CITY COUNCIL STAFF REPORT. DATE: December 7, Honorable Mayor and City Council. Darren Greenwood, Public Works Director

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1 CITY COUNCIL STAFF REPORT DATE: December 7, 2015 TO: FROM: SUBJECT: Honorable Mayor and City Council Darren Greenwood, Public Works Director Future Operation of the Springtown Golf Course RECOMMENDED ACTION Staff recommends the City Council direct staff to close the Springtown Golf Course and to develop a master-planning process for the golf course property that includes the involvement of Livermore Area Recreation and Park District (LARPD) and other public agencies to identify a mix of open space or recreation options. SUMMARY The Springtown Golf Course has been operated under a long-term lease with Sycamore Landscaping since The option to lease the course was identified during a 2008 public engagement process for Northeast Livermore public facilities, including the golf course. In early 2015, Sycamore Landscaping notified City staff that they would need an ongoing subsidy to continue operating the course. Staff reviewed the request and determined that a subsidy of about $250,000 per year would be needed for operational and capital replacement needs to keep the course operating in the current condition, with no significant upgrades or improvements. In July 2015 staff began discussions with Springtown residents regarding other options to keep the golf course open that were identified by the community in Staff took the following actions to evaluate the feasibility of continuing golf course operations: Reissued a Request for Proposals (RFP) to identify a new lease operator; Conducted a survey to determine support for an assessment district to help fund golf course operations; and, Commissioned a review by the National Golf Foundation (NGF) Consultants to determine if market or other conditions had changed since their previous 2007 Report to make the course more financially viable.

2 Page 2 Three firms attended a pre-bid meeting required by the RFP. None of the firms submitted a bid to lease the course. Staff received over 800 valid responses to the survey, with a very high response rate of 45%. Survey respondents indicated that they would not be willing to approve an assessment to fund the golf course by a 53% to 47% margin. The data indicated that a smaller assessment area near the course would approve an assessment by a 72% to 28% margin. However, the vast majority of residents in this smaller area did not indicate they would approve an assessment at a high enough dollar amount to fund the course. The 2015 National Golf Foundation Review concluded that the Springtown Golf Course is highly unlikely to generate sufficient revenue to cover all operating expenses and estimated annual operating losses between $150,000 and $200,000. Staff also received a proposal from a local Springtown resident, Mark Kolt, on behalf of the Springtown Homeowners Association (SHOA) to form a partnership between Mr. Kolt, the SHOA and the City of Livermore to explore potential uses of the SHOA-owned facilities in conjunction with the Springtown Golf Course. Staff reviewed the proposal and recommends against moving forward with the proposal because it relies on development of the SHOA property, and the Northeast Livermore community has explicitly expressed opposition to development on or near the golf course. If Council closes the golf course and directs staff to implement a master planning process, staff would begin discussions with LARPD and Livermore Valley Joint Unified School District staff to identify the appropriate structure and lead agency for the master planning process. Staff will also prepare budget estimates for the cost of a master planning effort as well as minor modifications necessary to convert the property to temporary, passive open space during the master planning process and will return to Council for direction and approval. DISCUSSION History/Background The Springtown Golf Course was constructed in 1967 as a 9-hole facility intended to support a planned community in Springtown. In 1971, the City of Livermore purchased the Springtown Golf Course when the original developer, the Intermark Corporation could not run the facility at a profit and proposed closing the course. Since that time, the City has operated the course as a Municipal Enterprise intended to be self-funded via green fees and other revenues, with no support from the City s General Fund. The Springtown Golf Course has struggled financially despite efforts by a series of different operators, consultations with golf experts, and infusions of City funds. By the end of Fiscal Year 2007/08, the Springtown golf course operator had departed, after informing the City that they could not operate the course at a profit, and the course

