HomeMy WebLinkAbout2003-01-21 City CouncilCity of PaRo ARto
C ty M ger s Report
HONORABLE CITY COUNCIL
FROM:CITY MANAGER DEPARTMENT.: COMMUNITY SERVICES
DATE:
SUBJECT:
JANUARY 21, 2003 CMR: 101:03
APPROVAL OF A NEW MANAGEMENT AGREEMENT FOR
GOLF PROFESSIONAL SERVICES
REPORT IN BRIEF
Staff recommends that council approve a 42-month management a~eement with Brad
Lozares Golf Shop, effective January 22, 2003, for golf course professional services. The
previous management ageement has been retained on a month-to-month basis during
extensive negotiations.
This report proposes compensation within the golf professional management ageement
that will maintain the Professional’s ability to provide exemplary customer service to golf
customers and provide incentives that will benefit the City in the form of higher golf
rounds, cart rentals, and driving range revenues. Incentive payments to the Professional
will derive from the additional revenues that are generated when the incentive goals are
met. This will result in impact on City reserves.
RECOMMENDATION
Staff recommends that Council approve and authorize the City Manager to execute the
attached 42-month management ageement with Brad Lozares Golf Shop (Golf
Professional) for golf course professional services at the Palo Alto Municipal Golf
Course.
BACKGROUND
On May 15, 1995, Council approved a Golf Course Improvement Master Plan
(CMR:248:95) to up~ade various components of the golf course. The plan involved the
issuance of tax-exempt debt to pay for a portion of the Master Plan improvements. On
July 21, 1997, (CMR: 327:97) Council approved the Golf Course Improvement Master
Plan construction and financing. In the report, staff recommended that golf course
revenues cover all golf course expenses (including debt service), with no subsidy from
the General Fund.
In a report dated February 13, 1996, (CMR: 123:96), staff indicated that Internal Revenue
Service (IRS) regulations regarding the use of tax-exempt financing had changed since
CMR: 101:03 Page 1 of 5
the last capital improvements made at the golf course in 1977, and that the new
reg-ulations restricted use of tax-exempt financing for improvements directly benefiting a
for-profit enterprise such as the retail sales operation run by Brad Lozares.
On July 21, 1997, Counci! directed staff to pursue issuance of tax-exempt revenue bonds.
On March 16, 1998, Council approved a 15-year lease agreement in addition to the
existing management agreelnent that complied with the new IRS regulations. Prior to
negotiating the agreement, staff consulted with a firm specializing in golf contracts, the
William Sherman Company. The consultant concluded that, under the new management
agreement, the golf professional would receive compensation similar to that under the old
relationship. Projected compensation placed the professional in the mid-range of
comparable public golf course professionals in the Bay Area given the level of services
provided at the course.
Since the new management agreement was negotiated, it has been amended three times to
add compensation in order to cover unanticipated costs that were previously borne by the
City. These unanticipated costs included credit card charges fees and the cost of paying a
bookkeeper to process the paperwork created by the new management agreement. These
changes were implemented to more equitably distribute costs between the City and
Professional.
DISCUSSION
Since the initial contract term expired May 1,200!, City staff and the golf professional
have been in arduous negotiations. The existing agreement was retained as a month-to-
month verbal agreement as negotiations continued. Much of the delay has been because
of the slumping economy and IRS fixed fee contract restrictions. It has been difficult to
determine a system within the IRS rules and regulations relative to fixed fees and
contractors that provides a means to reward the contractor for exceptiona! services or
sales. Attachment A is a negotiated management agreement, which provides for the
continued services of Brad Lozares Golf Shop to manage the play and fee collection at
the golf course, to ensure continued high quality golf programs and to maximize public
use of the Palo Alto Golf Course. The new management agreement is structured to
provide a fixed base fee for the golf professional, along with incentives if 2001 base line
sales voIumes are increased.
Since the inception of this agreement, the golf professional has incurred cash flow
problems. The City has incurred similar economic problems. While the capital
improvements at the golf course have addressed serious drainage and irrigation problems
to maintain a viable course, they did not result in a full renovation makeover to make the
course a "top" or "above average" place to play. Only 40% of the Master Plan
improvements were completed in the first phase, addressing the prioritized worst-case
areas of the golf course. In addition, the current economic downturn is resulting in below
optimal levels of golf rounds, affecting not only the City, but also the golf professional
CMR: 101:03 Page 2 of 5
and the clubhouse restaurant. The golf professional is experiencing reduced sales
volumes, along with rising labor and benefit costs to maintain qualified staff as revenues
have declined. The professional has taken steps to reduce costs by cutting staff hours,
reducing retail stock and delaying vendor payments. Overall, the professional’s efforts
and activities at the City facility have somewhat compensated for any of the course’s
physical shortcomings. The new a~eement represents the following changes:
®No annual CPI adjustments - in the prior contract, the management fees were
increased based on an annual CPI adjustment.
e The term of the contract will be 42 months.
e The fixed fee will be increased to $322,251 annually with no annual CPI
adjustment. This will be applied retroactively to May 1, 2001, the original
contract date of expiration.
