2011-04-12 Special CC PacketA3
CITY OF ALA11 EDA CALIFORNIA
SPECIAL JOINT MEETING OF THE CITY COUNCIL,
ALAMEDA REUSE AND REDEVELOPMENT AUTHORITY (ARRA),
AND COMMUNITY IMPROVEMENT COMMISSION (CIC)
TUESDAY APRIL 12,2011 5:30 P. M.
Locatio Cit Council Chambers Conference Room, Cit Hall, corner of Santa Clara
Avenue and Oak Street
Acienda:
1. Roll Call Cit Council, ARRA, CIC
2. Public Comment on A Items Onl
An wishin to address the -Council/Board/Commission on a items
onl ma speak for a maximum of 3 minutes per item
3. Ad to Closed Session to consider:
Cit Council
3-A. CONFERENCE WITH REAL PROPERTY NEGOTIATORS (54956.8)
Propert 1 Clubhouse. Memorial Drive
Ne parties: Cit of Alameda and Kemper Sports
Under ne n: Price and terms
3-B. CONFERENCE WITH LABOR NEGOTIATORS (Gov. Code Section 54957.6
Agen.c desi g nated repre sentatives: Ma Gilmore and Vice Ma Bonta
Unrepresented--emplo Cit Mana
Cit Count -iL ARRX.-C.I.0
3-C. CONFERENCE W.ITH LEGAL COUNSEL EXISTING LITIGATION (54956.9)
Name of case: SCC Alameda Point, LLC, et al v. Cit of Alameda et al, U.S.
District Court, case number CV 10-5178
3-D. CONFERENCE WITH LEGAL COUNSE EXISTING LITIGATIO (54.956.9)
Name of case.-. SCC Alameda Point, LLQ. et al v. Cit of Alameda et al Alameda
Count Superior Court, case number RG 10537988
4. Announcement of Action Taken in Closed Session, if an
5. Adjournment Cit Council, ARRA, CIC
Marie L. Gilmore, Ma
Chair, ARRA and CIC
CITY OF ALAMEDA CALIFORNIA
SPECIAL MEETING OF THE CITY COUNCIL
TUESDAY___ APRIL 12, 2 011 ___7:00 P.M.
Location: Cit Council Chambers, Cit Hall, corner of Santa Clara Ave and Oak Street
Public Partici anon
An wishin to address the Council on a items or business introduced b
Councilmembers Members ma speak for a maximum of 3 minutes per a item
when the subject is before the Council
PLEDGE OF ALLEGIANCE
1. ROLL CALL Cit Council
2. AGENDA ITEM
2-A. Discuss Options Related to the Future Operation of the Chuck Corica Golf
Complex and Provide Direction to the Actin Cit Mana on Next Steps, Cit y
Mana
3. BOARD REFERRAL
3-A. Golf Commission Report to Council
4. ADJOURNMENT Cit Council
MAI
Marie L. Gilmore, Mayor
CITY OF ALAM EDA
Memorandum
To: Honorable Mayor and
Members of the City Council
From: Lisa Goldman
Acting City Manager
Date: April 12, 2011
Re: Discuss options Related to the Future operation of the Chuck Corica Golf
Complex and Provide Direction to the Acting City Manager on Next Steps
BACKGROUND
In May 2007, the City retained the services of the National Golf Foundation (NGF) to
conduct a comprehensive operational review of the Chuck Corica Golf Complex
(Complex). The study was conducted during a six -month period, and the results were
presented to the City Council in January 2008.
Upon receipt and examination of this operational review, the City Council adopted a
motion directing staff to work with NGF to develop a Request for Proposal (RFP)
seeking an interim operator for the Complex. The RFP was developed and distributed
to more than 05 golf managements firms in July 2008. seven responses .were. received
and initially screened by the Interim Finance. Director, the Golf Commission. Chair, a
second Commissioner, the Director of Recreation and Parks, and the then Assistant
City Manager for compliance with RFP criteria. The interview panel consisted of ..the
Deputy City Manager, the Golf Director for the City of Walnut Creek, and the. golf
consultant to the City of San Leandro.
Kemper Sports Management was selected by a substantial point margin based upon its
experience in providing municipal golf management services, financial capacity and
sustainability, and operational references. On November 8, 2008, the City Council
authorized the City Manager to enter into a one -year agreement with Kemper sports to
provide interim management of the facility. (Dece.mber 2008- December 200 The City
Council also directed staff to research potential long -term solutions during this one -year
management contract period. Further, during this interim period, the City would
transition from City staff to contract staff at the Golf Complex.
