2000-12-14
On? ,~J' 1M !k~ 12/3/ /~;:"
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CITY OF ENCINITAS
ENCINITAS RANCH GOLF AUTHORITY
MI N UTES OF SPECIAL MEETI NG
Carnation Room, Civic Center
505 South Vulcan Avenue
THUR~DAY. December 14, 2000 at 3:00 p.m.
CALL TO ORO~RlROLL CALL
'~_l /' t-~':"d _ ;. ~:-- '
Chairman Kaisercall~d the meeting to order at 3:06 p.m.
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Directors Present:
Directors Absent:
,
Members of
Publ ic Present:
Also Present:
.;;-
Egward Kaiser, Susan Lamson, Alan Archibald and David Wigginton.
D~rector Kerry Miller joined the meeting at 3:25 p.m.
I'
None
David Balser, Lew Millburn, John Walter, Hal Boston
Chris Calkins and John White of Carltas Co.; John McNair, Rod Linville
and Mark Warren of JC Resorts: Nancy Sullivan, City staff; Pat Drew,
Recording Secretary.
ORAL COMMUNICATION [3 minutes for each speaker. Maximum 15 minutes for
A;V:,~..L<;,: oral communication.}
None
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AGENDIZED BUSINESS ITEMS
1. Approve Minutes of Special Meeting of November 9, 2000.
Dtrecto,r Archibald stated that he erred when he was quoted as 'saying, fourth
p~r.a~ra'e~'i6h page 4, that"it is not a tax,.fr.e~ municipal bond." He m;e~ntto $ay, ,iit
is;ndtat;'erieral Obligation Municipal Bond." Correction was requested,
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Dimctor Lamson requested that in the sixth paragraph on page 3 of the min'utes, the
Rhr~se';"Mr. Balser stated that" be added toJheflrst sentence, to read "Mr.8alser
!iit~m~\th~t people feel ti)e golf course isovercrowd'e,d."
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r\~~~t~..H~~2ussion it was agre~d to rem<;we the fol!owi~g statement from.t~~ third
P,c;l,r,~grCilphon page 4 of the mmutes: "The reason there IS also a bond paymgfor the
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roads is because the Eckes dedicated the 1'75 acres of land free. Otherwise, we
would have paid for the land with a bond. Either way,"
Chairman Kaiser moved that the minutes be approved as amended, seconded by
Director Lamson. Approved 3-1-1 (Wigginton absent at 11/9/2000 meeting and
Miller absent from 12/14/00 meeting).
2. Review Summary of October and November 2000 Financial Statement and Summary
of Capital Reserve and Expenditures. (Rod Linville/john McNair)
Mr. Linville reviewed the financial statements for the months of October and
November 2000. For October total revenues were $348,038 compared to budgeted
amount of $333,953 or 104% of budget; expenditures were $235,474 compared to
$250.435 or 94% of budget; net income was $110,192 compared to budgeted
amount of $81,234 or 136% of budget; total rounds were 5332 compared to budget
of 5496, or 97% of budget, and year-to-date rounds were 26,307 compared to budget
of 25,665 or 103% of budget.
Total revenue for November was $294,304 compared to budget of $290,181 or
101 % of budget; expenditures were $229,970 compared to budget of $233,389 or
99%; net income was $62,077 compared to a budget of $54,508 or 114% of budget;
total rounds were 4,891 compared to 4,855 or 101 % of budget. Year to date rounds
are 31,198 compared to budget of 30,520 or 102% of budget. Year to date income is
$767,367 compared to budget of $620,022 or 124% of budget;
In response to Director Archibald's question as to why the golf school was not doing
so well. Mr. McNair advised that it has not been performing as they had hoped.
People are using it for the day or half-day schools and not the two and three-day
schools as they had hoped. People coming for the three-day schools are local golfers
and are making it more as a vacation. The only way to get the word out would be to
do a costly national advertising program.
3.
Continue Discussion of Rate Issue.
(John McNair)
The following are verbatim notes of Mr. Calkins' comments:
Mr. Calkins said he was sorry he had not been at the November board meeting when
this issue was discussed. When he read the minutes of that meeting he was
concerned because there seems to be a growing misunderstanding of the relationship
as a result of the creation of the golf course.
1) This course was not created with the City taking any economic risk of its own.