The golf professional will continue to receive 40% of driving range and cart
rentals and the City will receive 60% of such revenues.
Sales productivity incentives related to golf rounds, driving range and golf cart
rentals above and beyond ageed upon calendar year 2001 baselines, are structured
to provide additional revenues to the golf division and income to the golf
professional.
In order to enhance overall golf division income, customer service and golf professional
revenues, a productivit?~ reward equal to a stated dollar amount based on increases of
golf rounds, power golf cart rentals and driving range sales becomes effective with this
ageement. This reward is consistent with IRS regulations.
In addition to the fixed and percentage fees, the golf professional shall receive
productivity rewards based on exceeding certain baseline golf rounds and goss sales.
An un-audited statement of golf rounds and goss golf cart and driving range sales will be
presented to the City in January of each calendar year. The City shall then distribute to
the golf professional such incentive payments, including productivity rewards for
increase golf rounds in the form of City direct purchases of driving range and cart
supplies up to the amount of the incentives. When the fully audited statements become
available, usually in April of each calendar year, a full reconciliation of actual
productivity amounts will be completed, resulting in either additional direct supply or a
refund to the City from the golf professional for any overpayment.
IRS regulations require that the management a~eement be awarded for a term not to
exceed five years. This ageement covers 42 months, through June 2006. Staff will
continue to monitor the professional’s compensation and will be prepared to negotiate it
at the end of the contract. Staff’s goal continues to be to maintain compensation at the
mid-range of comparable professionals while recognizing economic conditions and the
financial health of the General Fund.
CMR: 101:03 Page 3 of 5
RESOURCE IMPACT
The terms of the new Golf Professional management agreement will result in additional
annua! expense of approximately $23,931 for the 42-month term of the contract
($298,320 to $322,251) with no adjustments for inflation for the duration of the contract.
This contract will result in additional expenses of $33,668. The additional expenses
include $22,095 to retroactively reimburse the Golf Professional for prior CPI
adjustments related to the annual fixed management fee that were not included under the
terms of the contract extension from May 2001 through December 2002. (The prior
agreement on which the extension was based allowed for annual inflationary adjustments
to the contract). An additional $11,573 will cover the increase in the fixed management
fee for the remaining six months of the current fiscal year.
The financial terms of the Golf Professional a~eement wilt be accommodated with the
existing resources available to Golf Services. There will be no additional expenses to the
General Fund. Staff will return to Council with midyear budget adjustments that will be
necessary to implement the agreement.
The financial impact of the agreement will be absorbed from within the Community
Services Department, Golf Services Functional Area budget. No additional appropriation
from reserves is requested and no future year impacts on reserves are anticipated as a
result of this agreement.
POLICY IMPLICATIONS
Proposed changes recommended in this report are consistent with prior Council direction.
ENVIRONMENTAL REVIEW
The Management Agreement and the anaendment to the lease are not a project under the
California Environmental Quality Act (CEQA) and requires no environmental review.
ATTACHMENTS
Attachment A:Brad Lozares Golf Shop Management Agreement
CMR: 101:03 Page 4 of 5
PREPARED BY:
PAUL DIAS, Director Parks & Golf Division
Joe Saccio, Deputy Director Administrative Services
Steve Montano, Senior Financial Analyst
REVIEWED BY:
PAUL THILTGEN
Director, Community Services
EMILY HARRISON
Assistant City Manager
CMR: 101:03 Page 5 of 5
MANAGEMENT AGREEMENT BETWEEN THE
CITY OF PALO ALTO AND BRAD LOZARES GOLF SHOP
FOR PROFESSIONAL SERVICES AT THE
PALO ALTO MT!NICIPAL GOLF COURSE
This Management Agreement (Agreement) is made this day of
by and between the City of Palo Alto, a municipa!
corporation, (CITY) and Brad Lozares Golf Shop,a sole
proprietorship (GOLF PROFESSIONAL).
RECITALS
CITY owns the Palo Alto Municipal Golf Course (Golf Course),
par 72, 18-hole course covering approximately 180 acres within
the City of Palo Alto.
CITY desires to provide for golf professional services at the
Golf Course, collection of fees and other related golf
services to insure the highest quality of golf programs for
the public. CITY desires to retain responsibility for overall
management and maintenance of the Golf Course.
C o GOLF PROFESSIONAL is wel! qualified through its experience to
provide the Golf Professiona! Services.
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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 initia! management agreement that
expired on May I, 2001 and which was extended by mutual
agreement.
Pursuant to the terms and conditions of the extended initial
management agreement, GOLF PROFESSIONAL is entitled to
approximately $21,721 as compensation for CPI adjustments that
have not been paid by CITY during the term of the extended
agreement.
CITY and GOLF PROFESSIONAL desire the primary objectives for
GOLF PROFESSIONAL’s performance under this Agreement to be to
i) manage the play and fee collection of the Golf Course to
insure the highest quality of golf programs, and 2) to
maximize the public use of the Palo Alto Golf Course, and the
revenues to be received by CITY as a result thereof.
