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HomeMy WebLinkAbout1997-07-21 City Council (22)TO: Manager’s City of Palo Alto Summary Report HONORABLE CITY COUNCIL 7 FROM: AGENDA DATE: CITY MANAGER July 21, 1997 DEPARTMENT: Community Services CMR:327:97 SUBJECT:GOLF COURSE MASTER IMPROVEMENT PLAN CONSTRUCTION, FINANCING, BUDGET AMENDMENT ORDINANCE, PARKS IMPROVEMENT ORDINANCE, AND MUNICIPAL FEE SCHEDULE AMENDMENT Staff requests that Council authorize staff to proceed with construction of a significant portion of the Golf Course Master Improvement Plan (MIP), as outlined in this report. Staff also requests that Council approve the attached Budget Amendment Ordinance (BAO) in the amount of $5.4 million to allow staff to begin to award contracts for the MIP, a Park Improvement Ordinance which includes all construction phases of the Golf Course Improvement Project, an amendment to the Golf Services section of the Municipal Fee Schedule, and give staff authorization to fund the project through the issuance of bonds in approximately spring of 1998. RECOMMENDATIONS Staff recommends that Council: Approve the attached Budget Amendment Ordinance:to appropriate an additional $5.4 million to the existing capital improvement project 19624, "Golf Course Improvements" to fund construction costs. Funding will come out of bond proceeds, anticipated to be issued in spring of 1998, when the major construction occurs. Repayment of the bonds will come from golf revenues. The driving range work will begin this fall, with the contract for the remained of the work to be awarded by January 1998. Direct staffto pursue issuance of revenue bonds to fund the project. The timing of the sale will depend _on interest rates and the actual cash outlays for project construction. Estimated bond proceeds, to cover construction costs, design costs already incurred, issuance costs, and a debt service reserve fund as part of the financing, will total approximately $7.4 million. The final amount issued will depend on the bond rating the City receives and the actual interest rates in effect when the bonds are sold. 3.Approve the attached amendment to the Municipal Fee Schedule. CMR:327:97 Page 1 of 13 4.Approve and adopt the Park Improvement Ordinance and Plan for the improvements to the Municipal Golf Course. There are a number of policy issues inherent in staff’s proposal for the Golf Course improvements and financing. They include: , O O Level of subsidy, if any, from the General Fund for the course improvements. Staff recommends that Golf Course revenues fund the course improvements and that there should be no subsidy from the General Fund to provide staff support for the project. While the.Golf Course is an important community asset, as a fee- for-use recreational facility, it is appropriate for user fees to cover the cost of the facility rather than diverting funds from other General Fund programs. Staff has therefore sized the bond financing in accordance with the amount of debt financing that can be funded from the expected future green fee revenue. Staff will continue to recommend green fees that will fall within the average of Bay Area public courses. Consequently, staff believes that the financial burden of paying for the improvements overtime will not be onerous for users. Assumption 0frisk by the City: There exists a risk that, in the event of future economic downturn, demographic changes, or increased competition from surrounding courses, that there would be insufficient green fee revenues to pay for the debt service costs of these improvements. In that event, the General Fund would be expected to make up any revenue shortfalls so that debt service payments could be made. Staff believes, however, that the fee revenue projections are prudent and conservative, and that projected fee increases will not drive away customers. Furthermore, staff believes there is a larger risk to the golf course revenue stream from a.9.I improving the course. If the Golf Course continues to deteriorate, it is expected that bow the level of customer satisfaction and the amount of public use will continue to decline, along with revenue. ARY Since 1985, preparations have been under way to perform significant renovation work to the Palo Alto Municipal Golf Course. These preparations included the development of a ~ Course Master Improvement Plan, which Council approved in 1995. At that time, the cost to implement the plan_ was estimated at $7-8 million. In 1996, Council was presented with a preliminary draft of an implementation plan to address the goals of the ~I~ (CMR: 123:96). Using Golf Course revenue potential as the controlling factor, the plan recommended $5 million in construction, which is partial implementation of the full ~. The balance of the ]~LE would be completed by the tenants, City Golf Course staff, and future capital projects, as funding is available. CMR:327:97 Page 2 of 13 Since the presentation of the preliminary MIP, staff and the consultants have been working toward f’malizing construction plans and a financing plan, which are now complete. With Council’s approval, it is staffs intent to begin construction of this project in fall of 1997, which requires awarding a contract in August. The project will be completed by summer 1999. This recommended construction project not ohly addresses the most pressing issues identified in the ]EKE, but completes the necessary infrastructure which will be built upon with future, continued improvements of the Golf Course. To keep within projected budget restraints, the proposed project will not include all of the elements that were described in the preliminary implementation plan presented to Council in 1996 (CMR:123:96). Certain independent elements, including a storm reservoir, improvements to the parking lot, including a bike path and entrance road, and an irrigation storm lake adjacent to fairway 18, have been excluded from the proposed project and may be implemented when funds become available. Proposed Construction Project The additional funds needed for the proposed project total $5.4 million. The project elements are detailed in Attachment 1, and include: o Construction of a master drain system ($830,000) °Replacement of the irrigation system ($1;644,000) ¯Reconstruction of five fairways, eight greens, six tees, seven bunkers and various roughs ($2,310,000) °Repair/enhancement of cart paths ($68,000) ¯Renovation of the driving range ($548,000) Completion of these elements of the ~ will help create a Golf Course that drains properly, is efficiently irrigated, has healthy vegetation, is playable year-round and can compete with courses throughout the Bay Area. Municipal Fee Schedule Changes Staff is requesting that Council approve an amendment to the Golf Services section of the Municipal Fee Schedule. Because at times customers will not find the course in a fully playable condition as an 18-hole course, some changes are proposed to the Municipal Fee Schedule. During the construction period there will be three types of green fees in force. Regular fees will apply when the normal 18-hole course is in play. When a shortened 18- hole course will be in play, interim fees will apply. When the number of holes is reduced to CMR:327:97 Page 3 of 13 15 holes or less, special application fees will apply. Activation of the different levels of fees will be at the direction of the Director of Community Services. Park Improvement Ordinance The Charter and Municipal Code require that a Park