2001-07-19
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CITY OF ENCINIT AS
ENCINIT AS RANCH GOLF AUTHORITY
MINUTES OF SPECIAL MEETING
Lilac Room, Civic Center
505 South Vulcan Avenue
THURSDA V, JUL V 19, 2001 at 3:00 p.m.
CALL TO ORDER/ROLL CALL
Chairman Kaiser called the meeting to order at 3:07 p.m.
Directors Present: Edward Kaiser, Susan Lamson, Alan Archibald and David Wigginton.
Director Absent:
Kerry Miller.
Also Present:
Chris Calkins, Ardyce Jarvis and John Nabors, Carltas Co; John
McNair, Rod Linville and Mark Warren, J.C. Resorts; Tom Johnson,
Fieldman, Rolapp & Associates; Staff Leslie Suelter, Nancy Sullivan
and Pat Drew, Board Secretary
ORAL COMMUNICATION [3 minutes for each speaker. Maximum 15 minutes
for oral communication.]
None.
AGENDIZED BUSINESS ITEMS
1.
Approve Minutes of Regular Meeting of June 28,2001.
Director Kaiser moved approval of the June 28, 2001 minutes, seconded by
Director Wigginton. Approved 4-0-1 (Miller)
2.
Update on Quail Gardens Bridge.
(John Nabors)
Mr. Nabors gave an update on the status of the Quail Gardens Bridge. He advised
that he had just submitted the structural plans to the City for plan check. He
distributed a copy of the plan and said that the only difference to what the Board
had seen before was that they had re-positioned the angle of the supports parallel
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to the road instead of the original position of perpendicular to the bridge. So, as
one drives by the supports will be equal distance from the curbs.
The second change is that Commissioner Les Bagg had a problem with the design
of the set of guardrails that protect the bridge (the City thinks of them as protecting
the drive). He was concerned that there was too much railing. Mr. Nabors said
that he had promised to give a plan check set to the Planning Department to cycle
through Commissioner Bagg when it was about 90% complete. That was done
about three weeks earlier but he has not had any formal word back from Les Bagg.
However Planner Diane Langager said that he (Mr. Bagg) was still concerned with
too much railing. Mr. Nabors responded that he would let Planning work it out with
Engineering and the City because it's really an internal issue. The basic question
is how much guard railing is needed? He said they have made plan check
submittal (copy left for the Secretary's file) and will be producing a new schedule
which will be reproduced again as soon as they come out of plan check. Right
now they are showing two plan-check cycles with the City and are looking at
September 5th to start the fabrication foundations, and September 19 should start
all the construction. According to the schedule, the whole thing should be finished
and open by the middle of December, or before the 1 st of the New Year. At this
time there is no alert to any particular problem and they are on budget. Mr. Nabors
said he would keep the board informed about plan check but doesn't believe that
he needs to be back to the board before that has been completed.
Mr. Nabors left the meeting at 3: 15 p.m.
3.
Review Summary of June, 2001 Revenues and Expenditures/Financial Statement.
(Rod Linville/John McNair)
Mr. Linville reviewed the June 2001 Revenues and Expenditures statement. He
reported that the low number of rounds for the month was due to aeration of the
course, which he had not taken into account when he did the budget. They
dropped five days for this work.
Revenue for the month was at $424,726 compared to a budget amount of
$406,111 or 105% of budget. Revenue for the year was $4,476,333 compared to
a budget of $4,264,051 or 105% of budget.
Expenditures were $240,539 compared to a budget of $227,970 or 106% of
budget. Expenditures for the year were $2,767,110 compared to a budget of
$2,726,663 or 101% of budget.
Net income for the month was $179,905 compared to a budget of $172,258 or
104% of budget. Net income for the year was $1,693,606 compared to a budget
of$1,506,381 or 112% of budget.
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Total number of rounds for the month were 6,647 compared to a budget of 6,945
or 96% of budget. Rounds for the year were 70,327 compared to a budget of
72,020 or 98% of budget.
4.
Update on Bond Refinancing.
(Leslie Suelter)
Ms. Suelter advised that she and Nancy Sullivan have been working with the
various consultants plus John McNair and Rod Linville and Gene Krekorian of
Economics Research Associates. In going through the numerous legal documents
it became clear to the finance team that there is a problem with the existing bond
documents; the legal structure is not there to finance in the way being proposed.
