The URL can be used to link to this page

Home My WebLink AboutStaff Report 218-07TO: FROM: HONORABLE CITY COUNCIL CITY MANAGER City of Palo Alto City Manager’s Report 5 DEPARTMENT: ADMINISTRATIVE SERVICES DATE:MAY 14, 2007 CMR: 218:07 SUBJECT:AMENDMENT NO. 2 TO MANAGEMENT AGREEMENT WITH BRAD LOZARES FOR GOLF PROFESSIONAL SERVICES AT 1875 EMBARCADERO ROAD, PALO ALTO RECOMMENDATION Staff recommends that the Council approve and authorize the City Manager to execute the attached Amendment No. 2 to the Management Agreement with Brad Lozares for golf course professional services at the Palo Alto Municipal Golf Course, 1875 Embarcadero Road. BACKGROUND On March 16, 1998, the City issued tax-exempt bonds to finance golf course improvements. Prior to the bonds being issued, the City and the golf professional had operated under one lease agreement for both professional services and the lease of the City-owned facility. When the bonds were issued in 1998, IRS regulations required that there be two agreements, a management agreement for golf course professional services and a lease to operate a golf retail establishment. In 1998, Council approved a 20-month management agreement and a 15-year lease with the golf professional, Brad Lozares. The original management agreement was amended three times prior to Council approval of a new restated management agreement (Agreement) on January 27, 2003. On May l, 2006, Council approved Amendment No. 1 to the Agreement which: 1) extended the term for an additional eighteen months; 2) increased the fixed fee compensation by 3 percent; and 3) reimbursed the golf professional for 60 percent of the bank’s credit card merchant charges attributed to the golf cart rentals. DISCUSSION The attached proposed Amendment No. 2 to the Agreement will: 1) extend the term of the Agreement for an additional 12 months until December 31, 2008; and 2) increase the fixed fee compensation by 2 percent. Term: The current amended Agreement will expire on December 31, 2007. Under IRS regulations, the management agreements must be for no more than 60 months. The agreements and amendments between the City and golf pro have been for less than 60 months, in order to allow both parties to CMR:218:07 Page 1 of 2 make refinements to the agreement that reflect the current economic conditions at the golf course. Compensation: IRS regulations require that at least 50 percent of compensation for golf professional services must be fixed or pre-set in nature. Under the terms of the original agreement, the management fee was adjusted each 12-month period to reflect the changes in the consumer price index (CPI). Under the current Agreement, the annual CPI adjustment was eliminated and a one-time 8 percent adjustment was made. After 40 months during which no adjustments were made, the May 1, 2006 Amendment No. 1 to the current agreement increased the fixed fee by 3 percent to the current $27,660.25 per month. After 18 months at this rate, the golf professional is now requesting a 2 percent cost of living increase ($553.21 per month or $6,638.46 for the duration of the 12-month term). RESOURCE IMPACT The changes proposed in Amendment No. Two to the Agreement will result in an additional annual City expense of approximately $6,638.46 for the 12-month duration of the Agreement. The financial terms of the Agreement will be accommodated within the existing resources available to the Community Services Department. POLICY IMPLICATIONS The proposed amendment is consistent with prior Council direction. ENVIRONMENTAL REVIEW Approval of the amendment does not constitute a project under the California Environmental Quality Act (CEQA); therefore, no environmental assessment is required. PREPARED BY:~"C’~ ’,-~.