Improvement Ordinance and a Plan be approved and adopted prior to any construction or~ land held by the City for park purposes. The Municipal Golf Course is in this category. The Park Improvement Ordinance and Plan, Attachments five and six respectively, authorizes the improvements to the golf course. EISCAL/MPACT As reported in CMR: 140:96, the Golf Course improvement project will be fmanced through issuing revenue bonds. The debt service will be paid for out of golf revenue, which includes green fees and tenant r~ntal revenue. Community Services and Administrative staff have projected a schedule of annual green fees over the years that will support these higher debt servicecosts, without negatively impacting customer demand. The City’s current green fees are below the market, and raising them to the proposed levels will bring the fees to within the average for public golf courses in the Bay Area. The total financing package, including construction, design and interim improvements, the services of a f’mancial advisor and bond counsel, and a debt service reserve totals approximately $7,400,000. Debt service payments on the bonds will be approximately $600-650,000 annually, depending on the interest rates in effect when the bonds are actually taken to market. The total project f’mancing is projected as: Construction Budget (if approved by Council via BAO, attached) Funds already appropriated: Design and Interim Improvements Financial Advisor Financing Costs, to be:paid through bond proceeds, and which will not needto be budgeted for: Bond Counsel, Underwriter Fees, Other Issuance Costs (est.) $5,400,000 $660,000 $40,0O0 $400,000 Debt Service Reserve $900,000. Total Estimated Financing Package $7,400,000 CMR:327:97 Page 4 of 13 ~ Staff has plans to incur most of the construction expenditures in the late spring and early summer of 1998. To save on interest expenses during the first year, staff believes that the sale of bonds should occur in the spring/summer of next year. The exact timing of the project would depend on interest rates at that time, and the timing of the actual construction payments. Staff therefore proposes that Council approve conceptually a bond sale for the spring/summer of 1998, and authorize staff to determine the optimum timing with its financial advisor. ’ The Budget Amendment Ordinance is for the full amount of the capital improvement project because staffplans to award contracts for the entire project between now and the spring of 1998, when the debt is issued. The budget authorization needs to be in place for the contracts to be awarded, and, rather than propose several incremental BAOs, it is proposed to authorize the entire project at this time. The issuance of the debt, as stated above, is intended to coincide with the first payment for the first stages of construction. ENVIRONMENTAL ASSESSMENT The City Council approved a Mitigated Negative Declaration for this project in May 1995 (CMR:248:95). The Mitigated Negative Declaration determined that any potential impacts can be mitigated to levels of less than significance and are incorporated into the design of the project. CMR:327:97 Page 5 of 13 / C ty City of Palo Alto Manager’s Report SUBJECT: GOLF COURSE MASTER IMPROVEMENT PLAN CONSTRUCTION, FINANCING, BUDGET AMENDMENT ORDINANCE, PARKS IMPROVEMENT ORDINANCE, AND MUNICIPAL FEE SCHEDULE AMENDMENT Staff recommends that Council: Approve the attached Budget Amendment Ordinance to appropriate an additional $5.4 million to the existing capital improvement project 19624, "Golf Course Improvements" to fund construction costs. Funding will come out of bond proceeds in Spring of 1998 when the major construction occurs. Repayment of debt service will come from golf revenues. The driving range work will begin this fall, with the contract for the remainder of the work to be awarded by January 1998. Direct staffto pursue issuance of bonds in approximately spring of 1998 to fund the project. The timing of the sale will depend on interest rates and the actual cash outlays for project construction. Estimated total bond proceeds, to cover construction costs, design costs already incurred, issuance costs, and a debt service reserve fund as part of the financing will total approximately $7.4 million. The final amount issued will depend on the bond rating the City receives and the actual interest rates in effect when the bonds are sold. 3.Approve the attached amendment to the Municipal Fee Schedule. o Approve and adopt the Park Improvement Ordinanceand Plan for the improvements to the Municipal Golf Course. Since 1985, preparations have been under way with the goal of performing significant renovation work to th~ Palo Alto Municipal Golf Course. A brief history of those preparations is as follows: 1985 - 1991: Starting in 1985, staff begin studying a number of customer service and operational concerns that were emerging at the Golf Course. These included irrigation and drainage problems, safety issues arising from errant balls leaving the Golf Course, and revenue loss due to the limited size of the restaurant and pro shop. Some of these issues were addressed through capital project proposals that were CMR:327:97 Page 6 of 13 : , delayed pending development of a. comprehensive plan to address all Golf Course issues. 1992 - Council approved the preparation of a ]EilE with the objective of addressing existing problems and taking advantage of opportunities for long-term cost savings. 1993 - 1994 - The ~ was developed by consultants, Amphion Environmental, Inc. and Halsey Daray Golf, working closely with City staffand the local golf community. May 1995 - Council approved the ]~j~. Additionally, Council approved a Site and Design Application and a Mitigated Negative Declaration for this project (CMR:248:95). The plan was estimated to cost between $7 million and $8 million in 1995 dollars. February 1996 - City Manager’s Report (CMR: 123:96) outlined a preliminary draft of an implementation plan to address the goals of the ]kl!E. Using Golf Course revenue potential as the controlling factor, the plan recommended $5 million in construction, representing partial implementation of the full ]~Jd~. The balance of the ~ would be completed by the tenants, City Golf Course staff, and future capital projects. This report also approved a contract extension to Amphion Environmental Inc. to perform construction design work. Council also approved hiring a Financial Advisor to examine options for financing the ]kllE. (CMR: 140:96). February 1997 - Council approved funding for construction of interim greens and tees in preparation for major construction to begin in spring 1998 (CMR: 146:97). June 1997 - The 1997/98 budget adopted by Council included funds for materials and staffing to begin implementing the fairway top-dressing program. Since February 1997, staff and the consultants have been working toward fmalizing construction plans and a financing plan, which are now complete. With Council approval, it is staffs intent to begin construction of this project in fall of 1997 and complete the project by summer 1999. There are a number Of policy issues inherent in improvements and financing. They include: staff’s proposal for the Golf Course O Level of subsidy, if.any, from the General Fund for the course improvements. Staff recommends that Golf Course revenues fund the course improvements and that there should be.no subsidy from the General Fund to provide staff support for the project. While the Golf Course