3 Page 3 had accumulated losses of $414,947. In November 2008, the City Council authorized a loan from the General Fund to cover this deficit. City staff reassumed responsibility for maintenance of the course and brought in new pro-shop and restaurant operators. The City also made improvements to the grill and kitchen facilities, as well as repairs to the irrigation pump station. The new pro-shop and grill operators improved customer service and the quality and quantity of merchandise in the pro-shop, and expanded food sales at the grill. The quality of the course also improved under City maintenance. There was an increase in revenue from green fees, pro-shop merchandise and grill food sales based on these improvements. However, the increases in revenue were insufficient to cover costs, and the course continued to lose money. Between 2008 and 2009, the course had accumulated an additional $321,423 in losses. Based on approximately 25,000 rounds per year at the Springtown Golf Course in 2008, this loss translated to a per-round subsidy of about $ By 2009, the Springtown Golf Course had an accumulated debt of $736,376 to the City s General Fund with no available funding for needed golf course improvements. After the course was leased to Sycamore Landscaping, there was insufficient revenue to repay the loans and the City was forced to write-off the debt. In 2008, the City Council also initiated a public engagement process for Northeast Livermore Public Facilities and Programs Planning, which included a discussion of solutions for the Springtown Golf Course. The City contracted with a consultant, Design Community & Environment (DCE), to facilitate the engagement process. The process included three formal community meetings and the consensus of the residents represented at the 2008 meetings is shown below: The Springtown Golf Course should remain a golf course and be improved to enhance play and aesthetics without any costs borne by local residents. The course should not be developed for any alternate land uses, including housing, commerce or other non-golf recreation. Due to the poor financial condition of the course, workshop participants were encouraged to recommend feasible options to continue operating the course, and suggested the following: 1. Extend a long-term lease (10 years or more) to a private operator at no cost to the City. 2. Explore options for increasing revenue by increasing advertising, raising green fees, and/or expanding the restaurant facility. 3. Ask residents to create a Landscape Assessment District to fund the operating deficit at the Springtown Golf Course. The City Council endorsed the results of the engagement process and directed staff to move forward with a long-term lease. In early 2009, staff issued a Request for Proposals for a long-term lease operator for the Springtown Golf Course. The proposed full lease agreement included a ten year term with a minimum $1 per year lease payment; with the

4 Page 4 stipulation that the property must remain a golf course. The intent was to structure the agreement to provide a contractor with enough flexibility to maximize revenues in order to cover Springtown Golf Course operating and asset replacement costs. In response to the Request for Proposals, representatives from nine different management companies attended the mandatory pre-bid meeting. Sycamore Landscaping was the only company to submit a bid to operate the course. Sycamore s successful proposal included an enhanced lease payment of $6,000 per year to the City. Sycamore Landscaping was able to make the lease payment for the first few years, but has been unable to make the payment over the last 2 years due to the poor financial performance of the Springtown Golf Course, and instead required annual subsidies from the City to continue operation. In 2014, staff estimated the City would need to subsidize Sycamore Landscaping s operations by approximately $20,000 to $40,000 per year for the facility to remain operational. This subsidy was anticipated primarily to finance the permitting and consultant support necessary to install the diversion structure to provide irrigation water for the course. During FY 2014/15 the City paid over $65,000 to support Sycamore Landscaping s operation of the Springtown Golf Course and to avoid a default on the lease. Also, it appears much larger subsidies would be needed in the future to keep the course in operation. Declining revenue trends continued during Sycamore Landscaping s operation of the Springtown Golf Course. Between 2009 and 2015, total Green Fee revenue has declined by $287,000 per year, a decrease of just over 54%. The total rounds of golf per year have also declined over this period from about 25,000 to only about 13,000. While these declines are part of a long-term trend, there has been little or no improvement in any of the financial indicators since the lease-operation of the course began in FY 2009/10. Information regarding the total number of rounds and revenue for the Springtown Golf Course is included in Attachment 1. Staff had several conversations and meetings with Sycamore Landscaping in early 2015 regarding the need for on-going or one-time funding. In February 2015, Sycamore representatives provided a list of necessary immediate repairs and expenses totaling approximately $91,000 per year and indicated they would need at least this amount as an on-going subsidy from the City to stay operational. Staff reviewed the list and believed that the estimated costs provided were low and might require an even higher annual subsidy. Also, the annual subsidy would likely need to increase over time to keep up with increases in operational expenses. In addition to the items identified by Sycamore Landscaping, there are also numerous required capital improvement project needs for the facility. Staff compiled a list of required projects and determined that the City would need to allocate approximately $161,000 each year as part of a 20-year capital repair and replacement program. For example, repair and replacement projects for the irrigation pump station, equipment

5 Page 5 fueling components, maintenance facility, and clubhouse facility area are in immediate need of capital funding. Based on these estimates, the City would have needed to subsidize the Springtown Golf Course operations by over $250,000 in FY 2015/16 for Sycamore Landscaping to continue operating the facility and to start making essential repairs. This subsidy would also need to grow to at least $350,000 per year over the next 20 years. Since the lease was intended to be a zero-cost option for the City, staff could not recommend this level of subsidy by the General Fund. In March 2015, representatives from Sycamore Landscaping notified the City that without a subsidy, Sycamore would likely have to terminate the lease and cease their operations at the Springtown Golf Course. Sycamore representatives committed to continue operations while staff reengaged the community to discuss options for the golf course identified during the 2008 Engagement Process. Staff initiated discussions with the community in July 2015 as described in the following section. However, on September 22, 2015, City staff received an indicating that Sycamore Landscaping had a hard close down date of October 15, 2015 and would cease to exist as a corporate entity after that date. Based on this unexpected development, staff developed a revised approach to separate the issues involved with the deciding how to move forward with the golf course. Beginning in late September 2015, staff implemented the following steps to prepare for a City Council decision regarding continued operation of the course, including: 1. Implemented a temporary closure of the course on October 15, 2015 and continuing to maintain the golf course grounds in an interim closure condition so it could be reopened if a new operator is identified; 2. Circulated a Request for Proposal for Lease Operation of the course to identify a possible replacement for Sycamore Landscaping; 3. Conducted the Public Opinion Survey of Northeast Livermore to determine support for a Landscape Maintenance Assessment to fund the course; 4. Updated the 2007 National Golf Foundation Study to see if conditions in the golf industry or local market have changed to allow potential financial viability of the course The community engagement efforts, as well the results of the Request for Proposals, the public opinion survey, and the update of the NGF study are discussed below Community Engagement Efforts Staff has used a combination of public meetings, website information, social media postings, an information list, a dedicated hotline number, direct mailings and newspaper coverage to provide updates and information to the Northeast Livermore community regarding the Springtown Golf Course. Staff held a total of 6 public meetings

