City Council Report 915 I Street, 1 st Floor Sacramento, CA

Transcription

1 City Council Report 915 I Street, 1 st Floor Sacramento, CA File ID: June 19, 2018 Consent Item 30 Title: Fourth Lease Amendment with Morton Golf LLC to Operate William Land Park Golf Course Location: 1701 Sutterville Road, District 4 Recommendation: Pass a Resolution: 1) approving the Fourth Lease Amendment with Morton Golf LLC to add operation of the William Land Park Golf Course for FY2018/19 that includes a rent reduction of $250,000; 2) approving the commitment of General Fund unobligated fund balance on June 30, 2018 in the amount of $250,000 to support the Golf Fund (2603) operations; 3) appropriating the General Fund commitment from fund balance in FY2018/19, reducing the Golf Fund (2603) revenue budget by $250,000, and establishing the related transfers between the General Fund (1001) and the Golf Fund (2603); and 3) authorizing the City Manager or City Manager s designee to execute the Lease Amendment. Contact: Shannon Brown, Interim Director, (916) ; Barbara Smith, Administrative Officer, (916) , Department of Youth, Parks, & Community Enrichment. Presenter: None Attachments: 1-Description/Analysis 2- Resolution 3-Fourth Amendment to Lease Agreement Susana Alcala Wood, City Attorney Mindy Cuppy, City Clerk John Colville, City Treasurer Howard Chan, City Manager Page 1 of 15

2 File ID: Consent Item 30 Description/Analysis Issue Detail: In 1998, the City entered into a lease with the Sacramento Area Youth Golf Association doing business as The First Tee of Greater Sacramento (First Tee), to operate the William Land Golf Course. First Tee is a national nonprofit corporation that teaches life skills to youth through the game of golf. First Tee offers free golf training for youth at the Land Park course as part of their overall life skills educational program. In 2011, First Tee contracted with Morton Golf, LLC (Morton) to manage the maintenance and operation of the William Land Golf Course (Land Park) on their behalf. Morton holds a longterm lease to manage the City s other three golf courses (Haggin Oaks, Bing Maloney and Bartley Cavanaugh) which was awarded in 2011 (City Agreement No ). Due to a decline in golf rounds played at the Land Park nine-hole course and rising labor costs, First Tee has realized a net loss of $350,000 over the last five years. Maintenance costs have already been minimized to mitigate losses, but the cuts are not sufficient to cover the deficit. First Tee forecasts continued losses of between $150,000 - $200,000 annually. They have informed the City that they cannot afford to continue absorbing these losses as it diverts funds raised to support their youth programs. They have provided notice of their intent to terminate the Land Park golf course lease agreement effective June 30, Staff has evaluated options to keep the golf course open and recommend adding the Land Park course to the existing Morton Lease Agreement for one year, (July 1, 2018 through June 30, 2019) in order to evaluate whether any changes are feasible to make this golf course selfsustaining. Morton is willing to assume operation and maintenance of this golf course, but predicts the net loss will be $250,000 because the course needs some increased maintenance work and marketing efforts in order to attract more golfers. Morton will also continue to work with First Tee to support their free youth golf program at Land Park. Morton is successful in its operation of the other three City golf courses due in part to the revenue from special events and catering, as well as golf lessons and merchandise sales. Morton requires that the rent under the existing Lease be reduced by $250,000 to offset the anticipated net losses at Land Park over the next year. City staff and Morton will meet during the year to review costs and revenues at Land Park to verify the need for the rent reduction, and to determine if this course can become self-sustaining. The Lease revenues cover the golf loan payments and City staff costs. As a result, there needs to be a fund transfer to cover this Lease revenue reduction. Policy Considerations: Under City Code section F, the City Council needs to make a finding that leasing the Land Park course to Morton without competitive bidding is in the best City of Sacramento June 19, 2018 powered by Legistar Page 2 of 15

