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HomeMy WebLinkAboutAgenda Statement 1984/10/15 Item 7 COUNCIL AGENDA STATEMENT. Item 7 ► ` Meeting Date 10/15/84 :TEM TITLE: Resolution /(7g1,- Approving agreement between the City of Chula Vista and American Golf Corporation SUBMITTED BY:Assistant City ,•Manaaer ' (4/5ths Vote: Yes No X ) [VIEWED BY: City Manager n September 4, 1984, the City Council approved in concept leasing the Chula Vista uncipal Golf Course to American Golf Corporation and directed staff to negotiate a final ontract document. A final contract has been negotiated, which essentially reflects the nformational draft agreement furnished members of the City Council some time ago with the xception of some minor changes. xhibit 1 (attached) summarizes the major terms and conditions of the lease agreement. ECOMMENDATION: Adopt resolution approving a 20-year lease agreement of the Chula Vista Municipal Golf Course withAnerican Golf Corporation. OARDS/COMMISSIONS RECOMMENDATION: The Parks and Recreation Commission considered the proposed lease at its 9/27/84 meeting and recommended its approval by the City Council . The Golf Course Evaluation Committee were each furnished copies of the proposed lease and, while they did not meet as a group to evaluate its content, individual members all responded favorably to the lease terms. ISCUSSION: he final lease agreement and a summary of its major terms and conditions are provided in xhibit 1 attached. nder terms of the agreement, American Golf would be required to construct a significant umber of capital improvements over the next three years. The final agreement has added ne additional capital project to the CIP program, i .e. , construction of a halfway house food concession) if permitted and/or required by the City. American Golf has indicated hat they are willing to provide such a facility if, in the City's judgment, such a facility ould be beneficial to the overall operation of the golf course. merican Golf has met with present golf course employees but, as of this date, it would not ppear any current golf course employees will be going with American Golf Corporation. Due o this fact, the "bumping procedure" as prescribed in the Civil Service rules and regula- ions will come into play and some employees will have to be demoted. It currently appears s though about two employees would be terminated. These employees will be offered mployment by American Golf Corporation. he present Golf Professional , Joe Warburton, has been notified by the City that his ontract will be terminated 120 days from September 11 , 1984, or on January 9, 1985. merican Golf Corporation officials have met on two occasions with Mr. Warburton and made im an offer to continue as the Golf Pro at Chula Vista Municipal but, to date, Mr. Warburton as not accepted or rejected said offer. It would be American Golf's intention to take verr operation of the golf course on November 1 , 1984, notwithstanding Mr. Warburton's ights and obligations under his contract with the City. If an agreement is not reached, orm A-113 (Rev. 11/79) • Page 2, Item 7 Meeting Date 10/15/84 imerican Golf will not be entitled to income from the Pro Shop, golf cart rental or 'riving range, until January 10, 1985. •he draft agreement provided to the City Council required American Golf to furnish an nnual profit and loss statement. This provision was inserted at the suggestion of the inance Director in the belief that such information would be helpful in future green •ee increase requests. American Golf objected strenuously to the annual requirement, lthough they recognized other provisions of the agreement permitted the City to audit ny and all of their financial records as they pertain to the Chula Vista golf course operation and, while they would not be furnishing the City a profit and loss statement nnually, the City could develop from their own records the same statement. In view of he City's ability to develop all the information required in the future in considering green fee increases the final agreement does not include the annual profit and loss tatement requirement. .INANCIAL IMPACT: lased on the proposed contract, the following minimum and/or probable annual income hould accrue to the City: Year 1 Year 2 Year 3 Year 4 Year 5 linimum Net (1 ) $14,517 $21 ,429 $34,750 $45,175 $46,695 ercentaae Net (2) 20,967 41 ,929 54,650 56,725 63,895 1 )"Minimum Net" reflects the minimum American Golf would pay to the City under the proposed contract without regard to total income/sales. 