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1997-11-20 CITY OF ENCINITAS ENCINITAS RANCH GOLF AUTHORITY MINUTES OF REGULAR MEETING THURSDAY, NOVEMBER 20, 1997 at 3:00 p.m. CALL TO ORDER/ROLL CALL Chairman Kaiser called the meeting to order at 3:07 p.m. Members Present: Directors Ed Kaiser, Kathy Riggins, Lauren Wasserman, Alan Archibald, David Wigginton. Also Present: Chris Calkins of Carltas Co., Bob Dobek and Scott Bentley of J.e. Resorts; General Counsel Roger Attorney; Manager Jim Benson, Secretary Pat Drew. Members of Public Present: James Bond, Jack Stover, Art Beardsley, Claire Waldman, Doris Almy, Shirley Reeves, Bill Hillman, John Guidero, Norm Leraas, Clem Hale, Bob French, Heather Eabis, Jean Kelly, Judy Litman, Annie Leaf ORAL COMMUNICATION Council member Jim Bond said he was proud of the Board members and felt they were doing an excellent job of putting the Golf Course together and making it such a terrific addition to the City of Encinitas. Congratulated the Board on not opening the course for play until the course has fully grown in. Asked Board to seriously consider not eliminating the option of walking the course on the weekends. REGULAR AGENDA 1. Approve Minutes of Regular Meeting of October 16, 1997 Director Archibald moved approval, seconded by Director Wasserman. Approved 5 - 0 2. Approve Rate Structure. Clare Walden spoke to the proposed rate structure. Recommended that there be a three-tier rate structure with the resident rate being lowered appreciably and increase a third tier for out of County people. 1 Manager Benson reviewed for the visitors the reason why the proposed rate structure is looking I ike it is and how the Board got to those numbers. He explained that as discussed at previous meetings, the Board has an obligation under its original charter and under the revenue bonds that were issued, to set course rates that wi'l pay for not only operation and maintenance, but also around $950,000 a year in payments on the revenue bonds. This is a very different situation to what other courses operate under in terms of financial obligation. It is to be remembered th'at the course has been built with these revenue bonds and was made possible by the donation of the land by the Ecke Family; the land was appraised at $4.8 million. The bottom line is that the Board has a fiduciary responsibility to set up a rate structure that wi II pay for the bonds. Manager Benson handed out a revised summary of greens fees for review and discussion and explained the rationale for the numbers. A question was asked why there wasn't anything in the schedule for Encinitas residents on a monthly, quarterly or yearly rate. Was advised that this had not been considered. Manager Benson responded that this would be an econotnic problem because low cost rates would reduce income due to displacing full paying players. This could rapidly put the bottom line in the red. Director Archibald stated that he would like to see the proposed $7 rate differential for the week day rates the same on the weekend, but in order to keep the revenue stream flowing would need to raise the $49 to $50 for non-residents. This would generate more revenue and would probably eliminate the anticipated $19,000 deficit in the first year. Would go with the $28/$35 during the week. He also recommended mandatory carts on the weekend to end at an earlier time, say, noon or 2 pm. Director Wigginton requested that J.e. Resorts re-run the pro forma with the suggested new numbers for residents. Would like to know what impact there would be on the operations of the course and JC Resorts; his primary concern is with the bottom line. Chris Calkins said he understood why it is desirable to lower the rates as much as possible but it must be remembered that the reason JC Resorts were hired was to make sure the course would work. There is a large revenue bond to pay and ERGA doesn't want to run any risk with it. Since it is a brand new course, at this time we have no idea how it will operate. We have asked JC Resorts to bring in their best judgment but now we are trying to second-guess them. Board can always make adjustments later if we find out there is capacity to allow people to walk instead of mandatory carts, and the mix of play allows for reductions. Agrees with Director Wigginton that we should be very cautious and look at the bottom line. Manager Benson reminded the members that there is a trustee for the bond holder (we sold the bonds to one individual investor) and if we get into problems and cannot meet revenue bond payments, and have to draw off the reserve, we have to move into a situation where the Board loses control. Then we have to go out and get a consultant with the bond holder now in control. He can tell us (ERGA) how to manage the course better, etc., so they get 2 their money. We certainly don't want to get into such a situation. There is $10,600,000 worth of bonds out there so the investor has a lot at stake. The way we were able to get this funding was to have some pretty tight constraints put on the operation. Director Wasserman said that in reviewing the rate comparison with other San Diego golf courses, he would agree that the numbers being discussed are quite competitive. We are not overly high nor overly low, with the exception of a couple of other courses that are clearly getting a City subsidy and don't have any bonds to payoff. He also asked J.e. Resorts if they had any experience at any of their courses with a three tiered structure that included a separate fee for out of county players. Since they have not, he requested that