NOW, _HEREFORs, in consideration for the mutual promises
hereinafter set forth the parties hereto agree as follows:
030115 sm 0053189
I.SCOPE OF SERVICES
io GOLF PROFESSIONAL shal!, throughout the term of this
Agreement, provide services and activities typically
associated with a ful!-service golf professional
facility. These include, as a minimum, the following
services and activities:
Operation and management of course play including
management and contro! of the starting systei,
collection and deposit of green fees, regulation of
play, tournament play, and enforcement of course
rules and regulations.
o Operation and management of the driving range and
practice greens including co!lection and deposit of
fees, regulation of use, and enforcement of course
rules and regulations.
Operation and management of golf carts and golf
club rentals, and deposit of rental fees.
Provide services customarily provided by a PGA
class A Golf Professional and requested by the
course users.
Promotion of golf and golf related activities in
cooperation with Golf Advisory Committee, existing
golf clubs, organizations and CITY.
6.Provide Course Marshal! services.
Subject to the prior written approval of the City Manager
or designee, GOLF PROFESSIONAL may also use the Golf
Course to provide additional services and uses which are
ancillary to and compatible with the required services
and uses stated above and are not in conflict with the
required uses of the Golf Course restaurant tenant. Such
approva! shall be within the sole discretion of the City
Manager.
C o Mutual Cooperation. GOLF PROFESS!ONAL, Golf Course
Superintendent, and Director of Parks and Golf Division
sha!l communicate and cooperate to assure that said
course is maintained to the highest standards. In
furtherance of this purpose, GOLF PROFESSIONAL and CITY
agree as fo!lows:
GOLF PROFESSIONAL shal! periodically, as necessary,
meet with or otherwise convey to Golf Course
0301 I5 sm 0053189 2
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o
Superintendent and Director of Parks and Golf
Division public comments and GOLF PROFESSIONAL’s
observations regarding the condition of the Golf
Course and maintenance or repairs necessary for
satisfactory play, offer advice regarding
tournaments and specia! event preparation, care of
greens, mowing, cutting cups, repair of dents or
pits on putting surfaces,weeding, moving of
shoulders and trap edges,watering, spraying,
cleaning of litter or trash,raking or weeding of
traps, movement of tees, repair of divots and
trimming of fairways and roughs. Notwithstanding
the above, the determination of CITY’s Director of
Parks and Golf Division with regard to the
standards and conditions of the Golf Course sha!l
be final and conclusive for the purpose of this
Agreement.
GOLF PROFESSIONAL shall assist and make available
his expertise to the Citizens Golf Advisory
Committee or any golf club or golf organization
formed at the Course and GOLF PROFESSIONAL may
serve as ex-officio member of 9ny such club or
organization as may be necessary to further the
purposes of this Agreement. GOLF PROFESSIONAL
sha!l further meet with CITY’s staff, golf clubs
and organizations and Golf Course restaurant
tenant, to arrange tournaments and other special
events, to provide the necessary scheduling of such
events, and to discuss on-going needs of the
golfing public.
GOLF PROFESSIONAL shall keep up to date with the
changes and trends of the golfing profession and
shall generally provide on-going evaluation of the
operation of the Golf Course.
GOLF PROFESSIONAL shal!, unless specifically stated
otherwise, be accountable to and shal! report all
day to day operationa! problems to the Director of
Parks and Golf or designee. The Director of Parks
and Golf may in conjunction with GOLF PROFESSIONAL,
develop reasonable rules and regulations governing
the use of the Golf Course. GOLF PROFESSIONAL
shal! be bound by such rules and regulations. In
the event that GOLF PROFESSIONAL disagrees with
such rules and regulations, the determination of
the City Manager regarding their applicability
shall be fina! and conclusive.
030115 sm 0053189 3
During the course of the agreement, the CITY
anticipates making improvements to the golf course
consistent with the Golf Course Master Plan. In
order for the GOLF PROFESSIONAL to plan his
business operations and staffing effectively, CITY
wil! make every effort to give at least sixty (60)
days notice for any planned improvements that wil!
affect the GOLF PROFESSIONAL’s operations.
II.EQUIPMENT TO BE PROVIDED BY GOLF PROFESSIONAL
GOLF PROFESSIONAL shall provide:
io Golf carts (both manual and power driven), golf clubs and
other ancillary items to be available to the public for
rent, in sufficient quality and quantity for norma!
course operation.
Driving range tee dividers and artificia! tee mats wil!
be maintained in a good and satisfactory condition; mats,
driving range lights and other ancillary features wi!l
be maintained as necessary to ensure safe practice areas
for customers.
Adequate driving range equipment including range balls,
baskets, hal! washers, bal! retrieva! equipment, and
incidental and necessary equipment to satisfy customer
needs.
GOLF PROFESSIONAL shall be responsible for damage or
aru!~icial turf should therepair to the driving range ~’=’ ,
turf be damaged by GOLF PROFESSIONAL’S ball retrieval
equipment.
