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HomeMy WebLinkAboutID-3169 City of Palo Alto (ID # 3169) City Council Staff Report Report Type: Consent Calendar Meeting Date: 10/15/2012 Summary Title: Golf Course Reconfiguration - Approval of contract with Forrest Richardson $545,338 Title: Approval of Contract in a Not to Exceed Amount of $545,338 with Forrest Richardson & Associates for Design Services and Preparation of the Environmental Impact Report for the Golf Course Redesign and the Potential Expansion of the Baylands Athletic Center and Adoption of the Budget Amendment Ordinance to Reallocate $545,338 from the Infrastructure Reserve Fund to the Recreation Division Operating Budget. From: City Manager Lead Department: Community Services Recommendation Staff recommends that Council: Approve a contract with Golf Course Architect Forrest Richardson & Associates (Richardson) to complete the redesign of the Palo Alto Municipal Golf Course (Golf Course) and prepare the Environmental Impact Report for the Golf Course redesign and the potential expansion of the Baylands Athletic Center for $545,338 (Attachment A – Forrest Richardson & Associates Contract), and; Approve the Budget Amendment Ordinance and Capital Improvement Project “Golf Course Reconfiguration and Baylands Athletic Center Improvements” for $545,338 (Attachment D). Executive Summary Staff has worked over the past year with the San Francisquito Creek Joint Powers Authority (SFCJPA) and Golf Course Architect Forest Richardson (Richardson) to create Golf Course reconfiguration alternatives to support the SFCJPA flood control project while also taking advantage of the opportunity to design a more interesting, inviting and playable Golf Course that has the potential to make the Golf Course responsive to the needs of the golfing community and financially viable in the future. Using information from staff, City Council, Parks and Recreation Commission and broad community input, Richardson narrowed the Golf Course reconfiguration options from seven options to four. These four options were presented to the Finance Committee on March 6, 2012 and the City Council on July 23, 2012. The four Golf Course re-configuration options included: Option A - the simplest, least expensive option with minimal Golf Course improvements beyond what is required for the SFCJPA mitigation; Option D – enhances the Golf Course considerably with relatively low costs beyond SFCJPA mitigation; Option F - adds space for one athletic field and re-configures the majority of the Golf Course; and Option G - adds space for up to three full-size athletic fields and re-configures the entire Golf Course. The staff report from the July 23, 2012, Council meeting can be seen in Attachment B and draft minutes in Attachment E. The Council reviewed and discussed the options and unanimously voted to further pursue Option G for the following reasons. The opportunity to devote 10.5 acres of existing Golf Course land for possible playing fields was particularly appealing. The Finance Committee and Council reasoned that the cost of land acquisition in Palo Alto is extremely expensive; the possibility that the City would be able to purchase 10.5 acres for park and recreation needs in the future is highly unlikely, making this a unique opportunity. Furthermore, the financial analysis by the National Golf Foundation (Attachment C) was particularly compelling for Option G, as it has the highest return on investment over time compared to the other plans, according to the National Golf Foundation analysis. Additionally, the concept of a more Baylands oriented golfing experience with significantly more naturalized areas, a smaller turf footprint (less fertilization, pesticide application and water use), and an integrated marketing theme promoting an environmentally-friendly “Baylands” golf experience was viewed as an exciting vision for the Palo Alto Golf Course. Thus, On July 23, 2012, Council unanimously directed staff to pursue Option G by entering into the appropriate contracts to complete the necessary environmental clearance and golf course design. The contract has been drafted inclusive of some additional design costs and environmental analysis for the multi-use athletic center (Attachment A – Forrest Richardson & Associates Contract) and is before Council this evening for approval. In addition, the SFCJPA is completing its environmental analysis of the flood control levee project and is expected to begin construction soon. According to staff from the JPA the levee Project could begin as early as summer 2013. As the flood control levee project will require the short term closure of the Golf Course it is imperative that future work to upgrade the golf course be coordinated with the flood control project to minimize further impacts to the golf community and lost revenues due to Golf Course disruption. Thus, the City needs to move expeditiously in the design process in order to be ready to start the Golf Course project prior to or concurrently with the creek levee reconstruction. In order to complete the Golf Course reconfiguration and athletic center designs and environmental analysis, return to Council for approval, and be ready to bid the work for a potential start in summer 2013, staff needs the design team to work at a fast and steady pace with minimal delay. This is a very ambitious schedule that may need to be revisited as the project design and environmental work develops. Background The proposed SFCJPA flood control levee alignment will encroach onto the Golf Course. Conceptual alternatives for reconfiguration of the Golf Course necessitated by the levee realignment were contemplated by the City, SFCJPA, and the SFCJPA’s design consultant on the Project, and at a minimum would involve significant changes to holes 12, 13, 14, 15, 16, 17, at a and possibly hole 4 as well. Modifications to holes not directly impacted by levee realignment will be required in order to maintain minimum separation distances between fairways as required for golfer safety. Given the anticipated scale of the changes that will be needed within the Golf Course, in January 2011, SFCJPA and City staff agreed that a golf course architect should be secured under a separate design contract in order to maintain fairness and transparency in the consultant selection process for this significant element of the Project. On June 9, 2011, SFCJPA staff, City staff, and members of the Golf Advisory Committee interviewed six golf course architects. After careful consideration, a unanimous decision was made to select Golf Course Architect Forrest Richardson & Associates. Richardson’s experience working with high saline turf conditions, renovations on other Bell designed courses, the hand- picked team he selected to ensure all work tasks can be accomplished for this project, and his experience working with a variety of agencies were key factors in his selection. In addition, his experience in conducting public outreach forums and making presentations, his demonstrated knowledge in successful and profitable golf course operations, and his understanding that this project should integrate cohesively with the rest of the Baylands were additional factors in his selection. Over the past twelve months Richardson has developed an updated Golf Course long-range plan with the help of Palo Alto community stakeholders as part of his contract’s scope of work. Mr. Richardson firmly believes that the City should not re-design a portion of the Golf Course without a comprehensive view to ensure the entire 18-holes playing experience is sustained or enhanced. This approach has proven to be very valuable and staff and community are genuinely excited by the concepts that have emerged. Richardson has given particular thought to how the Golf Course can be designed in such a way to effectively utilize space and enhance the golfer experience in order to result in an increase in the patronage of the course, rounds of play and to generate revenue. His designs also provide for additional uses on the site, such as playing fields for other sports and recreational activities on a ten-acre portion of the golf course that abuts the Baylands Athletic Center. Public Outreach Public outreach meetings with Richardson are built into the scope of work and contract with Richardson. The public meetings ensure that Golf Course stakeholders and the general public have multiple opportunities to ask questions, make suggestions, and receive updates on the project. The schedule below is very aggressive, and represents a best case scenario with little to no delays. Staff recognizes that the schedule may need to be reconsidered but we present this timeline as a stretch goal for moving forward as expeditiously and responsibly as possible. Tentative Time-line and Public Meetings Dates 1 Golf Advisory and General Public 8/18/11 2 Parks and Recreation Commission 10/28/11 3 Golf Advisory and General Public 10/24/11 4 City Council 12/5/11 5 Community Input Meeting 1/26/12 6 Parks and Recreation Commission 2/28/12 7 Finance Committee 3/6/12 8 Parks and Recreation Commission 4/23/12 9 Golf Advisory and General Public 5/16/12 10 City Council 7/23/12 11 Golf Advisory and General Public 8/22/12 12 Parks and Recreation Commission (study session) 10/23/12 13 Architectural Review Board (study session) 11/1/12 14 Finance Committee 12/4/12 15 City Council (study session) 1/14/13 16 Golf Advisory and General Public 1/16/13 17 Parks and Recreation Commission (approval) 2/26/13 18 Architectural Review Board (approval) 5/2/13 19 Planning Transportation Commission (approval) 5/29/13 20 SFCJPA Board (approval if needed) TBD 21 City Council (approval) 6/18/13 22 Earliest construction could start 7/1/13 Discussion In order to complete the Golf Course and multi-use athletic center design, staff recommends entering into an expanded contract with Richardson. Because the design now involves the complete reconfiguration of the existing Golf Course and the addition of the 10.5-acre athletic center the scope of work of Richardson’s contract is substantially expanded from what the SFCJPA had initially envisioned. A revised scope of services and contract between the City and Richardson has been drafted for Council consideration - Attachment A. The cost for design, the Environmental Impact Report and related support services is estimated to be $545,338. Although this is a significant budget impact the cost is lessened due to the work Richardson has already performed and because Richardson is using ICF International to perform the environmental analysis. ICF International is the firm that the SFCJPA used for the levee project EIR. Because the Golf Course Reconfiguration project overlaps with the levee project in a variety of ways ICF International is able to leverage previous analysis from the levee EIR to support the Golf Course redesign and