It was created on the basis that this would be a stand-alone operation the risk for
which would be assumed by the Ecke (Carltas Company) for construction and
development. In return for this to succeed two things would need to happen: the
normal developer obligation that would be imposed on any landowner who owned
land adjacent to major roadways to improve those roads, would ultimately be
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assumed by the golf course and paid out of revenues. Howeveri because there was
some concern about whether revenues would be adequate the backup for that was
taxes that would be imposed on everyone else in the Encinitas Ranch. That's the so-
called CFD tax. That is essentially paying for what would have been a normal
development obligation associated with the golf course. The City would have
imposed it on any landowner that came forward. In fact, because of the way in which
it is being done the Golf Course will never pay the full costs associated with the
Course or the roadways. So, when someone starts talking about lowering rates, or
practices of municipal golf courses, and therefore people like seniors and others
should have a break, they should start by figuring out the running real costs.
2) In order to provide a basis for this project to even go forward at all, the City agreed
to loan to the Community Facilities District, with a guarantee by the Carltas Group,
amounts to cover the taxes for the first couple of years. There was an expressed
agreement that excess revenues of the golf course, after paying the CFD tax associated
with the golf course, would be used to retire that debt. In order to not overly burden
the Golf Course, there was no specific dollar amount attributed to it. It was to reflect
what had happened during the course of operations. If the Course was successful, it
was clearly envisioned that on a market basis the Course would generate revenues
sufficient not only to pay for the Course operations but also to pay for the road
improvements and to repay the sales tax obligation. This was, in fact, the City's own
money used to build its own roads to support its own golf course. The Carltas Group
guarantee is still out there. This is all reflected in the Development Agreement and in
specific supplements that were done with the City and ERGA. They remain an
obi igation both of the City and the Encinitas Ranch Golf Authority. It is important that
~ this be understood before anyone starts talking about reducing rates or doing anything
that isn't strictly market-driven. A clear economic forecast should be completed so
that everyone will understand the basis on which the Course will perform to meet the
obligations originally accepted by the City.
3) There was recognition that in accepting an operating enterprise in 175 acres of
open land, the City wanted a commitment to ultimately achieve a course fully owned
by the City. However, this is being done for a very small population in the City. The
number of residents who play golf, compared to the number of people in the City
who need recreational activities and who need support in the other kinds of seNices
the City seeks, is a very small part of the population that benefits from having a
municipal golf course. Consequently, on.e of the things that was discussed at the time
the project was put together, was that this course would be run on the basis that it was
market-driven. There should not be a subsidy provided for a very small population in
the City at the expense of the rest of the population. All of the seNices that Mr.
Wigginton (Community SeNices Director) has to provide to people should ultimately
benefit from the economic performance of the golf course. It was to be fair, not to be
unfair. The rates were to be fair. It is clear that they have been fair - the rates have
been lower than anything anyone could find around here for this kind of quality
course. It continues to be discussed at rate setting times and discussions seek to be
fair to residents, but the idea that now the Board would come under pressure and
under assertions that this is somehow something different than the structuring agreed
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to in the Development Agreement - that this was a fully subsidized municipal course
is just wrong. There is a legal set of obligations that the City and the Golf Authority
have that impacts it. Beyond that, they have the fiduciary duty to the rest of the
citizens of the community to run this course as a market-driven business enterprise
not as a subsidized benefit for anybody in this city.
Mr. Calkins said he wanted to go all the way through the issue because over the
course of time, while efforts have been made to accommodate the concerns of
individuals and while the City is sensitive to being fair to everyone, most people don't
know, or have lost sight of, how the golf course came about, what the deal is with it
and where it should be going. Unfortunately, that is a real concern to the Carltas
Group and it is one of the reasons the Golf Authority was set up as an independent
agency with a makeup of board membership that is set in the agreement.
Mr. Calkins said he just wanted to lay that out before any discussions go forward on
fee structure or subsidies or special rates, or anything else.
Director Miller joined the meeting at 3:25 p.m.
Chairman Kaiser explained for Director Miller's sake that Mr. Calkins had just given
the board a refresher on the history of the establishment of the golf course. Mr.
Calkins said the main reason for his comments was that in reviewing the minutes he
became aware that there is a discussion on the fee structure and the level of subsidy.
Part of that reflects a misunderstanding of the original structure and the continuing
financial obligations. He just wanted to make sure that from those who continued to
have a financial risk in the Course, whether it be from the CFD or sales tax obligation
or the ultimate performance of the Course under the Development Agreement, that
there was a clear expression that there is a structure that makes it different from most
municipal courses. He realized that most of the Board knows this but perhaps some
of the folks from the public are not aware that there is a structure that makes this
course different from most municipal courses.
