LOS ANGELES – COVID-19 did its best to postpone, but not cancel, the U.S. Open in 2020. Bryson deChambeau won the 120 th U.S. Open at Winged Foot, New York in September, not June. The next year, the Torrey Pines national championship took place in June. The USGA lost money on their biggest moneymaker due to a lack of tickets, merchandise, and corporate suites.
Or was it?
The USGA, a non-profit organisation with the mission to promote and advance golf as a sport, is an organization that is dedicated to this goal. Golfweek reported in 2020 that the U.S. The USGA generates revenue of $165 million annually or 75 percent. This money is used to fund the USGA’s 13 other national championships. The USGA’s insurance policy against such events offset a portion the losses associated with COVID Opens. The USGA, according to its Internal Revenue Service 2021 Form 990, filed an insurance claim in 2020 for business interruption. It received $29.5 millions, which allowed it to continue providing core services, and cover the costs of a limited number championships, despite a substantial loss in fan revenue.
Sentry, a corporate sponsor of the USGA, paid the USGA $25.5 million in 2021 for the change to the U.S. Open hospitality experience caused by the California COVID laws. This was based on both the validity of the claim as well as the estimated total claim value.
John Bodenhamer said that the USGA’s senior manager of Championships, John Bodenhamer, was “way down” on U.S. Open revenues during COVID. “But we did have business interruption insurance. Our organization decided to buy this insurance several years ago due to great leadership. There was some skepticism at the time as to why we needed this. We were all considered crazy. “Now everyone is patting themselves on their back.”
It does raise the question of why a 501-C3 non-profit organization with approximately $740 million net assets in its 2022 filing needs to file a claim.
Susan Pikitch was unable to talk to Golfweek during the week of last week, but she answered multiple emails.
The USGA has approximately 400 million dollars in reserves, which our Finance Committee recommends to be a best practice for fiscal responsibility. She wrote that $400M is less than two years’ worth of operating funds. It is prudent for businesses to keep at least three years’ worth of operating costs in reserve to ensure critical services are maintained and to mitigate the risk that catastrophic or long-term impacts will affect business operations. We learned from the pandemic that having these funds available is crucial to ensure continuity.
“The USGA has had event cancellation/curtailment insurance for at least 10 years. “We continue to view this insurance as a best financial practice, but the policy no longer covers pandemics,” added Ms. Shea.
She wrote: “Our business suffered a significant impact in 2020 when the pandemic began, particularly after we postponed and cancelled the U.S. Open. This was done without the normal fan and hospitality functions which drive significant revenue to our programs.” “Despite returning all 14 championships to 2021, continuing our work on golf course sustainability, GHIN/handicapping, governance, Allied Golf Association support, and our continued efforts in growing the game, we were heavily impacted by COVID-based restrictions in California. The amount of corporate sponsorship, ticket sales and other revenue that we receive was reduced. Our insurance policies allowed us to recover a portion of the revenue due to projections.
Bodenhamer responded to the question on reserves Wednesday by saying, “You should think of the U.S. Open. It’s more than just the trophy and gold medal we give out. This championship is important for the game. There’s no golf course in the United States that hasn’t benefited from the turf-grass fund. We’ll be spending, I believe, $3 million on this fund this year. These are all things that do not make money, but nobody knows about them. “It’s the U.S. Open.”
Pikitch said that the USGA Finance Committee had recommended the business interruption insurance several years earlier for these exact reasons. It was to ensure the core functions could continue when revenue sources, with the U.S. Open as the primary source, are disrupted. “We were fortunate to have insurance, just like other sports organizations. We didn’t have to make difficult decisions or layoffs.”
The USGA refused to disclose its insurance rates, but it did mention on page 71 in its public filing for 2022 that Sentry Insurance received a payment of 135,122 dollars.
Mike Davis speaks to the media during a practice round of the 2016 U.S. Open Golf Tournament at Oakmont CC. (Kyle Terada/USA TODAY Sports)
The USGA has released its full-year Form 990 for 2021, the latest year that is available to the public.
- In his last year as chief executive, Mike Davis earned $4.4million ($895,252 base salary, $2,122.548 bonus and incentive compensation, and $1,440.292 other reportable compensation), plus $89,000 of retirement, other deferred compensation, and non-taxable benefits. Pikitch stated that Davis completed 31 years of service at the time he left the association in 2021. He served as an advisor for the rest of 2021 to help with the leadership transition. His 2021 reportable compensation includes base pay, bonus, ancillary benefit and an initial distribution of the USGA retirement plan.
- The 990 form includes some additional details. “Michael Davis was CEO of the USGA until June 30, 2021.” From July 1, 2021 to December 31, 2021, Davis also served as an advisor to the USGA. Davis received two payments at the beginning of 2022, which were reflected in his compensation for 2021. Davis received an approximately $1.2million distribution from the USGA’s 457F plan in January 2022. This payment was reported in schedule J part II columns B (II), and F. Mr. Davis also received a bonus discretionary of $1.7 million based on his position and service length with the USGA. This payment was approved by the Compensations Committee of the USGA. It is reported in Schedule J Part II column B (II).
- Mike Whan who replaced Davis was paid $884,00 for less than six month’s work plus $55,000 other payments.
- The revenue totaled 304 million dollars, of which 37 percent came from broadcasting and media rights. Another 30 percent came from championships and 15 percent was from corporate partnerships.
- In 2021, the USGA earned $45 million from its sales of securities.
- The USGA has listed $36 millions in gifts and contributions to 2021 and a total of $122,000,000 over five years.
- In 2021, membership dues reached $13.2 million. Pikitch said, “As a not-for-profit organization, we are grateful for the private donors that support our mission and help the game…Most donations come in the form of pledges to USGA core programmes which do not generate revenues.”
- The FOX termination fee was $323.44million. Pikitch explained that when the USGA renegotiated their domestic broadcast rights for 2020, switching to NBC Sports from Fox Sports, they received a lump sum payment related to termination of the Fox Contract. This payment was made upfront but has been placed in a reserve created by the Finance/Audit Committees. It will be used for operating expenses only, and can last until 2026.
- The USGA confirmed that it reduced its TV rights fees by moving the championship from September 2020 to September 2021, when they had to compete with football. However, they did not disclose how much.
The USGA grants money to 95 different Allied Golf Associations, schools and turfgrass research programs. This is part of its mission to advance and champion the game. These missions are often geared towards junior golfers and golfers with special needs.
The USGA announced this year that it would invest up to $30 million over the next 15-years to help reduce the water consumption of courses by as much as 45 percent.
Mike Whan, USGA CEO, wrote that it would be a mistake for the organization to rest on its laurels. His message was posted online. When golf is so strong, we have an increased responsibility to foster its growth and ensure that we leave the game better for future generations.
