2001-05-24
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CITY OF ENCINIT AS
ENCINITAS RANCH GOLF AUTHORITY
MINUTES OF REGULAR MEETING
Carnation Room, Civic Center
505 South Vulcan Avenue
THURSDA V, May 24, 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, Alan Archibald, Kerry Miller, David Wigginton and
Susan Lamson being all of the Directors.
Also Present:
John White and Ardyce Jarvis of Carltas Co.; Rod Linville, John
McNair and Mark Warren of JC Resorts; Tom Johnson of Fieldman,
Rolapp & Associates; Bill Huck of Stone & Youngberg; Greg Caulor,
Encinitas Ranch Men's Golf Club; Jeffrey Lawler and Bret Ellis of
Nextel (left meeting at 4:00 p.m.); Burt Swaim, Golfer/Resident
(joined meeting at 3:22 p.m.); City Finance Manager Leslie Suelter;
Accountant Nancy Sullivan and Acting Board Secretary Sharon
Scott-Garren.
ORAL COMMUNICATION [3 minutes for each speaker. Maximum 15 minutes
for oral communication.]
None.
AGENDIZED BUSINESS ITEMS
1.
Approve Minutes of Regular Meeting of April 26, 2001.
On page 8, last paragraph, expenditures budget amount corrected to $1,824,026.
Director Miller moved that the minutes of the April 26, 2001 be approved as
amended, seconded by Director Archibald. Approved 4-0-1 (Wigginton
abstained)
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2.
Review of Refinancing Scenarios for the 1996 ERGA Bonds.
(Tom Johnson of Fieldman, Rolapp and Bill Huck of Stone & Youngberg; Staff
Leslie Suelter and Nancy Sullivan)
Ms. Suelter introduced Mr. Tom Johnson of Fieldman, Rolapp who were the
financial advisors on the original bond and would represent ERGA if the
refinancing goes forward, and Bill Huck of Stone & Youngberg who were the
underwriters on the original bonds.
Ms. Suelter distributed a handout outlining the main points of her presentation.
She said that the purpose of the presentation was to look at different refunding
options and to revisit various agreements that addressed intentions and flow of
funds. She gave a brief overview of revenue distribution as it is set out in the
Development Agreement so that this could be related to the various scenarios that
would be outlined. Mr. Johnson pointed out that when they looked at the possible
scenarios for refinancing they first determined that they were in compliance with all
the agreements that were signed by the partners.
Ms. Suelter described the five scenarios. The first option is to take no action and to
maintain the status quo. Scenario 1 would involve refunding now without taking
additional funds, and borrowing money from the City to build the golf cart bridge.
Scenario 2 would involve refunding now and using $500,000 of the net savings for
capital improvements including the golf cart bridge. Scenario 3 would involve
refunding now and using all of the savings generated by the refunding between
2002 and 2013, after that period the debt service returns to basically what it is
today. Scenario 4 would involve not acting until 2006, taking no new money and
the City would advance funds to pay for the golf cart bridge. Scenario 5 would
involve status quo until 2006, refunding in 2006 and taking an additional
$2,000,000, possibly for a clubhouse, and the City advances funds for a golf cart
bridge. Ms. Suelter explained that certain assumptions were made when
calculating the figures, including flat lining the revenue projections and increasing
the capital reserve to slightly more than the 2.5% estimated.
Mr. Johnson then explained in more detail the fiscal impact of each scenario as
outlined on pages 3 and 4 of the handout. Page 3 addresses the affect of
refinancing on the agreements between the parties, and page 4 shows the
resulting savings for ERGA from each option. None of the options extends the
maturity of the bonds beyond the current maturity at 2026 and all make financial
sense as they offer substantial savings. Mr. Johnson acknowledged that this was
not the only consideration, as the impact on the agreements has to be taken into
consideration. He said there are also policy implications, and implications on the
agreements that impact ERGA, the City and the property owners.
Ms. Suelter continued by giving an analysis of the pluses and minuses of each
scenario. There is so much benefit in refunding that the status quo was not a
favorite. The benefits of scenario 1 are that the City, assuming that the golf course
continues to perform at its current level, gets a sizable amount of the funds, and
Carltas is able to pay back more of the sales tax. All unfunded golf course bonds
get repaid, and all undeveloped property owners, Carltas, Cornerstone
Communities, and Barratt, get repaid. Also, there would be adequate money to
pay back the city for the golf cart bridge loan. The down side is that without extra
funds there is no money to implement other improvements. Scenario 2 would
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result in slightly lower surplus net revenue to be distributed to the city and there
would still be some unpaid sales tax. The bridge would be paid for with the new
funds. Scenario 3 allows Carltas to payoff the sales tax sooner, but the downside
is that ERGA will have a higher debt service at the end of 2013. Scenarios 4 and 5
are good for all parties if the interest rate environment remains the same as today,
but that, of course, is an unknown. Scenario 5 significantly reduces the chances of
the other parties to get what they want out of the agreement. Carltas would still
have a significant dollar amount of unpaid sales tax.