6 Page 6 on 3 different days, which included over 10 hours of public comments and questions and answers by staff. The initial intent of staff outreach efforts was to remind residents of the results of the 2008 Engagement Process and to continue to evaluate the feasibility of the options identified by the residents during that process. Staff held two community meetings on July 30, 2015 at the Springtown Homeowner s Association facility, with approximately 300 people in attendance between the two meetings. While all residents were welcome to attend, staff attempted to identify a core stakeholder group consisting of property owners located on or immediately adjacent to the course, as well as any members of the Men s, Ladies and Senior s Golf Clubs. The intent was to generate a group that was very interested in the future of the course due to proximity or frequent use, yet small enough to allow a feasible face-to-face meeting. The primary goals of the initial meetings were to confirm that the options identified in 2008 were still viable, and to get feedback on potential support for an assessment district to support the course. At the first meetings in July, staff provided attendees with a thorough background on the status of the Springtown Golf Course. After the presentation of background information, staff took questions from the audience verbally and via comment cards. In general, the questions and comments were very similar in nature to those received in 2008, with a majority of attendees supporting continued operation of the course. While many of the most vocal attendees noted that they would prefer that the City provide a subsidy to continue operating the course, staff explained the expectation for Enterprise funds to be self-sustaining. Staff also discussed the need for the City to focus on core governmental services and future infrastructure needs after being forced to lay off over 100 employees and spend over $12 million dollars in reserves during the financial downturn. Staff further explained that tax dollars earmarked to support recreation activities in Livermore do not come to the City, but instead are used to fund the Livermore Area Recreation and Parks District. Most residents who spoke insisted the best option was for a continued City subsidy, although a few residents said they did not think the City should subsidize the course, and seemed to favor finding other workable solutions for the ongoing financial problems at the course. After staff was notified of Sycamore Landscaping s intent to cease operations as described above, staff held additional community meetings on September 29 th and October 5 th. The purpose of this second round of meetings was to inform residents of Sycamore s pending departure and to discuss the near-term plan for the course. Two meetings were held on each day, and were attended by a total of approximately 140 people, with about 40 at the September 29th meetings and about 100 at the October 5th meetings. Staff sent out 2000 mailers to the larger Springtown community prior to the

7 Page 7 second meeting which likely contributed to the larger attendance. In addition to discussing the pending departure of Sycamore Landscaping and the temporary closure of the course on October 15 th, staff also reviewed plans to distribute a Request for Proposal to identify a new lease operator and to complete the opinion survey to determine support for an assessment district to help fund course operations. As with the meetings held in late July, there were many residents who supported continued operation of the course with an on-going City subsidy. However, in contrast to the July meetings, a number of residents at the September 29th and October 5th meetings openly spoke in opposition to continued City funding of the golf course and indicated an unwillingness to vote for an assessment district. There were also golfsupporters who indicated that they would be willing to vote for an assessment. Another consistent comment at the second set of meetings was to expand the survey city-wide. Staff explained that a citywide assessment would be very unlikely to pass and that even getting enough participation in a citywide survey would be difficult if not impossible. In addition to the multiple rounds of community meetings, staff also set up a Springtown Golf Course Information list and webpage to provide information and updates to the neighborhood. The list eventually grew to over 300 subscribers, and staff also provided responses to over 45 questions from the July 30 th meetings in four batches of weekly Question and Answer (Q&A) documents that were posted online. In addition to the Q&A documents, the website includes background information on the 2008 Community Engagement Process, the 2007 and 2015 National Golf Foundation (NGF) Report on the Springtown Golf Course, the 2015 RFP, and the results of the Assessment District Survey. Request for Proposals for New Lease Operator Staff distributed a Request for Proposals (RFP) for Lease Operation of the Springtown Golf Course on October 9, The RFP followed the same format as the 2009 RFP with minor modifications, including shortening the minimum term to 5 years instead of 10 and updating provisions for the operator to cancel the lease if water is unavailable. The RFP was mailed and ed to over 40 firms, and posted electronically on the Professional Golf Association (PGA) website and on the City website. A mandatory pre-bid meeting was held on October 19, 2015 and three firms attended the meeting. Staff prepared and distributed an addendum to the three firms in response to questions raised at the meeting. Responses to the RFP were due on November 4, 2015, however staff did not receive any bids. Several concerns have been expressed related to the RFP process, and are discussed below:

8 Page 8 1. The deadline for responding to the RFP was too short, partially because the RFP was mailed on the Friday before a Monday holiday. A four-week response time is reasonable for a relatively simple RFP of this type, and staff did not receive any requests for additional time from any potential bidders. Also, the RFP was ed to most of the recipients and posted online, so it s unlikely that the maildelay from the Monday holiday had a significant impact on potential bidders 2. The mandatory pre-bid meeting was held 10 days after the RFP was distributed. The preference in the golf-industry is to have the pre-bid meeting early in the process to allow bidders to ask questions and gather information needed to draft their bids. This is especially important for a facility such as the Springtown Golf Course that is not in optimal condition and has significant deferred maintenance items that could potentially be the responsibility of potential bidders. 3. Three local golf management companies were not on the RFP distribution list. Staff contacted the three companies referenced, two of the firms responded and indicated they were not interested in bidding and the third company did not respond to staff s inquiries. Staff does not recommend reissuing the RFP at this time since it is unlikely to attract a qualified bidder willing to take on full responsibility for the course, including deferred maintenance items. Assessment District Informational Survey The formation of a Landscape Maintenance District was one of the options identified during 2008 Community Engagement Process. The final assessment district boundaries and the assessment amount would be based on a formal study known as an Engineer s Report, which documents the benefit to properties in the district and calculates how the district costs are apportioned to each property. The final amount of the assessment would depend on the number of properties included in the assessment district. Staff has estimated that an assessment could range from about $85 per month for a district made up of about 250 homes immediately adjacent to the course, to about $20 per month for a larger district made up of about 1,850-1,900 homes in the surrounding area. Due to the cost and time necessary to conduct a full assessment district vote, as well as concern that residents would not approve a new or increased assessment, staff planned to conduct a survey to evaluate initial support for an assessment district to fund continued golf course operations before moving forward with a formal ballot. Based on a request from residents at the July Community meetings, staff postponed the planned opinion survey to allow the neighborhood to suggest additional survey topics or questions. After the Springtown Homeowners Association (SHOA) held several internal

9 Page 9 meetings, staff met with representatives of the SHOA on September 3 rd, The SHOA representatives noted that although they had several committees working to discuss how to save the golf course, they did not have any additional topics or alternatives that they wanted to include in the planned survey. Staff targeted an assessment district area of about 1900 homes for the survey. In preparation for the survey, staff mailed two pre-survey notices to each home (and property owner of record, if different) in the survey area to remind residents to look for and complete the survey. The survey itself was mailed twice due to an error by the mailing house, which did not include a stamped return envelope in the first mailing. In addition to the mailed survey, residents could complete the survey online via Survey Monkey or by phone and/or . Residents had to provide an address to submit a survey. The survey included the following questions: 1. Would you be willing to vote for a property tax assessment to fund ongoing golf course maintenance and operations if you considered the amount of the assessment to be reasonable? 2. How much would you be willing to pay per month? 3. Is there anything else you would like to add about future status of the Springtown Golf Course property? Staff received an overwhelming number of responses to the survey. Of the approximately 1,900 homes targeted, 846 unique and complete responses were received; a 45% response rate, which far exceeds the typical rate for this type of mailed survey. In response to the first question, a total of 401, or 47% of households indicated that they would vote for some level of assessment to support the golf course, while a total of 445, or 53% indicated that they would not vote for an assessment as shown below in Table 1. Table 1 Overall Survey Results Response Total Responses Percentage Yes % No % A simple majority vote of 50% plus 1 of the parcels in the proposed assessment district would be required to vote yes to establish a new landscape maintenance district to support the golf course. Based on the raw survey results of the larger assessment district area, there does not appear to be sufficient support to approve an assessment. In a formal assessment district vote, non-responses would count as no votes, so the assessment would fail a formal vote. However, even if the non-responses were ignored and a 100% response rate was assumed, the assessment would fail since only 47% of respondents voted yes.