the potential expansion of the Baylands Athletic Center EIR. The details of the deliverables for the Richardson contract are in the scope of services that can be viewed on Attachment A – Forrest Richardson & Associates Contract. The tasks include: Task (1) Design Development Task (2) Soil Importation Assistance Task (3) Environmental Impact Report Task (4) Construction Documents & Specifications Task (5) Bidding Assistance At the completion of Richardson’s work the City will be in a position to begin the Golf Course reconstruction project. City staff will return to Council periodically to provide on progress and schedule. Since funding needed for design and environmental work is typically included in capital projects, staff recommends to Council that the funding come from the Infrastructure Reserve. Golf Course rehabilitation was part of the Infrastructure Blue Ribbon Commission’s (IBRC) purview and as such should be prioritized among other needs identified by the IBRC. It is expected that the final design work for the Golf Course design and multi-use athletic center would refine the preliminary cost estimates so that Council can make a more informed decision in pursuing the projects, and ranking rehabilitation of the Golf Course and building a multi-use athletic center among other General Fund infrastructure priorities. The timeline above is driven by the SFCJPA who hope to begin levee realignment work in 2013. Ideally the reconfiguration of the Golf Course would occur in advance or concurrently with the levee realignment work. There will be a short-term loss of revenue due to the Golf Course reconfiguration construction period. The length of the construction period is anticipated to be 12 months and could begin as early as spring 2013. The construction will impact the City’s tenants and contractors that support the Golf Course operation (Brad Lozares for the Golf Course Pro Shop, Valley Crest Maintenance and Tom Talai at the Bay Cafe Restaurant). Staff are currently drafting extensions of the existing contracts for the period of construction and re- opening. Council can expect to see the contract extensions for review and approval before the end of the calendar year. Resource Impacts Expenses to Date In August 2011, the City entered into a contract with Forrest Richardson, separately from the SFCJPA, to develop Golf Course design options and long-range planning beyond SFCJPA mitigation. To date the contract with Forrest Richardson has cost the City $47,000. The City also entered into a contract with the National Golf Foundation to provide financial analysis on the design options and the long range Golf Course planning work. The contract with the National Golf Foundation cost the City $24,000. Design and Environment Impact Analysis The redesign of the Palo Alto Municipal Golf Course and the environmental impact analysis for the Golf Course redesign and the Baylands Athletic Center expansion will cost up to $545,338 and is what is being requested for approval from Council this evening. The contract dollar amount is higher than initially anticipated in July 2012 due to additional design costs and environmental analysis now incorporated into the Richardson contract for the potential Baylands Athletic Center improvements, which may occur concurrently with the Golf Course reconfiguration. To capture and track costs related to the Golf Course and Baylands Athletic Center improvements, staff is recommending creation of Capital Improvement Project “Golf Course Reconfiguration and Baylands Athletic Center Improvements”. Should Council approve the Richardson contract, $545,338 would be transferred from the Infrastructure Reserve and appropriated to CIP, “Golf Course Reconfiguration and Baylands Athletic Center Improvements”. At this time, staff does not have an estimate of costs associated with the potential improvements to the Baylands Athletic Center, so a single project is recommended. Staff would return to Council at a later time (e.g., midyear) to create separate projects for the Golf Course and the Baylands Athletic Center. If the City moves forward with the Golf Course reconfiguration construction, it is likely that the City would require a debt financing vehicle such as Certificates of Participation or proceeds from a General Obligation Bond. COPs were used in 1998 to finance Golf Course capital improvements where the revenue streams of the Course were pledged as the credit. It is anticipated that financing the improvements cited in this report will be part of the larger discussion of how to fund General Fund citywide infrastructure improvements. Staff believes that funding the final design and EIR for the Golf Course and athletic center will provide the Council with more enhanced information on capital costs and ongoing operating costs and whether to move forward with the projects. SFCJPA Mitigation Staff has worked with SFCJPA to explore appropriate mitigation as the timeline and levee design work progresses. City staff expects a dollar amount from the SFCJPA of between $3 to $3.2 million dollars for mitigation which is the estimated cost to reconfigure the Golf Course limited to the flood control impacts in 2013, unless the Council were to direct consideration of other factors in the mitigation. It should be remembered though that the creek and levee improvements are also in the interests of Palo Alto and provide significant value to our community and our neighbors. The approximate mitigation amount of $3 to $3.2 million dollars does not address lost revenues; value of land to support the new levee or lost parking at the Baylands Athletic Center. The table below summarizes the estimated costs along with benefits resulting from the flood control work. Staff recognizes that the flood control project is incredibly important to the City of Palo Alto and partner organizations on the SFCJPA Board and understands the notion of mitigation money from the SFCJPA to offset all costs inclusive of land contribution and lost revenue may not be feasible. Staff does, however, believe it is important to document the City of Palo Alto’s contribution to the overall flood control project for possible future credit toward flood control projects yet to occur upstream: Golf Course / Flood Control City Contribution vs. Value Added City Contribution vs. Value Added Dollars Comments City Contribution City revenue loss during construction of new levee $ 1,080,000 Based on National Golf Foundation Pro Formas - Plan A (pg. 47) Estimated Golf Course construction costs for Plan A $3,193,131 Based on Forrest Richardson's revised Plan A cost estimates 7.5 acres of Palo Alto park land for new levee $12,900,000 Estimated value of land provided by ASD/Real Estate Loss of overflow parking at the Baylands Athletic Center $282,000 Estimated value of lost parking spaces provided by Planning staff Value Added Flood protection unknown Estimated value of flood protection is unknown Improved Golf Course $(800,000) Based on Mr. Richardson's memo titled "Palo Alto Golf Course - Increased Value with Plan "A" Investment Golf Course Construction Costs Construction costs for the Golf Course reconfiguration is estimated to total $7,573,262. Of this total staff estimate up to $3.2 million dollars may be paid for by the SFCJPA. The remaining $4.45 million dollars would be financed over 20 years with the debt payments to come from Golf Course revenues. The financial analysis provided by the National Golf Foundation indicates the redesigned and improved Golf Course will be able to fully meet this obligation. In addition to the construction costs of $7,573,262 there will be additional construction support costs of an amount yet to be determined. The additional costs will include construction project management and Golf Course Architect construction support. Staff will return to Council as we approach the bidding and construction phase with a request for additional funding to support the project through the construction completion. Multi-use athletic center The Council recommended Golf Course design (Option G) which includes 10.5 acres for possible playing fields or other recreation amenities. The construction costs above (i.e. $7,573,262) provide for grading the 10.5 acres area for drainage and basic seed cover. The current contract contains some nominal budget for design of the playing fields and multi-use athletic center in order to permit those uses to be analyzed in a meaningful way in the EIR. Design and construction of the expanded athletic center, along with the associated operating costs, are not yet known or included in the cost estimates for the Golf Course reconfiguration. Policy Implications The Project is consistent with Policy C-24 and Policy C-26 of the Comprehensive Plan, which encourages reinvesting in aging facilities to improve their usefulness and appearance and avoiding deferred maintenance of City infrastructure; and maintaining and enhancing existing park facilities. This Project also supports Policy N-10, which calls for the City to work with the Santa Clara Valley Water District and other relevant regional agencies to enhance riparian corridors and provide adequate flood control by use of low impact restoration strategies. The Baylands Master Plan provides policy direction on the Golf Course. In 2008 the Baylands Master Plan was reformatted representing the 4th addition of the plan. The policy direction adopted in 2008 as seen in Chapter 8 of the plan is to continue the Golf Course in its present use and to continue with the implementation of the Palo Alto Municipal Golf Course Master Improvement Plan. The Baylands Master Plan also provides policy direction on the Baylands Athletic Center – Chapter 7. As with the Golf Course the policy direction is to continue to maintain the athletic center for its current use and to maintain and continue to improve standards of low external glare night lighting. Environmental Review This Project will be subject to environmental review under provisions of the California Environmental Quality Act (CEQA). The SFCJPA has followed the CEQA Guidelines and prepared an Environmental Impact Report (EIR) for the San Francisquito Creek Flood Protection and Ecosystem Restoration capital project. The City of Palo Alto will also follow CEQA Guidelines and conduct its own EIR for the Golf Course reconfiguration and athletic center capital project. A tree survey and arborist’s report for the project area has commenced. Several meetings with City Arborist have taken place in anticipation of the impacts to existing trees. It has been clearly communicated to the Golf Course Architect Richardson that the project must comply with the City’s Tree Ordinance. Attachments: Attachment A - Richardson Contract (PDF) Attachment B - July 23 staff report (PDF) Attachment C - FINAL NGF Report (PDF) Attachment D: Budget Amendment Ordinance (DOCX) Attachment E - Counicl Minutes 07-23-2012 CCM Excerpt Item 19 (PDF) Prepared By: Robert De Geus, Manager Department Head: Greg Betts, Director, Community Services City Manager Approval: ____________________________________ James Keene, City Manager Professional Services Rev. June 2, 2010 1 CITY OF PALO ALTO CONTRACT NO. C13147 AGREEMENT BETWEEN THE CITY OF PALO ALTO AND GOLF GROUP, LTD FOR PROFESSIONAL SERVICES This Agreement is entered into on this day of October, 2012, (“Agreement”) by and between the CITY OF PALO ALTO, a California chartered municipal corporation (“CITY”), and GOLF GROUP, LTD, a Arizona Corporation authorized to do business in the State of California, dba FORREST RICHARDSON & ASSOCIATES, located at 2337 East Orangewood Avenue, Phoenix, Arizona 85020, Telephone (602) 906-1818 ("CONSULTANT"). RECITALS The following recitals are a substantive portion of this Agreement. A. CITY intends to physically reconfigure its Golf course in conjunction with and to coincide with the upcoming levee work to the creek adjacent to the Golf course (“Project”) and desires to engage a consultant to assist with the design and the environment impact analysis in connection with the Project (“Services”). B. CONSULTANT has represented that it has the necessary professional expertise, qualifications, and capability, and all required licenses and/or certifications to provide the Services. C. CITY in reliance on these representations desires to engage CONSULTANT to provide the Services as more fully described in Exhibit “A”, attached to and made a part of this Agreement. NOW, THEREFORE, in consideration of the recitals, covenants, terms, and conditions, this Agreement, the parties agree: AGREEMENT SECTION 1. SCOPE OF SERVICES. CONSULTANT shall perform the Services described in Exhibit “A” in accordance with the terms and conditions contained in this Agreement. The performance of all Services shall be to the reasonable satisfaction of CITY. SECTION 2. TERM. The term of this Agreement shall be from the date of its full execution through 09/30/2014 in accordance with the Schedule of Performance attached as Exhibit “B” unless terminated earlier pursuant to Section 19 of this Agreement. SECTION 3. SCHEDULE OF PERFORMANCE. Time is of the essence in the performance of Services under this Agreement. CONSULTANT shall complete the Services within the term of this Agreement and in accordance with the schedule set forth in Exhibit “B”, attached to and made a part of this Agreement. Any Services for which times for performance are not specified in this Agreement shall be commenced and completed by CONSULTANT in a reasonably prompt and timely manner based upon the circumstances and direction communicated to the CONSULTANT. Professional Services Rev. June 2, 2010 2 S:\ASD\PURCH\SOLICITATIONS\CURRENT BUYER-CM FOLDERS\OTHERS - ADRIAN\Contracts\S13147444 Golf Course Reconfiguration Project\Large K\Contract\C13147XXX W-Golf Group LTD Main Body; FINAL.doc CITY’s agreement to extend the term or the schedule for performance shall not preclude recovery of damages for delay if the extension is required due to the fault of CONSULTANT. SECTION 4. NOT TO EXCEED COMPENSATION. The compensation to be paid to CONSULTANT for performance of the Services described in Exhibit “A”, including both payment for professional services and reimbursable expenses, shall not exceed Four Hundred Thirty Five Thousand Three Hundred Thirty Eight Dollars ($435,338). In the event Additional Services are authorized, the total compensation for services and reimbursable expenses shall not exceed Five Hundred Forty Five Thousand Three Hundred Thirty Eight Dollars ($545,338). The applicable rates and schedule of payment are set out in Exhibit “C-1”, entitled “Hourly Rate Schedule,” which is attached to and made part of this Agreement. Additional Services, if any, shall be authorized in accordance with and subject to the provisions of Exhibit “C”. CONSULTANT shall not receive any compensation for Additional Services performed without the prior written authorization of CITY. Additional Services shall mean any work that is determined by CITY to be necessary for the proper completion of the Project, but which is not included within the Scope of Basic and Reimbursable Services described in Exhibit “A”. SECTION 5. INVOICES. In order to request payment, CONSULTANT shall submit monthly invoices to the CITY describing the services performed and the applicable charges (including an identification of personnel who performed the services, hours worked, hourly rates, and reimbursable expenses), based upon the CONSULTANT’s billing rates (set forth in Exhibit “C-1”). If applicable, the invoice shall also describe the percentage of completion of each task. The information in CONSULTANT’s payment requests shall be subject to verification by CITY. CONSULTANT shall send all invoices to the City’s project manager at the address specified in Section 13 below. The City will process and pay invoices within thirty (30) to forty (40) days of receipt. SECTION 6. QUALIFICATIONS/STANDARD OF CARE. All of the Services shall be performed by CONSULTANT or under CONSULTANT’s supervision. CONSULTANT represents that it possesses the professional and technical personnel necessary to perform the Services required by this Agreement and that the personnel have sufficient skill and experience to perform the Services assigned to them. CONSULTANT represents that it, its employees and subconsultants, if permitted, have and shall maintain during the term of this Agreement all licenses, permits, qualifications, insurance and approvals of whatever nature that are legally required to perform the Services. All of the services to be furnished by CONSULTANT under this agreement shall meet the professional standard and quality that prevail among professionals in the same discipline and of similar knowledge and skill engaged in related work throughout California under the same or similar circumstances. SECTION 7. COMPLIANCE WITH LAWS. CONSULTANT shall keep itself informed of and in compliance with all federal, state and local laws, ordinances, regulations, and orders that may affect in any manner the Project or the performance of the Services or those engaged to perform Services under this Agreement. CONSULTANT shall procure all permits and licenses, pay all charges and fees, and give all notices required by law in the performance of the Services. Professional Services Rev. June 2, 2010 3 S:\ASD\PURCH\SOLICITATIONS\CURRENT BUYER-CM FOLDERS\OTHERS - ADRIAN\Contracts\S13147444 Golf Course Reconfiguration Project\Large K\Contract\C13147XXX W-Golf Group LTD Main Body; FINAL.doc SECTION 8. ERRORS/OMISSIONS. CONSULTANT shall correct, at no cost to CITY, any and all errors, omissions, or ambiguities in the work product submitted to CITY, provided CITY gives notice to CONSULTANT. If CONSULTANT has prepared plans and specifications or other design documents to construct the Project, CONSULTANT shall be obligated to correct any and all errors, omissions or ambiguities discovered prior to and during the course of construction of the Project. This obligation shall survive termination of the Agreement. SECTION 9. COST ESTIMATES. If this Agreement pertains to the design of a public works project, CONSULTANT shall submit estimates of probable construction costs at each phase of design submittal. If the total estimated construction cost at any submittal exceeds ten percent (10%) of the CITY’s stated construction budget, CONSULTANT shall make recommendations to the CITY for aligning the PROJECT design with the budget, incorporate CITY approved recommendations, and revise the design to meet the Project budget, at no additional cost to CITY. SECTION 10. INDEPENDENT CONTRACTOR. It is understood and agreed that in performing the Services under this Agreement CONSULTANT, and any person employed by or contracted with CONSULTANT to furnish labor and/or materials under this Agreement, shall act as and be an independent contractor and not an agent or employee of the CITY. SECTION 11. ASSIGNMENT. The parties agree that the expertise and experience of CONSULTANT are material considerations for this Agreement. CONSULTANT shall not assign or transfer any interest in this Agreement nor the performance of any of CONSULTANT’s obligations hereunder without the prior written consent of the city manager. Consent to one assignment will not be deemed to be consent to any subsequent assignment. Any assignment made without the approval of the city manager will be void. SECTION 12. SUBCONTRACTING. Notwithstanding Section 11 above, CITY agrees that subconsultants may be used to complete the Services. The subconsultants authorized by CITY to perform work on this Project are: Oberkamper & Associates (Civil Engineering) 7200 Redwood Boulevard, Suite 308 Novato, California 94945 415-897-2800 PE License No. 12094 (Lee Oberkamper) Russ Mitchell & Associates (Irrigation Consultants) DL Siemens Consulting (Construction Management) Golfauna (Environmental Consultants) Professional Services Rev. June 2, 2010 4 S:\ASD\PURCH\SOLICITATIONS\CURRENT BUYER-CM FOLDERS\OTHERS - ADRIAN\Contracts\S13147444 Golf Course Reconfiguration Project\Large K\Contract\C13147XXX W-Golf Group LTD Main Body; FINAL.doc ICF International (Environmental Impact Report Consultant) 75 E. Santa Clara Street, Suite No. 300 San Jose, California 95113 Telephone: (408) 216-2800 CONSULTANT shall be responsible for directing the work of any subconsultants and for any compensation due to subconsultants. CITY assumes no responsibility whatsoever concerning compensation. CONSULTANT shall be fully responsible to CITY for all acts and omissions of a subconsultant. CONSULTANT shall change or add subconsultants only with the prior approval of the city manager or his designee. SECTION 13. PROJECT MANAGEMENT. CONSULTANT will assign Forrest Richardson, Golf Course Architect, Email: forrest@golfgroupltd.com , Telephone: (602) 906-1818 Ext. 202 as the Director to have supervisory responsibility for the performance, progress, and execution of the Services and Forrest Richardson as the Project Manager to represent CONSULTANT during the day-to-day work on the Project. If circumstances cause the substitution of the project director, project coordinator, or any other key personnel for any reason, the appointment of a substitute project director and the assignment of any key new or replacement personnel will be subject to the prior written approval of the CITY’s project manager. CONSULTANT, at CITY’s request, shall promptly remove personnel who CITY finds do not perform the Services in an acceptable manner, are uncooperative, or present a threat to the adequate or timely completion of the Project or a threat to the safety of persons or property. The City’s project manager is Robert De Geus, Community Sevices Department, Recreation and Golf, Email: Robert.DeGeus@CityofPaloAlto.org , Telephone Number: (650) 463-4908, Lucie Stern Community Center, 1305 Middlefield Road, Palo Alto, CA 94303. The project manager will be CONSULTANT’s point of contact with respect to performance, progress and execution of the Services. The CITY may designate an alternate project manager from time to time. SECTION 14. OWNERSHIP OF MATERIALS. Upon delivery, all work product, including without limitation, all writings, drawings, plans, reports, specifications, calculations, documents, other materials and copyright interests developed under this Agreement shall be and remain the exclusive property of CITY without restriction or limitation upon their use. CONSULTANT agrees that all copyrights which arise from creation of the work pursuant to this Agreement shall be vested in CITY, and CONSULTANT waives and relinquishes all claims to copyright or other intellectual property rights in favor of the CITY. Neither CONSULTANT nor its contractors, if any, shall make any of such materials available to any individual or organization without the prior written approval of the City Manager or designee. CONSULTANT makes no representation of the suitability of the work product for use in or application to circumstances not contemplated by the scope of work. SECTION 15. AUDITS. CONSULTANT will permit CITY to audit, at any reasonable time during the term of this Agreement and for three (3) years thereafter, CONSULTANT’s records pertaining to matters covered by this Agreement. CONSULTANT further agrees to maintain and retain such records for at least three (3) years after the expiration or earlier termination of this Agreement. Professional Services Rev. June 2, 2010 5 S:\ASD\PURCH\SOLICITATIONS\CURRENT BUYER-CM FOLDERS\OTHERS - ADRIAN\Contracts\S13147444 Golf Course Reconfiguration Project\Large K\Contract\C13147XXX W-Golf Group LTD Main Body; FINAL.doc SECTION 16. INDEMNITY. 16.1. To the fullest extent permitted by law, CONSULTANT shall protect, indemnify, defend and hold harmless CITY, its Council members, officers, employees and agents (each an “Indemnified Party”) from and against any and all demands, claims, or liability of any nature, including death or injury to any person, property damage or any other loss, including all costs and expenses of whatever nature including attorneys fees, experts fees, court costs and disbursements (“Claims”) that arise out of, pertain to, or relate to the negligence, recklessness, or willful misconduct of the CONSULTANT, its officers, employees, agents or contractors under this Agreement, regardless of whether or not it is caused in part by an Indemnified Party. 16.2. Notwithstanding the above, nothing in this Section 16 shall be construed to require CONSULTANT to indemnify an Indemnified Party from Claims arising from the active negligence, sole negligence or willful misconduct of an Indemnified Party. 16.3. The acceptance of CONSULTANT’s services and duties by CITY shall not operate as a waiver of the right of indemnification. The provisions of this Section 16 shall survive the expiration or early termination of this Agreement. SECTION 17. WAIVERS. The waiver by either party of any breach or violation of any covenant, term, condition or provision of this Agreement, or of the provisions of any ordinance or law, will not be deemed to be a waiver of any other term, covenant, condition, provisions, ordinance or law, or of any subsequent breach or violation of the same or of any other term, covenant, condition, provision, ordinance or law. SECTION 18. INSURANCE. 18.1. CONSULTANT, at its sole cost and expense, shall obtain and maintain, in full force and effect during the term of this Agreement, the insurance coverage described in Exhibit "D". CONSULTANT and its contractors, if any, shall obtain a policy endorsement naming CITY as an additional insured under any general liability or automobile policy or policies. 18.2. All insurance coverage required hereunder shall be provided through carriers with AM Best’s Key Rating Guide ratings of A-:VII or higher which are licensed or authorized to transact insurance business in the State of California. Any and all contractors of CONSULTANT retained to perform Services under this Agreement will obtain and maintain, in full force and effect during the term of this Agreement, identical insurance coverage, naming CITY as an additional insured under such policies as required above. 18.3. Certificates evidencing such insurance shall be filed with CITY concurrently with the execution of this Agreement. The certificates will be subject to the approval of CITY’s Risk Manager and will contain an endorsement stating that the insurance is primary coverage and will not be canceled, or materially reduced in coverage or limits, by the insurer except after filing with the Purchasing Manager thirty (30) days' prior written notice of the cancellation or modification, CONSULTANT shall be responsible for ensuring that current certificates evidencing the insurance are provided to CITY’s Purchasing Manager during the entire term of this Agreement. Professional Services Rev. June 2, 2010 6 S:\ASD\PURCH\SOLICITATIONS\CURRENT BUYER-CM FOLDERS\OTHERS - ADRIAN\Contracts\S13147444 Golf Course Reconfiguration Project\Large K\Contract\C13147XXX W-Golf Group LTD Main Body; FINAL.doc 18.4. The procuring of such required policy or policies of insurance will not be construed to limit CONSULTANT's liability hereunder nor to fulfill the indemnification provisions of this Agreement. Notwithstanding the policy or policies of insurance, CONSULTANT will be obligated for the full and total amount of any damage, injury, or loss caused by or directly arising as a result of the Services performed under this Agreement, including such damage, injury, or loss arising after the Agreement is terminated or the term has expired. SECTION 19. M TER INATION OR SUSPENSION OF AGREEMENT OR SERVICES. 19.1. The City Manager may suspend the performance of the Services, in whole or in part, or terminate this Agreement, with or without cause, by giving ten (10) days prior written notice thereof to CONSULTANT. Upon receipt of such notice, CONSULTANT will immediately discontinue its m perfor ance of the Services. 19.2. CONSULTANT may terminate this Agreement or suspend its performance of the Services by giving thirty (30) days prior written notice thereof to CITY, but only in the event of a substantial fa filure o performance by CITY. 19.3. Upon such suspension or termination, CONSULTANT shall deliver to the City Manager immediately any and all copies of studies, sketches, drawings, computations, and other data, whether or not completed, prepared by CONSULTANT or its contractors, if any, or given to CONSULTANT or its contractors, if any, in connection with this Agreement. Such materials will become the pro operty f CITY. 19.4. Upon such suspension or termination by CITY, CONSULTANT will be paid for the Services rendered or materials delivered to CITY in accordance with the scope of services on or before the effective date (i.e., 10 days after giving notice) of suspension or termination; provided, however, if this Agreement is suspended or terminated on account of a default by CONSULTANT, CITY will be obligated to compensate CONSULTANT only for that portion of CONSULTANT’s services which are of direct and immediate benefit to CITY as such determination may be made by the City Manager acting in the reasonable exercise of his/her discretion. The following Sections will survive any ex npiratio or termination of this Agreement: 14, 15, 16, 19.4, 20, and 25. 19.5. No payment, partial payment, acceptance, or partial acceptance by CITY will operate as a waiver on the part of CITY of any of its rights under this Agreement. SECTION 20. NOTICES. All notices hereunder will be given in writing and mailed, postage prepaid, by certified mail, addressed as follows: Professional Services Rev. June 2, 2010 7 S:\ASD\PURCH\SOLICITATIONS\CURRENT BUYER-CM FOLDERS\OTHERS - ADRIAN\Contracts\S13147444 Golf Course Reconfiguration Project\Large K\Contract\C13147XXX W-Golf Group LTD Main Body; FINAL.doc To CITY: Office of the City Clerk City of Palo Alto Post Office Box 10250 Palo Alto, CA 94303 With a copy to the Purchasing Manager To CONSULTANT: Attention of the project director at the address of CONSULTANT recited above SECTION 21. CONFLICT OF INTEREST. 21.1. In accepting this Agreement, CONSULTANT covenants that it presently has no interest, and will not acquire any interest, direct or indirect, financial or otherwise, which would conflict in any manner or degree with the performance of the Services. 21.2. CONSULTANT further covenants that, in the performance of this Agreement, it will not employ subconsultants, contractors or persons having such an interest. CONSULTANT certifies that no person who has or will have any financial interest under this Agreement is an officer or employee of CITY; this provision will be interpreted in accordance with the applicable provisions of the Palo Alto Municipal Code and the Government Code of the State of California. 21.3. If the Project Manager determines that CONSULTANT is a “Consultant” as that term is defined by the Regulations of the Fair Political Practices Commission, CONSULTANT shall be required and agrees to file the appropriate financial disclosure documents required by the Palo Alto Municipal Code and the Political Reform Act. SECTION 22. NONDISCRIMINATION. As set forth in Palo Alto Municipal Code section 2.30.510, CONSULTANT certifies that in the performance of this Agreement, it shall not discriminate in the employment of any person because of the race, skin color, gender, age, religion, disability, national origin, ancestry, sexual orientation, housing status, marital status, familial status, weight or height of such person. CONSULTANT acknowledges that it has read and understands the provisions of Section 2.30.510 of the Palo Alto Municipal Code relating to Nondiscrimination Requirements and the penalties for violation thereof, and agrees to meet all requirements of Section 2.30.510 pertaining to nondiscrimination in employment. SECTION 23. ENVIRONMENTALLY PREFERRED PURCHASING AND ZERO WASTE REQUIREMENTS. CONSULTANT shall comply with the City’s Environmentally Preferred Purchasing policies which are available at the City’s Purchasing Department, incorporated by reference and may be amended from time to time. CONSULTANT shall comply with waste reduction, reuse, recycling and disposal requirements of the City’s Zero Waste Program. Zero Waste best practices include first minimizing and reducing waste; second, reusing waste and third, recycling or composting waste. In particular, Consultant shall comply with the following zero waste requirements: Professional Services Rev. June 2, 2010 8 S:\ASD\PURCH\SOLICITATIONS\CURRENT BUYER-CM FOLDERS\OTHERS - ADRIAN\Contracts\S13147444 Golf Course Reconfiguration Project\Large K\Contract\C13147XXX W-Golf Group LTD Main Body; FINAL.doc  All printed materials provided by Consultant to City generated from a personal computer and printer including but not limited to, proposals, quotes, invoices, reports, and public education materials, shall be double-sided and printed on a minimum of 30% or greater post-consumer content paper, unless otherwise approved by the City’s Project Manager. Any submitted materials printed by a professional printing company shall be a minimum of 30% or greater post-consumer material and printed with vegetable based inks.  