2008-04-22
CITY OF ENCINITAS
ENCINITAS RANCH GOLF AUTHORITY
MINUTES OF SPECIAL MEETING
CIVIC CENTER
505 SOUTH VULCAN
TUESDAY, APRIL 22, 2008 at 4:00 p.m.
CALL TO ORDER/ROLL CALL
Chairman Dean called the meeting to order at 4:03 p.m.
DIRECTORS PRESENT:
Peter Cota-Robles, Phil Cotton, Bill Dean, Chris Hazeltine and
Cindy Jacob.
DIRECTORS ABSENT:
None.
ALSO PRESENT:
John McNair, Rod Linville, Kent Graff, JC Resorts; City Staff
Jennifer Smith, Jay Lembach, Nancy Sullivan, and Board Secretary
Joan Woods.
ORAL COMMUNICATION
Chairman Dean read an e-mail from Bob Rief regarding his concerns on frequency of tee times,
course condition and food costs.
REGULAR AGENDA
1. Approve Minutes of Regular Meeting of March 25.2008.
This item was taken out of order and heard after item #7.
2. . Review Summary of Revenues and ExpenditureslFinancial Statement/update on Capital
Reserves for March 2008. (Rod Linville/John McNair)
This item was taken out of order and heard after item #7.
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3.
Encinitas Ranch Golf Authority Financial Reserves Policies.
(J ay Lembach)
This item was taken out of order and heard before item # 1.
Jay Lembach presented a staff report with recommended amendments to the Comprehensive Reserve
Policy for ERGA.
Mr. Lembach stated currently ERGA maintained three different reserves:
CURRENT PRACTICE:
(1) Operating Reserve-
maintain two (2) months of operating expenditures in an
operating account.
set aside 3% of Gross Revenues (as defined) for a short-
term capital reserve.
set aside 1 % of Gross Revenues (as defined) for a long-
term capital reserve.
(2) Short-Term Capital Reserve-
(3) Long-Term Capital Reserve-
Mr. Lembach proposed changes to the reserves policies and practices and the addition of two new reserve
categories:
(1) Operatine Reserve-
NEW POLICY -one month of expenditures to provide for cash flow requirements and expenditures.
Another month reserve of expenditures was proposed for the provision of a "rate stabilization fund". A
"rate stabilization fund" would provide a reserve of funds to offset unexpected shortfalls in revenue.
(2) Short-Term Capital Reserves-
NEW POLICY - There was no need to modify the current policy. Mr. Lembach recommended the
current policy/practice be hereby validated and made a part ofthe New Policy.
(3) Lone-Term Capital Reserves-
NEW POLICY -The 1 % set-aside amount shall be calculated each month consistent with current
practice, and that amount shall be forwarded to the City. The City shall account for such amounts as a
long-term capital reserve set-aside in the pooled investment accounts. In this manner, the excess funds
will earn a higher rate of return than in an operating checking account.
Two new Reserve categories:
(4) Debt Service Reserve - Current practice was to set aside amounts each June 30 to be utilized to
make the debt service payments coming due in the next fiscal year. Those amounts were:
ERGA 2004 Golf Course Bonds
CFD # 1 Bonds
11 months of principal and 5 months of interest
12 months of principal and 12 months of interest
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NEW POLICY -Mr. Lembach proposed that this reserve should be funded each June 30 at the following
levels:
ERGA 2004 Golf Course Bonds
CFD # 1 Bonds
the next scheduled payment amount due Sept 1 sl
12 months of principal and 12 months of interest
(5) Contineencv Reserve-
NEW POLICY -Any amounts available above the previously specified reserves would be considered a
reserve for contingencies. Mr. Lembach suggested a contingency reserve target of $500,000 would be
adequate.
FINANCIAL ANALYSIS:
Mr. Lembach proposed ERGA negotiate with the City of Encinitas and the Carltas Company to modify
the terms of the previous agreements and allow the Golf Course a grace period in which to build up
stronger financial reserves.
