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Home My WebLink AboutItem 12j - Purchase of Landscape Equipment (Arcadia Par 3 Golf Course)Supplemental Funding Form and Purchase of Landscape Equipment for Arcadia Par 3 January 15, 2019 Page 1 of 3 DATE: January 15, 2019 TO: Honorable Mayor and City Council FROM: Tom Tait, Public Works Services Director By: Jacquelyn Mercado, Management Analyst SUBJECT: USE OF SUPPLEMENTAL FUNDING REQUEST FORM AND A LOAN FROM THE GENERAL FUND RESERVE IN THE AMOUNT OF $116,457.17 FOR THE PURCHASE OF LANDSCAPE MAINTENANCE EQUIPMENT FOR THE ARCADIA PAR 3 GOLF COURSE Recommendation: Approve SUMMARY On November 20, 2018, the City Council approved a Management Agreement (“Agreement”) with Touchstone Golf, LLC (“Touchstone”) for the management of operations and maintenance of the Arcadia Par 3 Golf Course (“Golf Course”). This agreement structure allows for the management and operations of the Golf Course to be a collaborative effort between Touchstone and the City. With the departure of American Golf Corporation, after 30 years leasing the golf course, it was determined that the City would need to provide a loan to the Golf Course for operational equipment expenses incurred during the transition period, which will be recovered through operating revenues. It is recommended that the City Council approve the use of a Supplemental Funding Request Form and a loan from the General Fund Reserve in the amount of $116,457.17 for the purchase of landscape maintenance equipment for the Arcadia Par 3 Golf Course. BACKGROUND In May 2018, American Golf Corporation (“AGC”) notified the City that they would not be extending their lease. At the June 19, 2018, Study Session, the PWSD presented the City Council with several options to consider and, following a robust discussion, the City Council directed the PWSD to solicit proposals from firms for the operati on and maintenance of the Golf Course. On November 20, 2018, the City Council approved a Management Agreement with Touchstone for the management of operations and maintenance of the Golf Course. Supplemental Funding Form and Purchase of Landscape Equipment for Arcadia Par 3 January 15, 2019 Page 2 of 3 Prior to the transition from AGC to Touchstone, the PWSD informed the City Council that it would be necessary to transfer existing Capital Improvement Funds from the Par 3 Golf Course Trust Fund to purchase essential supplies, course and office equipment, and pay salaries for the first month. Additionally, the PWSD was directed to work with the City Attorney in creating an agreement that would allow for the lending of funds to the Golf Course operating account to pay expenses and require applicable reporting showing the fund transfer and repayment as required. DISCUSSION On December 1, 2018, Touchstone assumed management and operations of Arcadia Par 3 Golf Course. During the transition period from AGC to Touchstone, several items were seamlessly completed, which included the hiring of golf employees, transfer of all course agreements and appropriate licenses, deployment of a new Players Club Program, and establishment of a dedicated bank account solely for the operation of the Golf Course. The PWSD also worked with Touchstone in transitioning all golf vendors and accounts, utilities, point of sale system and credit card processing, and facility and equipment maintenance. Touchstone was able to negotiate a cost effective prorated price for several vital items of AGC owned equipment including, the range tee shade structure, range ball picking unit and washer, patio furniture, restaurant furniture, all current inventories of food and other merchandise, and the existing E-Range machine that provides patrons the ability to redeem range keys previously purchased under AGC. However, when Touchstone and the PWSD inspected the current landscape equipment offered by AGC for negotiation, it was determined that the equipment was at the end of its useful life and did not meet the standards needed to maintain the golf course at the required maintenance levels. Touchstone presented the PWSD with several options for acquiring the landscape equipment, which included leasing-to-own all new equipment or a hybrid of leasing some new and some pre-owned equipment. After review of all equipment types and purchasing options, the PWSD determined that it would be more cost effective to leverage Touchstone’s industry leader preferred pricing and loan the Golf Course the money to purchase the equipment instead of leasing-to-own at a higher interest rate. The following proposed equipment is to be purchased for a total of $116,457.17: Quantity