Chairman Kaiser asked if there were any questions for Mr. Calkins.
Mr. Balser said that he is probably as ignorant as the majority of the citizens in
Encinitas about what kind of golf course it is and who runs it. He said that ignorance
is probably due to the fact that no one has looked into it, and that not many citizens
attend the board meetings. However, there seems to be the appearance that this is a
municipal golf course. He. asked if someone could tell him what actually was
Proposition K in 1994, what did it say and how did it relate to the golf course? When
they voted on Prop K what were they really voting for?
Mr. Calkins responded that Proposition K was a Citizens Initiative which would have
the effect of setting aside, with City Council approval, the Encinitas Ranch Specific
Plan, and to set standards for development which would have superceded those the
City had imposed. Consequently, the Specific Plan was treated and viewed by most
people as being either approved or disapproved. Within the Specific Plan was called
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out a proposed golf course. In addition, there was a Development Agreement, which
had been previously negotiated and presented to City Council. Based on the City
Council's expressed motion it was conditioned upon the failure to pass of Proposition
K. The Specific Plan is a land use document describing the golf course. The
Development Agreement spells out the specific terms and conditions under which it
would be developed, under which the City would obtain ownership, how it would be
managed, and what the entity would be that, in fact, ran the golf course. This agency
(ERGA) is the result of the Development Agreement - and was specifically called out
in the Development Agreement. The financial terms described earlier were also
spelled out in the Development Agreement and they encumber the structure of the
golf course. The Development Agreement spelled out how the golf course would
come to be and what the structure of its management would be.
John White added that in response to Mr. Balser's question at the previous Board
meeting, a 'No' vote on Proposition K was actually a vote rejecting the Citizens'
Initiative which was trying to overturn the City Council approval. A 'No' meant that
the Citizens' Initiative was rejected and the Encinitas Ranch Specific Plan went
forward as the City Counci I had approved it.
Chairman Kaiser said that one of the problems that David Balser will bring up is that
there were politicians, according to Mr. Balser, who were planning a municipal golf
course for the residents of Encinitas at reduced rates, that caused a lot of people to
vote No on Prop 1<.
Mr. Calkins responded that it is a municipal golf course and fees are set at reduced
rates for the residents. It is municipal in the sense that it is owned by a publ ic agency,
that's all municipal means - it's a City public agency. But that doesn't mean it's
subsidized by the City. Everyone understands it is a municipal course - it's owned
entirely by the City and its agencies. It happens to have a separate entity that holds
title to it so the City doesn't bear any risk.
Mr. Balser said that this is not what was discussed at the last board meeting. Everyone
went away thinking that it was not a municipal course.
Mr. Calkins said that the issue here is the subsidy. He said there is a continuing
political battle in San Diego and Oceanside about the fact that because those courses
have been so heavily subsidized by the cities there is a gross unfairness to the rest of
the communities. One of the reasons the structure in Encinitas was the way it was
from the beginning was to avoid those conflicts. It was set up so that the golf course
would sustain itself and. not be a burden on the General Fund. It wouldn't take away
from the General Fund, it wouldn't put the General Fund at risk, but the City would
ultimately have the ownership, possession and economic benefit. The economic
benefit would be generated in such a way as to be fair to the whole community.
Director Archibald suggested to Mr. Balser that he take a look at the wording of
Proposition K, read the Development Agreement and he would seethat there were no
promises for substantially lower rates or for advanced tee times. The course wasn't
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set up at that time. Actually, the Development Agreement came after Prop K
conditional on Prop K failing.
Mr. Balser said that he wanted to make it perfectly clear that he was not at the
meeting representing the Encinitas Ranch Men's Golf Club, nor the Women's Golf
Club, he's just a citizen who wants to be involved. He loves the golf course and
praised the greens keeper for the condition of the course. Everything is good about it
except the rates.
Chairman Kaiser asked Mr. McNair to distribute copies of the scenarios he had
prepared if the suggested rate changes (from Mr. Balser at the last meeting) were
reflected together with the various assumptions.
Mr. Calkins asked why the issue of rates is being discussed at this time. Chairman
Kaiser said it was to accommodate the citizen population that had expressed some.
concern about them. Mr. Calkins reminded the Board that ever since the golf course
opened there have been complaints about the rates. He said his concern is that from
the beginning of the year the Carltas Group has put together forecasts on the impact
on revenues, on paying the accumulated as well as the forecast CFD costs, and to try
to make a projection as to the sales tax advance that was made to cover the City's
roads costs. They, Carltas, are operating on that set of assumptions this year.
