The nature of economic bubbles is that a lot of people pay inflated prices for a good, and then lose dramatic amounts of money when the market value of the property drops below the purchase price. This century’s first two decades have seen several; golf courses have been among them. When golf course values plummeted during the Great Recession, investors lost untold sums. Even a decade later, golf continues to contract under an aging customer base and lagging interest. The values of golf’s playing grounds react appropriately.
For any golf course owner, these economics are tough to weather. But imagine being on the hook not for one golf course, but for 26. Imagine that those golf courses were developed not with private equity, but with nine figures’ worth of public pension money. And imagine that the owner’s losses become so predictable that an entire state of nearly 5 million people must step in repeatedly and prop up the owner with tax revenue.
Welcome to Alabama’s Robert Trent Jones Golf Trail. Thirty years ago, within a bubble that continued inflating for nearly two decades, development began on a statewide golf construction project of unprecedented cost and scale. Now, with that bubble bursted and Alabama’s retirement system facing the Silver Tsunami, the wisdom of that development is questionable — but its future in that system is not. It’s here to stay. The Trail is too big to fail.
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The Robert Trent Jones Golf Trail, a collection of 11 multi-course sites stretching the full length of Alabama, bills itself as the largest golf development project in history. The claim would be difficult to dispute: from Muscle Shoals in the state’s northwestern corner to coastal Mobile more than 350 miles away, the Trail sprawls over some 5,700 acres and encompasses 468 holes of golf — all with an unlikely owner: the Retirement System of Alabama, overseer of the state’s public retirement funds.
The towering personalities behind the Robert Trent Jones Golf Trail: Alabama public pension CEO David Bronner, and the Trail’s namesake. The Montgomery Advertiser (Sept. 19, 1993).
If the RSA was an unlikely owner, then the Trail’s namesake was no less improbable. By 1990, Robert Trent Jones — for better or worse, post-World War II America’s most influential golf course architect — was 83 years old and retired. But the smell of cash was too hard to resist (the Trail’s first 18 courses cost $103 million; adjusted for inflation, that’s more than $10 million per 18-hole course). And despite calling the Trail “the biggest thing I have ever done,” Jones himself did little of the work (Jones’ old apprentice, Roger Rulewich, handled the bulk of the design work). After Jones’ death, his estate licensed the use of the architect’s name to future Trail developments, but the truth is that the RSA had been paying for little more than Jones’ name all along.
The Trail’s stated purpose has changed over time. Originally, the project’s unapologetic goal was to make money for the RSA; in 1993, RSA head David Bronner pegged an annual goal of at least $35,000 per site. “Then it becomes all profit,” he told the Montgomery Advertiser. And as late as 2001, the Trail was delivering on that investment: the Advertiser reported that year that the Trail was turning over nearly $30 million per year to the State. “If you are looking to make money, golf for golf’s sake is the best investment,” Bobby Vaughan, the CEO of the Trail’s management company, told the Advertiser that year. “It is not traditionally known to be a great lucrative investment, but the trail has made a profit each year.” And the Trail benefitted from glowing national attention — much of it the product of free advertising on television stations and in newspapers owned by the RSA (worth an estimated $30 million annually).
The Trail’s original, explicit purpose was to make money for Alabama’s public pension funds. At some point, that changed. “I always expected the Trail to be a loss leader,” RSA chief executive David Bronner told Golf Digest in 2012. The Montgomery Advertiser (Oct. 18, 1999).
At some point, though — coincidentally, in the years following the golf bubble’s bursting — that message began to change. Today, the Trail’s leaders say its purpose was to improve Alabama’s national image, and to attract tourism, retirees, and industry — thereby indirectly benefitting the RSA; making money, they say, was never the goal. “I always expected the Trail to be a loss leader,” Bronner told Golf Digest in 2012.
Attracting big business is all well and good, but it’s generally not seen as the job of a state retirement system. But the suggestion that economic development falls outside his mandate is one that Bronner has bristled at. “I don't want to be a pension-fund manager who doesn't given a shit about the state he lives in,” Bronner told Time in 2003.
And today, the RSA is eager to point to economic windfalls that have benefitted Alabama over the life of the Trail: tourism was a $14.3 billion industry in Alabama in 2017, up from $3 billion in 1990. To be clear, there is no evidence that the Trail is responsible for that revolution. But the RSA claims a share of the credit nonetheless.
“Mercedes Benz built a plant in Tuscaloosa in 1997. Then you had Toyota, Honda, and Hyundai all come in as well. Kia built a plant just over the border in Georgia that had an impact on RTJ’s Grand National facility. In Mobile, Airbus came in with the aerospace industry,” Dr. Mark Fagan, who wrote a flattering book about the Trail, told the National Golf Foundation in 2018. “The state is now doing so much better in terms of employment, capital funding and revenue. You can’t give all the credit to the Trail, but it was very important piece in all of that. Without the image enhancement, a lot of it wouldn’t have happened.”