Mr. Lembach suggested not using the current practice of calculating Amounts Available for Distribution
utilizing cash on hand less a specified portion of the nex~ year's debt service requirement.
NEW POLICY -Mr. Lembach stated an alternative would be to tie amounts available to the actual cash
flows of the Enterprise in the prior year. Positive cash flows (Surplus Golf Course Net Revenues) would
be considered available for distribution. Amounts not designated for repayment of the sales tax advance
and/or for distribution to the City, would be retained by ERGA to build up reserves. While the proposed
Policy would not change the method 'of calculating Surplus Golf Course Net Revenues, it would change
the method of calculating Amounts Available for Distribution to the net cash flow method.
BOARD CONCENSUS:
Authorize Management to proceed with the following recommended actions to be presented
to the Board at the June meeting:
(1) Draft a Comprehensive Reserve Policy utilizing the methodology and structure
contained herein. Board Member Cotton requested additional language to state that the
contingency reserve was a "goal".
(2) Discuss and determine appropriate reserve levels for each category and incorporate
those amounts as targets in the new policy.
(3) Authorize the use of the net cash flow method described above to calculate the Amounts
Available/or Distribution at the end of each fiscal year.
(4) Evaluate available options for increasing funded reserve levels to the established targets
over time. Board Member Cotton stated he and Jay Lembach would review this item and
bring it back to the Board at the June meeting.
4. Review Budget subcommittees' draft oflong term budget forecasting.
(Bill Dean/Chris Hazeltine)
Mr. Jay Lembach presented a draft long-term budget forecasting. Mr. Lembach stated the long-
term budget forecasting was to be done annually and be presented with the annual budget in May.
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5. Fiscal Year 2008/2009 Draft Budget Discussions.
This item was taken out of order and heard after item #6.
(John McNair)
6.
Approval of Cart fee rate structure.
(John McNairIRod Linville)
This item was taken out of order and heard after item #4.
John McNair presented a projected annual cart fleet expenses calculation referred to as Attachment
A to these minutes. There was Board discussion on a cart fee increase to be utilized in preparing
the budget for Fiscal years 2008/2009.
ACTION:
Cotton moved, Jacob seconded to raise cart rate fees by $2.00 to a total of $14.00 per rider to
be effective at the same time as the Golf Courses new rate pricing. Motion carried: Ayes:
Cotton, Cota-Robles, Dean, Hazeltine, and Jacob. Nays: None.
5.
Fiscal Year 2008/2009 Draft Budget Discussions.
(John McNair)
This item was taken out of order and heard after item #6.
Mr. McNair and Mr. Linville presented a first draft of 2008-2009 budget. Mr. Linville stated that
the draft budget was presented with a $2.00 increase to cart fees per person, $2.00 increase to
primetime green fees; and a $1.00 increase to the twilight green fee rate. Board Member Hazeltine
stated that Fiscal 2008/2009 Budget should be consistent with the 6 year long-term budget
forecasting. Board Member Cotton suggested the budget sub-committee work with JC Resorts to
be consistent for both budgets and to bring back to the May meeting.
7.
Discussion of Cell Tower Proposal.
(J ohTI McNair)
This item was taken out of order and heard after item #5.
John McNair updated the Board on Verizon's cell tower proposal. Mr. McNair said that the new
challenge to the lease negotiations was the size of the building to store the equipment. The
proposed building was approximately 15' by 26' 8" along the cart path by the 18th hole, between the
cart path and driving range. Mr. McNair stated he would contact Verizon about reducing the size of
the building. Board Members Cota-Robles and Cotton suggested going forward with the lease, but
suggested continued negotiations on the size, exterior of the building to match the clubhouse and
the development of a landscape plan to try to camouflage the building.
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BOARD CONCENSUS:
Authorize the sub-committee of John McNair and Chris Hazeltine to continued negotiations
with Verizon for the cell tower lease.