is an important community asset, as a fee-for-use recreational facility, it is appropriate for user fees to CMR:327:97 Page 7 of 13 l cover the cost of the facility rather than diverting funds from other General Fund programs. Staffhas therefore sized the bond financing in accordance with the amount of debt financing that can be funded from the expected future green fee revenue. Staffwill continue to recommend green fees that will fall within the average of Bay Area public courses. Consequently, staff believes that the financial burden of paying for the improvements overtime will not be onerous for users. ’ O Assumption of risk by the City: There exists a risk that, in the event of future economic downturn, demographic changes, or increased competition from surrounding courses, that there would be insufficient green fee revenues to pay for the debt service costs of these improvements. In that event, the General Fund would be expected to make up any revenue shortfalls so that debt service payments could be made. Staff believes, however, that the fee revenue projections are prudent and conservative, and that projected fee increases will not drive away customers. Furthermore, staffbelieves there is a larger risk to the golf course revenue stream from l19_t improving the course. If the Golf Course continues to deteriorate, it is expected that both the level of customer satisfaction and the amount of public use will continue to decline, along with revenue. This recommended construction project not only addresses the most pressing issues identified in the MIP, but completes the necessary infrastructure which will be built upon with future improvements of the Golf Course. To keep within projected budget constraints, the proposed project will not include all of the elements that were described in the preliminary implementation plan presented to Council in February 1996 (CMR:123:96). Certain independent elements, including a storm reservoir, improvements to the parking lot, including a bike path and entrance road, and a reclamation irrigation lake adjacent to fairway 18 have been excluded from the proposed project, to be implemented when funds become available. Proposed Construction Project The funds required for the proposed construction project total $5.4 million and are detailed in Attachment 1. The major elements of the project are as follows: Construction of a master drain system ($830,000): This is a storm drain system which will reduce flooding and "standing water" on the rough areas outside of the fairways, and on the course during the winter months, allowing for increased quality of play. Additionally, this system, working in concert with the irrigation system and sand-capping, will allow for the continual use of reclaimed water and will reduce salt buildup in the root zone areas of the fairway grass plants. CMR:327:97 Page 8 of 13 ~’ Replacement of the irrigation system ($1,644,000): The proposed irrigation system will replace the current, failing system which is a combination of a 1955 and 1977 installation. It is designed to economically and precisely distribute reclaimed water to fairways, tees and roughs (a State requirement), and potable water to the greens. Through the ]EKE process and through discussions with other golf facilities using reclaimed water, staff and the consultants agree that to minimize potential maintenance problems and enhance customer service and the quality of play, it is essential to apply potable water to the greens. Reconstruction of five fairways, eight greens, six tees, seven bunkers and various roughs ($2,310,000): This construction will renovate the most critical areas of the course with the highest toxicity levels in the soil and the poorest drainage. Drainage and growing conditions will be vastly improved through sand-capping and grading. Repair/enhancement of cart paths ($68,000): This element will provide cart paths at the tees which are scheduled for renovation, and repair sections of the paths and service roads that are damaged during construction. Path replacement in the new fairway areas will be installed at a later date when funding becomes available. Renovation of the driving range ($548,000): Repositioning the driving range and installing higher fencing will mitigate a continuing safety issue by preventing errant balls from going out onto Embarcadero Road, the office buildings adjacent to the range, and the tenth fairway. During this process, the natural tmfarea of the driving range will be replaced with a synthetic turf. The synthetic turf will reduce future maintenance costs associated with mowing and irrigation, greatly improve its appearance, and minimize the substantial dust problem that develops during most windy days. Proposed Municipal Fee Schedule Staff is requesting that Council approve an amendment tb the Golf Services section of the Municipal Fee Schedule. Because, at times, customers will not find the course in a fully playable condition as a 18-hole course, some changes are proposed to the Municipal Fee Schedule. During the construction period there will be three types of green fees in force. Regular fees will apply when the normal 1 g-hole course is in play. When a shortened 18- hole course will be in play, interim fees will apply. When the number of holes is reduced to 15 or less, special application fees will apply. Activation of the different levels of fees will be at the direction 0fthe Director of Community Services. Park Improvement Ordinance The Charter and Municipal Code require that a Park Improvement Ordinance and a Plan be approved and adopted prior to any construction on land held by the City for park purposes. The Municipal Golf Course is in this category. The Park Improvement Ordinance and Plan, Attachments five and six respectively, authorizes the improvements to the golf course. CMR:327:97 Page 9 of 13 Expected Results During summer months the Golf Course is plagued with areas of turf that are hard pan and brown, not due to lack of water, but due to the high salinity content of the soil. On many fairways, salt from the underground bay water leaches through the soil making growing conditions poor at best. This project will reduce salt intrusion and create favorable growing conditions through increased irrigation, drainage, and a growing medium consisting of 10 inches of sand. ’ During winter months, standing water and large ponds form on fairways and in rough areas, creating difficult to impossible playing conditions. Through sand-capping and the installation of a master drain system, water will be carried offthe Golf Course at an increased rate, and fairways scheduled for renovation may remain playable during the winter months. Many rough areas, which are now void of vegetation, will become growing mediums for turf and natural vegetation, giving the course a new look, with an expanse of vegetation instead of brown areas, dust and mud. Siltation and runoff from these areaswill be reduced to minimal amounts, benefiting the environment in and around the golf facility. Underneath the visible improvements will be the infrastructure that will give the Golf Course a solid base to be adequately maintained for the next twenty-year-period. The invisible miles of pipe and wire, and the tons of sand and fill dirt will help create a Golf Course that drains properly, is efficiently irrigated, has healthy vegetation, is playable year-round and can compete with courses throughout the Bay Area, Construction Schedule This project