As they understand it, a priority with the Board is to complete the bridge and
finance the bathrooms. There was a plan to do that by using some existing
reserve money as well as a loan from the City and also the intention to temporarily
raise the capital reserve in order to finance the bathrooms. In reviewing the legal
documents with the attorneys it became clear that under the existing bond
documents there are concerns from the bond investor, the underwriter and from
our legal advisors. The way the legal documents are currently written the legal
structure is not there for the plan in place to finance those improvements. The
bond documents are written in such a way that the most important thing is that the
course gets operated, there is an allowance in the documents for a moderate
capital reserve amount of 2.5%. After that the next thing that has priority is debt
service. Up to this point they have been saying that the City would be paid back
before debt service is paid. When they got into the legal review, and on advice of
the attorney, they discovered that this is not so. The bondholder would certainly
object to knowing that the City would be paid back before they would. The City
would be subordinate to the bondholder and all the other obligations that precede
the City, including the CFD debt, the sales tax repayment, and the 5-yr. look-back,
etc. The numbers that had been brought to the board was on the understanding
that the bondholder was subordinate to the City. Given the new understanding
and under those conditions, Ms. Suelter said she didn't think the City would be
interested in loaning, since essentially they would be saying the City would have to
wait for all these other obligations to be paid. She said that was certainly not what
the City Council had agreed to do.
The finance group spent quite a bit of time looking at alternatives that the Board
could go forward with. They ran some new numbers doing the same scenario
where they were going to collapse all the savings into twelve years, only this time
adding some new money into it and eliminating the City loan, and looking at the
debt service compared to what they had shown to the board last May. Also,
another option is to go back and revisit the Management Agreement, which is the
one that calls out the 2.5% reserve. The 2.5% question could be revisited with the
bondholder to see if there is room for negotiation to increase the reserve
percentage. The bond counsel advises that raising it to 5% is not going to fly with
the bondholder the way the current documents are written. Ms. Suelter said that in
the refunding they can revisit that and she thinks there is more than one option to
do that. They did run some new numbers with borrowing the money or taking new
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money out of the bonds. She said that in talking to Chris Calkins before the start of
the meeting he had mentioned that his concern was that it would be rather
expensive borrowing over 30 years. This is one of the reasons why they decided
last time not to take the new money but to pay for it very quickly over three years.
If the amount of the reserves can be raised to a higher amount it's all written into
the legal documents, possibly ERGA could still borrow from the City and have the
debt service for ERGA's repayment to the City come out of the reserve instead of
out of operating money.
Director Wigginton asked why the City wouldn't take the junior position. Ms.
Sue/ter responded that the whole issue around the golf course was that the City
would never put any general fund money at risk. There's no place in this entire
deal that the general fund and the taxpayers are at risk with the golf course. It
would seem that if they took a junior position it would be junior to a number of
things and there could be the risk that they would not be paid back. Mr. McNair
said that his one fear is with the rate structure. In theory the residents could come
back and say well you got this loan out there and if ERGA fails to pay it back they
(the taxpayers) would have to pay and that's why they should have their rates
lowered. He doesn't feel that ERGA should be liable for that.
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Mr. Calkins said that in Carltas' interest it would be better to not have a lot of
flexibility in the capital reserves. But looking over the life of the golf course he
thinks that if it was just financed with new money, that's it, that's the capital
limprovements, and it would be real tough to do anything more. Maybe there's a
blend with increasing the discretion on what the capital reserve could be, and
maybe some new money would allow for some flexibility. His concern is with not
having the flexibility to do capital improvements when we need it. His suggestion
would be to look at what can be done to get more discretion in the capital reserve
-- to be able to go for 5% or maybe even more. He feels it would be a good time to
~Jet this discretion while we are in good years; it's a good time to get the reserves in
place and get the course improvements done. Then the Board has the ability to
lower the percentage at a later date.
Ms. Suelter said that at their meeting the day before, all the players were at the
table, including Bill Huck the representative of the bondholder, our attorneys and
representatives of the golf course. She said there were obviously competing
interests. John McNair was recognizing what the Board wants to do. Bill Huck,
speaking on behalf of the bondholder, said that what the bondholder wants is to
make sure the golf course is well run. Obviously they have an interest in knowing
ERGA has an adequate reserve to do the basics but they are not interested in
having anything that would interfere with ERGA's ability to pay their debt service.