10 Page 10 Staff investigated the survey data in further detail to determine if there was a smaller area near the course that would be somewhat or very likely to approve an assessment. Staff plotted the responses by address and found that support for the assessment was significantly higher among property owners located on or near the course. However, there was still insufficient support for an assessment at amount necessary to support the course. Examining a subset of the survey data from just the streets where properties back-up to the course showed a total of 294 responses, with 72% voting yes and 28% voting no. Based on this overall yes/no response, an assessment would pass in this smaller area if the amount of the assessment were low enough. However, most respondents did not indicate they would be willing to vote for an assessment at a level high enough to support the course, even in the smaller proposed assessment area. In response to the question of How much would you be willing to pay per month, 156 respondents in the larger assessment area, or 18% of the 846 respondents said they would pay $20 or less per month. Fifty-three respondents, or about 7% indicated they would pay $81-$100 per month, despite the fact that the survey materials noted that that the required assessment would range from about $20-$85 per month depending on the size of the assessment district. The smaller assessment area of about 294 homes would need at least 148 property owners willing to support an assessment of about $85 per month to be successful. Since only 47 respondents from the 294 homes in the smaller area indicated they would pay over $80 per month, the survey does not show that the residents in the smaller area would be willing to pass an assessment capable of funding continued operation of the golf course. Table 2 below shows data regarding how much respondents were willing to pay each month for the entire survey area. Table 2 How Much Respondents Are Willing to Pay Range Number Relative Frequency Yes - $0 - $ % Yes - $21 - $ % Yes - $41 - $ % Yes - $61 - $80 6 1% Yes - $81 - $ % Yes - $ % Declined to State (DTS) 59 7% No % Total % Perhaps the most interesting result of the survey came in the answers to the last question regarding other comments regarding the future status of the course. By far the most

11 Page 11 common response, regardless of whether it was a yes or a no vote for the assessment, was some version of the statement whether it stays a golf course or not, at least do not develop the property. While the community appears split on the question of an assessment, the respondents appear to agree in their expressed opposition to development. The complete survey responses with comments are included as Attachment National Golf Foundation Review In 2007, the City retained the National Golf Foundation (NGF) Consultants to perform a comprehensive review of the City s Golf Courses, including Springtown. After the departure of Sycamore Landscaping, City staff contacted NGF to review and update the findings of their 2007 report to determine if market conditions have changed and to estimate the amount of operating and capital subsidies necessary to keep the course open. The 2007 NGF Report found that the facility was dated and in need of repairs, and had been suffering a decline in play and revenue for a number of years. The report identified a number of quick fix improvement totaling $1.9 million, but also noted that the improvements may not result in any real economic return to the City in terms of enhanced revenue. Other key findings in the 2007 NGF Report include: The NGF Team could not create any viable scenario for the continued operation of the Springtown Golf Course. This is due primarily to the limited upside potential for rounds of golf. Even when rounds are increase by 35% over FY 2007 levels, the facility comes far short of generating the revenue necessary to support operations... This means that in its best possible year with all variables aligned in favor of the facility, Springtown s revenues will just barely be enough to cover the MAINTENANCE and administration of the facility, not the mention any pro shop or other variable expenses; The Springtown Golf Course needs to be improved, especially in its irrigation system, if it is to continue as a viable golf facility. This will take a large dollar commitment from the City to achieve, regardless of how the facility is operator, and/or redesigned. Further, we not that this commitment may not result in any real economic return to the City in terms of enhanced revenues. Overall, the NGF team is hard pressed to find a recommendation for this facility that does not involve continued General Fund support. During the 2015 review, NGF representatives met with City staff, Sycamore Landscaping representatives, and conducted a tour of the Springtown Golf Course. The 2015 review noted some positive market factors; most notably the economic recovery occurring in Livermore, including lower unemployment, recovering housing values, and the success of the outlet mall in drawing more visitors to Livermore. However, the 2015 review also noted downward pressures on overall golf industry revenues from two different market dynamics. First, rack green fees have been stagnant or have even decreases in many