will be completed in three phases (see Attachment 2 for a complete construction schedule). Phase one, which will begin in July of 1997, will create new greens and tees that will be used as an interim course while the major construction is done in Spring of 1998. Phase two will implement construction of the driving range element. This element is being done prior to the main course construction to provide some immediate and visible benefits to the golfing community, and to allow for a more reliable revenue stream to the tenants (the Golf Shop and the restaurant) and the City. During the driving range closure period of approximately two months, the Golf Course will still be fully operational, and once the driving range is complete, the Course will undergo construction. Phase three, the major construction, will begin in the spring of 1998, at which time the interim greens and tees will be ready for use. Total construction and turf grow-in time is approximately one year, allowing the renovated course to be open to the public in late spring of 1999. Master Improvement Plan Elements Not Addressed in this Project: Many of the improvements discussed in the ~ are not addressed in this project. These include improvements that can be considered as independent or stand alone projects, and may CMR:327:97 Page 10 of 13 be implemented through a combination of in-house work, capital projects, or tenant financed improvements. It is important to note here that, although most of the critical issues affecting the Golf Course are being addressed, an integral part of the ]~[]~ Kes in the implementation of an enhanced maintenance program, which includes, a long-term fairway top dressing program. The enhanced maintenance program is necessary because this project will change the maintenance standards of the course by adding approximately 20 percent more turf to fertilize, irrigate, and mow. The top-dressing program will enhance drainage and growing deficiencies on the balance of the Golf Course, by slowly building a sand base that will isolate the turf roots from salt intrusion from underground bay water. This enhanced maintenance and top-dressing program is not addressed by the construction project, but will be included in the 1998-00 budget request. The ~ elements that need to be completed in the future along with possible approaches for implementation include: Through the use of in-house staff and contracted services: Improving drainage and growing conditions throughout the balance of the Golf Course with a top-dressing program and additional drainage installations.~ ¯Renovating remaining bunkers, greens and tees not addressed in this project ¯Planting trees lost through attrition for safety and esthetics Through the use of capital projects, developed when funding is available: ¯Constructing a reservoir that will act as a holding pond for excess water ¯Constructing a reclaimed water storage area for irrigation (Presently, there is only a 15 minute reserve of water should the system fail.) , Parking lot expansion ~ ¯ Expanding the cart paths Through tenant-funded improvements: o Expanding the pro shop to allow for increased retail space, retail storage, and potential increases in revenue Expanding the restaurant seating capacity, enabling large tournaments and meeting groups to use the facility and increasing potential revenues Creating outside restaurant seating and a pass-through service window to provide quick and easy access for golfers and non-golfers to obtain food and beverage service. As reported in CMR: 140:96, the Golf Course improvement project will be fmanced through issuing revenue bonds. This use of financing is consistent with the recently approved City debt policy (CMR:210:97): "It is appropriate to consider debt financing.., when the project CMR:327:97 Page 11 of 13 ! .~ financing can be paid for directly by the users of the facility" over time. The debt service will be paid for out of golf revenue, which includes green fees and tenant rental revenue. Community Services and Administrative staff have projected a schedule of annual green fees over the years that will support these higher debt service costs without negatively impacting customer demand. The City’s green fees are below market, and raising them to the levels projected will mean that the City"s fees are within the average of public golf courses in the Bay Area. The total project f’mancing is projected as: Construction Budget (if approved by Council via $5,400,000 BAO, attached) Funds already appropriated: Design and Interim Improvements $660,000 Financial Advisor $40,000 Financing Costs, to be paid through bond proceeds, and which will not need to be budgeted for: Bond Counsel, Underwriter Fees, Other Issuance $400,000 Costs (est.) " Debt Service Reserve $900,000 Total Estimated Financing Package $7,400,000 This will result in annual debt service payments on the bonds of approximately 650,000, depending on the interest rates in effect when the bonds are actually sold. $600- Staffhas projected that the bulk of the construction expenditures will occur in the late spring and early summer of 1998. In order to reduce interest expense the first year, staff believes that the bond sale should optimally occur in the spring/summer of 1998. The exact timing of the project would d~pend on interest rates at the time, and the timing of the actual construction payments. Staff therefore proposes that Council approve conceptually a bond sale for the spring/summer of 1998, and allow staff to determine the optimum timing with its financial advisor. Cash flow projections for the project expenditures indicate that about $.7 million will be spent over the next six months on the first phase of construction, the driving range, and on CMR:327:97 Page 12 of 13 the interim improvements approved by Council in CMR: 146:97 on February 24, 1997. With previously spent design work, the City will have advanced a total of about $1.2 million for the Golf Course project by next Spring. The City has been able to absorb these cash outlays through its healthy cash flow situation. The Budget Amendment Ordinance is for the full amount of the capital improvement project because staffplans to award contracts for the entire project between now and the spring of 1998, when the debt is issued. The budget authorization needs to be in place for the contracts to be awarded, and, rather than propose several incremental BAOs, it is proposed to authorize the entire project at this time. The issuance of the debt, as stated above, is intended to coincide with the first payment for the first stages of construction. The California Constitution limits local governments from increasing general bonded indebtedness without a 2/3 vote of the electorate. Therefore, absent a vote, one of the only financing vehicles available for this type of project is the issuance of Certificates of Participation (COPs). COPs are technically a long-term lease arrangement, not "debt," and are therefore exempt from the Constitution’s voter requirements. This form of financing has become a common, if not the predominant form of financing in California for projects that are not either assessments, redevelopment related, or utility revenue bonds. It is the same vehicle used for the existing golf financing done in 1978, as well as the method used to finance Civic Center garage seismic improvements in the early 1980’s, as well as the subsequent Civic Center seismic improvements-and fu’e alarm system. Under COPs, the City