3 File ID: Consent Item 30 interests of the City. Because Morton has been operating and maintaining this golf course under contract with First Tee, Morton is uniquely positioned to assume management of this course by the July 1st deadline to avoid a temporary closure. Also, because Morton operates the three other City golf courses, it can offer cost efficiencies in management and marketing. Economic Impacts: Keeping the William Land Golf Course open under Morton s continued operation and maintenance will preserve 3 existing full-time and 22 part-time golf course jobs, and add 3 to 4 additional full-time employees. In addition, revenue received through the golf course operation creates an estimated savings to the City of $125,000 per year based on the estimated $375,000 cost annually if City park maintenance staff assumed the task of mowing the golf course grounds versus the rent reduction of $250,000. Environmental Considerations: California Environmental Quality Act (CEQA): This action concerns administrative activities that will not have a significant effect on the environment and thereby, do not constitute a project as defined by the CEQA Guidelines Sections 15378(b)(2) and 15378(b)(4) and are not subject to the provisions of CEQA (CEQA Guidelines15060(c)(3)). Sustainability: Not applicable. Commission/Committee Action: Not applicable. Rationale for Recommendation: Contracting with Morton for the continued operation and maintenance of the William Land Golf Course allows a unique opportunity to achieve a seamless transition from First Tee to enable the continuation of the First Tee youth golf training program and allow for public use of this course, while providing the City a period of time to evaluate all options and formulate a long-term plan for William Land Golf Course that will benefit the community. Financial Considerations: Additional funds are needed to finance the $250,000 rent reduction that will occur in FY2018/19. A commitment of unobligated General Funds from fund balance on June 30, 2018 is needed to support the Golf Fund (2603) operations in FY2018/19 for the loss of revenues. In addition, if this lease for the Land Park course is not extended after June 2019, the City will assume responsibility for the outstanding liabilities from the lease-toown contracts for maintenance equipment that Morton will assume from First Tee and the costs of the existing inventory purchased by Morton from First Tee if it is not usable at the other golf courses. It is estimated that this liability is approximately $30,810. City of Sacramento June 19, 2018 powered by Legistar Page 3 of 15

4 File ID: Consent Item 30 Local Business Enterprise (LBE): Not applicable. City of Sacramento June 19, 2018 powered by Legistar Page 4 of 15

5 RESOLUTION NO Adopted by the Sacramento City Council APPROVING FOURTH LEASE AMENDMENT WITH MORTON GOLF LLC TO OPERATE THE WILLIAM LAND GOLF COURSE BACKGROUND: A. The Sacramento Area Youth Golf Association or First Tee has operated the golf course at William Land Park under a lease agreement since 1998.Due to the net losses from a reduction in user fees and increased maintenance costs, First Tee has notified the City that the lease will terminate on June 30, B. The Department of Youth, Parks, & Community Enrichment desires to continue operation of the William Land Golf Course for a one-year period to evaluate options to make the course self-sustaining. Morton Golf LLC (Morton) currently operates the three other City golf courses under an existing lease, as well as the Land Park course under contract with First Tee. Morton is willing to assume the operation of the William Land Golf Course for a one-year term if their rent under the existing City lease is reduced by $250,000 to off-set the costs of managing this golf course. C. The Golf Fund will need to be augmented by $250,000 to cover liabilities that the existing lease rent paid. A commitment of unobligated General Funds (1001) from fund balance at June 30, 2018 is needed to provide the necessary resources to offset the loss of revenues. D. City Council approval is required for fund transfers of $100,000 or more and certain leases of City property. BASED ON THE FACTS SET FORTH IN THE BACKGROUND, THE CITY COUNCIL RESOLVES AS FOLLOWS: Section 1. Section 2. Section 3. The Fourth Amendment to the Golf Course Lease with Morton Golf LLC to add operation of the William Land Park Golf Course for FY2018/19 and to reduce the rent by $250,000 is approved. The commitment of unobligated General Funds on June 30, 2018 from fund balance in the amount of $250,000 to support the Golf Fund (2603) operations in FY2018/19 is approved. The appropriation of the General Fund commitment from fund balance in FY2018/19 along with the reduction of the Golf Fund (2603) revenue budget and establishment of the related transfers between the General Fund (1001) and the Golf Fund (2603) is approved. Page 5 of 15

6 Section 4. The City Manager or his designee is authorized to execute this Lease Amendment. Page 6 of 15

7 Page 7 of 15

8 Page 8 of 15

9 Page 9 of 15

10 Page 10 of 15

11 Page 11 of 15

12 Page 12 of 15

13 Page 13 of 15

14 Page 14 of 15

15 Page 15 of 15