2)"Percentage Net" reflects the annual income American Golf would be expected to pay to the City based upon projected percentage factors times sales/income. RA:mab Dated /jam EXHIBIT " 1" • SUMMARY OF MAJOR TERMS AND CONDITIONS OF PROPOSED LEASE AGREEMENT The American Golf Corporation has agreed to the following major terms and conditions of a multi-year lease agreement: 1. Lease Term - The lease would have an initial term of three years with an option to extend for two additional one-year periods and three five-year periods. At City 's sole discretion, the lease could be extended for two additional five-year periods at the conclusion of the initial twenty year term. 2. Rent - American Golf Corporation has agreed to the following minimum annual rent guarantee: Year One $68,400 Year Two 74,000 Year Three 86,000 Years Four through Eight 100,000 Years Nine through Thirteen 112,000 Years Fourteen through Twenty 124,000 OR the following percentages of annual gross receipts, whichever is greater: 15% of gross greens fees, golf cart rental and driving range fees and 6% of total pro shop sales. 3. Purchase of City-Owned Equipment, Tools and Supplies - American Golf agrees to purchase within sixty days of execution of the lease agreement all City maintenance equipment, tools and supplies at fair market value, which value is to be determined by an appraisal . 4. Ownership of Improvements - All improvements currently on the course and major capital improvements to be provided by American Golf at their sole cost will be and/or remain in the ownership of the City. 5. Capital Improvements - Over a three year period, American Golf would provide major capital improvements to the golf course costing • approximately $1 .4 million based on estimated contract prices developed by City staff. It should be noted, however, that American Golf probably can accomplish this work for less because many of the improvements will be constructed by American Golf employees. It should also be noted that the major cost items, capital improvements to mitigate drainage problems and bridging the main channel , cannot be precisely estimated until a final design of the channel improvements have been developed and approved by the • •o • City. Notwithstanding the final cost of these improvements, American Golf has agreed to bond for those improvements, if required by the City, and • has agreed that all improvement plans are subject to the City's approval prior to construction. 6. City Control of Greens Fees - American Golf has agreed that the City Council would have authority over greens fees to be levied at the course. American Golf further agrees that such fees will not be adjusted more than once every lease year with the understanding that the City will allow fees comparable to those charged by other public golf courses in San Diego County. American Golf has indicated they do not want to increase the . - current greens fees during the first year of the lease term. 7. Triple Net Lease Agreement - American Golf has agreed to what it generally referred to as a triple net lease; i.e., American Golf would pay for all insurance, taxes and upkeep of the golf course and structures located thereon except the restaurant and jogging trail . Except for the annual - bond payment, the City would have no expenses of any kind. 8. Present Golf Course Employees - American Golf has agreed to include in the lease agreement language that would guarantee employment to all employees currently working at the golf course or to accept the employment of any City employees "bumped" out of City employment by reason of the lease agreement. 9. Golf Course Professional - American Golf is attempting to negotiate with the present Golf Professional , Mr. Warburton, to determine if mutually acceptable terms and conditions of employment can be worked out whereby he could remain as the Golf Professional under the employment of American Golf. Mr. Warburton's contract with the City provides for its termination with 120 days notice if the City decides to lease the entire course operation. American Golf's proposal is contingent upon the City's willingness to terminate the Warburton contract even if they are unsuccessful in working out a mutually acceptable arrangement. WPC 0 511 A t r I CERTIFICATE OF SECRETARY OF AMERICAN GOLF CORPORATION I, VETAHMARY R. HIGGINS, am the duly elected secretary of American Golf Corporation ("AGC") . 1. AGC is Lessee under that certain instrument entitled "Lease Between the City of Chula Vista and American Golf Corporation for the Operation of a Public Golf Course and Driving Range" ("Lease") . 2 . The Lease has been executed by David G. Price and Ernest Chase Burns on behalf of AGC. 3 . David G. Price is the Chairman of the Board of Directors and Chief Executive Officer of AGC, and Ernest Chase Burns is Vice President/Acquisitions of AGC. Both men are legally empowered to execute instruments on behalf of AGC. WITNESS MY HAND and entry of the Corporate Seal of American Golf Corporation this 30th day of October 1984 . WVA‘re-1. G°1-