sets up a separate legal entity, a nonprofit corporation, for a period of time to coincide with the long-term lease, typically 20 years. The corporation leases the Golf Course from the City. The "corporation," (i.e., the City), issues certificates .of participation, and the proceeds are used to finance the capital improvements. Investors in the bond market are, in effect purchasing a share of the fUture stream of lease payments that the City will make to the corporation for leasing the golf course back for 20 years. The City then uses green fee revenue to make the lease payments, and the General Fund stands behind the lease payments in the event that fee revenue declines. While the City does not have to stand behind the certificates, the interest rate charged would be quite expensive otherwise, as the bonds would be more risky. Staff believes the risk of a significant golf market downturn, particularly in the municipal market, is fairly remote. ~AL ASSESSMENT The City Council approved a Mitigated Negative Declaration for this project in May 1995 (CMR:248:95). The Mitigated Negative Declaration determined that any potential impacts can be mitigated to levels of less than significance and are incorporated into the design of the project. CMR:327:97 Page 13 of 13 ~ NEXT STEPS 1. Award contract for the Golf Course Driving Range 2. Develop and distribute RFP for Golf Course construction project 3. Award contract ATTACHMENTS Attachment 1: Project Elements and Budget " Attachment 2: Project Schedule Attachment 3: CMR: 123:96 Attachment 4: Budget Amendment Ordinance, with Exhibit A Attachment 5: Parks Improvement Ordinance Attachment 6: Golf Course Improvement Plans Prepared by: Richard James, Administrator, Community Services Department Jim Steele, Manager of Investments and Debt, Administrative Department Department Head Review~ PAUL THILTGEN City Manager Approval:_~ctor, Commun~ervices Palo Alto Golf Course Corporation " Palo Alto Golf Advisory Committee ~ Services CMR:327:97 Page 14 of 13 ] - GOLF COURSE AMENDED BUDGET (5/13/97)Attachment I ,~OLF COURSE IMPLEMENTATION PLAN ’"-’I Estimated Cost -i~I Construction T ~ilrrigation System ,,"Piping/heads i!Irrigation System Total IIStorm Drain System . - Drainage System Pump Storm Drain System Total Golf Course Surface Improvements Fairways & Roughs* #s 3, 4, 7, 10, 13, 15, 16, 18 Greens Traps Tees #s4, 5, 7, 8, 11, 13, 15, 16 #s 4, 5, 6, 7, 10, 13, 15, 16 #s 3, 4, 10,13, 15, 18 ’i Trees Golf Course Surface Improvements Total I Cart Path Repair/Expansion IDriving Range Fencing Realignment Driving Range Total Construction Phase Subtotal Construction Contingency Construction Consultant Services Const. Consultant Cont. Construction Phase Total ,iPre’Construction Costs Interim Improvements and Design Costs TOTAL PROJECT COSTS _ $1,371,969 $1~_371~969 $361,260 $331,793 $693~052 $1,613,108 $203,207 $34,001 $77,450 $o $1,927~766 $56~446 $197,125 $260,690 ¯ " $457,8!5 $4,507,049 $676,057 $180,282 $36,056 $660,000 ~6~444 $1_, 644,0001 $830,000 $2~310~000 $68~000 $548~000 $5,4o0,ooo $660,000 $ ,os0,0oo 06/20/97, 10:52 AM FILE:GOLF$2.WK4 Attachment 2 GOLF COURSE PROJECT SCHEDULE June 8, 1997 Interim Improvements a.Award construction contract b.Complete Construction June 2, 1997 September 1997 °Driving Range Solict bids Open bids Award contract & Park Improvement Ordiannce Start construction Complete construction " June 18, 1997 July 22, 1997 August 4, 1997 September 1997 November 1997 °Purchase Sand a.Solict bids b.Open bids c.Award contract July 1997 September 1997 October 1997 o Golf Course Improvements a.Solict bids b.Open bids . c.Award contract d.Start construction e.Complete construction October 1997 December 1997 January 1998 March 1998 June - August 1998 Attachment 3 City Manager’s City of Palo Alto Summary Report TO:HONORABLE CITY COUNCIL ATTENTION: FROM: FINANCE COMMITTEE CITY MANAGER DEPARTMENT:Community Services DATE:FEBRUARY 13, 1996 CMR: 123:96 SUBJECT: Implementation Plan for the Development of the Golf Course Master Improvement Plan This report is a follow up to CMR:298:95, Implementation and financing plans for development of the Golf Course Master Improvement Pdan. This report gives Council an overview of the progress made toward implementing the Golf Course Master Improvement Plan. RECOMMENDATIONS This is an informational report and there are no recommendations for action at this time. This report is consistent with City policy. EXECUTIVE SUMMARY The Golf Course Master Improvement Plan is a conceptual proposal to upgrade various components of the Golf Course, as addressed in CMR: 248:95. The Master Improvement Plan’s objectives were designed to address existing problems and to create a format that takes advantage of opportunities permitting long-term cost savings and increased value. Council approved a Site and Design Application in May 1995. The Master Improvement Plan originally called for approximately $8 million of improvements and the developement of an action plan for completion of the project. Atter much study, and with participation from-the departments of Administrative Services, Public Works, and Community Services, staff developed a modified Implementation Plan to fit within budgeting constraints. The Implementation Plan includes $5 million for construction projects, including design, a project manager and a contingency, a long-term accelerated maintenance program, and a plan to execute some Master Plan improvements at a later date due to financial constraints. The benefits of the proposed project are considerable, including irrigation, drainage, fairway, and driving range improvements. These enhancements will provide for a high quality Golf Course that will facilitate maintenance, ensure water savings by using reclaimed water more efficiently, significantly improve playing conditions, and solidify long-term revenues through a satisfied customer base. To finance this project, staff is formulating a plan, that involves issuing bonds and a possible subsidy to the Golf Course from the Gerieral Fund, as Golf Course revenue will not cover all costs during the construction phase. Staff is also exploring potential partnerships with tenants that would result in customer service improvements, and long-term enhancements to the restaurant and pro shop. Tenant improvements are not included in the $5 million. Tax law changes regarding the use of tax exempt bonds for portions of the Golf Course improvements, have raised issues that require additional research and discussion. A separate staff report recommends retaining a financial advisor to assist staff in studying these questions with bond counsel, supporting discussions on tenant lease negotiations, and structuring a financing package. FISCAL IMPACT No fiscal impact at this time. ENVIRONMENTAL ASSESSMENT 1. Environmental Assessment recommended adoption of a negative declaration. 