something they don’t value at the price they are being charged; they’re called forced riders.  The forced ridership problem, having to pay for those facilities that are gobbling down money without proving themselves desirable or valuable to any but the few who use them, has grown significantly at Diamondhead, and with it the open dissatisfaction that contributes to a diminished community reputation. 

What Diamondhead needs is less adding on of random new amenities in the hope they will improve its prospects, less advice from those whose primary business and interest is golf, and a more targeted, analytical approach of determining what current property owners want and what potential buyers in this region are looking for.  It’s past time to eliminate connections to HMS and Purcell and chart our own independent course. 

*The audits show a decrease in overall POA operating losses of $77,379 from 2011 to 2012, an increase of $17,203 from 2012 to 2013, and a decrease of $69,944 from 2013 to 2014.  Combined, that’s a total decrease of $130,120.