12 Page 12 areas due to prevalent discounting programs, including third-party providers like GolfNow. Second, and perhaps most important, the number of rounds played have been declining. The 2015 report cites declines in the number of rounds at both Las Positas and the City of Pleasanton s Callippe Preserve, where rounds have fallen by between 13% and 25% respectively, as examples of the overall decline in rounds across the local golf market. In addition, the 2015 NGF Review notes that there is an imbalance in golf course supply and demand, and that the correction in golf course supply continued in 2014 at a level comparable with the previous three years. The report states that since 2006, there has been a cumulative net reduction of 800+ courses (18 Hole-Equivalent), which represents a drop of about 4% off the peak supply year of The report also notes that this much-needed move toward supply/demand equilibrium is expected to continue for the next several years. The report acknowledges that 9-hole courses are particularly vulnerable to closure due to constrained revenue potential, stating these 9-hole courses are most at risk, with about 53% of golf course failures in the U.S. over the last decade or so being 9-hole courses, even though 9-hole courses represent only about one-third of total golf course supply. With regard to the need for repairs and capital improvement, NGF states, In short, there is not one aspect of the facility that doesn t need serious attention. After a facility tour, NGF prepared a preliminary list of immediate capital needs totaling between $250,000 and $300,000. This estimate is consistent with estimates prepared by City staff, and includes a variety of must do repairs that would be needed to re-open the course, including: Maintenance Building and Yard Irrigation System Repairs (heads, controllers, valves) Irrigation Pump System Repairs Fuel Tank Repairs Cart Storage Building and Chargers Clubhouse Restrooms Grill clean-up/inspection Golf Course Range Netting Replacement While NGF recognizes that needed improvements may be addressed on a triage basis due to limited funding, they also note that course improvements would be more effectively addressed through a larger, comprehensive master plan approach where all the repairs might be done at the same time. Based on a comprehensive, master plan approach, NGF estimates a total cost of between $2.4 and $3.0 million for all of the repairs necessary to make the facility most competitive in the market. However, the NGF 2015 Review notes that there is no realistic strategy that results in golf operations being able to pay back any of the capital costs to the General Fund, The report also notes that improvements will not result in the course reaching profitability, stating.even with major facility investment we believe that Springtown GC is very likely to require some level of annual operating subsidy, with operational break-even representing a best-case

13 Page 13 scenario in years when everything (e.g. weather, course conditions, economic factors) goes right. In short, the 2015 NGF Review, included as Attachment 3, did not identify any viable strategies for significantly increasing Springtown Golf Course revenues or consistently reaching a break-even operation. Required Capital Improvements and Facility Repairs After Sycamore Landscaping turned over the course to the City on October 15, 2015, staff performed inspections to identify which facilities were in working order and which needed repairs prior to returning the course to operation. Staff found that little or no preventative or corrective maintenance activities had occurred under Sycamore Landscaping, and extensive repairs are necessary to bring the course facilities up to even marginal operating conditions. Staff identified the need for repairs to the following items before the course could be reopened or turned over to a lease or contract operator: Irrigation Pump Station (2 of 3 pumps have failed and the third leaks) Irrigation Controllers (many have failed) Sprinkler heads and valves (over 20% of heads are in need of repair or replacement) Fuel Tank Maintenance Building Cart Barn and Charging Stations Driving Range Netting Grill/Kitchen Facilities Parking lot area Staff estimates that approximately $300,000 would be required to make the necessary repairs before the course could be effectively operated. This estimate consistent with the 2015 National Golf Foundation Report, which projected between $250,000 and $300,000 in improvements for the course to be minimally operational. In addition to these immediate improvements, the course would also need $2 to $3 million dollars of longterm capital improvements over the next years to remain in operation at even the current, marginal quality level. Options Analysis and Recommendation As mentioned earlier, the options to continue operations of the golf course identified during the 2008 community engagement process were: 1. Extend a long-term lease (10 years or more) to a private operator at no cost to the City. 2. Explore options for increasing revenue by increasing advertising, raising green fees, and/or expanding the restaurant facility.

14 Page Ask residents to create a Landscape Assessment District to fund the operating deficit at the Springtown Golf Course. Since 2009, City staff has attempted to implement the long-term lease option without success. The long-term lease was originally identified as a high risk option during the 2008 engagement process due to the potential for the lease operator to fail outright, or to neglect required facility maintenance, leaving the City with extensive repair costs. As discussed earlier in the report, staff circulated an RFP to identify a new potential operator and received no proposals. This is not surprising given current supply imbalance in the golf market, the high number of 9-hole course closures, as well as the long history of declining play and revenues at the Springtown Golf Course. As noted in the 2015 NGF Review, it is very unlikely that the City will find a qualified bidder to take on the operating risk and even minimal capital needs associated with the Springtown GC. Therefore, if the City decides to invest money in the facility and stay in the golf business, the best operating model would be under an experienced third party manager. However, we believe that most, if not all, reputable national management companies would be reluctant to take on Springtown even on a fee-based management contract basis without major upfront capital investment by the City. Staff cannot recommend a large capital investment from the General Fund that would be necessary to make improvements and attract a qualified lease operator given the ongoing need for funding to support core City services and public infrastructure replacement. In addition, staff does not consider this option viable based on the fact that major capital investments would not result in the course being able to reach a profitable or break-even financial status. The second option of increasing revenues through advertising, raising green fees and/or expanding the restaurant does not appear to be viable based on the findings of both the 2007 and 2015 NGF Reports, as well as past experience by City staff. Neither NGF study found viable options for significantly increasing revenues through course improvements or operational strategies. The most recent NGF Review noted that green fees have remained stagnant or decreased in the market due to promotional discounts and third party, online tee-time providers. Each of the NGF reports concluded that a longterm subsidy from the City s General Fund would almost certainly be necessary to keep the course open. Also, as noted previously, prior to implementing the lease with Sycamore Landscaping, City staff improved course conditions and brought in operators who improved the pro-shop and restaurant, but the course still lost money. Staff conducted a survey of Northeast Livermore residents to assess the viability of the third suggestion from the 2008 community engagement process regarding the formation of an Assessment District to help fund golf operations. As noted above, the survey results for a larger assessment district area of approximately 1,900 homes indicated by a margin of 53% to 47% that the residents would not be willing to approve an assessment to fund the golf course. Based on a review of a subset of the survey responses from properties located on or near the course, staff noted an area of about 294 homes where about 72%