2. Council approved a Mitigated Negative Declaration that determined that any potential impacts can be mitigated to levels of less than significance. ATTACHMENTS CMR:298:95 Golf Course Project Schedule Prepared by: Richard James, Department of Community Services Department Head Review: Director of Community Services City Manager Approval: CMR: 123:96 Page 2 of 8 :. City of Palo Alto City Manager’s Report Implementation Plan for the Development of the Golf Course Master Improvement Plan This report is a follow-up to CMR:298:95, J~plementation and financing plans for development of the Golf Co~. The report gives Council an overview of the progress made toward implementing the Golf Course Master Improvement Plan. The Golf Course Master Improvement Plan is a conceptual proposal developed to upgrade various components of the Golf Course, as addressed in CMR: 248:95. Council approved a Site and Design Application and a Mitigated Negative Declaration for this plan in May 1995. The Master Improvement Plan objectives were designed to address existing problems and to create a format to take advantage of opportunities permitting long-term cost savings and ¯ increased value. The Master Improvement Plan cites the following as its objectives: Address critical irrigation and drainage problems; -Optimize the use of reclaimed water; -Maintain affordable green fee structure and provide quality golf; -Minimize environmental impacts relative to areas of potential renovations; -Ensure the safety of golfers, staff and neighbors; -Balance long-term maintenance and budgetary requirements; -Improve parking, restaurant, golf shop and driving range facilities to meet safety issues and enhance revenue production; and -Improve the maintenance and storage facilities to address associated environmental concerns. The Master Plan originally called for approximately $8 million of improvements and developed an action plan for completion of the project. After much study, and with participation from the departments of Administrative Services, Public Works and Community Services, staffdeveloped a modified Implementation Plan to fit within budgeting constraints. The objectives of the modified Implementation Plan are: CMR: 123:96 Page 3 of 8 Address the most pressing recommendations of the Master Improvement Plan, Develop a viable financial plan, and Maintain revenue flow. by not closing the Golf Course during construction periods. The modified Implementation Plan includes $5 million for construction projects, including design, a project manager and a contingency, a long-term accelerated maintenance program, and a plan to execute Master Plan improvements that are being deferred due to financial constraints. The benefits of the proposed project are considerable, including irrigation, drainage, fairway, and driving range improvements. These enhancements allow for a high quality Golf Course that will facilitate maintenance, ensure water savings by using reclaimed water more efficiently, significantly improve playing conditions, and solidify long-term revenues through a satisfied customer base. ¯To finance this project, staffis formulating a plan that involves issuing bonds and a subsidy to the Golf Course from the General Fund, as golf course revenue will not cover all operating and debt sei’vice costs during the construction phase. Staff is also exploring potential partnerships with tenants that would result in customer service improvements, and long-term enhancements to the restaurant and pro shop. Tenant improvements are not included in the $5 million. Tax law changes regarding the use of tax exempt bonds for portions of the Golf Course improvements, have raised issues that require additional research and discussion. It is anticipated that bonds will no[ need to be sold until 1997-98. POLICY IMPLI~ This report is consistent with current City policy. IMPLEMENTATION PLAN The proposed Implementation Plan is the result of a collaborative effort by. City staff to design a program that balances customer needs with the need for horticultural and drainage improvements to the Course, regulatory agency requirements, and available funding. This Implementation Plan is grouped into ten areas consisting of: Project Management, Consultant Selection, Project Design, Interim Improvements, Project Schedule, Proposed Construction, City Staff Implemented Improvements, Tenant Improvements, Enhanced Maintenance Program and Financial Plan. Project Management Project management will be accomplished using a unique, team concept, composed of staff from the Public Works and Community Services Departments. This team approach will take advantage of each Department’s strengths and expertise. Community Services staffpossesses.._ knowledge and experience in Golf Course design, operation and maintenance, and works closely with the golfcornmunity. Public Works’ expertise lies in project planning, document CMR: 123:96 Page 4 of 8 preparation and contract negotiations. All aspects of the project will be monitored and appropriate decisions made using the knowledge and background contained within each Department. Staff is confident that this team approach to project management will be a blueprint for future projects of this nature. Consultant Selection The Master Plan consultants, Amphion Environmental, Inc. and Halsey Daray Golf, will provide the design and construction services for this project. The 1994 Golf Course Master Improvement Plan "Request for Proposals" included a provision to retain the consultant for future design work, if the initial work were deemed successful. The firms selected to prepare the Master Plan were successful in working with the community and City staff, and developed a quality product. Subsequently, staff is commencing negotiations with Amphion Environmental, Inc. and Halsey Daray Golf to have them continue to supply the services necessary to carry out the Master Plan. Project Design: The proposed Implementation Plan includes all of the recommended Master Improvement Plan Golf Course renovations. Although there are not sufficient funds to pay for all of these renovations, staff proposes that all greens, tees and fairways proposed to be rebuilt, be designed now with some as add-alternates to the bid. This would allow them to be included in the construction project, should estimates come in lower than anticipated. Designing all of the Course improvements at this time will also allow for consistency of design, Create cost effieiencies, and provide opportunities to proceed with the balance of the improvements should resources become available in future years. Interim Improvements: To allow continued golf play during the project, City staff will make necessary interim improvements to the Golf Course before construction. These include building temporary greens and tees, erecting safety barriers around the modified tee areas, and performing minor irrigation changes to help maintain the temporary greens and tees. Staff will return to Council following the design process with recommendations for temporary staffing, and supplies and materials for interim improvements. Project Schedule This element of the project is scheduled to begin its design phase in April 1996 and be completed in April 1997. Interim construction (temporary tees and greens) would commence no later than July 1997 and reach completion in time for course demolition, grading and renovation beginning in March 1998. Bonds would most likely be sold during this time. The initial construction project would be completed between March 1999 and June 1999. (A detailed project schedule is attached.) Proposed Construction: The work that will be accomplished during the initial construction period inelude~: Golf Course." CMR: 123:96 Page5of8 ,~ ~ Construction of a master drain system and storm reservoir. Replacement of the irrigation system. Reconsm~ction of five fairways, approximately nine greens and fourteen bunkers. Grading and leveling six tees and renovating various rough areas throughout the Golf Course. Reposition the driving range away from Embarcadero Road. Install higher fencing to contain