Goods purchased by Consultant on behalf of the City shall be purchased in accordance with the City’s Environmental Purchasing Policy including but not limited to Extended Producer Responsibility requirements for products and packaging. A copy of this policy is on file at the Purchasing Office.  Reusable/returnable pallets shall be taken back by the Consultant, at no additional cost to the City, for reuse or recycling. Consultant shall provide documentation from the facility accepting the pallets to verify that pallets are not being disposed. SECTION 24. NON-APPROPRIATION 24.1. This Agreement is subject to the fiscal provisions of the Charter of the City of Palo Alto and the Palo Alto Municipal Code. This Agreement will terminate without any penalty (a) at the end of any fiscal year in the event that funds are not appropriated for the following fiscal year, or (b) at any time within a fiscal year in the event that funds are only appropriated for a portion of the fiscal year and funds for this Agreement are no longer available. This section shall take precedence in the event of a conflict with any other covenant, term, condition, or provision of this Agreement. SECTION 25. MISCELLANEOUS PROVISIONS. 25.1. This Agreement will be governed by the laws of the State of California. 25.2. In the event that an action is brought, the parties agree that trial of such action will be vested exclusively in the state courts of California in the County of Santa Clara, State of California. 25.3. The prevailing party in any action brought to enforce the provisions of this Agreement may recover its reasonable costs and attorneys' fees expended in connection with that action. The prevailing party shall be entitled to recover an amount equal to the fair market value of legal services provided by attorneys employed by it as well as any attorneys’ fees paid to third parties. 25.4. This document represents the entire and integrated agreement between the parties and supersedes all prior negotiations, representations, and contracts, either written or oral. This document may be amended only by a written instrument, which is signed by the parties. 25.5. The covenants, terms, conditions and provisions of this Agreement will apply to, and will bind, the heirs, successors, executors, administrators, assignees, and consultants of the parties. Professional Services Rev. June 2, 2010 9 S:\ASD\PURCH\SOLICITATIONS\CURRENT BUYER-CM FOLDERS\OTHERS - ADRIAN\Contracts\S13147444 Golf Course Reconfiguration Project\Large K\Contract\C13147XXX W-Golf Group LTD Main Body; FINAL.doc 25.6. If a court of competent jurisdiction finds or rules that any provision of this Agreement or any amendment thereto is void or unenforceable, the unaffected provisions of this Agreement and any amendments thereto will remain in full force and effect. 25.7. All exhibits referred to in this Agreement and any addenda, appendices, attachments, and schedules to this Agreement which, from time to time, may be referred to in any duly executed amendment hereto are by such reference incorporated in this Agreement and will be deemed to be a part of this Agreement. 25.8 If, pursuant to this contract with CONSULTANT, City shares with CONSULTANT personal information as defined in California Civil Code section 1798.81.5(d) about a California resident (“Personal Information”), CONSULTANT shall maintain reasonable and appropriate security procedures to protect that Personal Information, and shall inform City immediately upon learning that there has been a breach in the security of the system or in the security of the Personal Information. CONSULTANT shall not use Personal Information for direct marketing purposes without City’s express written consent. / / / / / / / / / / / / / / / / / / / / / / 25.9 All unchecked boxes do not apply to this agreement. 25.10 The individuals executing this Agreement represent and warrant that they have the legal capacity and authority to do so on behalf of their respective legal entities. Professional Services Rev. June 2, 2010 10 S:\ASD\PURCH\SOLICITATIONS\CURRENT BUYER-CM FOLDERS\OTHERS - ADRIAN\Contracts\S13147444 Golf Course Reconfiguration Project\Large K\Contract\C13147XXX W-Golf Group LTD Main Body; FINAL.doc IN WITNESS WHEREOF, the parties hereto have by their duly authorized representatives executed this Agreement on the date first above written. CITY OF PALO ALTO ____________________________ City Manager APPROVED AS TO FORM: ____________________________ Senior Asst. City Attorney GOLF GROUP, LTD By:___________________________ Name:_________________________ Title:________________________ Attachments: EXHIBIT “A”: SCOPE OF WORK EXHIBIT “A-1” ENVIRONMENTAL CONSULTANT SCOPE OF WORK EXHIBIT “B”: SCHEDULE OF PERFORMANCE EXHIBIT “C”: COMPENSATION EXHIBIT “C-1” HOURLY RATE SCHEDULE EXHIBIT “D”: INSURANCE REQUIREMENTS Forrest L. RichardsonPrincipal / Vice President EXHIBIT “A” SCOPE OF SERVICES BASIC SERVICES The CONSULTANT’s Basic Services consist of the services described below: Task (1) Design Development Task (2) Soil Importation Assistance Task (3) Environmental Impact Report Task (4) Construction Documents & Specifications Task (5) Bidding Assistance Task 1 - Design Development 1.1 The CONSULTANT shall prepare a final Developed Design Plan that shows the final routing of the reconfigured golf course. The plan shall show the location of tees, greens, fairway boundaries, turf limits, path alignments, centerlines, mass grading indication, irrigation coverage and such other components as the CONSULTANT deems necessary or desirable. The scope of work for the Developed Design Plan shall include the rebuilding of all eighteen (18) golf holes and the existing practice putting green area; development of a new short-game area; expansion of the practice range tee area, and the addition of a new on-course restroom, integration and transition plans between the Golf Course and expanded Baylands Athletic Center. The Developed Design Plan shall provide enough data to convey a conceptual sense of the layout and composition of the proposed Golf Course improvements. 1.2 During Design Development, the CONSULTANT shall meet with the CITY staff to reconfirm the scope of work, schedule, design standards, environmental mitigation measures, and the required Plans, Specifications and Probable Cost Estimates for the Work. 1.3 During Design Development, the CONSULTANT shall attend and participate in public meetings to solicit initial comment on the project design from the Golf Course Advisory Committee; Parks and Recreation Commission; Architectural Review Board; Planning and Transportation Commission and City Council. CONSULTANT shall provide all necessary plans and documents for Design Development review, which shall consist of the following: (a) Final Golf Course Routing & Conceptual Grading (1”=100’ color plan) (b) Thematic Boards Showing Landscape Zones (color boards) (c) On-course Restroom Floor Plan & Elevations (1/4”-1’ color plans) (d) Finishes & Color Boards for On-course Restroom (color & material boards) (e) Before-After Imagery for Selected Golf Areas (existing and/or updated) The anticipated public meeting schedule is as follows: Professional Services Rev June 2, 2010   Time‐line and Public Meetings Dates  1 Parks and Recreation Commission (study session) 10/23/12  2 Architectural Review Board (study session) 11/1/12  3 Finance Committee 12/4/12  4 City Council  (study session) 1/14/13  5 Golf Advisory and General Public 1/16/13  6 Parks and Recreation Commission (approval) 2/26/13  7 Planning Transportation Commission (study session) 2/27/13  8 Architectural Review Board (approval) 5/2/13  9 Planning Transportation Commission (approval) 5/29/13  10 SFCJPA Board (approval if needed) TBD  11 City Council  (approval) 6/18/13  12 Earliest construction could start  7/1/13  1.4 The CONSULTANT shall work with CITY staff, golf professional Brad Lozares, and the Golf Advisory Committee to develop a program to maximize usage, revenue and customer satisfaction for the Golf Course through the implementation of a modified practice area for public use during closure of the Golf Course during construction. 1.5 The CONSULTANT shall coordinate a Biological Resources Evaluation report for the CITY for the purpose of the CITY’s California Environmental Quality Act (CEQA) documentation for the Project. 1.6 Design Development shall include the following deliverables: (a) Contract administration and invoicing (b) Developed Design Plan of the Golf Course at 1 in. = 100 ft. scale (or as agreed), minimum of six printed copies and electronic files in PDF format (c) Developed Design Plan of the on-course restroom, including location, building dimensions, building materials, and building massing diagram (d) Construction details and phasing plan for implementation of temporary practice areas for use during construction (e) Biological Resources Evaluation Report (f) Probable Cost Estimate(s) (g) Integration and transition plans between the Golf Course and expanded Baylands Athletic Center 1.7 All statements of the Probable Construction Cost prepared by the CONSULTANT shall represent the CONSULTANT’s best judgment as a design professional of the probable construction cost for the golf course work. It is recognized, however, that neither the CONSULTANT nor the City has control over the cost of labor, materials, equipment or course accessories, over the contractor’s methods of determining bid prices, or over competitive bidding, market or negotiating conditions. Professional Services Rev June 2, 2010 Task 2 - Soil Importation Assistance 2.1 For work in association with the importation of soil to the project, the CONSULTANT shall provide the following deliverables: (a) Assistance in defining specifications for soil importation (b) Assistance and coordination with the CITY or third-party consultants as to the locations and logistics for stockpiling, including specifications for stockpile preparation, protection and remediation (c) Additional grading and shaping plans required for integrating the imported soil to the golf course plans Task 3 - Environmental Impact Report 3.1 CONSULTANT’s sub-consultant, ICF International, shall prepare an Environmental Impact Report for the Palo Alto Municipal Golf Course Reconfiguration and expanded Baylands Athletic