Ms. Suelter said that what she was hearing from Mr. Huck was that, if it's too easy
to go out and take money that's going to interfere with the flow of those other
funds, then their monies become at risk.
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Chairman Kaiser said that apparently the whole concept of borrowing from the City
is flawed.
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Mr. Calkins noted that there is an exception, that if there's a capital reserve that is
going to generate enough funds to repay the City it can be paid out of that. It's
creating another loan, so that is worth thinking about for the Board to get more
discretion to set aside the reserve. On this issue the bondholder is going to say
they are going to assume that ERGA is always setting it at the maximum. That's
just an economic judgement - it shouldn't be an issue.
Ms. Suelter said that another question is that, in hindsight, in going back to when
they were establishing the documents, the 2.5% was inadequate from the
beginning. Ms. Jarvis said that Mr. Krekorian advised that in his analysis 3% was
more an industry average.
Mr. Johnson said that from the legal side they believe they have an opportunity to
go back and revise the document. So, if there is a legal concern about the current
limitation they can work around that. By revising the document then it would seem
that the limit for the setting of the capital reserve percentage could be negotiated.
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Mr. Calkins indicated that Carltas would be supportive of a change that would give
more discretion for the capital reserve going forward. In addition, they have
already agreed, and would continue to support, having the new money basically
replace the City money, plus something for the restrooms so that the Board
doesn't have to look at the capital reserve to get that. It could be taken care of
early on. His recommendation to the Board is to give the finance team the
discretion if the Board supports the notion of getting more flexibility built in. Now is
the time to do this on the capital reserve and he would suggest at least looking at
5%. The Management Agreement lets the Board go up to 5% based on
recommendations from management and approval by the Board on an annual
basis. His suggestion would be to set the capital reserve at from 2.5% - 6.0%.
Ms. Suelter told the Board that all of the things that had been suggested at the
meeting are things that they can explore. What they wanted to do was simply
bring to the Board the fact that the way they had brought it to the Board before was
not going to work. However, when they got into the details of the documents and
reviewed with the attorneys, the fine print indicated they were beyond stretching
the limits of the indenture by the way they had structured it. Probably Bill Huck is
going to have to get back with Alliance Capital. The economic analysis suggests
that the golf course will continue to do extremely well even with the current
economic slowdown in the overall market place. She said that all things being
equal ERGA is probably in a strong position to negotiate and they can explore the
ideas that Mr. Calkins has raised.
Mr. Calkins said he strongly urged the Board to make a recommendation that they
want a "hybrid" of a combination of new money and flexibility in the capital
reserves.
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Mr. Johnson said that if the Board provided conceptual direction that these are our
goals and we would like it structured in such a way, then they could come back at
the August 30th meeting with the documents that would reflect that concept. After
that they would just be fine tuning based on the numbers at that time.
Chairman Kaiser moved that the Board ask Leslie Suelter and Tom Johnson
to proceed on a scenario where ERGA gets $400,000 in additional funds to
be paid back in the first five years of the new bond issue, and that the
Management Agreement be amended and put into the new bond indenture a
3-4% flexibility on the capital reserve account, with a minimum of 2.5%.
Seconded by Director Wigginton. Approved 4-0-1 (Miller)
Ms. Suelter, Mr. Johnson and Ms. Jarvis left the meeting.
5.
Discussion of Capital Reserve Budget.
(John McNair)
John McNair said that one thing he wanted to touch on in relation to the proposed
restrooms is how the Board may wish to customize. Mark Warren had a list of
questions of ideas of which way to go. Mr. Warren distributed copies of the their
suggestions for proposed locations for the rest rooms on the north and south sides
of the property which would bring them to within approximately ten feet of the
existing sewer line. He said that there had been no discussion about how
electricity and potable water would be got to the restrooms. These are his two
biggest concerns. His first question was does the Board want electricity or
skylights.
Director Wigginton asked if there were other alternative sites to make it more
feasible to place the restrooms that would put them in a better position to get
electricity to them. Director Archibald said he didn't see too much of a problem.
Mr. Warren said his suggestion would be to go skylight. Director Wigginton said
that he disagreed since from his experience with the City's parks system they have
gone from paper towels to electric hand blowers and consequently reduced their
maintenance costs significantly by doing that. They have had less vandalism and
less maintenance picking up after people.
