AGENDA VALLEJO CITY COUNCIL SPECIAL MEETING 6:00 P.M. APRIL 3, 2012

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1 City Hall 555 Santa Clara Street Vallejo, CA AGENDA VALLEJO CITY COUNCIL SPECIAL MEETING 6:00 P.M. APRIL 3, 2012 MAYOR Osby Davis CITY COUNCIL Erin Hannigan, Vice Mayor Marti Brown Stephanie Gomes Robert H. McConnell Bob Sampayan Hermie Sunga This AGENDA contains a brief general description of each item to be considered. The posting of the recommended actions does not indicate what action may be taken. If comments come to the City Council without prior notice and are not listed on the AGENDA, no specific answers or response should be expected at this meeting per State law. Notice of Availability of Public Records: All public records relating to an open session item, which are not exempt from disclosure pursuant to the Public Records Act, that are distributed to a majority of the City Council will be available for public inspection at the City Clerk s Office, 555 Santa Clara Street, Vallejo, CA at the same time that the public records are distributed or made available to the City Council. Such documents may also be available on the City of Vallejo website at subject to staff s ability to post the documents prior to the meeting. Information may be obtained by calling (707) , TDD (707) Vallejo City Council Chambers is ADA compliant. Devices for the hearing impaired are available from the City Clerk. Requests for disability related modifications or accommodations, aids or services may be made by a person with a disability to the City Clerk's office no less than 72 hours prior to the meeting as required by Section 202 of the Americans with Disabilities Act of 1990 and the federal rules and regulations adopted in implementation thereof. TO THE MEMBERS OF THE VALLEJO CITY COUNCIL: You are hereby notified that I do hereby call the Vallejo City Council in special session to consider only the matters stated on the agenda listed below. NOTICE: Members of the public shall have the opportunity to address the City Council concerning any item listed on the agenda before or during consideration of that item. No other items may be discussed at this special meeting. 1. CALL TO ORDER 2. PLEDGE OF ALLEGIANCE 3. ROLL CALL 4. STUDY SESSION A. Blue Rock Springs Golf Course Operations Recommendation: Conduct a study session on the Blue Rock Springs Golf Course Operations Contact: Deborah Lauchner, Finance Director,

2 5. ACTION CALENDAR A. Reconsideration of Resolution No N.C.(Requested by Councilmembers Brown, Gomes and Sampayan) Recommendation: Adopt a Resolution revising and restating Resolution No N.C. as amended, and to clarify the role, as to participation and voting, of the City Manager s appointments of one member from the Police Department and one member from the Fire Department to the Ad-hoc Public Safety Advisory Committee and as to the Committee s reporting obligations to City Council Contact: Councilmembers Brown, Gomes and Sampayan, ADJOURNMENT Dated: March 29, 2012 Osby Davis, Mayor I, Dawn Abrahamson, City Clerk, do hereby certify that I have caused a true copy of the above notice and agenda to be delivered to each of the members of the City Council, at the time and in the manner prescribed by law and that this agenda was posted at City Hall, 555 Santa Clara Street, CA at 4:00 pm., Thursday, March 29, Dated: March 29, 2012 Dawn Abrahamson, City Clerk

3 Study Session 4A Agenda Item No. COUNCIL COMMUNICATION Date: April 3, 2012 TO: FROM: SUBJECT: Honorable Mayor and Members of the City Council Daniel E. Keen, City Manager lll!fl(. Deborah Lauchner, Finance Director~ STUDY SESSION ON THE BLUE ROCK SPRINGS GOLF COURSE RECOMMENDATION Conduct a study session on the Blue Rock Springs Golf Course. No decisions or actions are required to be taken by the City Council in conjunction with the study session. REASONS FOR RECOMMENDATION On August 31, 2012, the existing 1992 Lease Agreement for the West Golf Course and the 2004 Management Agreement for the East Golf Course between the City of Vallejo and the Vallejo Golf Club, Inc. for the premises commonly known as the Blue Rock Springs Golf Course are due to expire. On January 31, 2012, the City and the Golf Club entered into a new Management Agreement for the Blue Rock Springs Golf Course with a term of 5 years. While staff was negotiating the new Management Agreement, staff hired Pro Forma Advisors, LLC to work with the City and Vallejo Golf Club to perform an analysis of the current operations and provide for some alternative scenarios for management of the golf course operations. Staff has scheduled this study session with the City Council to provide a more comprehensive overview of the golfing industry and various options for the Council to consider for reducing or eliminating the expected golf course subsidy. FISCAL IMPACT: The City estimates the Consultant time and travel cost reimbursement to be up to $2,000. There are no additional fiscal impacts to holding the study session. BACKGROUND & DISCUSSION: This report is intended to inform the City Council and other interested parties of the fiscal condition of golf course operations. As explained in further detail in Attachment A to this staff report, the fiscal outlook for golf course operations for the next several years remains K:\PUBLI C\AI\FINANCE\201 2\Agenda Item- Staff Report - Golf Course Study Session Docx

4 Page No.;t Date: April 3, 2012 Subject: STUDY SESSION REGARDING BLUE ROCK SPRINGS GOLF COURSE challenging. Existing revenues are not expected to cover expenses which will result in the need for the City's General Fund to provide a subsidy to the golf course. Some additional background materials are included with this report that will address the following topics. Attachment A discusses the following topics: I. Golf Course Economics II. Golf Market Overview and Future Outlook Ill. Comparative Performance Review IV. Capital Costs V. Projected Golf Course Performance and General Fund Subsidy VI. Golf Course Operating Efficiencies NEXT STEPS: Staff will receive input from tonight's study session and will return to Council in May 2012 with a proposed fiscal year budget including the golf course budget. DOCUMENTS ATTACHED: ATTACHMENT A: Market and Economic Evaluation of Blue Rock Springs Golf Course CONTACT: Deborah Lauchner, Finance Director (707) K:\PUBLI C\AI\FINANCE\2012\Agenda Item - Staff Report- Golf Course Study Session Docx

5 Market and Economic Evaluation Blue Rock Springs Golf Course Vallejo, Solano County, CA Prepared for: City of Vallejo Prepared by: Pro Forma Advisors, LLC March 2012 PFAID: Version: 1.1 Pro Forma Advisors, LLC Los Angeles T New York Metro T F

6 Table of Contents I. Introduction/Background 5 II. Summary of Findings 6 Blue Rock Springs Facilities 6 Regional Golf Market 7 Blue Rock Springs Performance 8 Comparative Performance 10 Capital Improvement Requirements 11 Projected Performance 11 Golf Course Modifications 14 New Golf Course Projects 15 III. Blue Rock Springs 17 Description of Facilities 17 Historical Performance 20 IV. Golf Market Overview 30 Market Area Demographics 30 National Golf Market Trends 32 San Francisco Bay Area 34 Survey of Selected Regional Public-Access Golf Courses 42 V. Comparative Performance Review 47 Golf Course Utilization 47 Operating Revenue 48 Cost of Sales 52 Operating Expenses 52 VI. Capital Costs 57 Golf Courses 57 Support Facilities 59 Pro Forma Advisors, LLC PFAID:

7 Maintenance Equipment 60 Capital Improvement Reserve 60 VII. Projected Blue Rock Springs Performance Hole Golf Complex 61 Revenue Constrained Budget 66 VIII. Golf Course Modifications/New Projects 68 Reduced Number of Golf Holes 68 Alternative Golf Course Use 71 New Capital Projects 74 Pro Forma Advisors, LLC PFAID:

8 Limiting Conditions General Limiting Conditions Certain information included in this report contains forward-looking estimates, projections and/or statements. Pro Forma Advisors LLC has based these projections, estimates and/or statements on expected future events. These forward-looking items include statements that reflect our existing beliefs and knowledge regarding the operating environment, existing trends, existing plans, objectives, goals, expectations, anticipations, results of operations, future performance and business plans. Further, statements that include the words "may," "could," "should," "would," "believe," "expect," "anticipate," "estimate," "intend," "plan," project, or other words or expressions of similar meaning have been utilized. These statements reflect our judgment on the date they are made and we undertake no duty to update such statements in the future. No warranty or representation is made by Pro Forma Advisors that any of the projected values or results contained in this study will actually be achieved. Although we believe that the expectations in these reports are reasonable, any or all of the estimates or projections in this report may prove to be incorrect. To the extent possible, we have attempted to verify and confirm estimates and assumptions used in this analysis. However, some assumptions inevitably will not materialize as a result of inaccurate assumptions or as a consequence of known or unknown risks and uncertainties and unanticipated events and circumstances, which may occur. Consequently, actual results achieved during the period covered by our analysis will vary from our estimates and the variations may be material. As such, Pro Forma Advisors accepts no liability in relation to the estimates provided herein. In the production of this report, Pro Forma Advisors has served solely in the capacity of consultant and Pro Forma Advisors has not rendered any expert opinions and does not hold itself out as an expert (as the term expert is defined in Section 11 of the Securities Act of 1933). This report is not to be used in conjunction with any public or private offering of securities, and may not be relied upon without the express written consent of Pro Forma Advisors. This study is qualified in its entirety by, and should be considered in light of, these limitations, conditions, and considerations. Pro Forma Advisors, LLC Page 4 PFAID:

9 Introduction I. Introduction/Background The City of Vallejo owns the Blue Rock Springs golf complex, a 36-hole municipal golf facility located in the northern sector of the City. Presently, the facility is operated by the Vallejo Golf Club, Inc. (the Club), a 501 (c)(4) non-profit entity, under a combination lease/management structured agreements. The Club leases the 18-hole West Course which is open to membership and provides equal access to the general public, paying the City an annual lease payment. The 18-hole East Course, which serves mainly public daily fee golfers, is operated by the Club under a fee-for-service management agreement, with the City receiving all revenues and bearing all expenses. The current agreements expire on August 31, The City has negotiated a new agreement with the Club for operation, maintenance and management of the golf facility. As part of this process, the City retained Pro Forma Advisors LLC, a commercial recreation economic consulting firm specializing in golf course economics, to assist in evaluating current operating performance at Blue Rock Springs in the context of the existing and anticipated future regional golf market, review capital improvement requirements, assess alternative operating structures, and address a series of other issues which may influence the facility s future performance. The market and economic evaluation involved a series of tasks: Inspection of the golf course and assessment of existing conditions. Interviews with Club management. Analysis of the regional Bay Area and local Solano County/East Bay golf markets with respect to market trends, competitive inventory performance, Blue Rock Springs market share, and future opportunities. A review of the historical and current performance of Blue Rock Springs. A comparative analysis of Blue Rock Springs performance with similar regional facilities in terms of revenue generation, operating expenses and staffing. Review of near- and mid-term capital improvement requirements at the golf complex. Analysis of the economics of eliminating 9- or 18-holes from the East Course. Assessment of potential revenue enhancement related to potential capital improvement projects. Following this Introduction, a Summary of Findings is presented. Documentation of these finding is contained in the subsequent sections of the report. Pro Forma Advisors, LLC Page 5 PFAID:

10 Summary II. Summary of Findings A summary of the principal findings relating to current performance, market environment and prospects for improving operations at Blue Rock Springs Golf Course is presented in the following section. Analysis and documentation of these findings is contained in subsequent sections of the report. Blue Rock Springs Facilities The Blue Rock Springs golf complex is comprised of two regulation length 18-hole golf courses--the West Course, opened in 1941, and the East Course, opened in The West Course consists of a combination of eight original holes and ten newer holes constructed when the East course opened. The two courses are separated by Columbus Parkway, and are connected by a tunnel crossing located near the clubhouse. While the West Course has been open to membership and general public access, the majority of its utilization is attributed to members of the Vallejo Golf Club, a private club with a membership of 350 golfers. The East Course, until recently, has been available for daily fee public play only. In 2010, the membership structure was modified to allow non-resident members (previously only Vallejo residents were eligible), and Club members are now allowed limited use of the East Course, while both courses remain available for public play. The West Course has limited topography and is characterized by mature tree cover and small greens, and is considered the more challenging of the two courses. The East Course has substantial topography, offering panoramic views of the region to the south, and has limited tree cover. Due to its geography, the West Course is relative well protected from, while the East Course is exposed to, prevailing winds from the west. The golf practice range is located on the east side of Columbus Parkway, requiring golfers to use the under-crossing from the clubhouse staging area. The range has 28 artificial turf tee stations (mats) and a small natural turf tee area. The range slopes upwards from the tee line and is lighted for night use, although the lighting is not very effective. The golf courses are operated from a 10,200-square-foot, wood frame, clubhouse which is approximately 50 years old. The facility is poorly designed, has minimal food and beverage facilities, and is in poor condition. The maintenance facility and public cart storage facilities are in good condition. Golf course irrigation is provided by untreated water provided by the Vallejo Water Department, with annual consumption of approximately 500 acre feet (250 acre feet per course). The unit cost of the water, effective July 1, 2011, is currently $762 per acre foot, and is scheduled to increase 6% on July 1, 2012 and an additional 6% on July 1, The annual cost of the water presently is about $380,000, of which the golf course currently is bearing only the cost for the East Course, or about Pro Forma Advisors, LLC Page 6 PFAID:

11 Summary one-half of the total cost. The balance of the water cost (relating to the West Course) has been funded by the City under the previous Club agreement. Under the new agreement, the cost of water for the West Course will be increased steadily to 100% over the next five years such that the golf course will bear the entire cost of water in Regional Golf Market Mirroring the national golf market, the Bay Area regional golf market has softened considerably beginning in late 2002, with the sharp downturn persisting during the entire decade. The market softness primarily has resulted from the cumulative effects of unprecedented expansion of the public golf course inventory which began in the mid-1990s, unexpected reduction in the demand for golf and, most recently, the severe downturn in the national and regional economies. Importantly, the weak golf market condition, in large part, does not appear to be entirely cyclical, but rather a reflection of long-term shifts in the underlying demand for golf. Aggregate annual play on public access courses in the nine-county Bay Area has declined about 25% from peak levels in the early 2000-period. Because of the expansion of the inventory of golf courses, individual public courses in the region, on average, have suffered sharper declines of 25-35% over this period. Play at Blue Rock Springs has declined by nearly 40% over the past 10 years. Manifestations of the weak golf market are declining rounds and revenue, capital improvement cutbacks, excessive discounting, and financial failures, including some in the local market. The mid- to long-term outlook for the regional golf market is modestly favorable due to the aging baby boomer population (participation and frequency of play increase with age), few if any additions to the golf course inventory, and an improvement in overall economic conditions. Golf analysts project average annual growth of 1.0 to 2.0 percent over the foreseeable term, although any substantial growth is not likely to occur for at least a few years. Nonetheless, even with modest market improvement and no additional supply, a return to play levels at individual courses generated in the pre-2000 period will likely take at least years, if ever. In 2000, the nine surveyed courses in the North Bay Area submarket collectively generated about 583,000 rounds, of which the 36-hole Blue Rock Springs complex accounted for 107,000 rounds, or about 18.4% of the total.. The average play per surveyed 18-hole course in 2000 was 58,300 rounds, compared with the Blue Rock Springs average of 53,500 rounds per 18-hole course. In 2010, the same nine courses in the North Bay subregion generated about 449,400 rounds, of which Blue Rock Springs (36 holes) accounted for 65,400 rounds, or about 14.6% of the subregion total. The average rounds per 18-hole course at Blue Rock Springs declined to 32,700, compared with an average of about 44,900 rounds per 18 holes for the North Bay subregion. Over the past ten years, the average decline in play for North Bay submarket courses was 13,400 rounds or 23 percent, compared with a decline in Blue Rock Springs rounds of 20,800 average per Pro Forma Advisors, LLC Page 7 PFAID:

12 Summary course, or nearly 39 percent. Blue Rock Springs also competes with East Bay courses. Play on the average public course in the East Bay declined 33% over the 10-year period. The decline for all surveyed Bay Area courses over the 10-year period was 20,000 rounds, or 28 percent. With far less population density, and incomes slightly below average for the Bay Area, on average, public courses in the North Bay generally generate the lowest play levels in the Bay Area, an average of about 45,000 rounds per 18-hole course in Blue Rock Springs Performance Play levels at the 36-hole Blue Rock Springs have declined precipitously over the past 12 years, with the impact of the economic downturn beginning in late 2007/early 2008 having a pronounced adverse effect. Annual Rounds Change From 1999 Year West East Total Rounds Percent Course Course ,200 60, , ,300 48,100 87,400 (27,600) (24%) ,950 35,500 65,400 (49,600) (43%) Due to a number of factors, the average play per 18-hole course at Blue Rock Springs has declined more than the Bay Area public regulation length golf course market average. Annual Rounds Blue Rock Market Springs Average 1 Blue Rock Springs Percent tage of Market Average Year West East Total West East Course Course Course Course ,200 60,800 71, % 84.6% ,300 48,100 57, % 83.8% ,950 35,500 51, % 68.6% 1/ Defined as 9-County Bay Area. Pro Forma Advisors, LLC Page 8 PFAID:

13 Summary Vallejo Golf Club members, along with other annual passholders, account for about 17,000 of the 65,400 rounds, or about 26 percent of the total. Of the roughly 48,000 non-member rounds, City of Vallejo residents presently account for approximately 40 percent, with the percentage varying somewhat by course and weekday versus weekend. Annual gross revenue at Blue Rock Springs totaled $2.7 million in 2010, of which golf (greens fees, member dues and fees, carts, trail fees, and practice range revenue) accounted for $2.1 million. Revenue for 2011 is budgeted at about $3.2 million, but based on year-to-date actuals will be only slightly above The overall average greens fees (excluding cart) in 2010 was $21.30 per round for all types of play; the average greens fees for non-member daily fee play is calculated at $23.22 per round, and the revenue for member play averaged $16.58 per round. Operating expenses at the golf course have been sharply reduced over the past three years from $3.3 million to $2.48 million, or about 25 percent. Most of the reductions have occurred in the golf course maintenance department where staffing has been reduced to 14 for the 36-hole complex. Annual net operating income and net cash flow, after deducting capital expenditures and debt service, over the period is reported as follows (note that debt service is indicated at the actual annual outflow, which has been lower than the full golf course obligation in the past two years): Annual Amount (thousands of dollars) Gross Revenue 3,584.0 $3,348.0 $2,724.4 Less: Cost of Sales Gross Profit $3,265.3 $3,087.9 $2,477.0 Less: Operating Expenses 3, , ,479.4 Net Operating Income ($32.6) $124.5 ($2.4) Less: Capital Expenditures Debt Service 1/ Net Cash Flow, After Debt ($721.8) ($414.9) ($150.9) 1/ Based on actual outflows for outstanding debt which, in some cases, is less than full obligation; does not include debt service on cart storage facility. Pro Forma Advisors, LLC Page 9 PFAID:

14 Summary Beginning in 2010, annual debt service obligations consist of the East Course development cost at $355,000, a negotiated reduction from $470,000 with the debt holder. The annual debt service of $70,000 related to the cart storage construction has been forgiven by the City, and thus is not included in the calculations. Comparative Performance The 36-hole Blue Rock Springs facility generated 65,400 rounds in 2010, about the same as the 36- hole Foxtail facility in Rohnert Park, but well less than the 80,000 rounds accommodated by the two regulation length courses at Chuck Corica in Alameda. Regional 18-hole courses generated between 32,000 and 60,000 rounds, averaging about 50,000 rounds. Thus, Blue Rock Springs play, with 36 holes, is about 15,000 more than the average 18-hole course in the region. Stated differently, the average annual play per 18-hole golf course at Blue Rock Springs currently is 32,700 rounds, approximately 35% less than the average 18-hole course in the regional market. Blue Rock Springs market share of the entire Bay Area public access market has declined from 1.6% in 2000 to 1.3% presently. For the North Bay subregion, the market share has declined from 18.4% to 14.6% over this time frame. The average greens fees (including annual membership dues/fees) per total round is at the low end of the range for similar courses, but in-line with regard to non-member daily fee play. Cart revenue per round is at the high end of the range for similar courses, reflecting the topography and design of the East Course. Range revenue at Blue Rock Springs 28-tee facility averages $10,140 per tee per year, which compares with similarly located and operated ranges, and is consistent with the demographic characteristics of its market area. Merchandise and food and beverage revenue, on a per round basis, are at the lower end of the range of comparable facilities, reflecting the limited facilities and golfer profile. The cost of sales related to merchandise sales is in-line with industry standards given the type and mix of goods. The cost of sales for food and beverage, at 44% of gross sales, is well above the average of 32%-35%. In large part, this abnormally high cost of sales is the result of the practice of including sales tax in the food and beverage pricing which effectively reduced the revenue by 8%. Overall operating expenses at Blue Rock Springs, compared with similar 36-hole facilities is generally consistent with similar facilities, adjusted for specific facility characteristics. However, maintenance expenses are clearly at the low end of the range, while golf operations (pro shop, carts, range, marshaling) are above the norm. In part, the higher golf operations expenses are due to the course design (range remote from the clubhouse) and the practice to employ marshals (not volunteers). Some reduction in golf operations expenses appears achievable. Pro Forma Advisors, LLC Page 10 PFAID:

15 Summary Capital Improvement Requirements Blue Rock Springs, like all golf facilities, requires continuous reinvestment to maintain the quality of the facility and remain competitive in the marketplace. While substantial improvements have been completed over the years, there are a series of capital improvements which will be required over the next 5-15 year time frame. Excluding clubhouse and other elective improvements, golf course improvements in the range of $1.5 million (2011 dollars) are indicated. Most of these improvements can be deferred for about ten years, but beyond this point, deferring improvements are likely to result in higher operation and maintenance expenses and/or loss of revenue. The private cart storage facilities consist of two structures equipped with electric charging units and two without. At some point, all structures will have to be converted to accommodate electric-powered carts. The golf course clubhouse will eventually require complete renovation or new construction. Depending on the scope of food and beverage services, a new facility would range from 6,000 to 15,000 square feet, costing $2.0 to $4.5 million, or more. Again, the clubhouse does not require immediate attention, but eventually there will be significant expenditures required to renovate or reconstruct the building. As evident, golf course facilities are comprised of capital improvements which have a limited economic life, and it is necessary to continue to reinvest in the replacement of facilities as they deteriorate in order to remain competitive in the marketplace. Establishing a capital improvement annual replacement reserve fund is the best mechanism for ensuring that sufficient capital funds are available for timely improvements. This capital improvement fund is for capital improvements, not personal property, maintenance equipment, or golf carts. Generally, about 5% of gross revenue, or 7-8% of golf related (greens, carts, range) revenue, is a reasonable standard for annual contributions to the CIP fund. For Blue Rock Springs, an annual contribution in the range of $75,000 annually per 18-hole course, or $150,000 per year, is considered appropriate. This contribution level represents 5.5% of total gross revenue. Even at this level, the reserve is not able to fund periodic large components such as a clubhouse. Projected Performance The severe economic recession commencing in late 2007/early 2008 has had a more pronounced impact on Blue Rock Springs play levels than courses in other regions of the Bay Area. Improved economic conditions should benefit Blue Rock Springs, but market competition will likely limit significant improvement in play levels. Pro Forma Advisors, LLC Page 11 PFAID:

16 Summary Rates (greens fees and annual member/passholder fees) and other ancillary revenues are generally inline with similarly positioned courses in the region. While there may be some modifications to the pricing structure and/or operating policies, revenue gains would be modest at best. Maintenance expenses are at, or below, a sustainable level. There may be an opportunity to reduce golf course operations expenses by about $100,000 per year through staffing adjustments. Based on anticipated modest improvement in golf market conditions, and introduction of some additional potential efficiencies/cost reductions at Blue Rock Springs, projected annual net operating income and net cash flow at the course is projected in Table II-1: It is important to note that, while the projections include a provision for capital improvements (reserve), these reserves would only be sufficient to fund a small component of the $2.6-$4.5 million in required capital improvements identified over the next 5-15 years. It is unlikely that Blue Rock Springs can substantially reduce the net cash flow shortfall through further reductions in operating expenses. In 2010, the golf course generated about $2.7 million in gross revenue (2011 is projected at approximately the same level). Deducting cost of goods sold for merchandise and food and beverage sales yields about $2.55 million available for operating expenses and other funding requirements. In 2010, excluding outlays for capital expenditures and debt service, and with the course bearing only 50% of the cost of irrigation water, operating expenses totaled approximately $2.5 million. Thus, given the current level of maintenance and services, there is sufficient revenue to cover direct operating expenses. However, in 2010, irrigation water for the two courses totaled about $200,000, one-half of the actual cost of the water. Over the next five years, the golf course will be required to assume an increasing share of the cost such that by 2017 the course will bear 100% of the cost, equal to about $500,000 per year (2017 dollars, reflecting likely water cost escalation). There also is outstanding debt on the golf complex. Going forward, the debt service related to funding development of the East Course in 1994 is scheduled at $355,000 per year, reflecting a favorable modification of loan terms. The additional debt service of $70,000 per year related to the construction of the cart storage facility, since the funds derived from the golf course capital fund, has been forgiven. In addition, funding is required for replacement/leasing of golf course maintenance equipment ($65,000-$75,000 per year), and a capital improvements reserve for replacement of golf course/support building improvements of about $150,000 ($75,000 per course) would be expected. Pro Forma Advisors, LLC Page 12 PFAID:

17 Summary Table II-1: Blue Rock Springs Projected Annual Net Operating Income (thousands of constant 2011/2012 dollars) 2010 Actual Downside Baseline Upside Number of Annual Passholders Annual Rounds Annual Passholders 18,990 18,000 20,000 22,500 Daily Fee 44,490 40,000 45,000 48,000 Non-Revenue 2/ 2,060 2,000 2,000 2,000 Total Rounds 65,540 60,000 67,000 72,500 Annual Net Cash Flow Gross Revenue $2,724 $2,583 $2,979 $3,217 Cost of Sales 247 $215 $232 $256 Gross Profit $2,477 $2,468 $2,747 $2,971 Operating Expenses 2,479 $2,780 1/ $2,780 1/ $2,780 1/ Net Operating Income ($2) ($312) ($33) $181 Other Disbursements Capital Improvement Reserve $61 $150 $150 $150 Debt Service--COPs Total $148 $505 $505 $505 Net Cash Flow ($150) ($817) ($538) ($324) 1/ Includes a $280,000 increase in utility costs, reflecting increased allocation of actual costs from 50% to 100% and scheduledd water rate increases. 2/ A breakdown of non-revenue rounds is shown on page 22. As indicated above, annual expenditures, including allowances for increased water costs ($280,000), debt service ($355,000), maintenance equipment replacement ($70,000), and a capital improvement replacement reserve ($150,000), total about $3.3 million, resulting in an annual shortfall of nearly $600,000. Eliminating this entire subsidy would require operating expenses be reduced from $2.8 to Pro Forma Advisors, LLC Page 13 PFAID:

18 Summary $2.2 million, which cannot be done without adversely impacting revenue to a point where net operating income may actually decline. Even deferring capital improvements replacement reserves and at the current cost of water, and with some potential revenue enhancements/expense savings, an annual operating subsidy of $150,000 to $200,000 is likely. It is always possible to reduce the golf course maintenance and operating budget, but it appears that negligible, if any, further reductions can be achieved without affecting the condition of the course and service levels which, in turn, would impact revenue performance. Golf Course Modifications Reduction of the golf course from 36- to 27- or 18-holes, in terms of direct operating income, would have negligible, if any, benefit--that is, the reduction in operating expenses realized through scaling back the golf course operation would be offset by the expected reductions in revenue. Table II-2: Blue Rock Springs Projected Annual Gross Revenue (thousands of constant 2011/2012 dollars) 36 Holes 27 Holes 18 Holes Annual Rounds Member 20,000 18,000 16,000 Daily Fee 45,000 39,000 32,500 Non-Revenue 2,000 1,750 1,500 Total 67,000 58,750 50,000 Members Gross Revenue $2,979 $2,647 $2,303 Less: Cost of Sales $232 $213 $184 Gross Profit $2,747 $2,434 $2,119 Less: Operating Expenses 2,780 2,449 2,134 Net Operating Income ($33) ($15) ($15) Other Disbursements Capital Improvement Reserve $ Debt Service--COPs Total $505 $480 $455 Net Cash Flow ($538) ($495) ($470) Pro Forma Advisors, LLC Page 14 PFAID:

19 Summary At current and anticipated future play levels, an 18-hole golf course at Blue Rock Springs is sufficient to satisfy community golf needs. Thus, while the reduction in the scale of the golf operation would not achieve any net savings in operations, there is a significant potential capital gain related to converting a portion of the golf course to an alternative higher and better use. The East Course, including the practice range, maintenance facility and range building/halfway house, is located on the east side of Columbus Parkway, on a parcel of approximately 110 acres. The portion of the property south of the practice range and maintenance facility, extending southward to Lake Herman Road, totals approximately 55 acres. The property slopes moderately downward from north to south, offering panoramic views of the Vallejo Valley. Access to the property is excellent from Columbus Parkway and from Lake Herman Road. To the east of the property is Syar Industries Lake Herman Quarry gravel excavation activities, which may influence the marketability of the property to some degree. As well, a small portion of the East Course property (about 10 acres) is restricted to golf course use only. All, or a major portion, of the East Golf Course appears to be highly suitable for moderate density single family residential development. It may be economic to retain the golf practice range and maintenance complex in-place, and perhaps expand the practice range facilities. As such, acres would be available for development of residential uses. At a density of 4.5 units per gross acre (7,500 square foot lots), a total of residential units could be supported. A project of this size is a desirable scale, under normal market conditions, with about a 3-year development absorption period anticipated. It is recognized that, given the current state of the residential market, the marketability of a residential parcel of this scale will likely be at least 5-10 years away. Assuming that entitlements could be secured, the bulk land value of a 70-acre parcel planned for 315 residential units is estimated at $9.5 million (2011 dollars). This would allow repayment of the entire outstanding debt, saving the golf course $355,000 in debt service. New Golf Course Projects In the short term, the only improvements which would produce additional net operating income at Blue Rock Springs appears to be upgrades to the golf practice range. Improved lighting and providing wind protection/cover for the tee line would result in greater practice use of the range, particularly in the late afternoon and evenings. Given the demographics of the market, competition, and capacity of the range, these limited improvements should result in increasing range revenue from $10,150 to about $12,000-$14,000 per tee station per year, or by about $75,000 per year. Marginal expenses are estimated at 20% of revenue, yielding an increase in net income of $60,000 per year. The cost of the improvements is estimated at $300,000 to $400,000, and thus the return on invested capital is projected in the 15%-20% range or, stated differently, a payback period of about 5-7 years. Pro Forma Advisors, LLC Page 15 PFAID:

20 Summary Major renovation or construction of a new clubhouse at Blue Rock Springs will be required at some point, but this can be deferred. The economics of major improvements to the clubhouse/creation of an events center are generally poor. The economic feasibility of developing an outdoor events facility should be explored rather than a traditional clubhouse structure. If 9- or 18-holes on the East Course are eliminated, there would be sufficient land to substantially expand and enhance the golf practice facility. A state-of-the-art golf practice center would contain improvements to the natural turf tee area, creation of a short game practice facilities, and development of three golf practice holes. There are a number of advantages related to a high quality complete practice facility including increased utilization and revenue, and the availability of a facility which can serve as catalyst for new golfer development. A full practice complex may generate an additional $170,000 annually in net operating income, which would support capital costs of up to about $2 million. The cost of expanding the existing range to a state-of-the-art facility depend on numerous factors including the potential use of existing golf course improvements for practice holes and the cost relating to modifying the range to increase capacity. It is expected that the cost of these improvements would be in the range of $1.0 million, although it is possible that there is a scaled-down version of a range renovation plan may be more cost effective. In any event, assuming that land is available through elimination of a portion of the East Course, renovation of the range complex appears justified, with a payback period of approximately six years projected. As well, the potential benefits associated with having the ability to nurture new golfers with this facility would be expected to produce more play over the mid- to long-term. The cost of golf course irrigation water is a major component of overall operating expenses. With scheduled cost increases, irrigation water will account for over 15% of total operating expenses. Given the size and design of the golf courses, it will be difficult to materially reduce the consumption level. There have been some indications that reclaimed water may eventually be available, but the feasibility of using this water will depend on the cost of infrastructure required to deliver the water to the golf course and the unit cost of the water. Pro Forma Advisors, LLC Page 16 PFAID:

21 Blue Rock Springs III. Blue Rock Springs The following section contains a brief description of the facilities at Blue Rock Springs Golf Club and a review of historical operating performance. Description of Facilities Blue Rock Springs Golf Club is a 36-hole municipal golf facility located in the City of Vallejo, in the southern part of Solano County. The golf complex consists of two 18-hole regulation length golf courses, a golf practice range, clubhouse, and other support facilities. The facility is owned by the City of Vallejo and operated by The Vallejo Golf Club, Inc. (the Club), a non-profit California corporation, under an agreement whereby the Club leases one of the courses (West Course) and manages the other (East Course) for the City. The current agreement expires on August 31, Golf Courses Both golf courses are regulation length 18-hole layouts, designed with two returning nine-hole routings. The West Course, which lies on the west side of Columbus Parkway, was originally designed by Joe Mortara, Senior, opening in The East Course, lying on the east side of Columbus Parkway, was designed by Robert Muir Graves, opening in A tunnel under Columbus Parkway provides access to the East Course from the clubhouse, which is situated on the west side of the roadway. It should be noted that when the newer East Course was developed, the courses were reconfigured with each course comprised of both older, original holes and newly constructed holes. The distance, slope and rating for each course is as follows: West Course East Course Tees Distance Rating Slope Distance Rating Slope (yards) (yards) Blue 6, , White 5, , Gold 5, , Red 4, * 114* 4, * 117* * Women s slope and rating. The West Course, comprised of 8 original and 10 newer holes, is relatively flat and is characterized by its mature tree cover and is considered to be a relatively playable golf course in terms of difficulty and challenge. The East Course, comprised of 5 original and 13 new holes, has substantial topography which affords Pro Forma Advisors, LLC Page 17 PFAID:

22 Blue Rock Springs outstanding panoramic views to the south. The East Course has limited tree cover and is exposed to much windier conditions than the more sheltered West Course. The course also is relatively playable, particularly with its four tee placements. Both courses have a continuous concrete golf cart path network, although much of the West Course s paths are relatively narrow. The greens on the West Course are poa annua, with a mix of grasses on the tees, fairways and roughs. On the East Course, greens are a mix of bent and poa annua turf, with rye and mixed grasses on the tees, fairways and roughs. There are two water features on the West Course, one of which also serves as a irrigation water storage, located between the #17 and #18 fairways. There also is one water feature on the East Course located near the #17 green. Practice Range The Blue Rock Springs golf practice range is located on the east side of Columbus Parkway, with access from the clubhouse (located on the west side of Columbus Parkway) via a tunnel. The practice range also has its own parking lot adjacent to the range, with access off of Columbus Parkway. The range is oriented in a west-east direction, and features 28 tee stations. The tee line is a concrete pad, with artificial turf tees. The range is lighted. There also is a limited depth natural turf tee area in front of the concrete tee line, but because of the limited area, it can only be used one day per week. The landing area is natural turf and slopes upward from the tee line. There is an approximate 3,000 square foot building on the east side of the range where balls are dispensed and which serves as the food and beverage halfway house. There is a limited food and beverage menu and limited seating. Clubhouse The 10,200-square-foot clubhouse is located on the west side of Columbus Parkway, adjacent to the West Course. The two-story building is a wood frame structure constructed in 1960 (about 50 years old). The building, for the most part, serves basic golfer needs, but is poorly configured given its size. The pro shop is about 1,800 square feet and functional. The restaurant is relatively small, with seating for about There is a small (about 1,800 square feet) banquet room located on the second floor which can accommodate attendees for meeting or special events. Both the restaurant and the banquet room are supported by a small kitchen located on the first level. The clubhouse also has several other areas including administrative office space (about 1,500 square feet) located on the second floor, along with small men s and women s locker rooms. Adjoining the pro shop on the first floor is a storage area of approximately 1,500 square feet. Pro Forma Advisors, LLC Page 18 PFAID:

23 Blue Rock Springs Other Facilities The principal maintenance yard is located on the east side of the practice range. The facility was constructed in 1993, and is comprised of a 5,000 square foot concrete block building and outside storage areas. There also are several small buildings located on the west side of Columbus Parkway which are used for storing some equipment. Power golf carts are stored in two locations, both on the west side of Columbus Parkway, near the clubhouse. The Club s 120-cart leased fleet is located in a covered, open sided, structure located on the south side of the clubhouse. In addition, there are four older wood frame structures located in a parking area elevated southwest of the clubhouse where privately-owned golf carts are stored. There is capacity for 210 private golf carts, one-half gasoline powered and one-half electrical powered. At some point in the future, conversion of the entire fleet of carts from gasoline- to electric-powered will be required to meet environmental standards. 1 Golf Course Irrigation Presently, the source of golf course irrigation for both courses is untreated irrigation water provided by the City of Vallejo Water Department. Annual consumption averages approximately 250 acre feet per course per year. The water cost for the East Course is borne entirely by the golf course operation. Due to contractual terms of the agreement between the City and the operator, the cost of the water for the West Course is the responsibility of the City until the operating agreement between the City and the operator expires, at which time the golf course operation will be required to bear the cost of irrigation. The new agreement stipulates that the golf course s share of the West Course irrigation water steadily increase in 20-percent increments over the next five years such that 100% is borne by the golf course by The current rate for water delivered to the two storage lakes on the course is $1.75 per unit (100 cubic feet), or $762 per acre foot. The water is pumped from the on-course storage lakes into the irrigation system. The average electrical energy expenses are approximately $80 per acre foot. Annual irrigation expenses currently are estimated at about $350,000 (of which the golf course is responsible for one-half at this time). Water rates are scheduled to increase 6% on July 1, 2012 and another 6% on July 1, 2013, and are likely to continue to increase at similar rates beyond Thus, by 2017, the water cost allocated to the 36-hole golf complex will likely increase to about $500,000 per year. 1 California Environmental Protection Agency Air Resources Board stipulates that golf carts manufactured after January 1, 1997 must have zero emissions (ARB allowed purchase of gasoline carts in Bay Area until February 2000). Use of gasoline carts purchased in Bay Area prior to February 2000 is permitted. Pro Forma Advisors, LLC Page 19 PFAID:

24 Blue Rock Springs Historical Performance Blue Rock Springs Golf Course effectively has operated as a semi-private golf facility in recent years, with the West Course leased by the Vallejo Golf Club (the Club) and dedicated to member play, as well as general public access, and the East Course managed by the Club with full public access. Beginning in 2010, the Club members (and other annual passholders) were afforded access to both courses, with continued public access to both courses. The Club is a non-profit incorporated entity with bylaws which allow the Club to establish membership levels. The Club elected to limit membership to 350 individuals. Until recently, the Club bylaws restricted membership to Vallejo residents only. While designated as a membership club, the Club is structured more like a golf course men s or women s club than a private club. There is no initiation fee, with golf privileges provided through an annual fee assessed to the Club members. Annual Play Levels Annual play at Blue Rock Springs over the period is summarized in Table III-1. Average play by month over this period is shown in Table III-2, and illustrated as follows: 125 Figure III-1: Blue Rock Springs Annual Play Annual Rounds (thousands) East Course West Course Both Courses Pro Forma Advisors, LLC Page 20 PFAID:

25 Blue Rock Springs Table III-1: Blue Rock Springs Annual Play Year East West Total ,228 60, , ,235 59, , ,185 57, , ,432 54, , ,608 57, , ,360 54, , ,265 44,193 89, ,274 39,987 76, ,017 49,718 88, ,319 48,097 87, ,073 47,300 82, ,875 39,595 65, / 29,950 35,500 65,450 1/ Estimated annual level based on actual year-to-date play through October. Play in 2006 was adversely affected due to construction of capital improvements on the West Course along with unusually heavy rain during the early part of Pro Forma Advisors, LLC Page 21 PFAID:

26 Blue Rock Springs Table III-2: Blue Rock Springs Average Annual Rounds per Month Rounds Percent Distribution Month East West Total East West Total January 2,350 2,720 5, % 5.4% 5.5% February 2,416 2,856 5, March 3,351 3,669 7, April 3,800 4,390 8, May 4,424 5,039 9, June 4,307 5,224 9, July 4,674 5,636 10, August 4,486 5,294 9, September 4,009 4,469 8, October 3,828 4,310 8, November 3,187 3,713 6, December 2,230 2,725 4, Total/Average 43,060 50,044 93, % 100.0% 100.0% Between 2007 and 2010, play on both courses has declined 26 percent. Over this period, play on the East Course (mostly daily fee play) has declined 34 percent compared with a decline in play on the West Course (mostly member play) of about 20 percent. The distribution of annual play by type of round and course for 2010 is presented in Table III-3. Member play totaled approximately 17,000 rounds in 2010, an average of about 48 rounds per member. A distribution of complimentary rounds played at Blue Rock Springs in 2010, excluding the VGA Junior Program complimentary play, is summarized as follows (other comp play consists of a variety of miscellaneous sources): Category East West Total Course Course Employees ,659 High School Other Comp Play Total 897 1,158 2,055 Pro Forma Advisors, LLC Page 22 PFAID:

27 Blue Rock Springs Table III-3: Blue Rock Springs Rounds by Type-2010 East West Total Weekday 18-Hole Member 1,520 12,460 13,980 Daily Fee/Specials 7,740 9,120 16,860 Senior 3,090 3,570 6,660 Junior 535 1,070 1,605 Tournament Subtotal 13,190 26,520 39,710 Twilight/League 3, ,960 Total 16,350 27,320 43,670 Weekend 18-Hole Member 50 4,960 5,010 Daily Fee 6,145 4,155 10,300 Junior Tournament 1, ,690 Subtotal 7,325 9,895 17,220 Twilight/League 1,385 1,205 2,590 Total 8,710 11,100 19,810 Non-Revenue 900 1,160 2,060 Total 25,960 39,580 65,540 Pro Forma Advisors, LLC Page 23 PFAID:

28 Blue Rock Springs In addition to the complimentary rounds shown, the golf facility accommodated nearly 700 non-revenue rounds attributed to Vallejo Golf Association Junior Program play, which are not included in the non-revenue or total round statistics. As well, in addition to the discounts offered for twilight and 9-hole play, a substantial portion of the overall play occurs at significant discounts (senior play, weekday specials, golf discounters, A zip code analysis was conducted at Blue Rock Springs for the period November 26 through December 6, 2011 to gain a basic understanding of the source of daily fee golfers. About 400 golfer zip codes were recorded during the period, representing about one-half of the daily fee play. The overall results are summarized in Table III-4. As noted, Vallejo residents comprise an average of about 40% of total daily fee play, with the percentage varying somewhat by course and day of week. The region south of the Carquinez Strait (Alameda and Contra Costa County make-up the largest portion of non-vallejo residents, followed closely by areas to the east (Fairfield, Vacaville, Sacramento, Folsom), and then areas to the north (Napa, American Canyon). Table III-4: Residence of Blue Rock Springs Daily Fee Golfers West Course East Course Residence Weekday Weekend Weekday Weekend City of Vallejo 33% 58% 45% 36% Napa/American Cyn/ Santa Rosa/Rohnert Fairfield/Greater Sacramento Area Alameda/Contra Costa San Francisco/ Peninsula/Marin Out-of-Area Total 100% 100% 100% 100% Pro Forma Advisors, LLC Page 24 PFAID:

29 Blue Rock Springs Greens/Membership Fees Current greens fees at Blue Rock Springs, which apply to both the West and East Course, are as follows: Greens Fees (excluding cart) Weekday Weekend 18-Hole Play Resident $25 $32 Non-Resident Senior (Res or non-res) Twilight Play Resident Non-Resident The annual membership fee currently is as follows: Single Couple Vallejo Golf Club* $1,000 $1,500 Annual PassHolders 1,200 1,800 Senior PassHolders- Residents Senior PassHolders- Non-Residents 750 1, ,350 * Resident rate. Non-Resident club members subject to annual pass fee structure. Vallejo Golf Club and annual passholders have unlimited access to the West Course at all time and access to the East Course weekdays and weekends after 12:00 p.m. Senior passholders have access to both courses on weekdays only. In addition to these programs, there are several other programs offered to juniors and seniors which provide discounted golf opportunities. Pro Forma Advisors, LLC Page 25 PFAID:

30 Blue Rock Springs Cart fees are $16 per player for 18 holes and $12 per player for twilight play. Private golf carts, most of which are stored at the golf course, are charged a trail fee equal to $3 per cart per round. Cart utilization on the East Course, due to the more rugged terrain, is relatively high at about 85%. On the West Course, cart utilization is slightly less at about 75%, While the West Course is much more walkable than the East Course, it is used heavily by members who have a high propensity to use power carts. Gross Revenue Annual gross revenue for the period (actuals) and budgeted gross revenue for 2011 is presented in Table III-5. Between 2007 and 2010, annual golf gross revenue has declined at Blue Rock Springs by approximately 33% (total gross revenue by 32%), more than the decline in total play, but nearly the same as the decline in daily fee play. Note that for the merchandise and food and beverage categories, the values shown in the table represent gross profit, with the cost of sales deducted from gross sales. The average revenue per round at Blue Rock Springs for 2010 is calculated as follows: Revenue Department Rounds Gross Revenue Average Per Round Greens/Tournament Fees 46,550 $1,081,100 $23.22 Member Dues 18, , Subtotal 65,540 $1,396,000 $21.30 Cart Fees/Trail Fees 65, ,300 $7.48 Practice Range 65, , Merchandise 65, , Food & Beverage 65, , Other 65, , Total 65,540 $2,702,350 $41.23 Cost of Sales As noted, the gross revenue for merchandise and food and beverage are net of the cost of sales related to the revenue category. The cost of sales associated with merchandise and food and beverage revenue in 2010 totaled $109,100 and $138,300, respectively. With regard to merchandise, the cost of sales represented 72% of gross sales. Food and beverage cost of sales represented 44% of total gross sales. Pro Forma Advisors, LLC Page 26 PFAID:

31 Blue Rock Springs Table III-5: Blue Rock Springs Annual Gross Revenue (thousands of dollars) * Golf Revenue Greens Fees $1,596.3 $1,829.3 $1,509.8 $1,414.4 $1,041.2 $1,184.1 Member Dues Tournament Fees Cart Rentals Trail Fees Practice Range Subtotal Golf $2,828.8 $3,168.6 $2,809.0 $2,645.8 $2,134.5 $2,547.8 Merchandise 40.0** 52.8** 50.0** 45.4** 42.4** 61.3** Food & Beverage 222.5** 242.6** 236.4** 225.7** 175.5** 271.1** Lessons Golf Cart Storage Other Total $3,213.5 $3,614.9 $3,265.3 $3,087.8 $2,477.0 $2, * Budget **Represents gross profit (gross revenue, less cost of goods sold). Operating Expenses Annual operating expenses (excluding debt service and capital project expenditures) at Blue Rock Springs have been sharply reduced over the past three years from about $3.3 million in 2008 to $2.5 million in 2010, a reduction of nearly 25%, with 2011 budgeted expenses slightly higher than 2010 actuals. Annual operating expenses for Blue Rock Springs for 2010, by major expense category, are presented in Table III-6. As shown, expenses for the two courses totaled just over $2.48 million. The expenses exclude the cost of sales and do not include capital expenditures or debt service. As well, the expenses only include the actual irrigation water expenses for the East Course for the year, with the West Course irrigation water expenses borne by the City and not charged against the course. Note that under the new agreement, the Pro Forma Advisors, LLC Page 27 PFAID:

32 Blue Rock Springs Table III-6 : Blue Rock Springs Golf Course Operating Expenses-2010 (thousands of dollars) Course Maintenance Payroll and Benefits $513.1 Services and Supplies Utilities Maintenance Equipment --- Subtotal $946.6 Golf Operations Payroll and Benefits-Pro Shop $ Retail 19.5 Cart Leasing 94.6 Cart Operation/Outside Services 34.6 Range Services and Supplies 57.5 Subtotal $785.1 Food & Beverage $213.5 Undistributed/Clubhouse $57.4 General and Admin Payroll and Benefits $246.0 Insurance 49.4 Property Taxes 6.4 Marketing/Promotion 15.4 Bank Charges/Credit Card 38.0 Services and Supplies Management Fee --- Subtotal $476.8 Total $2,479.4 Pro Forma Advisors, LLC Page 28 PFAID:

33 Blue Rock Springs responsibility for the cost of water for the West Course will be transferred to the golf course operation over a 5-year period.0 Net Operating Income Net operating income, expressed on an earnings before interest, taxes, depreciation, or amortization (EBITDA) basis, and net cash flow, after deducting capital expenditures and debt service obligations related to the Certificates of Participation (showing only disbursements made by the Club, not full obligations), for the period is summarized as follows: Annual Amount (thousands of dollars) Gross Revenue 3,584.0 $3,348.0 $2,724.4 Less: Cost of Sales Gross Profit $3,265.3 $3,087.9 $2,477.0 Less: Operating Expenses 3, , ,479.4 Net Operating Income ($32.6) $124.5 ($2.4) Less: Capital Expenditures : Debt Service Net Cash Flow ($721.8) ($414.9) ($150.9) Net operating income in 2010 was effectively zero as operating revenues were sufficient to fund all operating expenses. After deducting some capital expenditures and a small portion of the debt service, net cash flow was reported at a negative $150,900. Payment of the full debt service obligation would have resulted in negative cash flow totaling about $420,000. As noted, the Club has reduced operating expenses sharply (approximately 25%) over the past three years from $3.3 million in 2008 to just under $2.5 million in 2010, and funded only a small component of the overall debt service obligation, which has allowed the Club to operate at close to break-even, despite a 24% decline in revenue over this period. Pro Forma Advisors, LLC Page 29 PFAID:

34 Golf Market Overview IV. Golf Market Overview The following section presents an overview of the demographic makeup of the Vallejo/Bay Area market area and an analysis of national, regional and local golf market conditions. Market Area Demographics The primary market area for a golf course is influenced by a number of factors including course quality, rate structure, transportation network and access, location and characteristics of competitive facilities, resident demographic attributes, and other such factors. The primary market area for Blue Rock Springs Golf Course, from which 80 to 90 percent of total play is expected to derive, is defined as the region within about a 20- to 30- minute drive time (10-15 miles) of the golf complex. This area generally extends from Highway 4 (Hercules-Concord) on the south to the Napa area on the north, and from the Sonoma Valley on the west to the Fairfield area on the east. The Carquinez Strait immediately to the south of Vallejo, which requires crossing the Carquinez toll bridge, serves somewhat as a geographic barrier, discouraging some golfers from patronizing Blue Rock Springs and effectively limiting the southern portion of the market area. The broader secondary/regional golf market, from which less than 20% of play is expected to derive, is defined as the balance of the nine-county San Francisco Bay Area and the Sacramento region further east. Comparative demographics of the Blue Rock Springs market area are presented in Table IV-1. Table IV-1: Regional Demographic Characteristics City of Vallejo Primary Market Area San Francisco Bay Area California Population (000) , , , , , ,253.9 Average Annual Growth Rate % 1.41% 1.20% 1.30% (0.08%) 0.58% 0.53% 0.96% Median Age (2010) Population % % 11.4% Median HH Income $61,340 $67,800 $70,250 $60,390 Pro Forma Advisors, LLC Page 30 PFAID:

35 Golf Market Overview As noted, the City of Vallejo s population has been relatively constant over the past 20 years, while the Primary Market Area has experienced very modest growth. Residents within the primary market area are slightly younger and slightly less affluent than the Bay Area as a whole. The southern part of Solano County experiences milder temperatures than most of the east San Francisco Bay Area counties and Sacramento area, as indicated in Table IV-2. Temperatures in the East Bay generally are several degrees cooler in the winter months and several degrees warmer in the summer months. Precipitation in the Vallejo region is generally similar to most Bay Area locations, with nearly 20 inches of rain annually, mostly occurring in the December to March period. Table IV-2: Vallejo Area Historical Climate Summary Average Historical Monthly Month High Low Precipitation Temperature Temperature (inches) January February March April May June July August September October November December Total Source: Martinez Water Plant Weather Station. Pro Forma Advisors, LLC Page 31 PFAID:

36 Golf Market Overview National Golf Market Trends Nationwide, golf play increased steadily between the mid-1980s and As shown in Table IV-3 below, during this period, the total number of annual rounds played nationally increased at an average rate of 2.4 percent per year. Golf balls sold, perhaps the best indicator of play, increased at a similar rate (2.5 percent per year). This unprecedented growth in golf play was due to a number of factors including: An increase in the number of golfers, The increasing importance of golf-oriented real estate, Expansion of the golf tourism industry, and One of the longest economic expansions in the nation s history. The increase in golf demand and the popularity of golf-related housing development during the 1990s stimulated extraordinary expansion of the national golf course inventory, primarily between 1995 and 2002, as summarized Table IV-4. Over the full period, the inventory of golf courses in the United States increased by 34 percent, while the U.S. population registered only a 24 percent gain, and golf demand (play) increased only 12 percent over this same period. Right after the new century started, the first signs of industry problems surfaced, and have persisted for the past 10 years. While total golfers and rounds played are down industrywide, individual golf courses have experienced steeper declines in utilization, along with revenue contraction and falling net operating income, as the market totals are spread over an increased supply of facilities. Further, golf course transaction prices have declined precipitously, bankruptcies and foreclosures have become routine, and new golf course construction has virtually ceased while the number of courses closing now well exceeds new openings. The impact of market softness has been widespread and spread evenly over all segments of the market and all geographic areas. The National Golf Foundation (NGF) reports that over the period, annual golf play in the United States declined from 518 million to 466 million rounds, or about 10 percent. Golf ball sales, perhaps a better indicator of demand, declined by about percent over this time period. The golf participation rate, after rising steadily through 2003, has fallen precipitously from 12.4 percent in 2004 to a current level estimated at only 9.3 percent. (It should be noted that the golfer participation rate is based on the number of golfers relative to the population over the age of 6 years old). Since 2007, the golf market has been significantly impacted by the national and regional economic recession. Annual rounds in the U.S., according to industry reports, have declined by nearly 9 percent since Other independent sources indicate a much more severe contraction, which is borne out by golf ball sales and other market indicators. Since 2002, the construction of new courses has declined sharply, and the rate at which courses have closed has accelerated. Between 2006 and 2010, for example, the number of courses closed exceeded new course openings. New courses have been added to the inventory since 2006 at a rate of 90- to 120- course per year range, while course closings have averaged about 150 per year. Despite the slowing Pro Forma Advisors, LLC Page 32 PFAID:

37 Golf Market Overview Table IV-3: Indicators of U.S. Golf Demand ( ) Number of Rounds Golfers 1 Participation Golf Ball Sales 3 (millions Year (millions) (millions) Rate 2 of dozens) * Average Annual Growth % 9.7% % % (2.1)% % % 2.9% % Subtotal 2.4% 3.4% % (1.1%) 0.3% --- (3.5%) (1.4%) (2.3%) --- (2.1%) 4 / *Projected by Pro Forma Advisors based on year-to-date activity through August. 1/ Represents golfers over 12 years of age. 2/ Estimated by PFA. 3/ Estimated by PFA based on soft goods sales recorded by Data Tech and golf ball manufacture sales. 4/ For period Source: National Golf Foundation and Pro Forma Advisors LLC. Pro Forma Advisors, LLC Page 33 PFAID:

38 Golf Market Overview Table IV-4 : Number of Golf Courses 1 - U.S. Year Average Annual Average Annual Courses Added Total Golf Courses 2 Percent Increase , , % , % ,960.0 (0.10%) ,915.0 (0.20%) ,840.0 (0.50%) ,780.0 (0.40%) 1 18-hole equivalents. 2 Includes courses added, less courses closed., Source: National Golf Foundation. expansion of new supply over the past four years, golf market conditions in most markets have continued to deteriorate since San Francisco Bay Area Mirroring the national market, the Bay Area golf market was very strong between the mid-1980s and 2000 with most golf courses operating at close to full capacity and sustaining greens fee increases well above general price inflation. Since 2001, however, this market has softened considerably in response to a number of changing conditions: The sharp downturn in the Bay Area economy between and The dramatic increase in the supply of public golf courses in the region, primarily between the mid-1990s and early 2000-period. Development of high-end daily fee golf courses located within master-planned golf communities, justified by housing economics rather than golf market conditions. Fundamental changes in lifestyle and entertainment/recreation pursuits affecting the demand for golf. Pro Forma Advisors, LLC Page 34 PFAID:

39 Golf Market Overview Golf Course Inventory Comparative data for the State of California and the San Francisco Bay Area which shows population to public golf course ratios for the years 1990 and 2010 is presented below. Population (millions) Number of Public Access Golf Courses Population per 18-hole Golf Course Bay Bay Year Area California Area California Bay Area California ,000 88, ,960 76,020 Increase (Decrease) Number (13,040) (12,880) Percent 18.8% 27.1% 40.0% 48.5% (15.2%) (14.5%) Over the period, the Bay Area public golf course inventory expanded by 40 percent compared with 48 percent for the State of California. Bay Area population has increased only 18.8 percent over this timeframe, resulting in a substantial decline of about 15 percent in the population per golf course such that the gap in this ratio for the state as a whole and the Bay Area has narrowed considerably, but for both areas the ratio still shows a considerable over-supply of golf courses relative to population levels. Table IV-5 presents a list of the public golf courses that have entered the nine-county Bay Area regional market since As shown, 30 new public golf facilities have entered the market, including 16 public courses developed in golf course communities, representing an increase in supply of about one-third. Following an approximate 10-year period of rapid supply growth, and with essentially flat demand, the San Francisco Bay Area golf market is still considerably over-supplied. However, an encouraging trend is that, as mentioned, the rate of new supply growth has essentially ceased over the last four years. Since 2006, for example, there has not been any new course openings in the Bay area. There appears to be only one firm, albeit long-term, plan for the development of a new public golf course in the Bay Area a public golf course in the City of Newark as part of the Sobrato Development master planned community. A golf course possibly developed with a lodge was under consideration at Alameda Point on the site of the former Naval Air Station, but this project is unlikely to move forward in the foreseeable term due to massive infrastructure requirements and economic conditions. Also, due to the financial challenges facing public agencies in the current environment, many public agencies in California are faced with the prospect of shuttering golf operations rather than continuing to subsidize their operations. Rumors persist that Modesto is looking at reducing the number of golf holes in their system. Sunol Valley Golf Club reportedly is looking at reducing the number of golf holes from 36 to 18, although this Pro Forma Advisors, LLC Page 35 PFAID:

40 Golf Market Overview Table IV-5: Distribution of New Public-Access Golf Courses by Type, Since 1990 Course Name No. of Holes Year Opened Golf Course Architect Course Positioning Golf Community? Rancho Solano, Fairfield Gary Roger Baird Mid-Market Yes Adobe Creek, Petaluma R.T. Jones II Upscale Yes Oakhurst, Clayton Ron Fream High-End Yes Paradise Valley, Fairfield R.M. Graves Mid-Market No Blue Rock Springs East, Vallejo R.M. Graves Mid-Market No Brentwood, Brentwood Ted Robinson Upper Mid-Mkt. Yes McInnis Park, San Rafael Fred Bliss Mid-Market No Hiddenbrooke, Vallejo Arnold Palmer High-End Yes Rio Vista, Rio Vista Ted Robinson Upper Mid-Mkt. Yes Poppy Ridge,Livermore Rees Jones Upper Mid-Mkt. No San Juan Oaks, Hollister Couples / Bates Upscale No Ocean Course, Half Moon Bay Arthur Hills High-End Yes Rooster Run, Petaluma Fred Bliss Mid-Market No Cinnabar Hills, San Jose John Harbottle High-End No Wente Vineyards, Livermore Greg Norman High-End No Eagle Ridge, Gilroy Miller / Fream High-End Yes Coyote Creek, San Jose Jack Nicklaus High-End No Mission Hills, Hayward Gary Bye Mid-Market No The Bridges, San Ramon Miller / Graves High-End Yes Mare Island, Vallejo Robin Nelson Mid-Market Yes Stone Tree, Novato Miller/Tatum/Bliss High-End Yes Roddy Ranch, Antioch J. Michasel Poellot Upper Mid-Mkt. No Rancho Del Pueblo, San Jose Damian Pascuzzo Mid-Market No Shadow Lakes, Brentwood Gary Roger Baird Upper Mid-Mkt. Yes Los Lagos, San Jose Brian Costello Mid-Market No Deer Ridge, Brentwood Andy Raugust Upper Mid-Mkt. Yes Dublin Ranch, Dublin Knott, Brooks, Linn Upper Mid-Mkt. Yes Metropolitan, Oakland Johnny Miller Upper Mid-Mkt. No Callippe Preserve, Pleasanton Brian Costello Upper Mid-Mkt. Yes The Ranch, San Jose Casey O Callaghan High-End Yes New Courses (18-H Equivalent) % New Courses in Golf Communities 54% Total Public Courses Supply 93.0 New Courses as % of Total Supply 32% 1 San Francisco, San Mateo, Santa Clara, Alameda, Contra Costa, Solano, Napa, Sonoma, and Marin counties. Source: PFA. Pro Forma Advisors, LLC Page 36 PFAID:

41 Golf Market Overview would require approval from the San Francisco PUC, the owner/lessor of the facility. There are reported behind-the-scene discussions regarding reducing San Francisco s Lincoln Park and Sharp Park golf courses from 18 to 9 holes, and the possibility of eliminating golf courses such as Golden Gate in San Francisco and Rancho del Pueblo in San Jose is under review. it is possible that the Ridgemark Country Club in Hollister may contract from 36 to 27 holes. San Francisco Bay Area Golf Play Trends Annual play on the public access golf courses serving the Bay Area over the 1990 to 2010 period is summarized below, segmented by market positioning. Currently, the 98 regulation length, public access courses in the region generate approximately 5.15 million rounds. Annual Rounds at SF Bay Public Access Courses (000s) Year High-End 1 Upper-Mid Market 2 All Others Total ,000 4, ,260 5, ,350 4,450 6, ,000 3,500 5,150 1 Defined as $70+ weekday greens fees expressed in 2011 dollars. 2 Defined as $50-$700 weekday greens fees expressed in 2011 dollars. Clearly, the growth in play on high-end and upper-mid-market public access San Francisco Bay Area courses has resulted from several factors including an increase in the population and number of golfers and the extraordinary expansion of the high fee golf course inventory. In 1990, there were six courses classified as high-end (inflation adjusted greens fees), compared with 20 as of Presently, approximately 13 and 20 percent of the total rounds played in the San Francisco Bay Area are generated on high-end and uppermid-market public access courses, respectively, in the San Francisco Bay Area. Table IV-6 presents a regulation length comparison of annual rounds played at 40 selected Bay Area public access golf facilities (46 golf courses) over the period. A brief profile of the North Bay and East Bay subregions of the regional Bay Area golf market is presented below (total rounds, including non-revenue play). Pro Forma Advisors, LLC Page 37 PFAID:

42 Golf Market Overview Table IV-6: Comparison of Annual Rounds, 2000 and Selected San Francisco Bay Area Courses Rounds Change Golf Course Name, Location Rounds Percent North Bay Blue Rock Springs, Vallejo (36) 107,000 65,400 (41,600) (39%) Paradise Valley, Fairfield 64,000 51,500 (12,500) (20%) Rancho Solano, Fairfield 64,000 48,500 (15,500) (24%) Foxtail Golf Club, Rohnert Park 70,000 66,700 (3,300) (5%) Kennedy Park, Napa 40,000 32,000 (8,000) (20%) Mare Island, Vallejo 48,000 40,000 (8,000) (17%) Hiddenbrooke, Vallejo 40,000 36,000 (4,000) (10%) Windsor Golf Club, Windsor 60,000 48,000 (12,000) (20%) Bennett Valley, Santa Rosa 90,000 61,000 (29,000) (32%) Total Rounds 583, ,400 (133,600) (23%) Number of 18-Hole Courses Average Rounds per 18, Change 58,300 44,940 (13,360) (23%) SF / Peninsula Harding Park, San Francisco (27) 145,000 90,000 (55,000) (38%) Presidio, San Francisco 75,000 50,000 (25,000) (33%) Palo Alto Muni, Palo Alto 90,000 72,000 (18,000) (20%) Poplar Creek, San Mateo 90,000 70,000 (20,000) (22%) Total Rounds 400, ,000 (118,000) (30%) Number of 18-Hole Courses Average Rounds per 18, Change 88,900 62,700 (26,200) (30%) East Bay Boundary Oak, Walnut Creek 78,000 60,000 (18,000) (23%) Chuck Corica, Alameda (45) 222, ,000 (112,000) (50%) Delta View, Pittsburgh 65,000 40,000 (25,000) (38%) Diablo Creek, Concord 76,700 60,000 (16,700) (22%) Franklin Canyon, Hercules 75,000 62,000 (13,000) (17%) Lake Chabot, Oakland 95,000 40,000 (55,000) (58%) Lone Tree, Antioch 83,000 50,000 (33,000) (40%) Las Positas, Livermore (27) 106,000 75,000 (31,000) (29%) Metorpolitan Golf Links, Oakland ,000 54, Monarch Bay, San Leandro (27 holes) 110,000 97,000 (13,000) (12%) Poppy Ridge, Livermore (27) 83,000 60,000 (23,000) (28%) San Ramon, San Ramon 80,000 50,000 (30.000) (37%) Tilden Park, Berkeley 80,000 60,000 (20,000) (25%) Wente Vineyards, Livermore 45,000 32,000 (13,000) (31%) Total Rounds 1,198, ,000 (348,700) (29%) Number of 18-Hole Courses Average Rounds per 18, Change 74,920 50,000 (24,920) (33%) South Bay Coyote Creek 70,000 55,000 (15,000) (21%) Cinnabar Hills 60,000 45,000 (15,000) (25%) Pro Forma Advisors, LLC Page 38 PFAID:

43 Golf Market Overview Table IV-6: Comparison of Annual Rounds, 2000 and Selected San Francisco Bay Area Courses Rounds Change Golf Course Name, Location Rounds Percent Crystal Springs, Burlingame 75,000 61,000 (14,000) (19%) Los Lagos, San Jose ,000 60, San Juan Oaks 40,000 30,000 (10,000) (25%) San Jose Muni, San Jose 96,000 80,000 (16,000) (17%) Santa Clara, Santa Clara 100,000 78,000 (22,000) (22%) Santa Teresa, San Jose (18) 95,000 70,000 (25,000) (26%) Shoreline, Mountain View 68,000 58,000 (10,000) (15%) Spring Valley, Milpitas 86,000 59,000 (27,000) (31%) Sunnyvale, Sunnyvale 95,000 70,000 (25,000) (26%) Sunol Valley, Sunol (36) 120,000 70,000 (50,000) (42%) Summitpointe, Milpitas 75,000 65,000 (10,000) (13%) Total Rounds 980, ,000 (179,000) (18%) Number of 18-Hole Courses Average Rounds per 18, Change 72,590 55,240 (17,350) (24%) BAY AREA TOTALS 3,161,700 2,382,400 (779,300) (25%) 18-Hole Equivalent Courses Average Rounds per 18 Holes 71,850 51,790 (20,060) (28%) Pro Forma Advisors, LLC Page 39 PFAID:

44 Golf Market Overview While Blue Rock Springs is located in the defined North Bay area, the facility competes with courses in both the North Bay and East Bay submarkets. A comparison of the change in play levels at Blue Rock Springs with other subregions is summarized as follows: Average Annual Rounds Change Submarket Rounds Percentage Blue Rock Springs 36-Holes 107,000 65,400 (41,600) (39%) 18-Hole Average 53,500 32,700 (20,800) (39%) Average Per 18-Holes North Bay 58,300 44,900 (13,400) (23%) East Bay 74,900 50,000 (24,900) (33%) Total 9-County Bay Area 71,900 51,800 (20,100) (28%) North Bay Area In 2000, the nine surveyed courses collectively generated about 583,000 rounds, of which Blue Rock Springs (36 holes) accounted for 107,000 rounds, or about 18.4% of the total. The average play per surveyed 18-hole course in 2000 is calculated at 58,300 rounds, compared with an average of 53,500 rounds per 18-hole course at Blue Rock Springs. By year-end 2010, the same nine courses generated about 449,400 rounds, an average of about 44,900 rounds per 18 holes. Blue Rock Springs (36 holes) accounted for 65,400 rounds, or about 14.6% of the North Bay subregion total. The average play per surveyed 18-hole course in 2010 (44,900 rounds) compares with an average of 53,500 rounds per 18-hole course at Blue Rock Springs. Over the past ten years, the average decline in play for North Bay courses was 13,400 rounds or 23 percent, compared with a decline in Blue Rock Springs rounds of 20,800 average per course, or nearly 39 percent. The average decline for all surveyed Bay Area courses over the 10-year period was 20,000 rounds, or 28 percent. With far less population density, and incomes slightly below average for the Bay Area, on average, public courses in the North Bay generally generate the lowest play levels in the Bay Area, an average of just under 50,000 rounds in Pro Forma Advisors, LLC Page 40 PFAID:

45 Golf Market Overview East Bay Area In 2000, the 16.0 surveyed courses in the East Bay collectively generated approximately 1.2 million rounds, or an average of about 74,920 rounds per 18 holes. By year-end 2010, the 17.0 surveyed courses generated about 850,000 rounds, an average of about 50, 000 rounds per 18 holes. Over the past ten years, the average decline in play for East Bay courses was nearly 25,000 rounds or 33 percent (compared to average declines of 20,000 rounds and 28 percent for the Bay Area). The East Bay has been particularly impacted by the introduction of many new public-access golf courses in recent years, many in master-planned golf course communities, including Brentwood (1994), Shadow Lakes (2001) and Deer Ridge (2003) in Brentwood, Poppy Ridge (1996) and Wente Vineyards (1998) in Livermore, the Bridges in San Ramon (1999), Metropolitan in Oakland (2003), Dublin Ranch in Dublin, and Callippe Preserve (2005) in Pleasanton. During the periods of strong golf market conditions ( ), a substantial number of golfers in the Bay Area commuted relatively long distance to golf facilities offering quality golf experiences for relatively affordable fees. Primarily, this was the result of limited access to nearby golf courses offering similar experiences and, to a lesser extent, better value (quality golf experience at reasonable pricing). With the extraordinary expansion of the golf supply during the 1990s, decline in fundamental demand for golf, intensive local price competition, and the high price of gasoline, there has been a marked reduction in golfers traveling longer distances for daily fee golf. Pro Forma Advisors, LLC Page 41 PFAID:

46 Golf Market Overview Survey of Selected Regional Public-Access Golf Courses Table IV-7 presents a summary of physical facilities, greens and cart fees, and annual rounds at selected regulation length public-access golf courses in the Bay Area which compete directly or indirectly with Blue Rock Springs. The courses which currently accommodate golfers which compete most directly with Blue Rock Springs include the following: - Paradise Valley, Fairfield - Rancho Solano, Fairfield - Mare Island, Mare Island/Vallejo - Kennedy Park, Napa - Hiddenbrooke Golf Club, Vallejo - Diablo Creek, Concord - Boundary Oak, Walnut Creek - Lone Tree, Antioch - Las Positas, Livermore - Tilden Park, Berkeley - Chuck Corica, Alameda - Foxtail, Rohnert Park - Bennett Valley, Santa Rosa - Windsor Golf Club, Windsor The following are key observations relative to the most competitive courses: Most of the mid-market public access golf courses offer either discounted resident rates or loyalty/ player club programs with substantial discounts. Posted standard greens fees, excluding cart, at the competitive facilities are generally in the $30-$38 range on weekdays and $40-$50 on weekends. Resident/loyalty club regular 18-hole rates are typically $5 to $10 below the non-resident rates. Senior rates are offered at most golf courses, typically about $5 below regular greens fees. Twilight and super-twilight rates are offered at virtually all golf courses, with the twilight rates at 60-65% of the regular 18-hole rates, and super twilight at 35-40% of regular 18-hole rates. Cart utilization varies among golf courses based on course design, topography, market positioning and other such factors. At most mid-market courses with modest topography, cart utilization generally ranges from 50-60%. Cart fees range from $14 to $16 per player. Due to discounting and the mix of play, the average greens fees, excluding cart, at the competitive facilities is in the $22 to $25 range. The average cart fee typically is in the range of $4 to $8 per round. Pro Forma Advisors, LLC Page 42 PFAID:

47 Golf Market Overview Table IV-7: Selected Characteristics of Competitive Regional Golf Clubs Course Blue Rock Springs Paradise Valley Rancho Solano Mare Island Kennedy Park Location Vallejo Fairfield Fairfield Vallejo Napa Course Type Municipal Municipal Municipal Daily Fee Municipal Course Architect Mortara/Graves Robt. Muir Graves Gary Roger Baird Robin Nelson Baldock/Fleming Owner City of Vallejo City of Fairfield City of Fairfield City of Napa Operator Vallejo Golf Club Kemper Sports Kemper Sports Touchstone Golf CourseCo Year Opened 1941/ / Number of Holes /2000 Par 70/ Course Length (back) 6162/6014 6,787 6,688 6,150 6,478 Rating (back) 68.7/ Slope (back) 128/ Greens Fees (resident/nr) Standard (18 hole) Weekday-Regular $25/$31 $25/31 $25/31 $30 $29/38 Weekday-Senior 19/23 19/23 19/ /26 Weekend 32/38 38/46 38/ /48 Twilight (9 hole) Weekday 19/ /26 Weekend 21/ /31 Annual Passes Single 7-day $1,200/1, $2,155 $500/yr+$10/rd Single-Weekday 1, , Single-WD Senior Cart Fees (per player) $16 $16 $16 $14 $14 Facilities Clubhouse (sq.ft.) 10,200 20,000 4,000 3,000 3,500 Seating Capacity Driving Range (# tees) Driving Range-Lighted yes yes no no no Annual Rounds 65,400 51,500 48,500 40,000 32,000 Pro Forma Advisors, LLC Page 43 PFAID:

48 Golf Market Overview Table IV-7 (continued): Selected Characteristics of Competitive Regional Golf Clubs Course Hiddenbrooke Diablo Creek Boundary Oak Lone Tree Las Positas Location Vallejo Concord Walnut Creek Antioch Livermore Course Type Semi-Private Municipal Municipal Municipal Municipal Course Architect Arnold Palmer Baldock/RM Graves Robt. Muir Graves Baldock/Harbottle Robt. Muir Graves Owner bank-owned City of Concord City of Walnut Creek City of Antioch City of Livermore Operator Kemper Sports Joe Fernandez CourseCo Non-Profit Association Debenedetti Year Opened Number of Holes Par Course Length (back) 6,678 6,830 6,739 6,427 6,677 Rating (back) Slope (back) Greens Fees Weekday-Regular $68 $25/29 $25/31 $26 $30/30 Weekday-Senior 50 19/22 20/ /26 Weekend 98 33/38 36/ /40 Twilight (9 hole) Weekday Weekend Annual Passes Single 7-day $4, Single-Weekday 2, Single-WD Senior 2, Cart Fees (per player) Included $14 $15 $15 $14 Facilities Clubhouse (sq.ft.) 26,000 12,000 25,000 45,000 20,000 Seating Capacity Driving Range (# tees) Driving Range-Lighted no yes yes yes non-profit Association Annual Rounds 36,000 60,000 61,000 50,000 55,000 Pro Forma Advisors, LLC Page 44 PFAID:

49 Golf Market Overview Table IV-7 (concluded): Selected Characteristics of Competitive Regional Golf Clubs Course Tilden Park Chuck Corica Foxtail Bennett Valley Windsor Location Berkeley Alameda Rohnert Park Santa Rosa Windsor Course Type Municipal Municipal Municipal Municipal Municipal Course Architect Wm. Bell, Jr. Wm Bell/RM Graves Gary Linn Ben Harmon Fred Bliss Owner East Bay Reg Park City of Alameda City of Rohnert Park City of Santa Rosa Windsor Golf Operator American Golf Kemper Sports CourseCo Bob Borowitcz Windsor Golf Year Opened / Number of Holes (reg) Par Course Length (back) 6,294 6,339 6,394 6,545 6,143 Rating (back) Slope (back) Greens Fees Weekday-Regular $30 $28/30 $25/35 $23/28 $33/37 Weekday-Senior 26 23/ /20 22/26 Weekend 50 35/40 34/49 37/45 51/56 Twilight (9 hole) Weekday 18 23/25 19/27 16/18 23/26 Weekend 18 25/27 19/27 20/24 35/39 Annual Passes Single 7-day $2, $2,226 Single-Weekday --- $1,600 1, ,496 Single-WD Senior --- 1,400 1, Cart Fees (per player) $15 $15 $15 $14 $14 Facilities Clubhouse (sq.ft.) n.a. 12,000 11,500 15,000 Seating Capacity Driving Range (# tees) Driving Range-Lighted yes yes no no no Annual Rounds 60,000 80,000 66,700 58,000 48,000 Pro Forma Advisors, LLC Page 45 PFAID:

50 Golf Market Overview Annual play at the competitive courses ranges widely from 32,000-60,000 rounds per year per 18-hole course. Annual play on courses offering only 18 holes ranges from about 40,000 to 60,000 rounds, with most averaging about 45,000 to 55,000 rounds. These play levels are about 30-35% below play levels generated at these courses in the peak golf period of the late 1990s and early 2000-period. The practice ranges at the competitive courses average about $1.00 per round from same-day golfers, plus commercial practice use which ranges widely from about $25,000 to over $200,000 depending on the orientation, location and extent of facilities. Merchandise sales range widely from less than $3 to over $6 per round at the competitive courses. Food and beverage revenue derives from same day golfers at an average of $4-$6 per round, plus restaurant and special event revenue. The non-golfer food and beverage revenue ranges widely from about $50,000 to over $1 million. Pro Forma Advisors, LLC Page 46 PFAID:

51 Comparative Review V. Comparative Performance Review The performance of Blue Rock Springs Golf Course is compared with that of selected similar golf courses operating in the region. Clearly, there are numerous factors and conditions which influence the relative performance of specific courses. Golf Course Utilization Annual play levels at regional golf courses for 2010 (or fiscal 2010/2011) are compared with Blue Rock Springs, is shown in Table V-1 below. Table V-1: Comparative Review of Play Levels Course Location # of Holes Annual Rounds Total Per 18- Holes Blue Rock Springs Vallejo 36 65,400 32,700 Paradise Valley Fairfield 18 51,500 51,500 Rancho Solano Fairfield 18 48,500 48,500 Mare Island Vallejo 18 40,000 40,000 Kennedy Park Napa 18 32,000 32,000 Hiddenbrooke Vallejo 18 36,000 36,000 Diablo Creek Concord 18 55,000 55,000 Boundary Oak Walnut Creek 18 61,000 61,000 Lone Tree Antioch 18 50,000 50,000 Las Positas 1/ Livermore 18 55,000 55,000 Tilden Park Berkeley 18 60,000 60,000 Chuck Corica 1/ Alameda 36 80,000 40,000 Foxtail Rohnert Park 36 66,700 33,350 Bennett Valley Santa Rosa 18 58,000 58,000 Windsor Windsor 18 48,000 48,000 1/ Regulation length courses only. Pro Forma Advisors, LLC Page 47 PFAID:

52 Comparative Review Compared with the 36-hole complexes, Blue Rock Springs generates similar play levels to Foxtail, but is well below Chuck Corica, which benefits from a more densely populated region of the Bay Area. The average play of the 18-hole courses is 50,000 rounds per course per year, with Paradise Valley (51,500 rounds) and Rancho Solano (48,500 rounds) representing the most similar courses in terms of market positioning and golf product. Hiddenbrooke, which is in close proximity to Blue Rock Springs, is positioned to serve a higher-end market segment, generates fewer rounds, and Mare Island Golf Course accommodates in the range of an estimated 40,000 rounds per year. Thus, Blue Rock Springs, with 36 holes, accommodates about 15,000 rounds per year more than the 18-hole course average, or about 30% more play. Operating Revenue Greens and Cart Revenue The average greens and cart fee per round depends on numerous factors and can be calculated for specific subcategories. Table V-2 contains the overall average combined greens and cart revenue for all rounds played at Blue Rock Springs compared with selected other courses. As shown, the average greens/fees (including annual dues) per round at Blue Rock Springs is calculated at $ The average cart fee is (including daily cart usage and trail fees) is calculated at $7.48 per round, yield a total average greens/cart fee of $28.79 per round. The average greens/dues fees per round at Blue Rock Springs is at the low end of the range of the golf courses shown. The average greens fees for daily fee play only (excluding member play) is calculated at $23.20 per round (based on 46,600 rounds), which is more in-line with those courses which do not offer membership-type programs. Higher end courses such as Callippe Preserve and Hiddenbrook generate greens/cart revenue in the range of $40-$45 per round. The average fee revenue for member play at Blue Rock Springs, based on about 18,990 member rounds, is calculated at $16.70 per round. The average cart fee at Blue Rock Springs is relatively high compared to other courses due to the high cart utilization, such that the overall average greens/cart fee at Blue Rock Springs is in-line with the other course shown. Excluding trail fees, the average cart fee per round is estimated at approximately $8.40 per round, very high for a golf course where cart use is optional. Pro Forma Advisors, LLC Page 48 PFAID:

53 Comparative Review Table V-2: Average Greens/Cart Fees Per Round at Selected Regional Golf Courses Annual Rounds Greens/Carts Revenue (thousands of dollars) Average Per Round Golf Course Greens Dues/ Subtotal Carts Total Greens Cart Total Fees Other Fees/ Dues Blue Rock Springs 65,540 $1,082 $315 $1,397 $490 $1,887 $21.31 $7.48 $28.79 Paradise Valley 51, , Rancho Solano 48, , Diablo Creek 55,000 1, , , Boundary Oak 61,000 1, , , Alameda-Chuck Corica 80, , Foxtail 66,700 1, , , Windsor 48, , , Bennett Valley 58,000 1, , , Metropolitan 53,900 1, , , Annual Memberships Blue Rock Springs for many years has accommodated the Vallejo Golf Club, offering up to 350 memberships to City of Vallejo residents. The members have paid annual dues for unlimited golf privileges, restricted in the past to the West Course. In effect, the membership was an annual pass for golf privileges. In 2010, a broader annual membership program was created which included members of the Club and general public (resident and non-resident) golfers, offering a multi-course pass where access to the West Course was unlimited, and access to the East Course was available on weekdays. The annual fees at Blue Rock Springs are compared with selected other regional courses in Table V-3. Pro Forma Advisors, LLC Page 49 PFAID:

54 Comparative Review Table V-3: Annual Membership Programs at Regional Golf Courses 7-Day Weekday Single Couple Senior Single Couple Senior Blue Rock Springs $1,000/$1,200 1/ 1,500/$1,800 1/ --- $1, $650 Mare Island 2, , Windsor 2,226/2,400 1/ 2,751/2,982 1/ --- 1,496/1,670 1/ 2,021/2, Foxtail 2,200 2, ,600 2,100 1,400 Kennedy Park Napa 500+$10/rd Bennett Valley 1,400 2, Chuck Corica ,600/2,000 1/ --- 1,400/1,750 1/ Hiddenbrooke CC 4,340 2/ --- 2,800/4,340 2/3/ 2,700 2/ --- 2,268/3600 2/3/ 1/ Resident/Non-resident. 2/ Includes cart. 3/ Single/Couple. Range Revenue The lighted practice range at Blue Rock Springs generated $248,000 in gross revenue in 2010, equal to $8,850 per tee station per year (28 tee stations). Typically, range revenue is equal to about $1 per round for same-day golfers, plus commercial practice range use. This would suggest that Blue Rock Springs generates about $180,000 per year in practice range revenue. Range revenue at courses in the Bay Area ranges widely from $5,000 to $15,000 per tee station per year depending on the quality and location of the range, market area demographics, competitive facilities, and number of tee stations. The availability of natural turf tees is particularly desirable, and there are few facilities which offer these due to land area constraints and the high cost to maintain the turf tee line. Modest size, well located lighted ranges in the Greater Bay Area typically generate an average of $10,000-$12,000 (see Table V-4). Regional access to the range at Blue Rock Springs via Columbus Parkway is excellent, but market area demographics (population density) are modest. The range quality is sufficient, but not outstanding due to the west-east orientation, uphill slope of the landing area, poor lighting, minimal natural turf tee area and exposure to prevailing westerly winds. Despite these limitation, the performance of the range is relatively good, and there appears to be some upside potential with improvements to range facilities. Pro Forma Advisors, LLC Page 50 PFAID:

55 Comparative Review Table V-4: Practice Range Revenue Golf Course # of Lighted Annual Revenue Tees Revenue Per Tee Blue Rock Springs 28 yes $248,000 $8,850 Paradise Valley 28 yes 179,400 6,410 Rancho Solano 12 no 73,500 6,125 Diablo Creek 26 yes 300,000 11,540 Boundary Oak 60 yes 450,000 7,500 Tilden Park 70 yes 450,000 6,430 Metropolitan 26 no 325,000 12,500 Alameda-Chuck Corica 40 yes 336,200 8,405 Foxtail 25 no 164,400 6,580 Merchandise Merchandise sales at Blue Rock Springs total about $160,000 per year, equal to $2.44 per round. Retail merchandise sales at a golf course depend on numerous factors including the extent of merchandise, emphasis on merchandising, type of golf course, logo, and other such factors. Most mid-market courses in the Bay Are generate $2.50 to $5.00 per round, such that Blue Rock Springs is near the low end of the range. The market for retail sales at a golf course has diminished substantially over recent years with the large volume off-site golf retailers offering golf merchandise at significant discounts. Food and Beverage Blue Rock Springs has very limited food and beverage facilities. The cafe is modest in size and menu, serving mostly golfers. The halfway house serves golfers and range users, but has a minimum menu offering, and a beverage cart is employed on peak days of golf course usage. There also is a small conference/function room on the second level of the clubhouse, but this room has limited capacity as well. In total, Blue Rock Springs currently generates about $315,000 in food and beverage gross revenue, of which about 95%, or $300,000 is attributed to non-golfers/range users, equal to $4.55 per round of golf. The average food and beverage gross revenue derived from golfers at most Bay Area golf courses ranges from about $4.00 to $8.00 per round, averaging approximately $5.50 per round. Pro Forma Advisors, LLC Page 51 PFAID:

56 Comparative Review Cost of Sales The cost of sales related to merchandise sales at Blue Rock Springs currently is 72%. Cost of sales for merchandise varies widely among courses depending on the mix of hard and soft goods, The cost of sales for hard goods is much higher than for soft goods. At most mid-market courses, the cost of merchandise sales is about 70-75%. The cost of sales related to food and beverage sales in 2010 was 44%. Food and beverage cost of sales at most courses ranges from 32% to 35%, such that Blue Rock Springs is well above the average. In large part this stems from the practice at Blue Rock Springs to include sales tax in the price of the food and beverage items, effectively reducing the price by about 8%. The cost of sales at Blue Rock Springs, calculated on the food sold (including sales tax) is about 35%, closer to the norm. Operating Expenses Blue Rock Springs has reduced operating expenses over the past three years from $3.3 million in 2008 to $2.5 million in 2011, a reduction of nearly 25 percent. Excluding food and beverage related expenses, current annual operating expenses at Blue Rock Springs are $2.25 million. A comparison of operating expenses, excluding food and beverage, by department for 36-hole mid-market golf courses is presented in Table V-5, and a similar distribution of expenses at regional 18-hole facilities is presented in Table V-6. It is important to note that the classification of expenses for each course often varies which should be considered in making direct comparison between specific expense categories. Moreover, some administrative related expenses may not be included, particularly outside management fees or overhead support, and the treatment of maintenance equipment expenses varies depending on whether the equipment is leased or owned. In general, Blue Rock Springs overall operating expenses are in-line with similar regional courses which are operating on lean budgets. However, maintenance expenses at Blue Rock Springs are at the low end of the range, reflecting low maintenance staffing levels. Golf operations expenses (pro shop, cart operations, range, instruction) at Blue Rock Springs is at the high end of the range. The higher expenses are due to a paid marshal program, the remote location of the range on the east side of Columbus Parkway, and slightly higher staffing levels/compensation structure for pro shop operations. Pro Forma Advisors, LLC Page 52 PFAID:

57 Comparative Review Table V-5: Comparable Golf Course Operating Expenses--36-Hole Courses * (thousands of dollars) 1/ Municipal Golf Courses Mid-Mkt Daily Fee Blue Rock Springs Vallejo Course A Course B Course C Course D Course E Course F Number of Holes Course Maintenance Payroll and Benefits $513 $801 $656 $783 $919 $850 $654 Services and Supplies Maintenance Equipment Subtotal (ex. utilities) $712 $1,186 $846 $1,130 $1,480 $1,300 $1,008 Golf Operations Payroll and Benefits $481 $225 $263 $167 $232 $ Cart/GPS Leasing Cart Operation Range Services and Supplies Subtotal $791 $441 $641 $522 $446 $363 $390 Undistributed/ Clubhouse $ $301 $216 $190 $162 General and Admin Payroll and Benefits $246 $129 $201 $186 $290 $246 $397 Insurance Property Taxes Marketing/Promotion Services and Supplies Management Fee Subtotal $497 $328 $416 $524 $467 $ Total--Excl Utilities $2,057 $1,956 $2,102 $2,477 $2,609 $2,978 $2,734 Plus: Utilities 3/ Total $2,467 $2,058 $2,438 $3,262 $2,734 $3,138 $3,059 * Excludes debt service. 1/ Excludes food and beverage. 2/ 36-hole regulation plus 9-hole par-3 course. 3/ Represents total cost, including subsidies, if any. Source: Individual Cities Golf Operations. Pro Forma Advisors, LLC Page 53 PFAID:

58 Comparative Review Table V-6: Comparable Golf Course Operating Expenses--18-Hole 1/ Courses (thousands of dollars) Municipal Golf Courses Mid-Mkt Daily Fee Course A Course B Course C Course D Course E Course F Course G Course H Course I Course Maintenance Payroll and Benefits $370 $411 $460 $415 $550 $490 $388 $477 $300 Services and Supplies Utilities Maintenance Equip Subtotal $614 $659 $805 $650 $1,125 $765 $878 $996 $510 Golf Operations Payroll and Benefits $175 $173 $170 $300 $185 $86 $141 $ Cart Leasing Cart Operation Range Services and Supplies Subtotal $448 $ $635 $386 $301 $341 $268 $305 Undistributed/CH $500 $65 $35 $14 $86 $70 General and Admin Payroll and Benefits $75 $119 $175 $150 $255 $130 $20 $167 $75 Insurance Property Taxes Marketing/Promotion Services and Supplies Management Fee Subtotal $416 $336 $490 $600 $611 $692 $478 $550 $515 Total $1,478 $1,403 $1,715 $2,385 $2,187 $1,792 $1,711 $1,900 $1,400 1 Excludes food and beverage. Source: Individual Cities Golf Operations. Pro Forma Advisors, LLC Page 54 PFAID:

59 Comparative Review A comparison of staffing levels at Blue Rock Springs with the 36-hole Foxtail Golf Course in Rohnert Park, considered similar in many respects to Blue Rock Springs, is shown in Table V-7 (excludes food and beverage operations). Table V-7: Comparative Staffing Levels Blue Rock Springs Foxtail Total Full Time Total Full Time Staff Equivalent Staff Equivalent Course Maintenance Superintendent Asst Sup/Mechanic Full Time Part Time Total Golf Operations Head Pro/Manager Other Inside Outside Services Range Marshals Total Clubhouse Maintenance General & Admin Manager Support Staff Total Total, excluding Food & Beverage Pro Forma Advisors, LLC Page 55 PFAID:

60 Comparative Review Excluding marshals, which are volunteer positions at Foxtail, Blue Rock Springs total staffing is 28.3 full time equivalent, compared with 31.5 at Foxtail. Blue Rock Springs has 6 fewer full time equivalent maintenance staff, and 2 more golf operations staff. The higher golf operations staff level is attributed to the remote location of the range at Blue Rock Springs which creates staffing inefficiencies. Food and Beverage Operations The above expense comparisons do not include food and beverage operations as these vary considerably between courses depending on the type of facilities, scale of operation and other factors. Blue Rock Springs has a limited food and beverage operation. The food and beverage operation at most public courses yields modest contributions toward net income, typically in the range of 5-15% of food and beverage gross revenue. Blue Rock Springs operations for 2010 are summarized as follows: Food & Beverage Operations Annual Amount Gross Revenue $313,800 Less: Cost of Sales 138,300 Gross Profit $175,500 Less: Direct Operating Expenses 1/ Payroll Related $181,200 Operating Expenses 42,500 Total $223,700 Net Operating Income ($48,200) 1/ Based on 2011 budget. In part, the poor performance is due to the design and condition of the clubhouse, and is further complicated by the food and beverage operations at the range. Under industry standard operating ratios, which may not be achievable at Blue Rock Springs, food and beverage sales would yield $15,000-$45,000 annually in net operating income, compared with the $48,200 operating deficit. Pro Forma Advisors, LLC Page 56 PFAID:

61 Comparative Review VI. Capital Costs Golf facilities require continuous capital reinvestment in order to maintain the quality of the product and operate efficiently. The following presents a discussion of potential capital improvement needs at Blue Rock Springs over the next 5-15 year period. Golf Courses The first 18 holes at Blue Rock Springs, which comprise primarily the existing West Course, was constructed in The second 18 holes at Blue Rock Springs, mostly comprising the current East Course, was constructed in Since the West Course routing was modified when the new course was designed, the West Course consists of only 8 original and 10 newer holes, while the East Course is comprised of portions of 5 original and 13 new holes. The driving range, maintenance facility, and range building/halfway house, were built in Due to the age of the golf course and limited funds available for capital improvements in recent years, there is a series of capital improvements which will be required in the near- and mid-term in order for the course to remain competitive in the marketplace. Table VI-1 delineates items and representative cost estimates for identified improvements, although a comprehensive assessment of the condition and specific capital improvement needs at Blue Rock Springs has not been conducted. The phasing of the improvements also is indicated under the premise that available funding is extremely limited. As such, improvements are deferred until conditions deteriorate to the point that safety becomes an issue or revenue is impacted. West Course Substantial capital improvements were completed on the West Course original holes (#4, #5, #6, #8, #9, #10, #16, #17, and #18) in 2005/2006, consisting of irrigation system improvements, greens complexes, tees, bunker renovation, and drainage improvements. The cost of these improvements totaled $1.6 million, or about $200,000 per hole. Irrigation Controllers--Irrigation controllers for the new holes on the West Course will require replacement over the next 10 years. Estimated Cost: $80,000 Tees and Bunkers--The tees (4 tee complexes) and bunkers (22 bunker complexes) on the portion of the 10 holes on the West Course constructed in 1994 require renovation. For the most part, the tees are too small and have crowned over the years. Estimated Cost: $170,000 Pro Forma Advisors, LLC Page 57 PFAID:

62 Comparative Review Table VI-1: Estimated Blue Rock Springs Capital Improvement Requirements (thousands of 2011/2012 constant dollars) Improvement Total West Course Irrigation Controllers --- $ $80 Tees Bunkers 1/ Cart Paths Other/Soft Subtotal $25 $125 $525 $675 East Course Irrigation Controllers --- $ $125 Irrigation Other Electrical Irrigation Modifications Tee Complexes Bunkers Fairway Top Soil Other/Soft Subtotal $65 $280 $430 $775 Support Facilities Clubhouse $1,800 $1,800 Cart Storage (private) Other/Soft Subtotal --- $125 $1,950 $2,075 Total $90 $530 $2,905 $3,525 1/ Includes 10 tee complexes and 22 bunkers. Pro Forma Advisors, LLC Page 58 PFAID:

63 Comparative Review Cart Paths--The cart paths on the original portion of the West Course (9 holes) are narrow and generally in poor condition. While not an immediate priority, a new concrete cart path network for the original holes will be required at some point (beyond 2020). Estimated Cost: $300,000 East Course There have been limited capital improvements to the East Course since it was constructed in Irrigation System-- A series of irrigation system improvement on the East Course are required. In the near term (2-5 years), replacement of electronic systems controlling the primary irrigation pump, mapping of the irrigation system, and other software upgrades, totaling about $50,000 will be required. In the mid-term (10-15 years), irrigation controllers will need to be replaced. In the longer term (beyond 2020), while the irrigation system on the East Course is only 17 years old, the system apparently was not designed properly resulting in inefficiencies and poor coverage. This deficiency is exacerbated by the windy conditions affecting the East Course. Improvements to the irrigation system on six holes on the upper portion of the course, which would significantly improve the condition of the course, will be required at some point, although probably deferred beyond In the near term, new controllers and the main irrigation pump station will require attention. Estimated Cost: $325,000. Tees--About 9 of the original tee complexes will require rebuilding (drainage and leveling) due to their age and relatively small size. Estimated Cost: $50,000. Bunkers--The 40 bunkers on the East Course will require refurbishment related primarily to improving bunker drainage. This improvement can be deferred for a number of years (beyond 2020). Estimated Cost: $200,000. Fairway Top Soil--Additional top soil to the 18 East Course fairways is proposed in the mid-term (10-15 years) in order to maintain the condition of the course. Estimated Cost: $50,000. Support Facilities The maintenance facility and main cart storage building are in good condition and do not require attention in the foreseeable term. The maintenance building was constructed in 1994 and the cart storage building in 2007 ($450,000 cost). The practice range and range building/halfway house also are in reasonably good condition, although some strategic improvements to the range may be justified, as discussed subsequently. The clubhouse was constructed in 1960, and thus is about 50 years old. The two-level wood frame structure is 10,180 square feet, excluding the lower level storage area adjacent to the pro shop. While some improvements have been completed over the years, the structure is effectively at its useful end. The building does not require immediate replacement or renovation, but will need to be addressed in the mid-term. A Pro Forma Advisors, LLC Page 59 PFAID:

64 Comparative Review new clubhouse would cost in the range of $300 per square foot, and could range from 6,000 to 15,000 square feet depending on the scale of the food and beverage operation. The associated cost of a new clubhouse, depending on size, would range from $1.8 to $4.5 million, or more. An assessment of a new clubhouse is presented subsequently. In addition to the golf course public cart storage facility, there are four wood frame structures located near the upper parking lot which are used for storage of 210 private carts. Two of the buildings are equipped with electric battery chargers, and two do not have electrical charging units (suitable for gasoline powered carts). To meet EPA regulations, at some point, use of gas carts will be prohibited and the two buildings currently without electrical chargers will have to be converted to accommodate electric powered carts if storage for private carts is desired. The cost, estimated at about $100,000, may be recovered through cart storage rental fees. Maintenance Equipment Presently, nearly all of the golf course maintenance equipment is owned by the Club. The replacement cost new of the entire equipment inventory is estimated in the range of $750,000. At this stage, the Club can continue to periodically replace aging equipment or to lease equipment. While there are cash flow implications related to the different strategies, the annualized cost is about the same, estimated at $65,000- $75,000 per year. Capital Improvement Reserve Golf course facilities are comprised of capital improvements which have a limited lifetime, and it is necessary to continue to reinvest in the replacement of facilities as they deteriorate in order to remain competitive in the marketplace. Establishing a capital improvement annual replacement reserve fund is the best mechanism for ensuring that sufficient capital funds are available for timely improvements. This capital improvement fund is for capital improvements, not personal property, maintenance equipment, or golf carts. Generally, about 5% of gross revenue, or 7-8% of golf related (greens, carts, range) revenue, is a reasonable standard for annual contributions to the CIP fund. For Blue Rock Springs, an annual contribution in the range of $75,000 annually per 18-hole course, or $150,000 per year, is considered appropriate. This contribution level represents 5.5% of total gross revenue. Even at this level, the reserve is not able to fund periodic large components such as a clubhouse. Pro Forma Advisors, LLC Page 60 PFAID:

65 Projected Performance VII. Projected Blue Rock Springs Performance Based on current and anticipated golf market conditions, recent performance at Blue Rock Springs, and selected modifications of policies and procedures at the course, projected performance for Blue Rock Springs is estimated. 36-Hole Golf Complex Projected annual performance at Blue Rock Springs is based on a series of factors and assumptions. The complex continues to offer 36 holes of golf. The facility offers annual memberships to residents and non-residents, as well as daily fee golf play. Annual members would have access to both courses. An unlimited 7-day and limited weekday membership is offered. The annual membership program would be expanded from its current level. Course conditions remain at their current level. Daily fee play would increase marginally, and the average greens fees per round would firm somewhat, in response to an anticipated modest recovery of economic conditions and the regional golf market. No significant capital improvements are implemented which would materially impact revenues--that is, no improvements to the practice range, clubhouse, or other facilities. A limited number of private carts would continue to be allowed, subject to a modest trail fee. The golf course would bear 100% of the cost of irrigation water, recognizing that the City has offered to transfer the full cost of irrigation water over a 5-year period. Operating expenses remain the same as the 2011 actual level. While some savings in golf operations appear achievable, any such savings would likely be shifted to restoring some of the course maintenance budget. A fleet of 120 golf carts are leased (fewer than the existing inventory). A $75,000 annual allowance is included in the maintenance budget for replacement of maintenance equipment. A capital improvements reserve contribution of $150,000 per year is included. A $50,000 per year administrative fee is paid to the management entity to cover expenses which relate to management of the golf course. There is no City of Vallejo administrative or citywide overhead assessment charged to the golf course. Other municipalities routinely allocate or assess a general citywide overhead charge ranging from $150,000 to $350,000 per year for services such as human resources, legal, finance, City Council and administration, liability insurance and other such services. Pro Forma Advisors, LLC Page 61 PFAID:

66 Projected Performance It should be noted that Blue Rock Springs has been particularly impacted by the severe downturn in economic conditions which commenced in late 2007/early Improved economic conditions clearly would benefit the golf market and Blue Rock Springs. However, most analysts believe that the golf market will continue to be challenged by steady or declining golf demand and an oversupply condition for the foreseeable term. As such, even a moderate to strong economic recovery is not expected to result in extraordinary improvement of the golf market and performance of Blue Rock Springs. Projected Revenues Play Levels: Baseline play is projected at 67,000 total rounds, compared with 2010 actual of 65,540, reflecting a very modest improvement in golf market conditions. Most of the increase is attributable to more annual pass-holders. Annual Pass-Holders: An increase in the number of annual pass-holders/members from 350 to 400, stemming from promotion of the multi-course pass, is projected. Greens Fees: Greens fees is the product of non-member play and an average greens fees of $24.00, up slightly from $23.20 in 2010, as the improved market should allow the average fee to firm slightly. Annual Fees: The average annual pass-holder fee is projected at $1,080 per member, similar to the current average level. Cart Rentals: Cart rental revenue is based on current utilization and fee structure. Trail fees remain unchanged, and cart storage fees also remain at current levels. Practice Range: Projected based on current average per round by same-day golfers and current commercial practice use. Merchandise: Projected based on current average per round. Food and Beverage: Projected based on current average per round. Cost of Sales Merchandise cost of sales is projected at 70% of gross sales compared with 72% in Food and beverage cost of sales is projected at 35% compared with 44% in The improvement in food and beverage cost of sales is based on the assumption that sales tax on food and beverage purchases will be passed through to the purchaser rather than absorbed by the course, as is currently practiced. Operating Expenses Overall operating expenses are projected at $2.78 million, about $300,000 higher than in 2010, and $230,000 higher than the 2011 budget (see Table VII-1). The additional expenses include $75,000 for replacement of golf course maintenance equipment, a $280,000 increase in golf course irrigation water, and a series of other minor adjustments in maintenance and golf operations expenses. Pro Forma Advisors, LLC Page 62 PFAID:

67 Projected Performance Table VII-1: Projected Golf Course Operating Expenses (thousands of dollars) Actual 2010 Projected Course Maintenance Payroll and Benefits $513 $550 Services and Supplies Utilities Maintenance Equipment Subtotal $947 $1,340 Golf Operations Payroll and Benefits-Pro Shop $433 $350 Cart Leasing Cart Operation/Outside Services Marshals Range Services and Supplies Subtotal $785 $690 Food & Beverage $214 $200 Undistributed/Clubhouse $50 $50 General and Admin Payroll and Benefits $246 $250 Insurance Property Taxes 6 5 Marketing/Promotion Bank Charges/Credit Card Services and Supplies Management Fee Subtotal $477 $500 Total $2,479 $2,780 Capital Improvement Repl. Reserve Debt Service 87 2/ 355 Adjusted Total $2,566 $3,285 1 Excludes food and beverage. 2/ Actual amount paid. Source: Individual Cities Golf Operations. Pro Forma Advisors, LLC Page 63 PFAID:

68 Pro Forma Advisors LLC Projected Performance Net Operating Income Projected net operating income and net cash flow for the 36-hole Blue Rock Springs golf complex under alternative play levels is presented in Table VII-2. Pro Forma Advisors, LLC Page 64 PFAID:

69 Projected Performance Table VII-2: Projected Blue Rock Springs Annual Net Operating Cash Flow ($000) 2010 Actual Downside Baseline Upside Number of Annual Passholders Annual Passholder Rounds 18,990 18,000 20,000 22,500 Daily Fee Rounds 44,490 40,000 45,000 48,000 Non-Revenue 2,060 2,000 2,000 2,000 Total 65,540 60,000 67,000 72,500 Gross Revenue Greens Fees $1,041 $960 $1,080 $1,152 Annual Fees Cart Rentals Trail Fees Practice Range Merchandise Food & Beverage Cart Storage Other/Miscellaneous Total $2,724 $2,683 $2,979 $3,217 Cost of Sales Merchandise $110 $105 $118 $130 Food & Beverage Subtotal $248 $215 $232 $256 Gross Profit $2,477 $2,468 $2,747 $2,971 Operating Expenses Course Maintenance (ex utilities) $712 $825 $825 $825 Irrigation Water/Power Golf Operations Food & Beverage Clubhouse Undistributed General & Administrative Total $2,479 $2,780 $2,780 $2,780 Net Operating Income ($2) ($312) ($33) $181 Other Disbursements Capital Improvement Reserve --- $150 $150 $150 Debt Service Total --- $505 $505 $505 Net Cash Flow --- ($817) ($538) ($324) Pro Forma Advisors, LLC Page 65 PFAID:

70 Projected Performance Revenue Constrained Budget Blue Rock Springs generated about $2.7 million in total gross revenue in 2010, of which golf-related revenue (greens fees, annual fees, cart rental, driving range) accounted for $2.2 million. Budgeted gross revenue totals $2.96 million for 2011, of which golf-related revenue represents $2.55 million but, based on year-todate results, it is likely that actual revenue in 2011 will far short of budget, ending slightly ahead of 2010 levels. With modest improvement in economic conditions, and some minor changes in rates/policies at Blue Rock Springs, annual total gross revenue of about $2.98 million, of which golf accounts for $2.4 million, represents a reasonable estimate of near-term performance for Blue Rock Springs. Deducting cost of goods sold for merchandise and food and beverage sales yields about $2.75 million available for operating expenses and other funding requirements. In 2010, excluding outlays for capital expenditures and debt service, and with the course bearing only 50% of the cost of irrigation water, operating expenses totaled approximately $2.5 million. Thus, given the current level of maintenance and services, there is sufficient revenue to cover direct operating expenses. However, in 2010, irrigation water for the two courses totaled about $200,000, only one-half of the actual cost of the water. Over the next five years, the golf course will be required to assume an increasing share of the cost such that by 2017 the course will bear 100% of the cost, equal to about $500,000 per year (2011 dollars). There also is outstanding debt on the golf complex. The debt service related to funding (Certificates of Participation) for development of the East Course in 1994 have been favorably modified, now totaling about $355,000 per year (the debt service of about $70,000 per year related to the construction of the cart storage facility has been forgiven as it was a loan from the Golf Capital Fund). In addition, funding is required for replacement/leasing of golf course maintenance equipment ($65,000-$75,000 per year), and a capital improvements reserve for replacement of golf course/support building improvements of about $150,000 ($75,000 per course) would be expected. Thus the total funding requirements are as follows: Funding Component ($000) Direct Operations & Maintenance $2,500 Additional Irrigation Water Allocation 280 Debt Service-COPs 355 Debt Service-Cart Facility --- Maintenance Equipment Replacement 70 Capital Improvement Replace Reserve 150 Total $3,355 Pro Forma Advisors, LLC Page 66 PFAID:

71 Projected Performance Thus, given the expected revenue level, full funding of all obligations results in a shortfall (required subsidy) of nearly $600,000. It is important to note that, while the above funding requirements include a provision for capital improvements (reserve), these reserves would only be sufficient to fund a small component of the $2.6-$4.5 million in required capital improvements identified over the next 5-15 years. It is unlikely that Blue Rock Springs can substantially reduce the net cash flow shortfall through further reductions in operating expenses. The projected shortfall considers some cost savings in golf operations (which are partially offset by slight increases in course maintenance) and some improvements in revenue generation. Nonetheless, even deferring capital improvements replacement reserves and at the current cost of water, and with some potential revenue enhancements/expense savings, an annual operating subsidy of $150,000 to $200,000 is likely. It is always possible to reduce the golf course maintenance and operating budget, but it appears that negligible, if any, further reductions can be achieved without affecting the condition of the course and service levels which, in turn, would impact revenue performance. Pro Forma Advisors, LLC Page 67 PFAID:

72 Golf Course Modifications VIII. Golf Course Modifications/New Projects An analysis of reducing the number of holes offered at Blue Rock Springs from 36- to 27- or 18-holes is presented in this section, along with consideration of several potential capital projects which might enhance revenues at the facility. Reduced Number of Golf Holes Given the current and expected play levels at Blue Rock Springs, and golf market conditions in the foreseeable term, 36 holes of golf at Blue Rock Springs are not supportable. The impact of reducing the number of holes from 36- to 27- or 18-holes is evaluated. A reduction in golf holes would reduce some operating expenses--primarily maintenance related expenses, but would also result in some loss of play due to the limited availability of preferred tee times on a golf course. Revenue Estimates Projected utilization and gross revenue estimates for a 36-, 27-, and 18-hole operation are presented in Table VIII-1. Eliminating 9 holes (27-hole course) is expected to result in a reduction in gross revenue of about $330,000 per year, and elimination of 18 holes (18-hole course) is expected to result in a loss of an additional $340,000 annually. After deducting cost of sales, gross profit is reduced from $2.7 million for a 36-hole complex to $2.4 million for a 27-hole complex, and $2.1 million for an 18-hole facility. Operating Expenses Annual operating expenses for the 36-, 27- and 18- hole golf complex are estimated in Table VIII-2. Since many of the golf operations and general and administrative expenses are basically fixed costs, reducing the size of the golf course does not result in proportionate reductions in overall expense levels. Pro Forma Advisors, LLC Page 68 PFAID:

73 Golf Course Modifications Table VIII-1: Blue Rock Springs Projected Annual Gross Revenue (thousands of dollars) 36 Holes 27 Holes 18 Holes Annual Rounds Member 20,000 18,000 16,000 Daily Fee 45,000 39,000 32,500 Non-Revenue 2,000 1,750 1,500 Total 67,000 58,750 50,000 Members Gross Revenue Golf Revenue Greens Fees $1,080 $936 $780 Annual Fees Cart Rentals Trail Fees Practice Range Merchandise Food & Beverage Cart Storage Other/Miscellaneous Total $2,979 $2,647 $2,303 Cost of Sales Merchandise $118 $ Food & Beverage Subtotal $232 $213 $184 Gross Profit $2,747 $2,434 $2,119 Pro Forma Advisors, LLC Page 69 PFAID:

74 Golf Course Modifications Table VIII-2: Projected Golf Course Operating Expenses (thousands of dollars) 36 Holes 27 Holes 18 Holes Course Maintenance Payroll and Benefits $550 $450 $350 Services and Supplies Utilities Maintenance Equipment Subtotal $1,340 $1,070 $810 Golf Operations Payroll and Benefits-Pro Shop $350 $350 $350 Cart Leasing Cart Operation Marshals Range Services and Supplies Subtotal $690 $653 $620 Food & Beverage $200 $200 $200 Undistributed/Clubhouse $50 $50 $50 General and Admin Payroll and Benefits $250 $250 $250 Insurance Property Taxes Marketing/Promotion Bank Charges/Credit Card Services and Supplies Management Fee Subtotal $500 $476 $454 Total $2,780 $2,449 $2,134 Capital Improvement Repl. Res Debt Service Adjusted Total $3,285 $2,929 $2,589 1 Excludes food and beverage. Source: Individual Cities Golf Operations. Pro Forma Advisors, LLC Page 70 PFAID:

75 Golf Course Modifications Net Impact Reduction of the golf course from 36- to 27- or 18-holes, in terms of direct operating income, would have negligible, if any, benefit--that is, the reduction in operating expenses realized through scaling back the golf course operation would be offset by the expected reductions in revenue. Table VIII-3: Blue Rock Springs Projected Annual Gross Revenue (thousands of dollars) 36 Holes 27 Holes 18 Holes Annual Rounds Member 20,000 18,000 16,000 Daily Fee 45,000 39,000 32,500 Non-Revenue 2,000 1,750 1,500 Total 67,000 58,750 50,000 Members Gross Revenue $2,979 $2,647 $2,303 Less: Cost of Sales $232 $213 $184 Gross Profit $2,747 $2,434 $2,119 Less: Operating Expenses 2,930 2,574 2,234 Net Operating Income ($183) ($140) ($115) Less: Debt Service Net Cash Flow ($538) ($495) ($470) While there are slight savings associated with reducing the number of golf holes, fixed costs such as debt service will remain unchanged, and there certainly will be some costs related to modifying/demolishing the golf course and ongoing expenses related to maintaining open space. Alternative Golf Course Use The East Golf Course, including the practice range, maintenance facility and range building/halfway house, is located on the east side of Columbus Parkway, on a parcel of approximately 110 acres. The portion of the property south of the practice range and maintenance facility, extending southward to Lake Herman Road, totals approximately 50 acres. The property slopes moderately from north to south, offering panoramic Pro Forma Advisors, LLC Page 71 PFAID:

76 Golf Course Modifications views of the Vallejo Valley. Access to the property is excellent from Columbus Parkway and from Lake Herman Road. To the east of the property is Syar Industries Lake Herman Quarry gravel excavation activities, which may influence the marketability of the property to some degree. A portion of the land (9.97 acres) for the East Course was conveyed to the City by Syar Industries in the early 1990s. The agreement between the City of Vallejo and Syar stipulated that the land be used solely for golf course purposes. If not use for golf course purposes, the agreement calls for the land to revert to Syar Industries. Thus, any plan involving alternative use of the East Course property must consider this provision. Assuming that entitlements could be secured, all, or a major portion, of the East Golf Course appears to be highly suitable for moderate density single family residential development. It may be economic to retain the golf practice range and maintenance complex in-place, and perhaps expand the practice range facilities. As such, development of acres would be available for development of residential uses. At a density of 4.5 units per gross acre (7,500 square foot lots), a total of residential units could be supported. A project of this size is a desirable scale, under normal market conditions, with about a 3-year development absorption period anticipated. Residential development on the East Course property would be compatible with development in the immediate area, as the areas on the west side of Columbus Parkway, north and south of the West Course, were developed with moderate density single family residential uses over the past years. The value of homes in this area has been severely impacted by the economic downturn, and most homes currently are valued in the $250,000-$300,000 range ($110-$130 per square foot). The Hiddenbrooke golf course oriented community just north of Blue Rock Springs is priced somewhat higher--generally in the $300,000- $400,000 range ($125-$150 per square foot). Again, these prices are sharply below levels. Reflecting the exceptional panoramic views offered by the East Course property, and assuming modest recovery of the residential housing market, home prices in the $350,000 range appear reasonable. Pro Forma Advisors, LLC Page 72 PFAID:

77 Golf Course Modifications The bulk land value of a 70-acre parcel planned for 315 residential units is estimated as follows: Bulk Value of Undeveloped Residential Parcel Parcel Size (acres) Average Density 70 acres 4.5 units per gross acre Number of Single Family Residential Units 315 Average Lot Size Average Unit Size Average Unit Value (2012 prices) 7,500 square feet 2,500 square feet $350,000 ($140 per square foot) Improved Finished Homesite Value $75,000 Land Improvement Costs Per Unit $45,000 Bulk Paper Lot Value Per Unit $30,000 At $30,000 per paper lot, a 70-acre parcel has a bulk value of approximately $9.5 million, or $135,000 per acre ($3.11 per square foot). Pro Forma Advisors, LLC Page 73 PFAID:

78 Golf Course Modifications New Capital Projects Several new capital improvement projects have been identified for consideration with the intent to enhance net operating income. Clearly, the objective of implementing new capital projects is to generate a return on invested capital which exceeds the cost of capital. Projects which are under consideration include: Practice Range Improvements Clubhouse Renovation/Construction Special Events Center Irrigation Water/Other Infrastructure Improvements Practice Range Improvements Blue Rock Springs practice range has 28 artificial turf tees. There also is a natural turf tee line which has limited depth which restricts its use to about one day per week. The range has lighting for night use, but the lighting design has limited effectiveness. The tee line is not covered or protected with any type of windbreak. In 2010, the range generated $284,000 in gross revenue, equal to $10,150 per tee station. Potential practice range improvements include upgraded lighting, creation of a tee line wind break, expansion of the natural turf tee area, and development of a comprehensive golf practice center. Expansion of the natural turf tee area and creating a complete practice center, which would include 3 practice holes, would only be possible by eliminating 9 or 18 holes from the East Course. Upgrading lighting and providing wind protection for the tee line would result in greater practice use of the range, particularly in the late afternoon and evenings. Given the demographics of the market, competition, and capacity of the range, these limited improvements should result in increasing range revenue from $10,150 to about $12,000-$14,000 per tee station per year, or by about $75,000 per year. Marginal expenses are estimated at 20% of revenue, yielding an increase in net income of $60,000 per year. The cost of the improvements is estimated at $300,000 to $400,000, and thus the return on invested capital is projected in the 15%-20% range. Assuming that additional land area is available, a complete state-of-the-art golf practice center could be created which would contain improvements to the natural turf tee area, short game practice facilities, and three golf practice holes. There are a number of advantages related to a high quality complete practice facility including increased utilization and revenue, and the availability of a facility which can serve as catalyst for new golfer development. Assuming the new facility would have capacity for tee stations, with other practice facilities, annual gross revenue in the range of $600,000 per year, an increase of over $300,000 would not be unreasonable ($15,000 per tee station per year). Operating and maintenance expenses of about $350,000 per year would be expected, yielding net operating income of $250,000 annually. Currently, the range generates about $80,000 per year in net operating income, before debt service or reserves for capital improvements. Thus, a full practice complex may generate an additional $170,000 annually in net operating income, which would support capital costs of up to about $2 million. Pro Forma Advisors, LLC Page 74 PFAID:

79 Golf Course Modifications The cost of expanding the existing range to a state-of-the-art facility depend on numerous factors including the potential use of existing golf course improvements for practice holes and the cost relating to modifying the range to increase capacity. It is expected that the cost of these improvements would be in the range of $1.0 million, although it is possible that there is a scaled-down version of a range renovation plan may be more cost effective. In any event, assuming that land is available through elimination of a portion of the East Course, renovation of the range complex appears justified. As well, the potential benefits associated with having the ability to nurture new golfers with this facility would be expected to produce more play over the mid- to long-term. In terms of the number of years required to recover capital investment, a payback period of about six years is indicated. Clubhouse Improvements The existing clubhouse has served its useful life and the current configuration is inefficient and dysfunctional. At some point, the condition of the clubhouse will have to be addressed. It is doubtful that a major renovation is economic as the cost of retrofitting and upgrading the facility to current safety codes and other requirements typically ends up approximating or exceeding the cost of new construction. The design of a newly constructed facility could vary considerably depending on the scope of food and beverage operations. A new clubhouse with food and beverage facilities primarily designed to service golfers would likely be in the 6,000 square foot range, while a full service clubhouse with indoor special event space capable of accommodating groups of would be in the 12,000 square foot range. At a turnkey cost of $300 per square foot, a new clubhouse cost would vary widely from about $1.8 million for a structure with limited food and beverage facilities to $3.5 million, or more for one with sizable banquet space capacity. Notwithstanding the potential impact of a new clubhouse on increasing play levels, the added direct revenue of a new clubhouse is related to the food and beverage facilities. Golfer generated revenue would be increased somewhat with an attractive bar/grill complex, estimated at about $6 per round of golf. A new banquet facility would substantially increase food and beverage revenues. With the capacity to accommodate groups of up to 250, special event/banquet gross revenue of $600,000-$800,000 per year, yielding gross revenue from all sources approaching $1 million annually. Net operating income, assuming cost of sales of 32% and an operating expense ratio of 45%, from a full service clubhouse would total $200,000 to $250,000 annually. At a cost of $3.5 million 12,000 square feet), a payback period of over 15 years would be required. Special Events Center In lieu of developing a major banquet/special events component within a new clubhouse, it may be more cost-effective to develop a dedicated events center and/or an enhanced outdoor pavilion area. Generally, sizing a facility to accommodate groups of up to is desirable from a market depth standpoint. Through the appropriate use of hardscape and softscape, an attractive outdoor facility can be created to accommodate outdoor social and other group functions. Clearly, an outdoor venue is constrained by climate Pro Forma Advisors, LLC Page 75 PFAID:

80 Golf Course Modifications considerations and absence of other amenities, but also provides a superior setting for many special events. Such outdoor venues also are suitable fro many golf tournaments an outings. Banquet operators indicate that an outdoor venue in climates similar to Vallejo generally accommodate about one-third of the number of events accommodated by a similar size indoor facility, but that average group size and per capita expenditures do not vary significantly. Moreover, operating expenses for an outdoor event tend to be at least as much as for a similar size indoor event. The primary advantage of an outdoor venue is in reduced capital cost. An outdoor venue can be developed for under $1 million compared to over $3.5 million for an indoor facility (12,000 square feet). The economics of an outdoor venue, in terms of the valued created versus the cost of creating the facilities, is more balanced than with a new clubhouse. Incremental annual net operating income of about $75,000 would be required to fully support a $1 million investment. This net income level could be achieved at approximately one-half the incremental food and beverage volume estimated with a full service traditional clubhouse/banquet facility. The payback period on this basis is indicated at about 13 years. Irrigation Water/Other Infrastructure Improvements The cost of golf course irrigation water is a major component of overall operating expenses. With scheduled cost increases, irrigation water will account for over 15% of total operating expenses. Given the size and design of the golf courses, it will be difficult to materially reduce the consumption level. There have been some indications that reclaimed water may eventually be available, but the feasibility of using this water will depend on the cost of infrastructure required to deliver the water to the golf course and the unit cost of the water. Pro Forma Advisors, LLC Page 76 PFAID:

81 Action Calendar SA RESOLUTION NO. ESTABLISHING THE PURPOSE OF THE CITY COUNCIL PUBLIC SAFETY COMMITTEE AND ESTABLISHING THE CREATION, STRUCTURE AND ROLE OF AN AD-HOC CITIZENS PUBLIC SAFETY ADVISORY COMMITTEE BE IT RESOLVED by the Council of the City of Vallejo as follows: WHEREAS, on December 20, 2011 the City Council adopted Resolution No N.C. establishing a City Council Public Safety Committee ("Committee") consisting of two member; and WHEAREAS, on January 31, 2012 the City Council adopted Resolution No N.C. which in part increased the size of the Committee to three members and defined the specific objectives of the Committee and established the creation, structure and role of an Ad-hoc Citizens Public Safety Advisory Committee; and WHEREAS, on February 28, 2012 the City Council adopted Resolution No N.C. which specifically reduced the membership of the City Council Public Safety Committee from three councilmembers to two councilmembers, defined the specific objectives of the City Council Public Safety Committee, and created an Ad-Hoc Citizens Public Safety Advisory Committee to provide input to the City Council Public Safety Committee; and WHEREAS, on March 27, 2012, Councilmembers Brown, Gomes and Sampayan, having voted in the majority on Resolution N.C. requested that the City Council reconsider this Resolution to clarify the role, as to participation and voting, of the City Manager's appointments of one member from the Police Department and one member from the Fire Department to the Ad-hoc Public Safety Advisory Committee; and WHEREAS, on March 27, 2012, the City Council by motion approved Councilmembers Brown, Gomes and Sampayan's request and further indicated their desire to revise the report obligations of the Ad-hoc Public Safety Advisory Committee and to adopt a new resolution that is a revision and restatement of Resolution N.C., as amended, in a single resolution. NOW, THEREFORE BE IT RESOLVED that the City Council hereby defines the purpose and responsibilities of the City Council Public Safety Committee as follows: 1. Receive referrals and make recommendations to the City Council regarding public safety issues within the City Council's discretion. 2. Receive public input regarding enhancement of public safety in the community from an Ad-Hoc Citizens Public Safety Advisory Committee. 3. Review opportunities for public safety cost savings, revenue opportunities and enhanced technology to create a safer community. 4. Review ongoing enhancements of public safety underway in the police and fire departments (e.g. Implementation of Assessment Report items). BE IT FURTHER RESOLVED, that the City Council Public Safety Committee shall consist of two (2) members

82 BE IT FURTHER RESOLVED, that an Ad-Hoc Citizens Public Safety Advisory Committee ("Committee") is hereby created and the Committee is charged to provide input to the City Council Public Safety Committee in the following subject areas: A. A review of best practices in other cities of Citizens Police Commissions, including approaches, powers, limitations and the impact of various models of citizen review. B. A review of best practices in other cities of police and fire departments in terms of efficient operations, revenue generation, reducing calls for service,crime suppression, increasing police presence, and enhancing technology to reduce crime and create a safer community. C. A review of current and future trends in public safety compensation methodology; and BE IT FURTHER RESOLVED the City Council establishes the following criteria for the Committee's organization and time frame for the completion of its work assignment: 1) Committee Organization a) The Committee shall consist of seven voting members and two nonvoting members and shall elect its own chairperson and vice chairperson. The City Manager and City Attorney are hereby directed to support the Committee in its organization and in considering, formulating and making findings and recommendations. b) Members of the Committee must be registered voters of. the City of Vallejo as of January 31, 2012, except the two members appointed by the City Manager, and it is desirable that they possess prior experience in finance, budgeting, human relations, or public safety. Appointments to the Committee shall be made from those applicants obtained through the normal process used for selection of members of City boards and commissions. City Councilmembers shall select one person each to serve on the Committee who shall be voting members of the Committee. The City Manager shall appoint one member from the Police Department and one member from the Fire Department who shall serve as non-voting members to the Committee. Members of the Committee shall be removed and replaced by the City Council pursuant to Chapter 2.26 of the Vallejo Municipal Code. If a member is removed, the Councilmember who nominated the removed member shall nominate a new member for consideration and appointment by the City Council. c) The Committee is directly responsible and reports to the City Council Public Safety Committee. d) The Committee shall meet for the purpose of organization within 15 days after the appointments have been made. Further meetings of the -2-