~-"~"~ WILLIAM W. FELLMA~ Manager, Real Property I -, DEPARTMENT HEAD APPROVAL: ~ctbr, Administrative Services CITY MANAGER APPROVAL: Assistant City Manager ATTACHMENTS Attachment A: Amendment No. 2 to Agreement cc: Brad Lozares CMR:218:07 Page 2 of 2 ATTACHMENT A ¯ AMENDMENT NO. 2 TO MANAGEMENT AGREEMENT BETWEEN THE CITY OF PALO ALTO’ANDBRAD LOZARES GOLF SHOP FOR PROFESSIONAL SERVICES AT THE PALO ALTO MUNICIPAL GOLF COURSE, 1875 EMBARCADERO ROAD, PALO ALTO THIS AMENDMENT NO. 2 to the Management Agreement between the City of Palo Alto and Brad Lozares Golf Shop for Professional Services at the Palo Alto Municipal Golf Course, dated January 28, 2003, ("Agreement,") is made and entered into this day of__., 2007, by and between the City. of Palo Alto, a municipal corporation ("CITy") and Brad Lozares Golf Shop, a sole proprietorship ("GOLF PROFESSIONAL"). RECITALS No GOLF PROFESSIONAL has assumed responsibility for and continued the operation and management of course play for the Golf Course facility on behalf of the CITY on the terms and conditions set forth in the Agreement and its Amendment No. 1 to the Agreement dated May I, 2006. The amended Agreement will expire on December 31,2007. ’ The amended Agreement (Section, IV, A) provides the GOLF PROFESSIONAL with an annual fixed fee compensation of $331,923 payable in monthly installments. CITY and GOLF PROFESSIONAL desire to amend the Agreementto extend the term by 12 months and increase the GOLF PROFESSIONAL’s fixed fee compensation amount by two percent (2%). AGREEMENT NOW, THEREFORE, in consideration of the terms, conditions, and provisions of this Amendment, the parties agree as follows: SECTION 1. Section III (Term) is amended to extend the term by twelve (12) months and shall read in its entirety as follows: "IlI. TERM The initial term of this Agreement shall commence on January 28, 2003 and end on June 30, 2006. Commencing July 1, 2006, the term of this Agreement shall be extended by eighteen (18) months to December 31, 2007. Commencing January 1, 2008, the term of this Agreement shall be extended by twelve (12) months to December 31, 2008." 11 II II It II li SECTION 2. Section IV (Compensation), Subparagraph A (Fixed Fee), is amended to increase the fixed fee by 2% during the twelve month period from January 1, 2008 to December 31, 2008, payable in monthly installments of $28,213.46, and shall read in its entirety as follows: "A. Fixed Fee The GOLF PROFESSIONAL shall receive a fixed fee during the term of this Agreement for GOLF PROFESSIONAL’s Golf Course and driving range management, Golf Course marshaling and starting and cart rental services. The fixed fee for the initial term of this Agreement will be $322;251 annually, based on a calendar year. The fixed fee shall be paid in 12 equal installments.. During the eighteen-month extension term from July 1,2006 to December 31, 2007, the GOLF PROFESSIONAL shall receive a fixed fee, payable monthly, in the amount of $27,660.25. During the twelve month extension term from January 1, 2008 to December 31, 2008, the GOLF PROFESSIONAL shall receive a fixed fee, payable monthly, in the amount of $28,213.46. CITY shall forward the fixed fee by the 5t~ working day of the CITY’s working month for the amount due tbr that month to the GOLF ROFESSIONAL. If not received within ten calendar days after the fifth working day of the month, a late charge of one percent of monthly payment due and unpaid plus an administrative fee of $45.00 shall be added to the payment due and unpaid, and the total monthly sum shall become immediately due and payable to GOLF PROFESSIONAL. The parties agree that such late charges represent a fair and reasonable estimate of the costs that GOLF PROFESSIONAL will incur by reason of CITY’s late payments and that acceptance of such late charges in no event constitutes a waiver of CITY’s detgult with respect to such overdue~ payment nor prevents GOLF PROFESSIONAL from exercising any of the other rights and remedies granted hereunder or by any provision of law." SECTION 3. Except as herein modified, all other provisions of the Agreement, including any exhibits and subsequent amendments thereto, shall remain in full force and effect. IN WITNESS WHEREOF, the parties hereto have executed this amendment the day and year first written. ATTEST:CITY OF PALO ALTO City Clerk Assistant City Manager APPROVED AS TO FORM:- Sr. Asst. City Attorney APPROVED: Director, Administrative Services BRAD LOZARF__~ GOLF SHOP By: ~]\~’~’ ~ Taxpayer Identification No.: 3