The consensus was to go with power for the restrooms. This would also allow for
automatic sensors for conservation of water and lights as used throughout the
City's parks system. The other question Mr. Warren had was regarding the
number of stalls he should be considering.
Director Wigginton said that before responding to the number of stalls he would
like the Board to decide whether they want a split-face block building or a pre-
fabricated building. Director Wigginton said that he has pre-fabricated buildings at
every park site except one which is Leo Mullen. The block definitely looks a lot
nicer than pre-fabricated but it is a lot more expensive because then an architect
would be required to design the restrooms. The block building at Leo Mullen cost
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about $130,000 for one. A good example of the pre-fabricated building would be
the rest rooms at Cardiff Sports Park.
Mr. Calkins said that his recommendation would be that the Board should go with
pre-fabricated restrooms and put the money into having sensors etc. and keep the
structure simple. It was agreed that the women's restroom would have two stalls
with a stainless steel basin and mirror and the men's one stall, a urinal and
stainless steel basin.
Mr. Warren was requested to get comparative quotes for both split-face and pre-
fabricated buildings and bring to the next board meeting together with catalogue
examples/pictures.
6.
Entry Way Gate/Entry Improvements
(Mark Warren)
Mr. Warren said he has a landscape architect who is willing to do a concept
drawing, bring it in for the Board's review and approval for one cost of $2500. He
said the gate is still something that needs to be discussed whether the Board
wants a retracting or retractable gate or swing gate, wrought iron or what. He
would need guidance from the board before proceeding with getting costs.
Chairman Kaiser asked Mr. Warren to put together some options with graphics,
including replacing the current gate.
Mr. Calkins said he doesn't view the entryway gate as being crucial to the golf
experience. He feels the monument is important to have identification, but a swing
gate and being able to replace it when people crash into it at an inexpensive price
he feels is preferable. Even though the present gate is not attractive, so long as it
is open during the day people are not seeing it. Mr. Warren said he would also
get a price on repairing the present gate and possibly ordering two replacement
gates for future use.
Mr. McNair asked for clarification on the Board's wishes for the landscaping at the
entryway. About three months earlier the Board had discussed putting a putting
green at the entry location and he wondered if the Board wished to keep that
option open. Director Archibald said he felt it was too far from the clubhouse but
maybe they would want to consider another putting a small green at No.1 tee. Mr.
Calkins agreed that he thought that was a better idea since he thought
management wanted to give people a chance to warm up before play. He felt that
putting it by the gate was inviting problems. By putting it at the first tee it will only
be people who are playing and will also give them something to do while waiting to
tee off.
7.
Update on Monument Sign.
(Alan Archibald)
Director Archibald reported that the block is up and is ready to have the rock put
on it. He had tried calling Jack Robson to see what the schedule was since it has
been that way for weeks.
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Director Wigginton said he has a problem with what he has seen. It's not what he
remembered as being presented to the Board. The dimensions are way smaller
than the rendering indicated and may even be higher than was agreed to by the
Board. Also, he understood the plan called for it to be pushed back into the slope
but the block in place now is sticking out. Mr. Warren said he has measured it
and it is according to plan. Director Wigginton said the Board never saw the plans
for approval but they did approve the rendering. The secretary was requested to
pull up the minutes to determine what the Board agreed to with Ure Kretowicz.
8.
Incidents and Accidents.
(Rod Linville)
Mr. Linville reported on a stolen credit card.
9.
Potential Course Enhancements.
None
10.
Discussion/Direction Concerning Course Operations, Conditions Needing Change.
Mr. McNair reported on a complaint received through Jim Bond on some issues
regarding the greens. He had talked to Mark Warren about it and the course in
general. He passed out a copy of a memo written in response to the situation
along with Mark Warren's comments.
11.
Directors and/or Manager Reports
[For reported topics not described on this agenda, State law prohibits Board
discussion, responses, and action. A Boardmember may ask questions, but
only to clarify what the speaker is reporting.]
12.
Next Meeting - Thursday, August 23, 2001 at 3:00 p.m. Changed to August 30,
2001.
13.
Adjournment
4:40 P.M.
ITEMS FOR FUTURE AGENDAS:
a)
Discussion of Bids for 2 Restrooms
(John McNair)
Respectfully submitted,
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Patricia Drew, Board Secretary
Edward Kaiser, Chairman
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