errant balls from entering Embarcadero Road, office buildings, and the tenth fairway. Grade, sand cap, install irrigation, and plant turf on the range. ¯ _ a Enlarge parking lot and provide a new exit to Embarcadero Road to improve traffic flow. Improve the Golf Course/Airport access road. Improve restaurant delivery service entry and employee parking area. City Staff Implemented Improvements: The Parks and Golf Division can complete the balance of the deferred improvements through a combination of in-house work, outside contracts and capital improvement projects. The deferred components could be funded when cash flow allows, which staff estimates to be in the fiscal year 2005-06. Completion of deferred components may include: Repairing and enhancing the cart path system; Planting trees for safety and esthetics; -Improving the fairways, greens and tees that were not part of the initial project; -Maintaining facility improvements; and -Other items as defined in the Master Improvement Plan. Tenant Improvements: Several improvements recommended in the Master Improvement Plan .included customer service enhancements to Golf Course tenant facilities. Implementing such improvements is contingent upon future lease contracts with the restaurant and pro shop operators. Potential tenant improvements include: -Pro shop expansion allowing increased retail space, retail storage, and potenti~il increases in revenue; -Installation of driving range lighting allowing for limited night use and increased revenues; . -Additional restaurant seating capacity enabling large tournament and meeting groups to use the facility, thus increasing potential revenue sources; and" CMR: 123:96 Page 6 of 8 ~.~., "~ -Outside restaurant seating and a pass-through service window to provide quick and easy access for golfers and non-golfers to obtain food and beverage service. Enhanced Maintenance Program The Golf Course consultant and the Master Improvement Plan recommend an enhanced. maintenance program. Accomplishing this will "require an increase in present levels of maintenance expenditures, which involves augmentations in staffing, equipment and materials. Noting that present staffing levels are considerably below comparable courses, the Master Plan recommends at least three full time staff be added to the operating budget. This implementation proposal recommends the addition of two full time maintenance personnel. The additional personnel will facilitate the Master Plan’s recommended increase in turf maintenance and aid in the completion of deferred maintenance and Master Plan projects. The Master Plan also recommends an accelerated topdressing program to improve existing turf conditions and to reduce future capital costs for improvements. This topdressing program is designed to improve the soil structures and medium for those fairways deferred or not designated for sand capping. Periodic light layers of sand, approximately 1/4" thick, will be applied to the fairways to improve existing soil conditions and drainage in the surface of the soil structure. The sand will be applied monthly during the growing season. The long- term goal is to raise the existing surface of the fairways 12 to 18 inches, over a 7 to 10 year period, creating a medium suitable to growing tuff. and better utilization of reelairned water. Implementation of this program calls for an increase to the operation budget of $150,000 for supplies and materials. Financial Plan To finance the Implementation Plan, staffhas been formulating a financial plan that involves funding from a bond issuance for construction projects and-a subsidy from the General Fund to maintain golf operations during the construction period, when green fee revenue will decline due to an anticipated decline in golf rounds played. In exploring bond financing, a number of issues arose which affect the type and amount of debt that can be issued and also affect the City’s Golf Course’s contractual arrangements with its tenants. Because staff is still working with bond counsel and the Golf Course tenants on these issues, a reasonably accurate pro forma cannot be prepared at this time. However, Staff is able to provide background information into the questions at hand and into the essential features of Master Plan financing. A nonprofit Golf Course Corporation was formed in 1977 to facilitate Golf Course improvements. Since the.Corporation last issued debt in 1978, tax laws have changed. These changes center on the extent to which a tax-exempt bond issuance for a public facility can CMR: 123:96 Page 7 of 8 ~ ~- benefit a private, for profit business. The City also has the option of issuing taxable bonds for Master Plan improvements. Use of taxable bonds allows the City to enter into any type of contractual agreement with lessees and make any improvements Council approves, but that method of financing is more costly. The type of bonds issued, therefore, has an impact on the amount of debt that can be incurred, and on the terms of the leases with tenants. The role of the financial advisor will be to help staff study these questions with bond counsel, support discussions on tenant lease negotiations, and structure a financing package. Based on a conservative, tax-exempt rate of 6.3 percent and anticipated project and issuance costs of $5.6 million, the Golf Course’s annual’debt service would equal $501,000 per year. At a higher, taxable bond rate of 8.3 percent for the same project, an annual debt service of $584,000 would be required. The rate spread, between the types of bonds issued, requires staff to carefully assess options and alternatives in financing the Master Plan and in developing contracts with lessees. In addition, staffwill explore with bond counsel whether the issuance of new debt requires the Golf Course to refinance the remaining debt from the 1978 bond issuance. ALTERNATIVES Alternatives are not addressed in this report. FISCAL IMPACT The recommendations in this report have no direct fiscal impact. ENVIRONMENTAL ASSESSMENT Council approved a Mitigated Negative Declaration for this project in May 1995 (CMR:248:95). Major issues that were discussed included biotic resources, hazardous materials, reclaimed water, flooding, lighting and glare, and traffic and circulation. The Mitigated Negative Declaration determined that any potential impacts can be mitigated to levels of less than significance. STEPS FOLLOWING APPROVAl,.." 1. Develop Request for Proposal for financial advisor services. 2. Award contract to Financial Advisor. 3. Begin contract negotiations with Amphion Environmental, Inc., and Halsey Daray Golf. 4. Return to Council for approval of an amended consultant contract including a Budget Amendment Ordinance. 5. Create a Capital Impiovement Project for construction design services. 