during the first twelve months, they develop a chart to show if there is a pattern. If it could be projected to show it would work financially, believes it would be a good idea to restructure the rate schedule. Chris Calkins reminded the Board that when the course was originally proposed and considered by the Council, it was with the idea of encouraging people into the area, not to deter them with high rates. The course was to provide a vehicle for increasing City revenues because City is not currently getting its share from people coming down from Los Angeles and Orange Counties. I Christine Barch asked if any consideration had been given to special rates for the Men's and Ladies' Clubs during off peak times in the week. Scott Bentley responded that they had taken into account that probably most of the membership would be either residents or JCR club members who have the lowest rates. Given the constraints in having to payoff the bond, that was about the lowest they could afford to go. Director Wasserman requested Scott Bentley come back at a special meeting with a pro forma showing the suggested numbers with carts mandatory on the weekend until the late rate, and the issue of walking on weekends to be reviewed in a year. Also, to track for a year to find out where people are coming from; and to consider, in a year's time, the three- tier structure after we have some data to look at. A special meeting was scheduled for 3 p.m. on Tuesday, December 2, 1997, to do a final approval of the rate structure. It was agreed the December 2 meeting would take the place of the regular December 18 meeting. 3. Approve Policies: a) Cash Controls b) Inventory Controls c) Waiver of Greens Fees d) Use of Course by Groups and Tournaments Manager Benson recommended that the Board approve the policies as presented. 3 Director Archib~ld moved, Director Kaiser seconded, approval of the policies as presented. Approved 5-0 4. Review Rules for Use of Soft Spikes on Course Council member Jim Bond spoke to encourage the Board to make the course spikeless. Scott Bentley handed out an update on the soft spike issue and invited discussion. Director Wasserman moved approval of the policy banning metal spikes, seconded by Director Riggins. Approved 5-0. 5. Review Amendment 1. to Golf Course Consulting and Management Agreement with e.J. Resorts Removing the Food and Beverage Facility from the Agreement. Director Wigginton moved approval of Amendment 1 to the Consulting and Management Agreement, seconded by Director Archibald. Approved 5-0. 6. Approval of Lease with e.J. Resorts for Food and Beverage Concession at Golf Course. Bob Dobek reviewed an overview of the proposed lease agreement for the food and beverage concession vs. the original management agreement that was a part of their contract. He reviewed the comparative figures showing how ERGA and CJ Resorts would have fared under the original management agreement, and how ERGA and CJ Resorts would fare under the proposed new lease agreement, with CJ Resorts purchasing the equipment and having all liability involved with licensing and all other legalities that go with it, including the general risk of business . Director Riggins said she felt it was well worth giving it a try and would recommend going ahead with the lease agreement. General Counsel Krauel said there were a number of questions that needed to be addressed: 1) wording about the buy-back of equipment, 2) issue regarding possessory interest tax that might be paid, and 3) indemnity provisions. Issue was tabled to allow Manager Benson to work with General Counsel Krauel on the wording and his concerns. Item to be brought back to the December 2, 1997 Special meeting. Regarding possessory interest tax, Counsel Krauel explained that whenever a public agency is leasing property to a private entity or operator of that property, State law requires that there be a provision that says "you are gaining possession of public property. We are alerting you that there may be a possessory interest tax you will have to pay." The City does not impose or calculate or determine whether it is due, that is done by the County Tax Assessor. We are required to have such a provision in the lease alerting the tenant that by taking on this lease they maybe acquiring a possessory interest tax. This tax is in lieu of a real property tax if 4 they were the owners and paying property tax. Pointed out that in paragraph eleven the lease agreement has the City paying the tax. Wanted to be sure that that is what the Board intends. Manager Benson asked to look into this issue also. Bob Dobek explained that they are currently working with ABC on the permitting for the property. He handed out a map showing outlining the areas that will be licensed permitting the sale of alcohol. The rule as it states currently, is that no one may cross any public road, whether the road is touched or not (i.e. go over a bridge) with alcohol purchased at the club house. This also involves a beverage cart that would be restricted from "working" the front nine holes. Actually limited to the seven holes that are contiguous to the club house. Any other area is off limits. This will, of course, have an impact on revenue. They will continue to work with ABC on this issue. 