Center, per the attached scope of services (Exhibit “A-1”). Such work shall be coordinated in form of a subcontract administered by the CONSULTANT. Task 4 - Construction Documents & Specifications 4.1 The CONSULTANT shall prepare Construction Documents consisting of Plans, Specifications and estimates of Probable Construction Cost for the construction of the Work, to include: (a) Final golf course grading and drainage plans; showing shaping, contours, and drainage improvements for reconfigured golf holes and surrounding areas. (b) Green plans; showing detailed contours of new putting surfaces and drainage improvements for twenty-two (22) greens. (c) Plans for construction of the on-course restroom, with the plans and specifications for the building per the design direction established in the Long Range Master Planning work performed to-date and based on the Project Civil Engineer coordinating all final plans and specifications for utilities, structural and architectural components. Construction of the restroom building shall be bid and implemented under the same contract together with the Golf Course improvement work. (d) Specifications and details required for construction of the above noted plans, integrated with requirements for agronomic and any special details to be provided by the CITY. (e) Other plans and details deemed to be required by the CONSULTANT, such as staking plans, clearing plans, grassing plans, arbor plans, or plans for water features limits. Professional Services Rev June 2, 2010 (f) Coordination of work to integrate the golf course plans to the adjacent Baylands Athletic Center, including a grading plan to show buffer mounding separating the Golf Course from the recreation area. (g) A phasing plan showing how the construction shall be sequenced over the area of the Golf Course. 4.2 During the preparation of Construction Documents and Specifications, the CONSULTANT shall meet with the CITY staff to reconfirm the scope of work, schedule, design standards, environmental mitigation measures, and the required Plans, Specifications and estimates of Probable Construction Cost for the construction of the Work. 4.3 Prior to finalization of the Construction Documents and Specifications, the CONSULTANT shall attend and participate in public meetings to secure final approval of the project design from the Golf Course Advisory Committee and Parks and Recreation Commission, and shall secure approval of a Site and Design application through meetings with the Architectural Review Board, Planning and Transportation Commission, and City Council. CONSULTANT shall provide all necessary plans, documents, and exhibits to facilitate such final approvals. 4.4 Construction Documents & Specifications shall include the following deliverables: (a) Contract Administration & Invoicing (b) Final Plans (c) Specifications (d) Probable Cost Estimate(s) The scale and format of Construction Plans and Specifications shall conform to golf course construction formats. Plans shall be prepared on the CITY’s standard 24” x 36” plan sheets, and specifications shall be prepared following the standard Construction Standards Institute (CSI) numbering format. Plans shall be delivered to the CITY in both digital format (AutoCAD) and as hard copies in a quantity sufficient for internal review and for the required Site and Design Review and in the size specified by the CITY. The CONSULTANT shall prepare a set of construction plans according to the following outline: Sheet 1 Cover Sheet Sheet 2 Project General Site Plan, Locator Map, Ownership & Consultant List Sheets 3-4 Staking, Demo & Staging Plan (1”=100’) Sheet 5 Tree Preservation Plan Sheets 6-9 Grading & Drainage Plans (1”=60’ at 1 ft Interval) Sheets 10-13 Greens Details (1”-20’ at .5 ft. Interval) Sheets 14-15 Grassing Plan (1”=100’) Sheets 16-21 Irrigation Plans (Scale TBD) Professional Services Rev June 2, 2010 Sheet 22 Irrigation Details Sheet 23 Civil Details Sheet 24 On-course Restroom Architectural Plans Sheet 25 On-course Restroom Utility/Civil Plans Sheet 26 On-course Restroom Structural, Mechanical, Plumbing, Electrical Note: Where plans and details may be combined to conserve resources, the outline may adjust to reduce sheets. The CONSULTANT shall prepare technical specifications at a sheet size of 8.5 in. x 11 in., formatted to a booklet and printable PDF format consistent with customary golf course construction bidding. 4.5 The CONSULTANT shall advise the CITY regarding generally recognized methods of putting green construction and turf selection, and shall select and retain knowledgeable agronomic consultants and qualified testing laboratories that have demonstrated ongoing competency in the testing of materials for “Putting Green Construction” and turf establishment. This process results in materials, construction and quality control methods for “Putting Green Construction” and turf establishment. Unique site conditions (regional climate, microclimates, water quantity and quality, and turf types), together with cost, availability and likely performance of root zone materials and amendments regarding particle size, percolation rate, retained moisture, bulk density, porosity and other factors will affect the performance of putting green construction. Based on information and analysis, the CITY will approve materials and determine the preferred construction methods and turf selections for the Project together with the CONSULTANT. The CONSULTANT shall include the CITY’s approved construction and material recommendations as a part of the construction documents, for the sole purpose of obtaining a bid for construction of the Project. The CONSULTANT shall advise the CITY and their consultants during the procurement, installation and quality control monitoring of the root zone materials, but shall not be responsible for evaluating or approving the materials, or for satisfactory performance of the root zone material or greens. The Parties acknowledge that characteristics of root zone material meeting applicable Project specifications at the time of installation will vary over time and future testing of materials may yield different values, and that root zone materials may not conform to future changes in USGA or other recommendations for “Putting Green Construction” occurring after the design of the Project. Neither these conditions nor any other condition shall give rise to any liability of the CONSULTANT to the City for the performance of the greens or turf. Task 5 - Bidding Assistance 5.1 The CONSULTANT shall assist the CITY during the bidding period to provide bid support and consultation relative to the interpretation of the golf course elements of the Project as covered by the plans and specifications. 5.2 Bidding Assistance shall include the following deliverables: Professional Services Rev June 2, 2010 (a) Contract administration and invoicing (b) Written clarifications (as needed) Professional Services Rev June 2, 2010 ADDITIONAL SERVICES The services listed below (“Additional Services”) are not included in “Basic Services”. If any of these Additional Services are requested and authorized by the CITY, they shall be paid for by the CITY as provided in the Agreement or through an amendment to the Agreement, based on rates as listed in Exhibit “C-1” or as listed below where estimates have been provided. AS1 Construction Support CONSULTANT shall provide the following services for a fee not to exceed $84,320 plus reimbursable expenses estimated not to exceed $24,000 (Total NTE $108,320). It is the CITY’s intent to authorize these services through a future amendment to the Agreement, to be executed concurrently with the award of a construction contract for the Golf Course improvements. (a) The CONSULTANT shall assist and support the CITY during the construction of the Project, including attending a pre-construction conference; providing clarifications/interpretations of plans and specifications; preparing and/or reviewing required shop drawings and submittal reviews; assisting with the preparation of contract change orders; providing recommendations for changes required by design discrepancies, utility conflicts, or other unforeseen circumstances that may develop during construction; and preparing punch lists prior to final acceptance of the Work. (b) The CONSULTANT shall make periodic site visits to observe progress and assist the CITY during the construction of the Project. Administration of the construction of the Project shall be the responsibility of the CITY unless additional services are contracted between the parties for construction administration services. The CONSULTANT has provided a Construction Management Services scope of work as a potential Additional Service to this Contract to be utilized at the discretion of the CITY. (c) Construction Support will commence with the award of the construction contract (or individual contracts in the case of multiple contractors being engaged for this project or the Project being incrementally constructed) and will terminate when the CITY has determined final completion of the Work covered by the CONSULTANT’s plans and specifications. Final completion of the Work shall mean acceptance by the CITY of the Work upon completion of the Work to the CITY’s satisfaction. (d) The CONSULTANT, as a representative of the CITY during the Construction Support phase, shall advise and consult with the CITY, and all of the CITY’s instructions to the Contractor(s) working on the Project shall be issued simultaneously to the CONSULTANT. The CONSULTANT shall have authority to act on behalf of the CITY to the extent provided in the design Agreement. (e) The CONSULTANT shall at all times have access to the Project wherever it is in progress. (f) The CONSULTANT or his representative(s) shall make periodic visits to the site of the Project to familiarize himself generally with the progress and quality of the Work to determine in general if the Project is proceeding in accordance with the Construction Professional Services Rev June 2, 2010 Documents prepared by the CONSULTANT. On the basis of these on-site observations, the CONSULTANT shall endeavor to guard the CITY against defects and deficiencies in the Work of the Contractor(s). The quantity of on-site observation visits of the CONSULTANT shall be not less than thirty (30) and not more than forty (40) during the construction of the Work. An on-site visit is defined as one (1) personnel on-site for two (2) or more hours per calendar day inclusive of travel time to and from the site. (g) The CONSULTANT shall review and approve shop drawings, samples, change orders and other submissions of the Contractor(s) only for conformance with the design concept of the Project and for compliance with the information given in the Construction Documents. (h) Upon completion of any portion of the Work, and prior to payment to the Contractor(s) of