In July 2009, based on previous City Council direction, staff prepared a second RFP
seeking a long -term operator to provide management, operational, and maintenance
functions on a long -terra lease basis. The City was also looking for a firm willing to
invest much- needed funds in capital improvement, an investment the City had been
unable to make for many years. The .RFP was distributed to 05 firms in October 2009.
As a result of the national economic market collapse and recession, only two firms in
City council
Agenda item #2 -A
04 -12 -11
Honorable Mayor and April 12, 2011
Members of the City council Page 2 of 7
the industry submitted proposals, Kemper sports Management and Bellows Golf
Manage ment/Landscape Golf Group.
Following an extensive review of both of the proposals, Kemper Sports. Management
was once again selected as the top firm based on Its national experience and solid
reputation in the field as well as its commitment to providing capital funding for critical
improvements to the Golf Complex. This review, conducted by the then Interim City
Manager, found that Bellows Golf Manage ment/Landscape Golf Group, in ..contrast, .had
less ability to invest funds in the Golf complex and would have relied on the. Golf
Enterprise Fund Balance to support its capital expenditures. The City Council approved
the selection of Kemper Sports Management on March 10, 2010, and directed.staff to
begin negotiations for a long -term agreement.
DISCUSSION
Between March 2010 and December 2010, the then Interim city Manager and the
Director of Recreation and Parks worked with Kemper .Sports Managern.ent. to .develop a
number of scenarios for the future long -term operation ..of the. Chuck Corica Golf
Complex. The scenarios ranged from a no- change option, under which the City
retained the services of Kemper under a management agreement, to log -tern lease
options for either 27 holes (with nine holes on the South Course closed) or .30 Tholes.
On January 25, 2011, the city council held a special meeting on golf in order t0 discuss
moving forward with a long -term lease of the facility. Mr. Ben Blake, Executive vice
President for Kemper sports Management, presented two scenarios. for the future
operation of the Golf Complex as well as background information on the golf market in
the Bay Area. According to Mr. Blake, the local golf market is soft, .with calendar .year
2010 ,rounds down between 6% and 9% at local golf courses (Metropolitan, Tilden, .and
Monarch Bay).
Course Configuration
At the January 25, 2011, meeting, Mr. Blake presented Kemper's proposal to secure a
long -terra lease with a 27 -hole configuration. According to Mr. Blake, this configuration
would have allowed an investment (via bond financing) of $5 to $5.25 million in capital
improvements to the Golf Complex, including the driving range. The list of capital
expenditures (known as CAPBx included:
0 Clean out drainage canals
0 Renovate irrigation system
0 Replace sand mix and grass on greens
0 Repair drainage and replace sand in bunkers
0 Renovate driving range
0 Repair fairways and tees
Honorable Mayor and April 12, 2011
Members of the City Council Page 3 of 7
Under this scenario, Kemper believed that it could service the debt payments from the
bond financing and have enough positive cash flow to participate in some level.of profit
sharing with the city. That profit sharing amount would have been the subject of
negotiations between the city and Kemper.
At the meeting, Mr. Blake also addressed the 30 -hole scenario under which the two
courses continue to operate as is. Mr. Blake assumed under this scenario that it .would
cost just under $8 million to renovate the 38 holes and the driving range. This.close. to
$8 million figure was based on the estimate included in the National Golf. Foundation
report. The NGF report, which was dated September 2007, included the following
rough estimates for capital expenditures:
Fix/repair artificial turf at driving range $1,000,000
Improve 18 -hole south course $3,000
Improve 18 -hole North Course $3,250,000
Miscellaneous repairs of restroorns, entryway, maintenance area 370;000
Total $7,620,000
Given the amount of funding available ($5 to $5.25 million), Kemper did not believe that
it was prudent to spread this funding over 35 holes and dilute improvements.
Rather, they believed that a 27 -hole configuration would allow them to make the
necessary repairs and course improvements with the available funding while still
providing sufficient capacity for tournaments and general play.
After discussing Kemper's proposal and receiving public comment, the City. Council
asked that the item be brought back at a later date so that both the council and the
community could review the scenarios that Kemper and the former Interim City. Manager
discussed between March and December 2010. Much of this information Kemper
considered to be proprietary and therefore confidential; summaries. of the information
were shared with the City council and members of the golf community in early
February.