Director Miller said his conclusion based on the summary was that it makes sense
for ERGA to refund and that scenario 1 is the most prudent when looking at the
pure benefits of refunding. Chairman Kaiser pointed out that a new call provision
would have to be negotiated with Alliance. Mr. Johnson explained that if the bonds
were refunded Alliance has asked for the first right of refusal.
Mr. White said that scenario 3 appeared to be the best option for Carltas but
expressed concerns about sales tax issues. He asked if the City Council would be
interested in extending the terms to repay the sales tax. Ms. Suelter said the
Development Agreement does state that the City would, in good faith, consider
extending the term six years, but it is a decision that is beyond the scope of the
ERGA Board. She said she believes there is a win/win opportunity here for Carltas
and ERGA.
Chairman Kaiser raised a question about the 2.5% reserve that is currently in
place and if that may be raised to 3%. Ms. Suelter said she believed that the 2.5%
was a minimum and in fact it was currently greater than that. Chairman Kaiser
stated that he could not see a need to refinance for additional funds; Directors
Miller and Archibald agreed. Chairman Kaiser said he believed scenario 3 was the
best of all the scenarios, and it also results in the biggest reduction of Carltas'
sales tax. Director Miller asked for an explanation of the advantages of scenario 3,
in particular those for ERGA. Ms. Suelter said there would be an immediate
reduction in the debt service and ERGA would comply with the agreement with
Carltas to ensure that enough revenues are generated to pay back sales taxes.
The cumulative net revenue is the largest of all the scenarios, and there will be an
opportunity to again refund before the end of 2012. There is the likelihood of
seeing a different debt service at the end of the twelve years. Mr. White added
that the course would be managed consistent with the indenture and the
agreements. Chairman Kaiser asked for any drawbacks to scenario 3. Ms.
Suelter said that if ERGA cannot refund at the end of that time, or the refunding
environment is not good, then there could be a couple of years where a higher
debt service may have to be paid, but it would only be equivalent to that being paid
currently.
Director Lamson moved that staff and consultants be directed to pursue the
scenario 3 refunding option, initiate a market study, contract with the finance
team, determine a specific schedule, and commence discussions with
Alliance Capital, seconded by Director Archibald. Approved 4-1-0 (Wigginton
abstained).
3.
Review Summary of April 2001 Revenues and Expenditures/Financial Statements.
(Rod Linville/John McNair)
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Mr. Linville reviewed financial statements for the month of April. He said April was
a good month, although rain and cold weather resulted in a decrease in the
number of rounds but there will be an increase in May and June. Three or four
days a week during March and April the golf course was being used by local
schools and this resulted in a loss of approximately 20 golfers a day.
Total revenues for the month were $380,321 compared to a budget of $362,552
or 105% of budget. Expenditures were $230,187 compared to the budgeted
amount of $224,993 or 102% of budget. Net income for the month was $150,134
compared to a budget of $135,275 or 111 % of budget. Total rounds for the month
were 5984 compared to 6065 or 99% of budget. Year to date net income of
$1,351,132 compared to a budget of $1,183,509 or 114%. Total rounds are at
56,917 compared to a budget of 58,405 or 97% of budget.
4.
Approve FY 2001/2002 Budget.
(John McNair/Rod Linville)
Mr. Linville presented draft budget options numbers 8, 9 and 10, which indicated
the revisions from the previous budget discussion. All three have the same green
fee adjustments for public rounds, the introduction of a Southern California Card,
the J.C. member card going up $2, the twilight rate going up $1, and a change in
the junior rate to $15 on weekdays and $20 on weekends. The only difference in
the three drafts is that draft 8 includes a senior rate of $28 on Monday and
Tuesday, draft 9 includes a senior rate that would apply on Monday only, and in
draft 10 it would apply on Monday through Thursday. All three drafts would
increase revenues over projected revenues for this year.
Mr. Linville said there would be certain guidelines that would need to be set if a
senior rate were introduced. Guidelines such as a starting age for seniors, if the
rate would apply to resident seniors only, and if it would be on a standby or
reservation basis. Mr. Linville said he would recommend that the senior rate apply
to resident seniors only, that the age for seniors be set at 60 and above, and that it
be a reservation rate. Director Archibald agreed that they should be able to make
tee times and would prefer Monday through Thursday for resident seniors. Mr.