III.TERM
The term of this Agreement shal! be 42 MONTHS commencing on jANU~_RY
!,2003 and ending on JUNE 30, 2006.
IV.COMPENSATION
During the term of the Agreement, GOLF PRO_sSSIONAL shaT1 receive a
fixed fee and percentage fees as defined below (collectively the
Management Fee).
A.Fixed Fee
The GOLF PRO~ESS_ONAL shall receive a fixed fee during
the term of this Agreement for GOLF PROFESSIONAL’s Golf
Course and driving range management, Golf Course
030115 sm 0053189 4
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marshaling and starting and cart rental services. The
fixed fee for the term of this agreement will be $322,251
annually, based on a calendar year. The fixed fee shal!
be paid in 12 equa! monthly installments.
CITY shal! forward the fixed fee by the 5th working day
of the CITY’s working month for the amount due for that
month to the GOLF PROFESSIONAL. If not received within
ten calendar days after the fifth working day of the
month, a late charge of one percent of monthly pa?~ent
due and unpaid plus an administrative fee of $45.00 shall
be added to the payment due and unpaid, and the tota!
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
default 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.
Percentage Fees
In addition to the fixed fee, GOLF PROFESSIONAL shal!
receive 40% percent of the gross revenues of the driving
range and of the gross revenues of the golf .cart and golf
club rentals. Percentage fees for each month wil! be
calculated and. paid no later than the 10th day of the
fol!owing month. In no event, however, shal! the
cumulative percentage fees paid to GOLF PROFESSIONAL for
a single calendar year exceed the total fixed fee
payments described in section IV-A herein for that same
calendar year.
Golf Cart Fuel Reimbursement
GOLF PROFESSIONAL shall reimburse CITY quarterly for fuel
supplied to gas golf carts. Reimbursement shal! be at
the current retail ful! service pump price on the date of
billing for unleaded fuel, determined quarterly by CITY.
GOLF PROFESSIONAL shal! reimburse the City no later than
the 20th of the month fol!owing the c!ose of
each quarter.
Productivity Reward (Incentives)
In order to enhance overal! golf division business
incomes, customer service & golfprofessiona! revenues, a
productivity reward equa! to a stated dollar amount based
030115sm 0053189 S
on increases of golf rounds, gross power golf cart
rentals and driving range sales becomes effective with
this agreement. (IRS section 1.141 revenue procedures).
In addition to the fixed and percentage fees, the golf
professional shall receive the following productivity
rewards based on exceeding the following baseline golf
rounds and gross sales:
PAID GOLF ROUNDS: (FEE, DISCOUNT CARD & REPLAY ROUNDS)
* Greater than 87,000 rounds $3.00 PER ROUND
POWER GOLF CART RENTALS:
* Greater than $250,000
INCR=ASs
$200 PER $I,000
DRIVING RANGE SALES:
* Greater than $440,000 $200 PER $i,000
INCREASE INCENTIVE DOLLAR DISTRIBUTION:
An unaudited statement of golf rounds and gross sales
will be presented to the City in January of each calendar
year. The City shall distribute to the golf professiona!
such incentive payments for increased golf rounds, cart
rentals and driving range sales as a direct city purchase
of supplies related to driving range and power carts.
When the fully audited statements become available,
usually in April of each calendar year, a full
reconciliation of actual productivity amounts will be
completed, resulting in either additiona! direct third
party reimbursements or a refund to the City from the
Golf Professiona! for any overpayment.
In addition to the foregoing, GOLF PROFESSIONAL shal!
receive a one-time payment of $21,721 as full and
complete compensation for any and al! claims arising out
of GOLF PROFESSIONAL’s continued performance under the
extended initia! agreement during the period between May
1, 2001 and January I, 2003.
RECORDS AND ACC01/NTS
Bank Deposit.
On a daily basis, GOLF PROFESSIONAL shal! collect al!
revenues generated for that day’s work and shal! deposit
or cause to be deposited all revenues collected for the
driving range, equipment rental and golf course green
fees into a bank account. Revenues consist of Pro Shop
merchandise sales as wel! as golf course green fees,
tournament fees and play card revenues collected for the
030115 sm 0053189 ~
city.
GOLF PROFESSIONAL agrees he is holding cash as a
custodian for the CITY under this agreement.
CITY agrees that these revenues collected by GOLF
PROFESSIONAL may be deposited, temporarily by GOLF
PROFESSIONAL into the same account used by him for his
Golf Course lease operations. However, in no event shall
such account be used for or contain any .funds relating to
personal use, or to business use other than pursuant to
an agreement between GOLF PROFESSIONAL and the CITY.