Fi nand n
During a discussion with Kemper in early February, staff learned that the questi.on .of
bond financing for the project was not settled. It was Kemper's understanding, based
on their discussions with prior staff, that the city would issue tax- exempt bonds for this
project, and Kemper would pay the debt service on those bonds. Current staff
understood that under the contemplated transaction, Kemper was going to issue the
bonds and be responsible for the debt service. unfortunately, neither scenario is
feasible.
A golf course financing undertaken by the city would not be considered a public use
eligible for tax exempt financing, even though the Golf complex would continue to be a
City-owned asset, because the Golf Complex is intended to be leased to a private party.
The City could undertake a financing for a taxable bond, but the rates would likely be
Honorable Mayor and
Members of the City council
April 12, 2011
Page 4 of 7
much higher than for a tax exempt bond, and the city's General Fund would have to
back the bonds. This means that the General Fund would have the burden for any
default on the bonds, which is neither feasible nor prudent.
New Kem er Prop osal
As a result of the misunderstanding related to the financing, staff asked Kemper to
revisit its proposal and determine if there was any gray to raise the necessary funds
privately. Between early February and early April, Kemper worked to find private
funding for the Golf complex. Unfortunately, given the state of the economy, Kemper
was unable to secure private financing in order to make the $5 to $5.25 million in
investments.
As a result, Kemper submitted a new proposal to the City in early April in which Kemper
would retain the existing 30 -hole course configuration. over the first ten years of the
proposed 20 -year lease agreement, they would make $5.8 million of improvements to
the golf course and the driving range (Exhibit 1).
Kemper would fund the improvements to the Golf Complex through the use of the
operating income from the course and would contribute $500,00O its own money
upfront to start the renovations in 2012. Each year through.2022, Kemper would spend
approximately $500,000, or more if operating results are better than projected, on
renovations (with the exception of one year in which the renovations would be
approximately $350,000). The renovations include work on the drainage and irrigation,
renovation of the driving range, replacing the greens on the south Course, renovating
the tees and bunkers on the south course, and repairing the cart paths.. For..the
second ten years of the 20 -year term, Kemper would pay the City a Nigher percentage
of the revenues in order to fund additional Golf Complex improvements. All. of these
points would be subject to negotiations should the City Council direct staff to move
forward with Kemper and negotiate a lease agreement that would be subject to City
Council approval.
Alternative Proposais
At the City Council meeting on January 25, some members of the community suggested
that other golf management firms would be willing to invest significant resources in the
Golf Complex if given the opportunity. over the past several months, three .golf firms,
Bellows Golf Management, Greenway Golf, and Billy Casper Golf sent unsolicited
letters to the City expressing their interest in the Chuck Corica Golf Complex. Those
letters are attached as Exhibits 2, 3, and 4, respectively.
Given that staff's last direction from the city Council, on March 16, 2010, was to enter
into negotiations with Kemper Sports Management, staff has not discussed the letters of
interest with the three firms. Should the City Council be interested in entertaining offers
from operators other than Kemper, staff would recommend that the City issue a new
RFP and conduct an open, transparent, competitive selection process.
Honorable Mayor and April 12, 2011
Members of the City Council Page 6 of 7
Staff estimates that an RFP process could take three to six months to complete. It is
important to note that between now and the end of June, the Acting city Manager and
other staff who would work on this RFP will be immersed in the City's budget process,
thereby potentially delaying the completion of the RFP process to some time in the.fall.
On April 6, 2011, the city council received a fetter from Harbor Bay Isle Associates
(HBIA) regarding its interest in the Chuck Corica Golf Complex. That letter is attached
as Exhibit 6. HBIA's proposal includes three elements:
1. HBIA will consider providing up to $6 million to upgrade and reconfigure the .existing
36 holes of golf and create a new course for juniors and seniors on a. portion of the
reconfigured south Course. The $6 million would also be used to repair drainage
and irrigation and provide enhanced fairways, greens and bunkers.
2. HBIA will transfer the 12 acres of property it owns on North Loop load to the pity for
the creation of soccer fields, baseball fields, and concession and rnaintena.nce
facilities. They would contribute $3 million toward this plan. The Landscape and
Maintenance District funded by the Harbor Bay Business D.istri would maintain the
property in perpetuity, thereby relieving the city of maintenance. costs for the. new
sports fields.