15 Page 15 of the respondents indicated that they would be willing to approve an assessment. However, even in that smaller area near the course, survey respondents indicated they would not be willing to vote for an assessment of a high enough dollar value, with only 47 respondents out of 293, or about 16% indicating they would pay $80 per month or more. Based on these results, staff does not recommend that the City invest the funds necessary to prepare an Engineer s Report and conduct a formal assessment district vote. Also, even if an Assessment District was supported by the residents, this option has a number of complications that would raise the cost and make implementation difficult at best. Due to restrictions on Landscape Maintenance Districts (LMD), funds from the assessment could be used to fund golf course maintenance activities but could not be spent on operating the pro shop or restaurant. Therefore, a lease operation which combined the separate operations would not be possible, and the City would have to hire one or more contract operators. During winter months when green fees alone might not be sufficient to cover restaurant or pro-shop operations, the City might be forced to subsidize the course to ensure that LMD funds would not be spent on prohibited uses. The additional required staff oversight would add operational costs and increase the required amount of the assessment/subsidy. In addition to the options identified during the 2008 community engagement process, staff received a proposal from a local Springtown resident, Mark Kolt, on behalf of the Springtown Homeowners Association (SHOA) that is included as Attachment 3. The proposal suggests a partnership between Mr. Kolt, the SHOA and the City of Livermore to explore potential uses of the SHOA-owned facilities in conjunction with the Springtown Golf Course. The proposal outlines the concept as follows: This proposal suggests a partnership, between Mark Kolt, the SHOA and the City of Livermore, whereby Springtown Golf Course would be leased to SHOA on a long-term basis. SHOA would then work with third-party investors, to refurbish existing SHOA-owned facilities and update and reconfigure the golf course, as well as to hire and install a new, top-tier golf course operator. Enhancements to SHOAowned facilities would be designed to attract business revenue, in support of the golf course, as well as to provide new tax revenues to the City. The vision is for the enhanced facilities of both the renovated buildings and the golf course to complement each other and maximize the viability of the entire complex and to enable additional revenue streams. The proposal is a conceptual-level, non-binding document, with few details on types or intensity of development proposed for the SHOA property. Based on a review of the proposal and brief discussions with Mr. Kolt, staff has identified a number of concerns regarding the viability of the proposal, including:

16 Page 16 The proposal relies on development of the SHOA building and association property adjacent to the golf course, including the likely addition of a second floor on the existing facility for proposed Class A office space or possible residential use. The Northeast Livermore community has explicitly expressed opposition to development, specifically multi-story residential or commercial development near the golf course, due to traffic and other concerns. Development of the SHOA facility would require a General Plan Amendment to change the current Open Space land-use designation to allow commercial or residential development on the site. The ongoing community discussion regarding the Springtown Golf Course has divided the neighborhood and given rise to groups supporting both golf and open space uses. Therefore, it seems unlikely that a proposed GPA to allow development on the SHOA property would be supported by the overall neighborhood. The proposal claims to relieve the City from any ongoing financial liability through a long-term lease of golf course property to the SHOA. However, because the City would retain ownership of the property it would also retain some degree of financial liability for the property under a lease arrangement. Even if the SHOA were legally responsible for the property via lease or other agreement, there would still be a community expectation for the City to step in should the SHOA ever fail to operate the course or care for the property as promised. There is ongoing friction between the SHOA and non-hoa member residents due to the golf course discussions, as well as past conflicts over use of facilities and denied requests to join the association. Staff is concerned that transferring control and responsibility of the golf course property to a relatively small group of property owners would not be supported or accepted by the larger community. Based on the above concerns, staff is unable to recommend moving forward with the proposal from Mr. Kolt and the Springtown Homeowners Association. Total Cost and Cost Per User A major reservation to recommending any option to reopen the golf course is the high upfront cost of repairs needed to make the course minimally operational. Both City staff and NGF estimate that an immediate investment of $250,000 and $300,000 would be required to make necessary repairs to reopen the course. Because none of the options to keep the course open addresses the fundamental problem that a 9-hole, neighborhood golf course is simply not competitive in the current golf market, staff cannot justify the initial investment required to repair the irrigation system and other facilities to reopen the course. Because overall demand for golf continues to soften, any option to reopen the course would be a temporary solution at best, and that the City Council would eventually be faced with the same decision it has now; embrace a significant, long-term General Fund subsidy or close the course permanently. In addition to the total cost, the cost/benefit to Livermore residents of continuing to invest in a failing golf course is also a key consideration. If the City were to spend $300,000 to

