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HomeMy WebLinkAboutItem 10h - Arcadia Par 3 Golf Course Management Services DATE: October 17, 2023 TO: Honorable Mayor and City Council FROM: Paul Cranmer, Public Works Services Director By: Janessa Kalanjian, Management Analyst SUBJECT: EXTENSION TO THE MANAGEMENT AGREEMENT WITH TOUCHSTONE GOLF, LLC, FOR THE MANAGEMENT OF OPERATIONS AND MAINTENANCE OF THE ARCADIA PAR 3 GOLF COURSE CEQA: Not a Project Recommendation: Approve SUMMARY On November 20, 2018, the City Council approved a five-year management agreement with Touchstone Golf, LLC, (“Touchstone”) for the management of operations and maintenance of the Arcadia Par 3 Golf Course (“Par 3”). Touchstone is nearing the end of their initial agreement term and has requested to extend the agreement for another five-year term, in accordance with the terms of the original agreement. In addition to the extension, Touchstone is requesting to add a second, optional five-year renewal term to this amendment. The additional term would allow for more progress of long-term improvement projects at the golf course, including the addition of a double-decker driving range project, to which Touchstone has agreed to contribute $50,000 towards design services, as a condition of this amendment. All other terms of the agreement will remain the same. It is recommended that the City Council approve, authorize, and direct the City Manager to execute an extension to the Management Agreement with Touchstone Golf, LLC, for the management of operations and maintenance of the Par 3 Golf Course through 2028, with the option of one additional five-year renewal term. BACKGROUND The Arcadia Par 3 Golf Course opened in 1962. It hosts an 18-hole course over 1,947 yards and sits on approximately 26 acres. Weather permitting, the golf course is open for business at least 12 hours per day, 360 days per year. Both the driving range and golf course are equipped with lighting for night play. There is a clubhouse for recreational use, Arcadia Par 3 Management Agreement October 17, 2023 Page 2 of 4 pro shop, snack bar and grill, and a practice putting green. Patrons also have access to rental golf clubs, a pull cart, and electric golf carts. In July 2018, the City solicited proposals for management services for the golf course. Through a competitive Request for Proposals process that included personal interviews, follow-up discussions, and financial evaluation, it was determined that Touchstone provided the best proposal, and was a qualified and responsible firm to manage the operations and maintenance of the Par 3 Golf Course. At the November 20, 2018, City Council Meeting, the City Council approved a five-year management agreement with Touchstone for management of the operations and maintenance of the Arcadia Par 3 Golf Course. Prior to this agreement, the golf course was managed through a lease where the City received a guaranteed minimum amount in rent annually. Through this lease, the operator handled all details and retained the bulk of any profits from operations. Due to a regional decline in the golf industry, the trend in golf course management moved away from traditional lease agreements to hybrid lease/management agreements. The benefit of these types of agreements for municipal golf courses is a more collaborative relationship between the entity and management company. Touchstone is a known leader in the golf course industry, with a proven record of providing comprehensive and cost-effective management of golf course conditions while offering a first-class experience for golfers. Touchstone has a management portfolio of over 35 golf courses, including 12 municipal golf courses. Per the current agreement, day-to-day operations and maintenance of the property are funded by golf course revenues. The remaining net income is split 85% to the City and 15% to Touchstone. This structure allows for the management and operation of a golf course to be a collaborative effort. Below are the terms of the agreement with Touchstone for the management and operations of Par 3. Term 5-year term, with the option of one 5-year extension Management Fee $48,000 annually paid to Touchstone Revenue Touchstone to receive 15% of net income, City retains the remaining revenues Capital Improvement Fund Fund an annual CIP Reserve equal to 2.5% of Gross Revenues for future facility improvements and ongoing repair requirements Arcadia Par 3 Management Agreement October 17, 2023 Page 3 of 4 DISCUSSION On November 20, 2018, the City Council approved a five-year management agreement with Touchstone Golf LLC for the management of operations and maintenance of the Arcadia Par 3 Golf Course. Touchstone is reaching the end of their initial agreement term and has requested to exercise the optional five-year renewal. During the initial term, Touchstone has been in full compliance with the terms of the agreement and has maintained a positive working relationship with City staff. Touchstone has continued to find innovative ways to increase use of the golf course such as allowing the course to be used for a disc golf tournament. The tournament was held during dusk, a time of day that is not typically active with golfers, and generated significant revenue during a time that would otherwise have little activity. In addition to exercising the five-year renewal option, which would extend the current agreement through 2028, Touchstone is requesting to add a second, optional five-year renewal term. The second renewal