1. Approve Minutes of Regular Meeting of March 25. 2008.
This item was taken out of order and heard after item #7.
The Board approved the changes to the minutes as follows:
Page 1: Discussion of identified Deferred MaintenanceIReplacement Projects and Tour the Course.
Mr. Graff stated some prep work had been done on the drainage issues this winter so the sod could
be installed this spring which would expedite the process. (delete from two 'Nooks to one week.)....
ACTION:
Cotton moved, Cota-Robles seconded to approve the amended March 25, 2008 Regular
Meeting minutes. Motion carried: Ayes: Cotton, Cota-Robles, Dean, and Hazeltine. Nays:
None. Abstain: Jacob.
2. Review Summary of Revenues and ExpenditureslFinancial Statement/update on Capital
Reserves for March 2008. (Rod Linville/John McNair)
Mr. Linville reviewed the summary ofthe March financial report as follows:
Revenues for the month were $431,922 at 100% of budget; Expenditures were $335,337 at 120%
of budget; Income for the month was $126,161at 84% of budget. Total rounds were 5,897 at 97%
of budget. Year to date net income was $806,014 at 100% of budget. Year to date total rounds
were 48,873 at 95% of budget. Mr. McNair stated he would research the increased administration
expenditures.
8.
Report on Course Enhancements
(Kent Graff)
Mr. Graff stated they had been working on fairway 7. They had removed existing sod from fairway
7 and were using the material on holes 4, 5, and 6. Mr. Graff stated they would be prepping
Fairway 7, with work on bunker drainage, finish the grade and replacing the sod with paspalum.
There would be ongoing sprig/seeding and force feeding of the bermuda. Mr. McNair stated they
had developed a flyer that was posted around the clubhouse which explained the course conditions.
Mr. Graff stated they also posted course enhancements on a dry eraser board in the pro shop.
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9.
Incidents and Accidents.
(Rod Linville)
Mr. Graff reported on an accident which involved an employee working on Fairway 7. He stated it
was a significant injury and the employee was in the hospital.
10. Directors and/or Manager Reports
Board Member Cotton suggested Chairman Dean address the City Council with a presentation on
the Encinitas Ranch Golf Authority to the City Council later this year.
11. Next Meeting - Discussion of May meeting date and location.
The Board discussed and scheduled a regular meeting on May 27, 2008 at 4:00 p.m. at the Civic
Center.
12. Adjournment
Chairman Dean adjourned the meeting at 6:18 p.m.
Respectfully submitted,
a~~ t{ 0~rf6
I I
Joal'l Woods, Board Secretary
~
Bill Dean, Chairman of the Board
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Eneinitas Ranch
Projected Annual Cart Fleet Expel1ses
E-Z Go Lease (4-vr lease =0 $387,642)
Cilrt Fleet Maintenance
Parts
Batteries
Electricity
Payroll
Mechanics,Supervi$qrs, Cart Staff
Course Maintenance to Mail1tainCartPaths
Path
Maintenance
Capital Costs
Cart Barn
Carl Path
Attachment A
Expenses
2008-2009
$96,910
$12,800
$21,666
$30,000
$208,500
$15,000
$4,000
$20,000
$25,000
Expenses
2009-2010
$96,910
$13,312
$22,533
$31,200
$216,840
$15;600
$4,160
$20,000
$25,000
Expenses
2010~2011
$96,910
$13,844
$23,434
$32,448
$225,51'4
$16,224
$4,326
$20,000
$25,000
Expenses
2011.:2012
$96,910
$14,398
$24,371
$33,746
$234,534
$16,873
$4;499
$20,000
$25,000
Expenses
2012-2013
$96,910
$14,974
$25,346
$35,og6
$243,916
$17,548
$4,679
$20,000
$25,000
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Projected Reven(Je@$12 per rid!;lr
based on 58,000 cart rounds $696,000 $696,000 $696,000 $696,000 $696,000
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