6. Initiate design work for the project. ATTACHMENTS/EXHIBITS CMR:298:95 Golf Course Project Schedule CMR: 123:96 Page 8 of 8 ’ f City City of Palo Alto Manager’s Report TO:HONORABLE CITY COUNCIL FROM:CITY MANAGER DEPARTMENT: Community Services AGENDA DATE: June 12, 1995 CMR: 298:95 SUBJECT:Implementation and financing plans for development of the Golf Course Master Improvement Plan REQUEST This is an informational report and no Council action is requested. RECOMMENDATIONS" There are no recommendations at this time. Staff will submit to the Finance Committee a recommendation for implementation, development and financing, for the Golf Course Master Improvement Plan, late this Summer. A Committee recommendation could then be given to Council in the Fall. POLICY IMPLICATIONS This project does not represent any change to existing City policies. EXECUTIVE SUMMARY The Golf Course Master Improvement Plan is a conceptual proposal to upgrade various components of the golf course, as addressed in the Planning and Community Environment Site and Design CMR: 248:95. Staff, the Consultant Team and the Golf Advisory Committee will continue to refine the technique for developing and financing the Master Improvement Plan. Finance, Community Services and Public Works Departments are in the process of reworking the pro forma financial statements and the development of work schedules, so that this project can be accommodated within fiscal eonslraints, and allow the Golf Course to remain open in some manner during the=construction phase to minimize public disruption. FISCAL IMPACT There is no fiscal impact at this time. CMR: 298:95 Page 1 of 2 ENVIRONMENTAL ASSESSMENT There is no environmental assessment or impact associated with this report. Related CMK:248:95 Site and Design Application (Copies available in City Manager’s Office) PREPARED BY: Paul Dias, Parks and Golf Division DEPARTMENT HEAD REVIEW: PAUL THILTGE~ Director of Community Services CITY MANAGER APPROVAL: CC:Golf Advisory Committee Golf Course Corporation CMR:298:9~Page 2 of 2 Attachm~ ORDINANCE NO. ORDINANCE OF THE COUNCIL OF THE CITY OF PAL0 ALTO AMENDING THE BUDGET FOR THE FISCAL YEAR 1997-98 TO PROVIDE AN ADDITIONAL APPROPRIATION AND TO AMEND THE MUNICIPAL FEE SCHEDULE FOR THE’GOLF COURSE IMPROVEMENTS CAPITAL IMPROVEMENTS PROJECT, NUMBER 19624 WHEREAS, pursuant to the provisions of Section 12 of Article III of the Charter of the City of Palo Alto, the Council on June 23, 1997 did adopt a budget and a Municipal Fee Schedule for fiscal year 1997-98; and WHEREAS, on May 15, 1995, Council approved a Golf Course Master Plan; and WHEREAS, in order to preserve its long-term viability, improvements to the Golf Course are needed, including work to enhance drainage, upgrade the irrigation system, improve fairways and greens, and renovate the driving range; and WHEREAS, the estimated cost of the proposed improvements is $5,400,000; and WHEREAS, the Council has adopted Resolution 7581, declaring its intent to issue debt financing in the form of tax exempt bonds in the future to fund the improvements to the Golf Course; and WHEREAS, the bonds will be sold in spring or early summer of 1998 to coincide with the timing of actual cash outlays for,project construction and obtain the most advantageous interest rates; and WHEREAS, CIP 19624, Golf Course Improvements, needs to be increased now so that construction of driving range improvements can begin in the fall and so that the contract for the major improvements can be awarded in January 1998;and WHEREAS, upon the sale of the bonds, the General Fund will be reimbursed for all expenses incurred up to the date of the sale which are related-to the Golf Course project; and WHEREAS, the 1997-98 Municipal Fee Schedule needs to be amended to allow for fee reductions during times when the course will not be in a fully playable condition due to interim improvements and construction; and WHEREAS, City Council authorization is needed to amend the 1997-98 budget and the Municipal Fee Schedule as hereinafter set forth. NOW, THEREFORE, the Council of the City of Palo Alto does ORDAIN as follows: SECTION i. The sum of Five Million Four Hundred Thousand Dollars ($5,400,000) is hereby appropriated to Capital Improvement Project No. 19624, Golf Course Improvements, which will be funded from the anticipated sale of bonds. SECTION 2. This transaction will have no impact on the Budget Stabilization Reserve. SECTION 3. The Municipal Fee Schedule is hereby amended to reflect changes shown in Exhibit A, which is attached hereto and incorporated herein by reference. SECTION 4. As specified in Section 2.28.080(a) of the Palo Alto Municipal Code, a two-thirds vote of the City Council is. required to adopt this ordinance. SECTION 5. The City Council approved a Mitigated Negative Declaration for this project in May 1995 (CMR:248:95) . The Mitigated Negative Declaration determined that any potential impacts can be mitigated to less than significance, and have been incorporated into the design of the project. SECTION 6. As provided in Section 2.04.350 of the Palo Alto Municipal Code, this ordinance shall become effective upon adoption. INTRODUCED AND PASSED: AYES: NOES: ABSTENTIONS: ABSENT: ATTEST:APPROVED AS TO FORM: City Clerk Senior Asst. City Attorney APPROVED: Mayor City Manager Acting Director, Administrative Services Department Director of Community Services Department ORDINANCE NO. ORDINANCE OF THE COUNCIL OF THE CITY OF PALO ALTO APPROVING AND ADOPTING A PLAN FOR IMPROVEMENTS TO MUNICIPAL GOLF COURSE WHEREAS, Article VIII of th~ Charter of the City of Palo Alto and Section 22.08.005 of the Palo Alto Municipal Code require that before any substantial building, construction, reconstruction or development is commenced or approved, upon or with respect to any land held by the City for park purposes, the Council shall first cause to be prepared and by ordinance approve and adopt a plan therefor; and WHEREAS, the Municipal Golf Course is dedicated to park purposes; and WHEREAS, the City intends to construct certain capital improvements to the Municipal Golf Course, including, without limitation: the reconstruction of various fairways, greens, roughs, tees, bunkers and golf cart paths; the construction of an electric utility system; the installation of a new irrigation system; the installation of a new storm drain system and drainagepumping system; and the realignment and renovation of the driving range ("Plan"); and WHEREAS, the site and design review of the Plan has been conducted and the Plan has been recommended for approval by the City boards and commissions having jurisdiction over such matters, because it conforms to the provisions of Chapter 18.82 of the Palo Alto Municipal Code and the Palo Alto Comprehensive Plan; and WHEREAS, the Council desires to approve the Plan and to adopt it as part of the official plan for the construction of improvements at the Municipal Golf Course; NOW, THEREFORE, the Council of the City of Palo Alto does ORDAIN as follows: SECTION I. The Plan, a copy of which is on file in the office of the Division of Planning, Department of Planning and Community Environment, and to which copy reference is hereby made concerning the full particulars thereof, is hereby approved and adopted. SECTION 2. TheCity Council hereby finds that this project is categorically exempt under Section 15304 of Title 14 of the California Code of Regulations. 970715 syn 0071241 SECTION 3. This ordinance shall become effective upon the commencement of the thirty-first day after the day of its adoption. INTRODUCED : PASSED: AYES : NOES : ABSENT: ABSTENTIONS : ATTEST :APPROVED: City Clerk Mayor City Manager APPROVED AS TO FORM: Senior Asst. City Attorney City Manager Director of Public Works Director of Planning and Community Environment Director of Community Services Director of Parks and Golf Course 2 970715 syn 0071241 Attachment 6 Construction Item Legend :.:i’;’ili.!.ii~.!’ Rough Reconstruction Areas Fairways Greens and Bunkers Fairway Bunkers Driving Ranl~ Realign & Renovate Driving Range Existing Club House & Pro Shop Enhance WetLands ’.:.:.:..,Oo o o od New Irrigation Entire Course Existing Restroom Existing Parking Lot