amounts due for such portion of the work, the CONSULTANT shall certify to the CITY in writing the percentage of the Work of the Contractor(s) which has been performed and completed in conformance with the Construction Documents. AS2 Construction Administration Services (Project Representative) CONSULTANT shall provide the services of a Project Representative, whose duties are described below, at a rate of $11,493.75 per month inclusive of all reimbursable, travel and living expenses. The rate is based on a Project construction duration of twelve (12) months, with the estimated total cost of the Project Representative to be $137,925. A longer construction duration will require additional fees subject to the provisions herein. It is the CITY’s intent to authorize these services through a future amendment to the Agreement, to be executed concurrently with the award of a construction contract for the Golf Course improvements. (a) Project Representative(s) shall be mutually selected by the CONSULTANT and the CITY with duties, responsibilities and limitations of authority to be set forth in writing, as agreed to by the City and the CONSULTANT. Provisions shall be included to permit the CONSULTANT to impart instructions and interpretations to the Project Representative(s) for the purpose of implementing the golf course plans and their design intent. (b) The on-site observations by Project Representative(s) of the Work as it progresses is for the purpose of providing further protection for the CITY against the failure of the Work to conform to the Construction Documents, but providing the services of the Project Representative(s) shall not modify the rights or obligations of the CONSULTANT as provided herein. (c) The Project Representative(s) shall be under contract by the CONSULTANT. (d) Through the on-site observations by Project Representative(s) of the Work as it progresses, the CONSULTANT shall consult with the CITY on matters pertaining to performance of the Work and conformance to the design and specifications of the golf course aspects of the Work. Professional Services Rev June 2, 2010 (e) The Project Representative(s) shall perform the following construction administration services from award of the construction contract by the CITY through final acceptance of the Project: (1) Provide regular, on-site observations to ascertain progress, compliance and quality of the work performed by the Contractor(s) (2) Review of weekly progress reports by the Contractor(s) (3) Coordination of the site visits of the CONSULTANT (4) Required meetings for scheduling, approvals and administration (5) Provide contract administration and coordinate payment approvals consistent with that of the CONSULTANT AS3 Providing extensive planning surveys, such as multiple site evaluations or comparative studies of multiple prospective sites. AS4 Making measured drawings of existing construction when required for planning additions or alterations thereto. AS5 Making substantial revisions to previously approved Drawings, Specifications or other documents to accomplish revisions not initiated by the CONSULTANT when such revisions are requested by the CITY and are inconsistent with any approval or instruction previously given by the CITY. This provision does not apply to customary changes made as part of any Design Review process or process to obtain approval of the final plans and specifications developed from the schematic and design plans completed as of the date of this Agreement. AS6 Preparing documents for alternate bids requested by the CITY which are not contemplated in the design development plans prepared for the Work. AS7 Providing detailed estimates of construction costs over and above any probable cost estimates which may be prepared during the course of the Work. AS8 Providing consultation concerning replacement of any part of the Project damaged by casualty or other cause during construction, and furnishing professional services of the type set forth under the caption “Basic Services” as may be required in connection with the replacement of such parts of the Project. AS9 Providing services as a witness or expert in connection with any public hearing, arbitration proceeding, or the proceedings of a court of record. AS10 Irrigation system field staking and system programming. (Irrigation system field staking and programming shall be incorporated to the specifications and requirements of the successful bidder to be completed as part of the Work to construct the golf course and improvements.) Professional Services Rev June 2, 2010 AS11 Irrigation, drainage and golf feature as-builts. (Irrigation, drainage and feature as-builts shall be incorporated to the specifications and requirements of the successful bidder to be completed as part of the Work to construct the golf course and improvements and shall be subject to City approval as to the format for capturing GPS data during construction.) AS12 Providing additional special analysis or programming of the CITY’s needs for the Project that is not covered by previous work by CONSULTANT or services called for herein. AS13 Providing financial feasibility or other special studies. AS14 Provide landscape and other design and support services for the expanded Baylands Athletic Center AS15 Provide design and engineering services for the Golf Course irrigation system pump station improvements. AS16 Providing detailed estimates of construction costs over and above any probable cost estimates which may be prepared during the course of the Work. AS17 Providing any other services requested by the CITY not otherwise included under “Basic Services”. Professional Services Rev June 2, 2010 SERVICES AND INFORMATION TO BE PROVIDED BY CITY The services and information listed within this section are to be specifically provided by and/or contracted for by the CITY. Any services, information, surveys and reports listed below shall be furnished at the CITY’s expense, and the CONSULTANT shall be entitled to rely upon the accuracy and completeness thereto, (1) Landscape Architecture for the adjoining and/or adjacent areas to the golf course which are to be landscaped, including the clubhouse, maintenance areas, athletic field area and any areas maintained as part of roadways, landscaped grounds or buffers to the golf course areas subject to City discretion. (2) Any required utility plans except those existing to be modified within the Project limits and to accommodate the on-course restroom. (3) Irrigation (effluent) source delivery, design and engineering if necessary. (4) Lakes and water feature engineering; including pumping systems, recirculation systems and lake aeration systems if deemed necessary by the City. (5) Clubhouse/Structural Architecture; the CONSULTANT shall not be responsible for the design or specification of the Clubhouse or any other buildings or structures except for the on-course restroom as defined within the Basic Services. (6) Water rights consultation if deemed necessary by the City. (7) Soils evaluations and reports for the purpose of establishing agronomic specifications. (8) Traffic engineering if deemed necessary by the City. (9) Signage programming, design and wording including signage warning of potential and actual dangers associated with the use of the golf course, paths, carts or other related activities to be permitted by the CITY if deemed necessary by the City. (10) Work of a certified arborist subject to City discretion. (11) The CITY shall furnish topographical mapping showing the existing grades, drainageways, limits of the property and data pertaining to all other improvements and plans which may affect the golf course areas. (Note: The topographical mapping work is completed and accepted by the CONSULTANT.) The CITY shall also furnish, as applicable, zoning restrictions, deed restrictions, vegetation, tree inventory/survey, soils and hydrological information relating to the site. (12) The CITY shall furnish any laboratory test, inspection or report as required by law or the Construction Documents. Professional Services Rev June 2, 2010 SPECIFIC ACKNOWLEDGEMENTS BY THE CITY (1) The CITY shall provide to the CONSULTANT complete information regarding the general program and project budget requirements for the Project, and the information and services as enumerated below. The CITY’s overall construction budget for the Project is $7,573,262, not including any land development costs; required permit fees: loss of revenue: signage and furnishings; grow-in and maturation cost: maintenance and operation equipment: adjacent recreation area development: CITY staff time and CITY administrative expenses. (2) The CITY acknowledges that the game of golf has inherent risks associated with golfers striking balls across uneven terrain and fields while other players and the public may be present. While the CONSULTANT will perform responsibilities in a professional manner and will use reasonable measures to improve the golf facilities covered herein, and will communicate to CITY when property conditions may be too constrained for the purposes intended, it cannot be assumed that golf balls will not leave the projected alignments, corridors, fairways, holes, property or playing areas designated within plans or directions made by CONSULTANT. (3) The City shall provide for reasonable access by the CONSULTANT and/or his agent(s) to photograph and document the progress of construction, completion and operation of the Project for the purposes of publicity and promotion subject to advance approval by the City. Professional Services Rev June 2, 2010 EXHIBIT “A-1” September 28, 2012 Rob de Geus City of Palo Alto Division Manager, Recreation and Golf Services 1305 Middlefield Road Palo Alto, CA 94301 Subject: Proposal for Preparation of an Environmental Impact Report for Palo Alto Municipal Golf Course Reconfiguration and Baylands Athletic Center Expansion Dear Mr. de Gues, Thank you for inviting ICF to submit a proposal to prepare the environmental impact report (EIR) for the reconfiguration of the Palo Alto Municipal Golf Course (located at 1875 Embarcadero Road in Palo Alto, California) and expansion of the Baylands Athletic Center. This proposal includes our project understanding, proposed scope of work, and cost estimate to prepare the EIR in accordance with the California Environmental Quality Act (CEQA). Project Understanding ICF has reviewed the information provided by the City of Palo Alto (City) that outlines the proposed project. Based on our review of this information and our August 30 meeting with the City, we understand that the City wishes to prepare an EIR for the proposed project. We understand that the reconfiguration of the golf course is required since the San Francisquito Creek Flood Reduction, Ecosystem Restoration, and Recreation Project (Flood Reduction project) proposed by the San Francisquito