3. HBIA would exchange its property. on North Loop Road for the 12 acres .of the Mif
Albright Course, upon which it would build its Village 6 housing proposal.
According to HBIA, this proposal would bring many benefits to the City of Alameda. and
to the greater Alameda community. It would preserve and improve the Golf. Comp lex,
ensure that youth and seniors have a course of their own, and provide much- needed
sports fields and facilities. Under this proposal, HBIA would not operate the Golf
Complex. Kemper or another golf. operator. would perform this function. Staff .has. not
had an opportunity to fully analyze. this proposal but felt it appropriate to include this
information in the report for the public's benefit.
Mif Albright
On December 7, 2010, the City Council approved a notion to .direct staff to finalize
negotiations for the lease of the Mif Albright Course with the principals of the Alameda
Junior Golf Association (AJGA) and. to reserve $10.0 from .the.. Golf Enterprise Fund
as a match for a grant from the Wadsworth. Foundation to AJGA for the Mit Albright
Course. The Wadsworth Foundation is offering not only $260,D00 in cash for the
course but also in -kind support for capital improvements to the course. In return, they
are seeking an agreement from AJGA to operate the Mif Albright Course for 15 years.
Staff has been negotiating with the members of. AJGA since January on this proposal
and has general agreement on a term sheet (Exhibit 6). Some of the items on the term
sheet, such as use of the Driving Range Pro Shop to support the Mif Albright operations
Honorable Mayor and April 12, 2011
Members of the City Council Page 6 of 7
and use of teaching stalls at the Norma Arnerich Teaching Center, require discussions
between AJGA and the eventual operator of the Chuck Corica Golf Complex. The
actual lease agreement will be brought to the City Council for approval in the future.
Golf Enterprise Fund Balance
At the end of February 2011, the Golf Enterprise Fund cash balance was $594,576, and
the available fund balance was $343,353, net of the $100,000. reserved for the Mif
Albright matching grant. The difference between the cash balance of $594,57.6 and the
available fund balance of $343,353 is comprised of funds that have been committed for
payments to vendors and for future redemption of previously issued gift certificates in
essence bills that will come due but .have not yet been paid. When the C.ity Council
adopted the FY 10 -11 budget for the Golf Complex, the beginning avai lab.le fund balance
was projected .to be $690,372, while the available ending funding balance.was projected-
to be $1,065,562, an increase of $375,190. (These are. the amounts that appear i n the
City's adopted budget.) However, the actual beginning fund balance, which is also the
available ending fund balance for the prior year, was $657,644, as. can be seen on
Exhibit 7, which shows a ten -year history of the Golf Complex finances.
As the spreadsheet shows, the available fund balance dropped from a high of
$3,629,527 in FY04 -05 to a low of $343,353 at the end of. February .2011. In order to
project an ending fund balance for the current fiscal year, staff assumed that revenues
and expenditures for the remainder of .this fiscal year (March 1 .through June 30) would
approximate revenues and expenditures for. the same period last year. If those
assumptions hold, then .the Golf Enterprise Fund Balance will be .$605,847. as .of June
30, 2011, rather than the $1,065,562 included in the FY10 -11 budget. Should. the Golf
Complex experience good weather. through .the remainder of. this fi.scai year, then the
revenues may rise, and the fund .balance ma be. greater than the $605,847 currently
projected. Conversely, a period. of bad weather, such as the Golf Complex experienced
in March, may negatively affect the fund balance.
FINANCIAL IMPACT
As described above, the Golf Enterprise Fund had a cash fund balance of $594,576 and
an available fund balance of $343,353, inclusive of the $100,040 reserved for the. Mif,
as of February 28, 2011. while Kemper has managed to slow the rate of revenue loss,
the current situation is not sustainable.
RECOMMENDATION
Discuss options related to the future .operation of the Chuck Corica Golf Complex and
provide direction to the Acting City Manager on next steps
Honorable Mayor and
Members of the city Council
Exhibits:
1. Letter from Kemper Sports Management
2. Fetter from Bellows Golf Management
3. Letter from G reenway Calf
4. Email and supporting materials from Billy Casper Golf
5. Letter from Harbor Bay Isle Associates
6. Draft term sheet for non profit operation of the Mif Albright Course
7. Golf Course Income statements, FY00 -01 through FY10 -11
April 12, 2011
Page 7 of 7
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