7. Review of Relationship and Operating Procedures Between the Golf Course and Men's Club and Ladies' Club. Jack Stover said that as the Owner of the San Diego County Golfers Association with 130 members, they have been very pleased with their ten year membership in SCPLA. While he is very happy with J.e. Resorts as the operator, he is concerned that the Men's Club members must join SCGA. Feels that the members of the Men's Club should have the vote on which association they wish to join. As a member of the club he would go along with their decision. Manager Benson explained that the Board asked both organizations to make a presentation, which they did. Based on those presentations the Board discussed the relative strengths and weaknesses, and what each would bring to the membership. One of the primary concerns was that PubLinks has no course in San Diego County with which they are associated. The Board made the decision to authorize SCGA to rate the course and handle members handicapping. Scott Bentley stated that they really value the Fore magazine that SCGA puts out and it is an excellent means of marketing the golf course, and J.e. Resorts can benefit greatly from any and all publ icity it can get. One of the best ways to get a golf course off to a good start is to get it written up in Fore Magazine. Does not believe that PubLinks would be in a position to do this. JC Resorts felt that because of the service SCGA would provide in rating the course, handicapping services etc., they were the better association to go with. Chairman Kaiser reviewed the decision the board made to go with SCGA because of the services they provide in handicapping services in the pro shop. The Board also endorsed the concept of letting JC Resorts form the Men's and Ladies' Clubs. There is nothing to stop another club that belongs to PubLinks from playing the course or having tournaments. Scott Bentley reminded the public members present that J.e. Resorts, as the operator, feels the Men's and Ladies' clubs are really the property of the golf course. The clubs will have their own boards of directors to run their clubs, but JC Resorts will have a final say in the operation and rules they set. 5 On Monday, December 1, 1997, JC Resorts will be having a public meeting to organize the Men's and Ladies' Clubs. Members will be signed up that evening and a later meeting will be held in January to elect officers and Board members of the two clubs. The clubs will be free to settheir own by-laws and agendas, with JC Resorts' guidance and oversight, and the days they will meet will be set. Scott Bentley and/or the Golf Pro, John Mason, will usually attend meetings to offer guidance when needed. 8. Discuss/Consider Inviting City Residents to Walk the Course Prior to Grand Opening. Director Archibald said that he had talked to Hazard Construction, who still has possession of the golf course, about their concerns re groups touring the course, etc., and they want to be protected from liability. Hazard Construction want the option of denying any activity on the course other than ongoing maintenance. . Manager Benson said that the City's Risk Manager is working on having the insurance Joint Powers that covers the City to also include coverage for ERGA. There are several options, and we are working to get coverage to start a little earlier so as to include a day like this. We could probably get cover age for a one-day special event through the insurance JPA for a relatively inexpensive rate. 9. Discuss/Consider a Promotional Tournament Event for John Mason and Scott Bentley to Play the Buick Open Champions. Scott Bentley advised that this is a promotional event being coordinated by John Mason with Taylor Made Golf Company to play Taylor Made tour staff professionals some time in. February. This will follow the Buick Open tournament. 10. Potential Course Enhancements. Director Archibald and Manager Benson discussed some small enhancements that still need to be done, one being a small stairway up the hill from Quail Gardens Drive which would save the walking players during the week quite a few steps, and some minor things like putting a small wall along the tees on 17 to control erosion from the slope that is being brought back to its natural state. The 16th hole is still being discussed as to how to ensure safety from the middle and back tees - there is a drivable shot into an area that cannot be seen. The concern is how to let people know of this hazard. Still working on a solution. Director Riggins showed a sample tee marker that they will be using as an enhancement. 11. Directors and/or Manager Reports Director Riggins advised that she and John Mason have been working on the Board approved concept of going after approved major sponsors. She passed out a copy of the letter that has gone out to prospective sponsors inviting participation. A three year, $5000 donation would also give them two tickets to the dedication/tournament on February 28, together with acknowledgment at the ribbon cutting ceremony. Have asked for responses by December 6 31 in order to be able to move ahead. Looking at 18 sponsors, one per hole. With this program we have the ability to raise $90,000. For informational purposes, Director Riggins handed out copies of the invit,ation to the ded i cation/tou rnament. 12. Items for future agendas: a) Recommendation from Staff and J.e. Resorts for displaying donor plaques in temporary club hours. b) Approve Rate Structure. c) Approve Lease with e.J. Resorts for Food and Beverage Concession. d) Men's and Ladies' Clubs update. e) Golf Course Dedication!Tournament. f) Update on Major Hole Sponsor Program. 13. Next Meeting - Thursday, December 18, 1997 at 3:00 p.m. Changed to a Special meeting on Tuesday, December 2 at 3:00 p.m. 14. Adjournment Chairman Kaiser adjourned the meeting at 5:00 p.m. Respectfully submitted, \:i~v- )yR~ Patricia Drew, Secretary ~dL' Edward Kaiser, Chairman 7