term, if exercised, would extend the management agreement through 2033. The additional term would allow the City and Touchstone to continue to collaborate on long-term improvements to the golf course such as the addition of a double-decker driving range, which both parties have identified as a potential revenue enhancement over time. To further facilitate this effort, Touchstone has offered to include a contribution of $50,000 towards the design of the double-decker driving range as a condition of adding the additional renewal term. All other conditions of the original agreement would remain the same. During the initial agreement term, Touchstone has successfully managed the Arcadia Par 3 Golf Course. The Public Works Services Department is confident that Touchstone will continue to deliver services in a successful manner during the renewal term. ENVIRONMENTAL ANALYSIS The proposed action does not constitute a project under the California Environmental Quality Act (“CEQA”) under Section 15061(b)(3) of the CEQA Guidelines, as it can be seen with certainty that it will have no impact on the environment. Thus, this matter is exempt under CEQA. FISCAL IMPACT Prior to the current agreement with Touchstone, Par 3 was operated on a calendar-year lease-term basis, with an approximate net average monthly income of $78,300. Touchstone assumed management of Par 3 during the last half of Fiscal Year 2018-19. Initially, revenue declined slightly during the first few months of the transition and the facility was closed for roughly two months due to the pandemic. Despite these challenges, Par 3’s revenue quickly improved and has nearly doubled from the previous agreement. The average monthly gross revenues show steady growth with $154,700 in 2021, Arcadia Par 3 Management Agreement October 17, 2023 Page 4 of 4 $159,400 in 2022, and $162,800 (year-to-date) for 2023. Since Touchstone took over the management of the Par3 Course, the net income is just over $2 million. Under the current agreement, golf course revenues are utilized to fund the day-to-day operations of the golf course. The remaining net revenue is split 85% to the City and 15% to Touchstone. Additionally, 2.5% of total gross revenues are used to fund capital improvements and other maintenance projects in excess of $5,000, contributing approximately $25,000 per year. City staff works with the Touchstone management team to identify projects to include in the Capital Improvement Program each year. No General Fund monies are used towards day-to-day operations or maintenance of Arcadia Par 3 Golf Course. RECOMMENDATION It is recommended that the City Council determine that this action does not constitute a project under the California Environmental Quality Act (“CEQA”); and approve, authorize, and direct the City Manager to execute an extension to the Management Agreement with Touchstone Golf, LLC, for the management of operations and maintenance of the Arcadia Par 3 Golf Course, with the option of one additional five-year renewal term. Attachment: Proposed Amendment No. 1 1ST AMENDMENT OF ARCADIA PAR 3 GOLF COURSE MANAGEMENT AGREEMENT THIS AMENDMENT dated _______________, 2023 is entered into effective _____________, 2023 by and between the City of Arcadia, California, a charter city organized under the Constitution and laws of the State of California (“CITY”) and Touchstone Golf, LLC, a Delaware limited liability company ("TOUCHSTONE"). WHEREAS, CITY and TOUCHSTONE previously entered into the Arcadia Par 3 Golf Course Management Agreement dated November 30, 2018, relating to the operation and management of the golf course and clubhouse facilities at the Arcadia Par 3 Golf Course (the "Agreement"); and WHEREAS, the parties desire to amend the Agreement as provided in this Amendment; NOW THEREFORE, in consideration of the premises and the mutual covenants and agreements herein set forth, the parties agree as follows: TERMS OF THE AMENDMENT 1. Amendment to Section I (A) of the Management Agreement The parties agree that as of ________________, 2023, TOUCHSTONE is in compliance with Agreement and the CITY hereby approves the 5 year Renewal Term for the period of __________, 2023 through ____________, 2028. Further, the City agrees to provide for an additional 5 year renewal term (the “Second Renewal Term) from ____________, 2028 to ___________, 2033 provided that TOUCHSTONE is in compliance with the Agreement upon termination of the Renewal Term and further provided that TOUCHSTONE contributes $50,000 to the City’s golf course driving range project no later than ___________, 2023. 3. No Further Modification. Except as modified by the terms of this Amendment, all terms and conditions of the Agreement shall remain unmodified and in full force and effect. 4. Counterparts. This Amendment may be executed in one or more counterparts, each of which shall be deemed an original, but all of which shall constitute one and the same document. Counterparts executed and exchanged by email or facsimile transmission shall be fully enforceable. [signature page attached] SIGNATURE PAGE 1ST AMENDMENT OF ARCADIA PAR 3 GOLF COURSE MANAGEMENT AGREEMENT IN WITNESS WHEREOF, the parties have executed this Amendment as of the date set forth above. CITY OF ARCADIA TOUCHSTONE GOLF, LLC By: By: Dominic Lazzaretto City Manager Title: Printed Name: ATTEST: By: Title: By: City Clerk Printed Name: APPROVED AS TO FORM: CONCUR: By: ___________________________________ Michael J. Maurer Paul Cranmer City Attorney Public Works Services Director