17 Page 17 reopen the course, a few hundred homeowners around the course and the few hundred Livermore residents who play golf at Springtown would benefit. However, if the City instead spent the $300,000 to convert the property to natural, unimproved open space use by connecting existing cart paths and other trails and installing limited drip-irrigation to maintain existing trees, then the overall community could use the property. The same cost/benefit concept applies to the discussion of an on-going General Fund subsidy to support the golf course versus the ongoing cost of open space maintenance. City staff estimates that an annual subsidy of approximately $250,000 (including capital replacement costs) would be needed to continue operating the golf course. Based on an average of about 15,000 rounds per year at the Springtown Golf Course, the City would be paying over $16.60 per round to keep the course operating. If the number of rounds were somehow increased by 30% to 20,000 per year, the per-round subsidy would go down to $12.50 per round. By comparison, the estimated cost to maintain the property in a natural, unimproved open space use would be about $45,000 to $75,000 per year, depending on the level of amenities (trails, benches, trash cans, etc.) and maintenance provided. If even half as many people (7,500 per year, or about 20 per day) visited the property to walk or ride their bikes as used to play golf at the course, the cost per use would be about $6-$10 each. If 20,000 people per year used the property as open space instead of a golf course as noted above, the per-visit cost would be only $2.25 to $3.75 instead of $12.50 for a round of golf, as summarized in Table 3 below. Table 3 Subsidy Comparison, Per Visit Golf Course Open Space Total Annual Subsidy $250, $75, Per 15,000 Golf Rounds/Users $16.67 $5.00 Per 20,000 Golf Rounds/Users $12.50 $3.75 If the use of the property by the public since the temporary course closure in mid-october is any indicator, it appears more residents would use the property as open space than have had the opportunity to use it as a golf course in recent years. Based on the above evaluation, staff recommends permanent closure of the Springtown Golf Course. Re-Use Master Plan Options Staff recommends a comprehensive master planning process, which includes the involvement of Northeast Livermore Community members, to identify a mix of open space or recreation options that would be acceptable to the community. Due to the ongoing concerns expressed by neighborhood residents, staff recommends that master plan not consider any residential or commercial development options for the property. Because of the complexity of the issues and options, staff recommends the use of a consultant/facilitator for this process. In addition to citizen involvement, the master

18 Page 18 planning effort will need to include the Livermore Area Recreation and Parks District (LARPD) and possibly the Livermore Valley Joint Unified School District (LVJUSD) depending on the scope of the options being considered. Because Livermore has a separate Recreation and Parks District, the City receives no tax funding to support recreation activities; consequently the City does not operate or maintain parks, playfields or other recreation facilities. The City does own and maintain several open space and trail areas. Therefore, the City s participation in a master planning process for the Springtown Golf Course property would by definition need to be somewhat limited to natural or unimproved open space uses or other options under the control of the City. If the process were limited to discussion of open space options, it would be appropriate for the City to lead the effort. However, if the master plan is to consider more improved open space concepts or recreation options such as improved/developed parks or playfields, it would be more appropriate for LARPD to take the lead in a master planning effort, perhaps with the assistance of LVJUSD. While LARPD has overall responsibility for recreation facilities in Livermore, LARPD and the school district work closely together to meet the need for recreation and playfields in the community and have collaborated, along with the City, on past bond measures to fund new or improved facilities. If Council approves the staff recommendation for permanent closure and implementation of a master planning process, staff will begin discussions with LARPD and LVJUSD staff to identify the appropriate structure and lead agency for the process, and will return to council for direction and approval. FISCAL AND ADMINISTRATIVE IMPACTS Approval of the staff recommendation will result in future savings of up to $250,000 per year in golf course subsidies, but will also result in additional costs for a master planning process, modifications to covert the golf course property to temporary, natural open space during the master plan process, as well as ongoing maintenance costs. Current estimates for these efforts are included below: Master planning process - $200,000 to $400,000 Converting property to temporary, natural open space - $300,000 Annual maintenance of open space - $45,000 to $75,000 Upon City Council direction, staff will prepare more detailed cost-estimates for a master planning effort, as well as minor modifications necessary to convert the property to temporary, natural open space during the master planning process for Council consideration. A supplemental budget allocation will also be necessary, since no funding for the Springtown Golf Course is included in the City s current Financial Plan. Also, staff has incurred approximately $40,000 to $50,000 in costs so far in FY 2015/16 to support operations of the course and the community engagement efforts necessary