Letters to the Editor

Letter to the Editor | A proposed solution to the Madrona dispute

PenMet has just terminated its lease with ZTM Holdings alleging several breaches of the lease terms. I assume a lawsuit will soon be filed as well.

In recent days, I’ve had conversations with several individuals associated with ZTM and others regarding the Madrona golf course to gain a better understanding of the issues and the parties. I’ve found those discussions very informative. I’ve also read several documents to better understand who said what to whom.

Let me stress I’m not taking sides in this. I have two goals:

• Protect the taxpayers living in the PenMet Park District
• Protect the golfers who use the Madrona Golf Course

With those goals in mind, I believe the best alternative to solving the ongoing dispute between PenMet and ZTM (not to mention Stutsman Enterprise, Inc. that actually operates the course) is:

Proposed solution

PenMet sells its parcel to ZTM at an appraised value of the land considering its current use as a golf course and removes itself from any future discussions between ZTM and Stutsman (and there are issues there) and from any future operational issues. The sale would have a deed restriction saying the property must remain as a golf course, and a provision that says if ZTM attempts to defeat that restriction, the purchase price would be adjusted to the property’s value at its highest and best use which would be millions of dollars higher. A significant penalty. I have been told by ZTM they would agree to this solution (which shows their commitment to keeping the golf course), but the termination may alter their feelings.

What does this do for PenMet?

• PenMet is facing significant financial uncertainty with the ongoing construction of its Community Recreation Center (“CRC”) which is already over budget, months behind schedule, and expected to operate at a significant loss in its early years plus …
• PenMet has spent hundreds of thousands on outside consultants for the DeMolay Sandspit, Peninsula Gardens, a proposed aquatic center, and a proposed senior center … at a time when cash conservation would appear to be critically important which leads to …
• The proceeds from the sale would create a significant cash reserve to protect PenMet from possible cash depletion due to further cost increases on the CRC project, due to far greater financial losses from CRC operations than anticipated, and a possible $800,000 judgment in Glenlar’s favor AND …
• Interest on the proceeds would be multiple times higher than PenMet’s income from the ZTM lease which is mid five figures (not a great return on a multimillion dollar property) and …
• It confirms to PenMet’s and Gig Harbor’s citizens that PenMet intends to keep the golf course operational (the importance of this cannot be overstated) and plus …
• It avoids costly litigation with ZTM over who’s responsible for capital improvements and deferred maintenance and …
• It allows for course improvements now rather than possibly years from now and …
• It eliminates a business operation for which PenMet has shown no interest, until recently, in wanting to participate and for which it has no experience, and it eliminates maintenance issues for which it does not have the staff or time to address

What happens if PenMet sues ZTM?

• PenMet, ZTM, and Stutsman will all incur substantial legal fees with no assurance of a favorable judgment for any of them (money that could be spent on Madrona)
• It could be in court for years (while deterioration continues)
• PenMet would have to prove that capital improvements are not its responsibility and this could be difficult given that PenMet has, on multiple occasions, specifically approved a provision in ZTM’s sublease to Stutsman that Stutsman would invest a percentage of the gross green fees in capital improvements.  That raises the issue of who might be responsible for any capital improvements over that amount?  PenMet’s lease with ZTM is silent on this so it might be that a court would say capital improvements are the owner’s responsibility.
• They may have to prove the cost of the proposed expenditures is deferred maintenance or operational expenses which, if proven, would be ZTM’s responsibility and through ZTM ultimately to Stutsman — who knows?
• They would have to explain why PenMet, as the owner of most of the golf course, has let years pass during its ownership without raising any issues regarding the course’s condition until only recently.  Did that delay put part or all the blame on PenMet for the current conditions?  Did it make things worse?
• Only the attorneys involved will be the winners in this process.  Taxpayers and golfers will be the losers.  Why is PenMet, a taxpayer supported entity, either willing to or feels it is forced to, spend hundreds of thousands of dollars on legal fees?

Ask yourself

• Do you want your property taxes used for legal fees?
• Do you want Madrona to continue to decline while the courts decide who’s at fault?

Let PenMet know your thoughts!

Craig McLaughlin

Fox Island

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