In the event that GOLF
temporarily in a bank
PROFESSIONAL agrees that:
PROFESSIONAL deposits revenue
of his choosing, the GOLF
a.GOLF PROFESSIONAL will pay for all banking fees,
including all monthly service charges, armored courier
pickup services and any credit and debit card service
charges excluding those finance charges associated
with the purchase of any and al! green fees,
tournament fees and play cards paid by credit cards;
(reimbursement of said Merchant Fees on GFTFPC sales
is made monthly to the golf professional upon receipt
of settlement statements from credit card merchants.
b. The CITY wil! be held harmless for any cash shortages,
refunds, or other !osses that may occur as a result of
his handling of CITY revenues;
c.Revenues collected from the first of the month to the
fifteenth (1-15) are paid to the City by the 20th of
the month by check. Revenues collected from the
sixteenth of the month to end of the month (16-EOM)
are paid to the City a!ong with its monthly settlement
of rent by the 5th day after c!osing of the previous
month (ref: Lease 211)
d. A detailed accounting and reconciliation of revenues
and records for each month, in accordance with the
terms specified in section V. B be!ow, shall be
provided to CITY no later than the 10th day of the
following month.
e. For the purpose of this agreement, Revenue Collection
hereby acknowledges that revenue derived from
operations at the Golf Course and Pro Shop is
collected daily under the name BRAD LOZARES GOLF SHOP
and deposited into BLGS’s CBT Main Account. BLGS acts
030115 sm 0053189 7
as the City’s agent in revenue collection of Green
Fees, Play card Sales, and Tournament Fees and as
such, transfers City revenue into a separate account,
AKA Money Plus Account.
Credit card revenues are electronically deposited daily into
BLGS’s CBT Main Account. Two statements are received monthly
from Nationa! Data Fund Service for the visa and MasterCard
transactions and from American Express via an Internet
statement.
Money is collected via armored courier (Brinks 2002) Monday
through Saturday, is delivered to central processing and then
deposited directly into Brad Lozares Golf Shop (BLGS)’s banking
institution (California Bank & Trust) Main Account. There is
no armored courier service on Sundays or holidays.
Once BLGS’s Business Manager confirms the deposits have been
made into their MAIN ACCOUNT, the City’s revenue is
electronically transferred via CBT’s Cash Management Service
into a Money Plus account that is used exclusively for the
collection of the City’s Revenues.
For the purpose of this agreement, the City and Revenue
Collections acknowledge that an account was originally opened
with Ten Thousand Dollars ($i0,000) of persona! funds from Brad
Lozares to meet the minimum deposit requirement of a MONEY PLUS
ACCOUNT. This account provides the City of Palo Alto with
every assurance that their money is not !onger co-mingled with
the Golf Shop operating revenue. In addition, the City
receives a monthly bank statement which gives independent
con~irmat!o of daily green fee, tournament fee and play card
revenue being deposited.
in the event that GOLF PROFESSIONAL does not deposit CITY
revenues into GOLF PROFESSIONAL’S business bank
temporarily, GOLF PROFESSIONAL agrees to:
a. Make ready CITY revenues for a daily pickup by the
CITY or by the City’s armored courier service. In
this case, the GOLF PROFESSIONAL shal! segregate
money collected for the CITY from any other revenue
GOLF PROFESSIONAL collects for his own business and
from his persona! funds, in this case, the CITY wil!
pay for the cost of al! banking fees related to the
City’s revenues, including monthly service fees,
armored courier service and banking fees, and credit
and debit card charges. The CITY wil! not, in such
event, pay for banking service fees for any revenues
collected by GOLF PROFESSIONAL;
030I 15 sm 0053189 8
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1)
b.Provide a detailed accounting and reconciliation of
revenues and records for each month, in accordance
with the terms specified in section V.B below, no
later than the !0th day of the following month
Records. GOLF PROFESSIONAL shal!, at all times during
the term of this Agreement, keep or cause to be kept true
and complete books, records, and accounts of al!
financia! transactions conducted in the operation of all
business activities, of whatever nature, conducted
pursuant to the rights granted herein. The records,
books and accounts sha!l be kept or made available to
CITY at a !ocation within Santa Clara or San Mateo
County. The records must be supported by source
documents such as cash register tapes, purchase invoices,
or other pertinent documents. Except as may be otherwise
provided by this Agreement, al! charges shall be recorded
by means of the LINKSource PRO Point of Sale accounting
system purchased jointly in 1998 by the City and Brad
Lozares Golf Shop which displays to the customer the
amount of the transaction and automatically issues a
receipt. The registers sha!l be equipped with devices
which !ock in transaction records, or with counters
which are not resettable and which record transaction
numbers. Totals registered shal! be read and recorded at
the beginning and end of each day.
Records that shall be supplied to the CITY shall include,
but not be limited to the following:
2)
A summary report generated-from, or linked to the cash
receipting system that, at a minimum, lists al! CITY
transactions for the day with corresponding fees
received, summarizes the tota! fees by category, and
lists the tota! revenue (LINKSource PLU 1-115 and Sales
Summary by Department PLU 1-115 reports). Monthly
summary reports shall also be provided which cumulate
fees collected by each category. (Ref: Cash handling
procedures)
A summary of any other sales transact!on for the day
be!onging to the GOLF PROFESSIONAL. (LINKSource Sale
Summary by item Retai! report)
In addition, GOLF PROFESSIONAL shal! keep available for
inspection by CITY staff the daily records from a source in
addition to the LINKSource PRO Point of Sale (ref: Cash
Handling Procedures) system that can be used by the CITY to
verify the accuracy of cash receipting records of golf rounds,
030115 sm 0053!89 9
driving range play, and equipment rentals.