Linville said that Monday was the lightest day followed by Tuesday and then
Wednesday and Thursday. He noted that the course almost sells out every day
and regularly sells out on Wednesday and Thursday, and definitely on Friday and
Saturday. Director Lamson asked if the senior fee would fill in those times which
otherwise would not be sold, and if more income would be generated as a result of
the senior fee. Mr. Linville said he believed revenues were actually going to go
down if a senior rate is introduced, as players that are currently paying $32 will be
paying $28.
Chairman Kaiser submitted a letter he received from the Carltas Company, which
expressed their opposition to offering special rates to any special interest groups,
apart from juniors. Mr. White said he did not see any economic basis for special
rates, as there is no need to fill extra rounds. He said that Carltas would stand by
the recommendation of J.C. Resorts. Mr. McNair said that the impact on revenues
was not immediately obvious due to the increase in the junior rates. He said that
opening up to seniors, especially doing so across the board, would displace non-
resident players, which would have a negative impact on revenue. Director Miller
expressed concern that it appeared that the junior rate has been raised to offset
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the revenue loss from the senior rate. Director Archibald said he would like to see
something done for the seniors that doesn't affect the bottom line. Mr. Warren
introduced the idea of giving the seniors a free bucket of balls on certain days of
the week. Director Archibald said he liked the idea of giving resident seniors a
range token on weekdays. Mr. Linville suggested that seniors could be given a
range token when they pay their green fee. There was a general consensus that it
would be a good idea to not create a senior rate at this time but to give tokens out
on Mondays through Thursdays. Director Miller said this would remove the
impression that the junior rate was increased to compensate for the senior rate.
Director Archibald asked Mr. Linville to keep a record of how many tokens were
distributed.
Chairman Kaiser moved to adopt budget draft #9, without the senior rate,
and to give fee paying resident seniors a range token Monday through
Thursday, seconded by Director Archibald. Approved 5-0
5.
Nextel Update
(Mark Warren)
The representatives from Nextel had to leave the meeting prior to this item. Mr.
McNair said that Nextel were offering to pay $800 per month. Director Lamson
suggested that a figure of more than $2000 should be offered. Director Miller said
the City Council was having a workshop on cell towers on June 13 and an
ordinance will eventually be drafted. It is unlikely that there will be any action on
cell tower applications before the fall and Director Miller suggested Mr. McNair let
Nextel know about this. Mr. McNair will contact Nextel.
6.
Update on Request from Cornerstone re Tree Planting for Screening the
Maintenance Building. (Mark Warren)
Mr. Warren said he had discussions with Cornerstone. They want to place the
trees by the maintenance building but they want the golf course to pay the cost of
maintaining the trees as they mature. Mr. Warren said there was no benefit to the
golf course. At this time Cornerstone is not interested, as the price was not
acceptable.
7.
Incidents and Accidents.
(Rod Linville)
Mr. Linville reported that there had been one auto accident on the corner of
Leucadia Boulevard and Quail Gardens and numerous reported near-collisions
due to cars on Leucadia Boulevard running the stop light. He said that there is a
concern about the speed limit in that area and also that the light does not remain
green long enough for pedestrians to cross Leucadia Boulevard. Director Archibald
said that he would look into that.
8.
Report of any Complaints from Citizens/Players.
(John McNair)
Mr. Linville said that there was a complaint from a resident in the housing behind
the golf course about early morning mowing. Mr. White pointed out that the
CC&R's contain specific language that states the golf course can do any
maintenance at any point in time that they deem necessary. Mr. Warren said that
they do consider the neighbors and try to work away from residences as much as
possible. Mr. White suggested that the golf course send out a letter to reiterate the
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Sharon Scott -Ga ,
Acting Board Secretary
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rules. Director Miller said the letter could state what the golf course is doing to
minimize the impact on its neighbors.
Potential Course Enhancements.
Mr. Warren said the putting green enhancement was scheduled to begin in May
but has been held up and may not commence until the new fiscal year.
Discussion/Direction Concerning Course Operations, Conditions Needing Change.
Mr. Linville received a letter from Mr. Bob McClendan, which listed several safety
issues, including the ramp that comes down from hole 9 to the bridge. If cart
brakes were to fail there was a risk of crashing and being ejected from the cart.
Mr. Linville suggested railing may alleviate the problem but would decrease the
width of the bridge. Mr. Linville advised that the risk would be reduced with the
new cart fleet.
Directors and/or Manager Reports
Director Archibald advised that he had talked with Cornerstone regarding building
the monument sign. They have not yet built it but would stake out the signs and
then contact Director Archibald and Mark Warren to make sure they were in the
correct place.
Next meeting - Thursday June 28,2001 at 4:00 p.m.
13.
Adjournment.
Chairman Kaiser adjourned the meeting at 5:47 p.m.
Respectfully submitted,
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Edward Kaiser, Chairman
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