Therefore, he has some concern about trying to make some changes in mid stream
because people don't like the rates. He pointed out that he has seen no reports that
there has been a reduction in the play, no demographics that suggest that the seniors
who are playing on this course are penniless or even need a subsidy. In fact, it flies in
the face of the demographics of this very community. He's trying to understand why
the Board is looking at it at this point in the year. There is a process, which says that
once a year in the context of the budget and capital expense reviews, rates will be
reviewed. The reason this Board was set up as a separate agency was in order to be
free from political pressure and to run the agency and golf course like a business and
not react because of political pressure. Apparently the reason this is being discussed
at this time is because some people, who happen to be voting members of our
community, have decided they don't like the rates. Not because any financial
justification has been shown.
In response, Director Miller said that the Board had made no decision as to whether
there is going to be any kind of rate adjustment. As he understood it, the issue was
brought in good faith to the Board by the members of the publ ic, users of the course,
and he believes that the Board is trying to understand this a little bit better. He also
believes that there is some information sharing which is very good and very
constructive. Certainly, as a Board member, it is very constructive for him to
understand it.
Chairman Kaiser and Director Miller both stated that they don't believe any members
of the Board want to jeopardize the loss of revenues that have already been budgeted.
However, they thought that maybe there was some fine-tuning that could be done to
make customer service a little bit better at the golf course. The rate scenarios that
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were distributed were simply illustrative to give the Board an idea of what
modifications to the rates could look like. It's agreed that there is a process, which
should be honored. However, the Board does have a responsibility to be responsive
to the issues that are brought to the Board to the extent it increases the level of
understanding. Perhaps, in the future, based upon the Board's appropriate process, it
is led to some different conclusions or different ways of doing things while still
maintaining the financial integrity of the Course.
Chairman Kaiser said that he doesn't believe there is anyone on the Board who wants
to reduce the budget revenue in any way shape or form but with what has been
presented the Board has the opportun ity to take it and look at it and come back at a
future meeting, maybe the next meeting, to see if there are any suggestions. For
instance, maybe the rate for the jC Club members, who are getting the same rate as
the Encinitas residents, could be raised.
Chairman Kaiser requested that the issue be brought back to the january board
meeting. Mr. Calkins recommended that jC Resorts also do an analysis/survey on the
Senior Rate issue and bringthe data back to the Board for review.
Mark Warren left the meeting at 4:00 p.m. because of an emergency at the golf
course. He requested that Items 4, 5 and 6 be continued to the next meeting.
Mr. Balser left the meeting at 4:10p.m.
5.
14th Tee Update.
(Mark Warren/john McNair)
Director Archibald advised that the hole is open and looks great. Issue closed.
6. Status of Requirement for a Landscaping Plan for Hole 14 and Slope Area.
(Mark Warren/Phil Cotton)
Continued to Next Meeting.
7.
Status of Entrance Monument and Torrey Pines on Slopes.
(Alan Archibald)
Director Archibald said he was misinformed at the last meeting when he thought the
Planning Commission had approved the plans. The plans have been submitted but
have not gone through the Planning Commission. Will probably do so in january or
February.
Chairman Kaiser requested that Director Archibald obtain a letter from Cornerstone
Communities, following Planning Commission's approval, giving a time frame of
when they will complete the project.
8.
Quail Gardens Drive Bridge Update.
(john Nabors)
In Mr. Nabors' absence, Mr. Calkins reported that a few more design changes have
been made and the plan is supposed to go to Planning Commission in January.
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9.
Discussion re financing of bridge.
(Chairman Kaiser)
Chairman Kaiser indicated that the bridge is still on budget at $322,000, and the
City's loan of $250,000 for three years is still in place. . Director Archibald said that
he and Nancy Sullivan have agreed that ERGA doesn't need to trigger the loan until
begi!)lning the construction of the bridge. As agree at a previous meeting, the balance
of the funds needed to complete the project would be taken out of the Capital
Reserve funds.
10.
Proposal to Change Cart Fleet One Year Earlier than Scheduled.
(Rod Linville)
Mr. McNair explained the differences and improvements in the new golf carts from
those currently being leased. The increase in the monthly lease amount will be $600
i.e. $6.54 increase per cart per month. The lease with E-Z-GO is for 48 months.
Chairman Kaiser moved approval of the lease of the carts from E-Z-GO, seconded
by Director Archibald. Approved 5-0.
Director Miller was authorized to sign the Agreement.
11.
Incidents and Accidents.