All records and report formats shall be developed in
collaboration with, and approved by CITY’s Director of
Administrative Services, or his or her designee. In the event
of admission charges or rentals, GOLF PROFESSIONAL shal! issue
serially numbered tickets for each such admission or rental
and shal! keep an adequate record of the play-cards, both
issued and unissued.
Upon request of GOLF PROFESSIONAL and at the City Auditor’s
sole discretion, the City Auditor may authorize the keeping of
the above-referenced books of account and records and
supporting source documents in a single location outside the
limits of Santa Clara or San Mateo County provided GOLF
PROFESSIONAL agrees to pay all expenses including, but not
limited to, transportation, food, and !odging necessary for
the City Auditor to send its representative to audit or review
books and records.
GOLF PROFESSIONAL agrees to use a cash receipting system that
is supplied by, or approved by the CITY, and to take
appropriate steps to keep the system in good running order.
CITY agrees to pay for maintenance costs for the system. GOLF
PROFESSIONAL further agrees to ensure that his staff does not
use City’s acquired cash receipting system in such a way that
violates proprietary agreements CITY has with 3rd party
software company. GOLF PROFESSIONAL shal! ensure that none of
his emp!oyees, agents or contractors copy or duplicate any
part of the cash receipting system software, nor disc!ose in
any manner any proprietary information related to the system
or its software. GOLF PROFESSIONAL further agrees to cooperate
with CITY in using CITY approved credit card and/or debit card
acceptance. GOLF PROFESSIONAL agrees to take appropriate and
reasonable, commonly practioed steps to ensure that any
payments made for services by persona! check or by credit or
debit card are valid and legitimate.
The Accounting Year. The accounting year shall be twelve
full calendar months beginning January i. The accounting
year shall be continued through the term of this
Agreement unless CITY specifically approves in writing a
different accounting year. CITY shall approve a change
in accounting year only in the event of undue hardship
being placed on either the GOLF PROFESSION~ or CITY, and
not because of mere convenience or inconvenience.
Financ%al statements and Audit by CITY. Within one
hundred twenty (120 days after the end of each
accounting year, GOLF PROFESSIONAL shal!, at its own
030115 sm 0053189 ! 0
expense, submit to CITY an unaudited balance sheet and
income statement. Within one hundred eighty (180) days
after the end of each accounting year, GOLF PROFESSIONAL
shal!, at its own expense, submit to CITY a balance sheet
and income statement submitted by a Certified Public
Accountant, reflecting business transacted on or from the
Golf Course during the preceding accounting year. The
Certified Public Accountant must attest that the balance
and income statement submitted are an accurate
representation of GOLF PROFESSIONAL’s records as reported
to the United States of America for income tax purposes.
At the same time, GOLF PROFESSIONAL shall submit to CITY
a statement certified as to the accuracy by a Certified
Public Accountant wherein the total gross receipts for
the accounting year are classified according to the
categories established for percentage fees listed in
Clause IV B and for any other business conducted on or
from the Golf Course. The City Auditor may accept
alternatives to the above Certified Public Accountant’s
audited statement provided that in the City Auditor’s
sole opinion, the alternative provides sufficient
assurance that the financial statement accurately
reflects business transacted on or from the Golf Course.
All of GOLF PROFESSIONAL’s books of account and records and
supporting source documents shal! be made available to CITY’s
representatives at any and all reasonable time during the term
of this Agreement and within two (2) years after expiration or
termination of this Agreement, for the purpose of determining
the accuracy of the monthly statements of sales and monies
received, and rent due and paid to CITY.
Notwithstanding the previous paragraph, the full cost of any
such audit by CITY, as determined by CITY, shall be borne by
GOLF PROFESSIONAL if either of the fol!owing conditions
exists:
The audit reveals an underpayment of more than five
percent (5%) between the monies due the CITY as reported
in accordance with this Agreement and the monies due as
determined by the audit; or
GOLF PROFESSIONAL has materially failed to maintain true
and complete books, records, accounts, and supporting
source documents in accordance with subparagraph A above.
The City Auditor shal! determine the adequacy of records.
Otherwise, CITY shal! bear the cost of any such audit.
Upon the request of CITY, GOLF PROFESSIONAL shall promptly
provide, at GOLF PROFESSIONAL’s expense, necessary data to
030115 srn 0053189 i !
enable CITY to fully comply with any and all requirements of
the State of California or the United States of America for
information or reports relating to this Agreement and to GOLF
PROFESSIONAL’s use of the Golf Course. Such data shall
include, if required, a detailed breakdown of GOLF
PROFESSIONAL’s use of the Golf Course, and/or a detailed
breakdown of GOLF PROFESSIONAL’s receipts and expenses.