Equipment Description 1 New Toro Greensmaster 3150-Q Gas Mower 1 Pre-Owned Toro Groundsmaster 4500D Mower 3 Pre-Owned Toro Workman MDX Gas Utility Vehicles 1 Pre-Owned SmithCo 200 Gallon Turf Sprayer Supplemental Funding Form and Purchase of Landscape Equipment for Arcadia Par 3 January 15, 2019 Page 3 of 3 With a dedicated bank account established for the operations of the Golf Course, Touchstone is able to make daily revenue deposits as well as pay City-approved direct operational costs. Under the current Agreement, in the event that funds in the established operating account are not sufficient to cover operating expenses, the City shall deposit additional funds in order to meet operational requirements. The City Attorney has created a Supplemental Funding Form to be used in this instance to document the transfer or loan of funds to the operating account to cover such expenses when there is not sufficient cash flow from operations. The Proposed Supplemental Funding Request Form is attached. Touchstone will provide monthly accounting reports that will show the initial fund transfer and repayment through revenues as required. ENVIRONMENTAL IMPACT The proposed action does not constitute a project under the California Environmental Quality Act (“CEQA”), and it can be seen with certainty that it will have no impact on the environment. Thus, this matter is exempt under CEQA. FISCAL IMPACT The total cost for purchasing the landscape equipment at the Arcadia Par 3 Golf Course is $116,457.17. The City will appropriate this amount from the General Fund Reserve to the Arcadia Par 3 Golf Course operating account as a loan that will be recovered through the Golf Course operating revenues. Additionally, the City will own the equipment as opposed to leasing the equipment with a higher interest rate resulting in a reduced monthly operational expense. Similar to other PWSD equipment purchases, the Golf Course equipment replacement costs will be budgeted for replacement in future years. RECOMMENDATION It is recommended that the City Council approve the use of a Supplemental Funding Request Form and a loan from the General Fund Reserve in the amount of $116,457.17 for the purchase of landscape maintenance equipment for the Arcadia Par 3 Golf Course. Attachment: Proposed Supplemental Funding Request Form 24347.00600\31642366.2 SUPPLEMENTAL FUNDING REQUEST Public Works Services City of Arcadia 11800 Goldring Road Arcadia, CA 91006 Re: Request for Supplemental Funding for Arcadia Par 3 Golf Course Operations As set forth in the Arcadia Par 3 Golf Course Management Agreement dated November 30, 2018 between Touchstone Golf, LLC, and City of Arcadia (the “Agreement”), including Section B of Article V, it is contemplated that funding from the City may be necessary from time to time to provide sufficient liquidity in the Par 3 Golf Course operating account (“Operating Account”) to cover budgeted or unbudgeted expenses when there is not sufficient cash flow from operations to cover such budgeted or unbudgeted expenses. It is the intent of Touchstone and the City that such supplemental funding will be reimbursed to the City from time to time from the Operating Account when there are excess operating revenues. As of ____________, Touchstone has projected that there will be: (i) ___ a deficit in the Operating Account; (ii) ___ insufficient funds to carry out budgeted expenditures; or (iii) ___ insufficient funds to cover unbudgeted or emergency expenditures. Touchstone has attached to this Funding Request a detailed schedule showing the amount of the deficit or funding shortfall and the budgeted or unbudgeted expenditures that need to be paid (“Funding Schedule”) and Touchstone hereby requests, in its position as the manager of the Par 3 Golf Course pursuant to the Agreement, that the City transfer the following funds to the Operating Account: Amount of funding: $___________________ Requested funding date: ___________________ Touchstone hereby certifies that: (i) the proceeds of the supplemental funding will be used by Touchstone only for costs and expenses incurred in connection with the operation of the Golf Course Facility and as further described in the Funding Schedule; (ii) Touchstone is in compliance with its obligations under the Agreement, including the proper management of golf course expenditures and the approved budget; and (iii) all information contained in the Funding Schedule is true and correct as of the date of this funding request. Sincerely, Touchstone Golf, LLC By: ______________________________ Name: ______________________________ Its: ______________________________ Date: __________________