Exactly how much the Trail’s “image enhancement” costs isn’t clear; the RSA wouldn’t disclose the Trail’s operating margins in recent years, nor whether the Trail sites’ real estate has diminished in value. Full-page photos of the Trail’s courses splash across the RSA’s annual report, along with giant pull-out quotes touting its historic construction — but the report never explains whether the Trail actually loses money, or how much. In 2015, a conservative-tilting statewide news site pegged the Trail’s annual losses at $20 million (without explaining how it arrived at that figure); in 2017, the president of the Trail’s management company outright refused to disclose the Trail’s financial condition.
Still, questions over the wisdom of a 30-year-old decision to invest heavily in golf development might be brushed aside as 20/20 hindsight, bur for the RSA’s two biggest problems — both of which the Trail exacerbates.
First, the RSA is underfunded — in other words, its assets are insufficient to cover its obligations to current and future retirees. This hasn’t always been the case, though. From 1997 to 2014, the RSA dropped from 111 percent funded to 63 percent funded (by 2017, its funding had risen to 71 percent). Alabama Media Group calls the Trail a “drag” on the RSA.
Second, one of the RSA’s chief criticisms is the over-representation of its in-state investments. When a pension invests in-state, it often makes that decision based on something other than anticipated performance (for example, supporting a local industry). A 2019 report found that more than 15 percent of the RSA’s investments were located in Alabama — one of the highest rates of in-state investment for any state pension in America. Bronner has disputed that figure, but he also hasn’t shied away from keeping the RSA’s money inside the state. “If we don’t invest in ourselves, who the hell will?” Bronner told the Alabama Media Group.
The Robert Trent Jones Golf Trail is both of these things: a financial drag in a fund desperate to stop its own bleeding, and a barrier to geographically diversifying the RSA’s assets.
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When it comes to spending public money, everyone has an opinion. That’s why trying to get someone to talk about the Trail’s role within the RSA portfolio is so bizarre: no one will speak about it.
The Pew Charitable Trusts, a leading force on public pension research, declined to discuss the RSA or the Trail (“We don’t comment on specific investments or offer recommendations on how fund assets should be invested,” a spokesperson said). The Urban Institute, a think tank that also has researched the fitness of state pensions, claimed too little expertise in “pension investment practices.” A Republican Alabama state senator failed to respond to repeated e-mails. The RSA directed Trail-specific questions to the Trail, and the Trail itself didn’t respond to multiple e-mails.
Perhaps this is all a coincidence. Or perhaps it’s a reflection of the out-sized influence wielded by the RSA’s chief executive, David Bronner — who, in the words of Governing magazine, “may be the most powerful man in Alabama.” Bronner is not a native southerner, nor does he claim any political allegiances — making his rise to power in an insular, conservative state perhaps unique. But since taking over the RSA in 1973, he has taken a portfolio worth half a billion to one valued by the RSA’s last annual report at nearly $44 billion. There’s a certain amount of political capital that comes with reigning over a mountain of cash.
Bronner has wielded that influence like a mace, lashing out toward every perceived threat, from within state government and without. He’s accused the Koch Brothers of “buying universities across the country” to attack public pensions’ stability — including Troy University in Alabama, which has criticized the RSA. He has fought his own board’s efforts to hire independent legal counsel. And he has fiercely resisted suggestions that the Robert Trent Jones Golf Trail was poorly conceived: Bronner told Governing that his critics thought they were “going to get him on this one. So the buzzards were flying around me. Keep flying, I don’t give a shit.”
Maybe the lack of criticism toward the Trail is its undeniable place in Alabama’s sense of public pride. Maybe no one in a position to level meaningful criticism wants to get on Bronner’s bad side. Or maybe there’s the fact that, 30 years into the experiment, Alabama is married to the Trail, for better or worse; an investment fund with the principle goal of making money ordinarily would cut loose an unprofitable asset, or at least prune it of its costliest elements. But the Trail’s true value lies in the collection of golf courses, not the sum of the courses themselves; whatever they’re worth, they’re worth it because they’re The Trail, not because they’re 26 individual golf courses. Selling off parts of the Trail would make no sense, either for the RSA or for buyers. So any hypothetical sale would have to unload the entire Trail. But no investor in her right mind would spend the kind of money that it would require to purchase the Trail on a collection of golf courses that are destined to lose money for the rest of time. So the RSA is stuck with the Trail. And Alabama taxpayers are stuck filling in the financial sinkhole.
Three decades into the Trail’s life, then — and now more than a decade past the bursting of the golf development bubble that made the Trail possible — the Trail is as much cautionary tale as novelty. On most days, its courses’ tee sheets are wide open; its clubhouses quiet, nearly empty. Today, the Trail is a reminder that, going forward in golf, if you build it, they might not come. Bigger is not always better; sometimes, more is less.
It’s been a painful lesson for many golf investors over the past decade. Perhaps it’s less painful when learned with other people’s money.
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