VI. HOLD HARMLESS
GOLF PROFESSIONAL hereby waives al! claims, liability and recourse
against CITY including the right of contribution for !oss or damage
of or to persons or property arising from, growing out of or in any
way connected with or related to this Agreement. GOLF
PROFESSIONAL hereby agrees to indemnify, hold harmless and defend
CITY, its officers, agents, and emp!oyees against any and all
claims, liability, demands, damages, cost, liability costs,
expenses or attorneys’ fees arising out of the GOLF Professiona!’s
negligence or willful acts or omissions in the performance of this
Agreement, except for liability arising out of the sole negligence
of CITY, its officers, agents or employees. In the event CITY is
names as co-defendant, GOLF PROFESSIONAL shall represent CITY in
such lega! action unless CITY undertakes to represent itself as co-
defendant in such lega! action, in which event GOLF PROFESSIONAL
shal! pay CITY of its cost of defense, including reasonable
attorneys’ fees. If GOLF PROFESSIONAL is not a party to litigation
in which it has an obligation to defend hereunder, CITY shal! have
the right to reasonably approve any counse! selected by GOLF
PROFESSIONAL to defend CITY. Notwithstanding the foregoing, CITY
shal! indemnify, hold harmless and defend GOLF PROFESSIONAL from
any claims or !oss arising from stray range balls causing damage to
any of the property at 1755 Embarcadero Road.
VII. INSIiRANCE
GOLF PROFESSIONAL shal! maintain insurance acceptable to CITY in
ful! force and effect throughout the term of this Agreement.
Minimum ScoDe of Insurance
Coverage shall be at least as broad as:
i)
2)
3)
insurance Services Office Commercial General Liability
coverage (occurrence form CG 0001) .
Insurance Services Office form number CA 0001 (Ed. 1/87)
covering Automobile Liability, code ! (any auto).
Workers’ Compensation insurance as required by the State
of California and Emp!oyer’s Liability Insurance.
The policy or policies of insurance maintained by GOLF PROFESSION~
shal! provide the following limits and coverage’s:
POLICY MINIMUM LIMITS OF LIABILITY
(i)WORKERS’
COMPENSATION Statutory
(2) COMPREHENSIVE Bodily Injury $I,000,000 ea. person
AUTOMOBILE $i,000,000 ea.occurrence
LIabILITY,Property Damage $I,000,000 ea.occurrence
including owned,
hired, and non-owned
automobiles
(3)COMPREHENSIVE
GENERAL
LIABILITY
including
products and
Bodily Injury $i,000,000 ea. person
$i,000,000 ea.occurrence
$i,000,000 aggregate
Property Damage $i,000,000 ea. occurrence
Personal Injury $i,000,000 ea. occurrence
completed operations,
broad form contractual,
and mersona] injury.
Vlll. DEDUCTIBLES AAID SELF-INSURED RETENTIONS
Any deductibles or self-insured retentions must be declared to and
approved by the CITY. At the option of the CZTY either: a) the
insurer shall reduce or eliminate such deductibles or self-insured
~ ’ s respects the CITY its officers officials, employeesrecentlon as -,’
~ s b) the GOLF PROFESSIONAL shal! procure a bondand volunteer ; or -
guaranteeing payment of !osses and related investigations, claim
administration and defense expenses.
Insurance shal! be in ful! force and effect commencing on the first
day of the term of this Agreement. Each insurance policy required
by this Agreement shal! contain the following clauses:
"Each insurance policy required by this clause shal! be
endorsed to state that coverage shall not be suspended,
voided, canceled by either party, reduced in coverage or
in limits except after thirty (30) days’ prior written
notice by certified mai!, return receipt requested, has
been given to the CITY.".
o "Al! rights of subrogation are hereby waived against the
CITY OF PALO ~TO and the members of the City Council and
elective or appointive officers or emp!oyees, when acting
within the scope of their emp!oyment or appointment."
°
"The CITY OF PALO ALTO is named as a loss payee on the
properuy and course of consu_uction insurance policies
030115 ~sm 0053189 ! 3
described above."
"The CITY, its officers, officials, employees, agents and
volunteers ar@ to be covered as insureds as respects:
liability arising out of activities performed by or on
behalf of the GOLF PROFESSIONAL; products and completed
operations of the GOLF PROFESSIONAL; premises owned,
occupied or used by the GOLF PROFESSIONAL; or automobiles
owned, leased, hired or borrowed by the GOLF
PROFESSIONAL. The coverage shal! contain no special
limitations on the scope of protection afforded to the
CITY, its officers, officials, emp!oyees, agents or
volunteers."
o "For any claims related to this Agreement, the GOLF
PROFESSIONAL’s insurance coverage shall be primary
insurance as respects the CITY, its officers, officials,
employees, agents and volunteers. Any insurance or self-
insurance maintained by the CITY, its officers,
officials, employees, agents or volunteers shall be
excess of the GOLF PROFESSIONAL’s insurance and shal! not
contribute with it."
