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Agenda Item 31.
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| City Council Meeting |
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| Subject: |
| Interim Contract with Western Golf Properties for Birch Hills Golf Course and Funding for Maintenance, Operations and Other Related Costs |
| RECOMMENDATION |
- Award interim contract to Western Golf Properties LLC in the amount of $825,180 for Birch Hills Golf Course; and
- Include the projected revenues and expenditures for the Birch Hills Golf Course operations for Fiscal Year 2020-21 in the Golf Course Enterprise Fund (Fund 465).
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| BACKGROUND/DISCUSSION |
In March of 2011, City Council approved a lease agreement with Imperial Golf to operate and maintain the 18-hole Birch Hills Golf Course. Per the agreement, the lease would become effective when the course was transferred to the City of Brea, which occurred in October of 2019. Shortly after the golf course transferred to the City, Imperial cited concerns regarding specific terms in their lease and requested for some concessions from the City. After discussion, Imperial and City decided to mutually terminate their lease and City would seek a new operator. The current lease will terminate on July 5, 2020.
Given the short turnaround time to take over the golf course operations and look for a permanent operator, staff is recommending that City Council approve moving forward with an interim operation and maintenance contract for the golf course from July 1, 2020 through December 31, 2020 while a permanent operator is selected for a longer term. Should the selection of the permanent operator extend past December 31, 2020, the interim contract will change to a month-to-month term until City terminates the contract.
During the interim period, the City will be operating the Birch Hills Golf Course using a contract operator as opposed to a lease agreement. This means the City will take in all the revenues generated (through the operator) and pay the operator a fixed fee for the maintenance and operations of the golf course. Additionally, the City will be responsible for other costs such as the cost of goods sold in the restaurant and pro-shop; water costs, Golf Course Specialist position and credit card processing charges.
Contract Operator
The initial interim period is expected to be six months. During this interim period, staff will issue a Request for Proposal (RFP) seeking a permanent operator for both the Birch Hills and Brea Creek courses. Western Golf Properties (WGP) currently operates Birch Hills as a sub-contractor to Imperial Golf and is currently the interim operator at Brea Creek for the City. WGP has done a commendable job operating and maintaining both golf courses.
WGP provided a six month proposal for the interim operations at Birch Hills. WGP expressed their desire to work with the City and reduced their original proposal by $21,000 over the 6 month period. The final proposed amount is $137,530 per month. In addition to the six month term, other terms in the agreement include:
- Provide full maintenance and operation of the course;
- Provide all the maintenance equipment and golf carts for the operation; and
- Provide a daily accounting of all sales and provide all revenues to City
The full scope of work is available in Exhibit “A” of the agreement. Additionally, during the interim period, WGP has committed to improve the golf course by restoring grass on the driving range landing area by a phased slit seeding process. This phased process is necessary to be able to recover the range balls with the additional irrigation needed to establish the seed. The range should be green again by September 2020. Other additional maintenance activities will continue to be directed at the weeds in the roughs along the holes.
During the interim period, there are other golf course related costs that are not the responsibility of the contract operator. The following costs are estimated to be approximately $311,068 for the six-month period:
- Cost of Goods Sold – Food and Beverage
- Cost of Goods Sold - Merchandise in the Pro-shop
- Credit Card Processing Fees
- Irrigation water
- Golf Course Specialist
Based on the information received, revenue estimates at the golf course for the six month period are $1,240,415. Gross revenues include pre-pandemic food and beverage estimates and could vary based on clubhouse operations going forward.
The projected gross revenues less the contract operator cost and the other estimated costs are as follows:
| Gross Revenues |
$1,240,415 |
Expenses:
- Contract Operations
- Cost of Goods Sold
- Water
- Credit Card Fees
- Golf Course Specialist
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$825,180
$130,788
$153,000
$16,280
$11,000
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| Total Expenditures |
$1,136,248 |
| Revenues Over Expenditures |
$104,167 |
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| COMMISSION/COMMITTEE RECOMMENDATION |
| The Finance Committee reviewed this item at their meeting on June 9, 2020. The Committee felt that the contract should include a more robust field marshall program and should also include a youth golf program. Finance Committee recommended that staff provide an overview of this item for discussion at the June 16, 2020 City Council Study Session. |
| FISCAL IMPACT/SUMMARY |
The projected net revenues over expenditures from this interim operation are $104,167 which will be included in the Golf Course Operations Fund (Fund 465) for Fiscal Year 2020-21. The lease agreement with Imperial Golf had a base rent amount of $72,000, plus a projected $79,000 in percentage rent for an estimated total of $151,000 for the six month period from July 1 – December 31, 2020, which would have been budgeted in the General Fund.
An RFP will be issued for a permanent operator of the Birch Hills and Brea Creek Golf Courses. Staff recommends awarding a six month contract to Western Golf Properties for the maintenance and operations of the Birch Hills course in the amount of $825,180. |
| RESPECTFULLY SUBMITTED: |
William Gallardo, City Manager
Prepared by: Bill Bowlus, Public Works Superintendent
Faith Madrazo, Revenue & Budget Manager
Concurrence: Tony Olmos, P.E., Public Works Director
Cindy Russell, Administrative Services Director |
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