(Rod Li nvi lie)
Director Lamson reported for the sub-committee (Lamson and Kaiser) on their
meetings with Rod Linville and his staff relative to the King matter, and also with the
King family.
John McNair said that he had talked to the Kings and also wrote a letter to the Kings
explaining that there had been some miscommunication between them and looked
forward to a mutually beneficial relationship in the future. He also looked forward to
playing a round of golf with Andrew. He had also written an internal memorandum
to staff explaining how they were to fill out incident reports. Copies of the letter and
memorandum are to be filed with the minutes of this meeting.
Director Wigginton said he was confused. Director Lamson explained for his benefit.
Rod Linville said he had some comments and clarification that he would like included
in the minutes. He did not suspend Andrew for three months for all the incidents. He
suspended him because he suspended Mr. Hammond for one incident that involved
Andrew King. He suspended them both equally for the one incident.
12. Capital Improvement Issues/Discussion (Wish List):
(a) Restrooms; Preliminary Design/Sewer Line for Restrooms at the south end of
the golf course.
Mr. Calkins asked if any work had been done on this item because if there are
going to be sewer hook-ups it should be done before they put the houses in
along that area.
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Chairman Kaiser said this is probably the next improvement that will be
undertaken. New estimates for the restrooms will be obtained at that time.
(b) Club House
(c) fountain in Pond at Hole 8.
- Discuss at next Board meeting.
(d) Other
Director Archibald said that when he was talking to Ure Kretowicz about the
monuments, he advised that he is still willing to arrange for planting Torrey
Pines on the slopes. However, they cannot locate the site line map that was
prepared by Community Services. Director Wigginton suggested that, if the
trees are small, they go ahead and space the trees and as they get older those
trees that block the view can be relocated. Director Wigginton agreed to call
Mr. Kretowicz to tell him to go ahead with the planting.
Mr. Calkins said they are aware of people driving motor cycles across the golf
course at the north end. As urbanization continues to increase he felt the
Board would be well advised to begin thinking of continuing the fencing that
starts at Paseo De Las Flores, and over a period of years adding fencing along
the roadways.
The remaining members of the Public left the meeting at 4:35 p.m.
13. Potential Course Enhancements.
Director Archibald advised that there are five or six Pepper Trees along holes 2 3 and
4 that are right in the way of the new sewer construction; There is still time to move
the trees and save them rather than have them destroyed as part of the storm-drain
construction. He suggested that Mark Warren arrange for them to be moved onto the
golf course property.
The other point he (Dir.ector Archibald) wanted to make was that now there is a lot
more traffic on Paseo De Las Flores he believes that either a stop or a yield sign
should be placed at the cart crossing because it is an at-grade crossing. It was agreed
to place a Stop sign for golf carts.
14. Discussion/Direction Concerning Course Operations, Conditions Needing Change.
Director Wigginton said he had a couple of items to discuss.
Based on the minutes of the last meeting and the discussion on fees, he wondered if
there was any interest by the Board in putting together some type of educational
program to let the people of Encinitas understand how the golf course was financed,
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what the ERGA board is all about, and the types of improvements that the Board has
been able to do with the golf course.
Director Miller suggested a brochure giving the history of the course, how it is/was
financed, how it is governed etc. It was agreed that a brochure would only reach a
limited number of people and the recommendation was, made that an article be
included in the City's IN ENCINIT AS magazine. Mr. Calkins agreed to write
something for the next issue.
Mark Warren returned to the meeting at 4:40 p.m.
Director Wigginton said that his department was successful in getting the recreation
trai I along hole 13 designated No Equestrian Use. Does the Board want them to
proceed with erecting the fence now that they have that determination? Approval was
given.
Taken out of Order
4.
Replacement Plants for Brome Grass.
(Alan Archibald/Mark Warren/John McNair)
Mark Warren advised that the Committee recommends going to native material to
replace the Brome Grass. Director Miller recommended that the Board authorize
moving ahead with the project using native materials.
Director Miller moved that the Committee be authorized to spend $10,000 on the
native materials, seconded by Director Kaiser. Approved 5-0.
Director Kaiser moved approval of up to $5000 for the fencing by hole 13,
seconded by Director Archibald. Approved 5-0.
15. 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.]
16. Next Meeting - Thursday, January 25,2001 at 3:00 p.m.
17. Adjournment.
Chairman Kaiser adjourned the meeting at 4:53 p.m.
R~~:f~~IY ~ub~itted, .
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Patricia Drew, Secretary
!ZMcjL -
Edward Kaiser, Chairman
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