"Any failure to comply with reporting or other provisions
of the policies including breaches of warranties shall
not affect coverage provided to the CITY, its officers,
officials, emp!oyees, agents or volunteers."
IX.ACCEPTABILITY OF INSURERS
Insurance is to be placed with insurers with a current A.M. Best’s
rating of no less than A:X.
X.POSSESSORY INTEREST
GOLF PROFESSIONAL recognizes and understands that this Agreement is
not intended to, but may create a real property possessory interest
in the Golf Course that may be subject to tea! property or other
taxation, and that GOLF PROFESSIONAL shal! be subject to or liable
for the payment of any rea! property t&xes or other taxes levied on
such interest.
Xl.ARBITRATION
Should arbitration be necessary, the matter in dispute shal! be
submitted to arbitration to take place in Palo Alto, California,
pursuant to the then current rules and regulations of the American
Arbitration Association. Either party requesting arbitration under
such clauses shall make a demand On the other party by registered
or certified mai! with a copy to the San Francisco Regiona! Office
030115 srn 0053189
of the American Arbitration Association, 225 Bush St. 18th Floor,
San Francisco, Calif. 94104 (415-981-3901). The arbitration sha!l
take place as noticed by the American Arbitration Association.
Judgment upon the award rendered by the arbitrator(s) may be
entered in any Court having jurisdiction thereof.
XII. CIRCUMSTANCES WHICH EXCUSE PERFORMANCE (FORCE MAJEURE)
If either party hereto shall be delayed or prevented from the
performance of any act required hereunder by reason of acts of God,
restrictive governmenta! laws or regulations, or other cause
without fault and beyond the control of the party obligated
(financia! inability excepted), performance of such act shal! be
excused for the period of the delay and the period for the
_~eDer~ormanc of any such act sha!l be extended for a period
equivalent to the period of such delay.
XIII. NONDISCRIMINATION
GOLF PROFESS!ONAL and its emp!oyees shall not discriminate against
any person because of race, color, religion, ancestry, age, sex,
national origin, disability or sexual preference. GOLF
PROFESSIONAL shall not discriminate against any emp!oyee or
applicant for employment because of race, color, religion,
ancestry, sex, age, national origin, disability or sexua!
preference. GOLF PROFESSIONAL covenants to meet al! requirements
of the Palo Alto Municipal Code pertaining to nondiscrimination in
employment. If GOLF PROFESSIONAL is found in violation of the
nondiscrimination provision of the State of California Fair
Emp!oyment Practices Act or similar provisions of federal law or
executive order in the conduct of its activities under this
Agreement by the State of .California Fair Employment Practices
Commission or the equivalent federa! agency or officer, it shal!
thereby be found in default under this Agreement, and such default
sha!l constitute a material breach of this Agreement. CITY shal!
then have the power to cance! or suspend this Agreement in whole or
in part.
XIV. CONFLICT OF INTEREST
GOLF PROFESSIONAL warrants and covenants that no official or
emp!oyee of CITY nor any business entity in which any officia! or
emp!oyee of CITY is :interested has been emp!oyed or retained to
solicit or aide in the procuring of this Agreement or wil! be
emp!oyed in the performance of this Agreement without the
divulgence of such fact to CITY. In the event that CITY determines
that the employment of any such officia!, employee or business
entity is not compatible with such official’s or employee’s duties
as an officia! or emp!oyee of CITY, GOLF PROFESSIONAL upon request
of CITY shal! immediately terminate such emp!oyment. Violation of
030115sm0053189 15
this provision constitutes a serious breach of this Agreement and
CITY may terminate this Agreement as a result of such violation.
XV.NOTICES
Al! notices pursuant to this Agreement shall be addressed as set
forth be!ow or as either party may subsequently designate by
written notice.
II
II
I1
I1
II
II
I1
II
II
TO: CITY TO: GOLF PROFESSIONAL
Real Property
City of Palo Alto
P.O. Box 10250
250 Hamilton Avenue
Palo Alto, CA 94303
FAX: (650) 323-1741
Brad Lozares
Brad Lozares Golf Shop
845 Doverton Square
Mountain View, CA 94040
with a.copy to:
City Clerk, City of Pa!o Alto
P.O. Box 10250
250 Hamilton Avenue
Palo Alto, CA 94303
FAX: (650) 328-3631
And
City Attorney, City of Palo Alto
P.O. Box 10250
250 Hamilton Avenue
Palo Alto CA 94303
FAX: (650) 329-2646
030115 sm 0053189 ! 6
IN WITNESS WHEREOF, the parties have executed this Agreement the
day and year first above written.
ATTEST:CITY OF PALO ALTO
City Clerk
APPROVED AS TO FORM:
Mayor
BRAD LOZARES GOLF SHOP
City Attorney
By:
APPROVED:
Name:
Assistant City Manager Title:
Director, Administrative
Services
Taxpayer Identification No.
Director, Community Services
Director, .Parks & Golf
Division
Manager, Real Property
030115 sm 0053 !89 ! 7