Joint Powers Authority (SFCJPA) would permanently incorporate 7.4 acres of the golf course into their project. The Flood Reduction Project Draft EIR, which is currently out for public review, mentions that the golf course reconfiguration would be undertaken by the City of Palo Alto. The Draft EIR specifically mentions on Page 1-2 under Relationship with Other Projects that the Palo Alto Municipal Golf Course Reconfiguration Project is an effort being undertaken by the City of Palo Alto, in response to the planning of this Project, to determine how to reconfigure the Golf Course to accommodate the San Francisquito Creek Flood Protection and continue to maintain the Golf Course’s number of holes and par rating. The Draft EIR further states that the Golf Course Project also contemplates other recreational improvements at the Golf Course site. Rob de Geus September 28, 2012 Page 2 It is our understanding that the City will now has additional funding to reconfigure and improve the entire Golf Course and is evaluating options for expanding the Baylands Athletic Center immediately to the southwest of the Golf Course. We understand that the City would like to start construction by spring 2013 in order to start work at the same time as the SFCJPA Project. Project Team Our project team includes in-house CEQA experts and technical leads for each of the key resource topics to ensure that the analysis can be completed effectively and efficiently. This is the same team that has worked on the Flood Reduction project. Our project director maintains ultimate responsibility for the project, with a keen focus on fiduciary issues and overall quality of each deliverable. The project manager takes the lead on daily communications with technical staff and will be the conduit to the City staff. Each of our technical leads work with the project manager to understand their resource topics within the context of the project and then focus on the key issues relevant to the analysis. Mathew Jones will serve as the project director. With 12 years experience, Mathew specializes in project management of CEQA and NEPA environmental compliance documents for development and infrastructure projects. Shilpa Trisal will serve as the project manager. With 8 years of experience managing projects including projects with impacts to golf courses, Shilpa will be responsible for day-to-day management of the project team and contact with the City. Shilpa and Mathew will oversee delivery of the CEQA document and coordinate milestones in the CEQA process. Shilpa will manage staff resources and ensure deliverables meet the needs of the City. The ICF team will be joined by Hexagon Transportation Consultants for the traffic study. Approach Given our familiarity with the project site and the Flood Reduction project, we propose to Incorporate by Reference the technical analysis and background data collected for the Flood Reduction project. To save time, we propose that an initial study not be prepared at the time of the Notice of Preparation and to start work on the EIR immediately upon Notice to Proceed. Rob de Geus September 28, 2012 Page 3 Proposed Scope of Work Task 1. Initiate Project and Prepare Project Description This task will begin by reviewing and confirming the scope of work and approach with City staff. This will include discussing potential issues, impacts and controversy; approach for the required alternatives and cumulative analyses; and scoping, public involvement, and public meetings. This task includes reviewing the project understanding so we can prepare a project description that includes project objectives and goals, detailed description of the project components including graphics, and construction methodology based on information provided by the City, the application plan set, and site visit. We assume that the City will provide us a detailed description of project elements, including the preliminary preferred approach to the Baylands Athletic Center expansion. We will rely on the City to provide us with information about the excavation and construction processes, including estimated time period, type of machinery used, estimated number of workers, truck traffic to and from the site, and method of disposing of the excavated materials. We will submit a draft of the project description to the City for review and approval prior to beginning the technical analyses to ensure that we share a common understanding of the project being evaluated. We assume one round of review and revision of the draft project description will be needed. Deliverables  Draft project description in electronic MS Word and PDF format Task 2. Prepare Notice of Preparation and Conduct Scoping We will prepare the Notice of Preparation (NOP) of an EIR, the purpose of which is to solicit comments from public agencies on the scope and content of the EIR. As required by CEQA, the NOP will include a description of the project, location of the project, and probable environmental effects, as well as the time/date/location of the scoping meeting if held. Although a scoping meeting is not required, it is assumed that the City will hold a public scoping meeting/workshop during the 30-day NOP public circulation period to provide information on the project and solicit additional input from the public. CEQA requires that notice of the scoping meeting be provided to any bordering city, responsible agency, public agency with jurisdiction by law to the project, and any organization or individual who has filed written request for the notice. We will work with the City to compile an appropriate distribution list and determine public postings. We propose that an initial study not be prepared; however, if the City policies require that an initial study be prepared, that can be accommodated in our schedule. Rob de Geus September 28, 2012 Page 4 This scope assumes that ICF will prepare the notice and there will be one round of review, that ICF will file the NOP with the County Clerk (and pay appropriate handling fee), State Clearinghouse, and that the City will distribute the remaining notices. The NOP must be sent via certified mail or any other method of transmittal that provides a record that the notice was received. Once the 30-day NOP review period is over, ICF will summarize the comments received and discuss any issues with the City. This scope assumes that the City will make preparations for a lead the scoping meeting, and ICF will be in attendance, but the scope can be revised if the City would like ICF to take the lead on this. ICF will provide 15 hard copies and 10 CDs of the NOP for distribution. ICF will print and distribute the NOP. Deliverables  NOP for review in electronic MS Word and PDF formats  15 hard copies and 10 CDs of the NOP Task 3. Prepare Administrative Draft EIR ICF will prepare an EIR in accordance with the State CEQA Guidelines, most recent CEQA- related legislation and case law, as well as the City’s standards. Consistent with CEQA Appendix G Environmental Checklist Form, the EIR will include analysis of the following resource topics. It is assumed that topic resources, such as Agriculture and Forest Resources and Mineral Resources, will be scoped out with appropriate explanation in the Effects Found Not Significant section. • Aesthetics • Air Quality • Biological Resources • Cultural Resources • Geology and Soils • Greenhouse Gas Emissions (Climate Change) • Hazards and Hazardous Materials • Hydrology and Water Quality • Land Use and Planning • Noise • Population and Housing • Public Services • Recreation • Transportation/Traffic • Utilities and Service Systems Rob de Geus September 28, 2012 Page 5 The environmental analyses for resource topics will include the following information.  Introduction. The introductory paragraph will describe what is being analyzed in the section and the general basis for the analysis, and it may reference appropriate appendices if applicable.  Summary of Project Impacts. This will include a table that summarizes the project impacts and the significance conclusions.  Environmental Setting. The setting will describe regional conditions; site-specific conditions; and relevant plans, policies, and regulations.  Impacts and Mitigation Measures. The subsections will include “Criteria for Determining Significance” and “Impacts and Mitigation Measures.” The impact statement and analysis will clearly correlate with the significance criteria and specific project components. The analysis will thoroughly explain the rationale for the significance conclusion. For each potentially significant impact, we will identify detailed mitigation measure(s), if feasible, and indicate pre- and post-mitigation level of significance. If feasible mitigation is not available, the impact will be determined significant and unavoidable. The analyses will consider comments received during the scoping process. Additional detail is provided below for the more technical resource topics or clarification regarding assumptions. During early preparation of the administrative draft EIR, we will discuss the significance thresholds to be used and provide preliminary identification of potential impacts and mitigation measures for City review to provide an opportunity for early concurrence. Aesthetics The analysis will address potential effects on scenic resources, the existing visual character, and creation of new sources of light and glare. Air Quality ICF will prepare an analysis of air quality impacts consistent with all applicable procedures and requirements of the Bay Area Air Quality Management District (BAAQMD). The air quality analysis will focus on the criteria pollutants of greatest concern in the San Francisco Bay Area Air Basin (SFBAAB) that will be generated by construction and operation of the proposed project. Those pollutants include ozone precursor (reactive organic gases [ROGs] and oxides of nitrogen [NOX]), carbon monoxide (CO), and inhalable particulate matter (PM10 and PM 2.5). ICF air quality specialists will prepare an air quality analysis describing existing air quality conditions, the project’s air impacts, and mitigation measures (including those recommended and required by the BAAQMD designed to reduce the significance of project-related air impacts). In the project setting section, ICF will describe the existing environmental conditions and the current air quality regulatory environment as it applies to this project. We will summarize Rob de Geus September 28, 2012 Page 6 meteorological and climatological data for the project study area, as well as localized conditions in the vicinity of the proposed project using data collected by the BAAQMD and the California Air Resources Board (ARB). We will also describe the general locations of existing sensitive receptors in the project vicinity. In the project impacts section, ICF will identify significant impacts using the BAAQMD’s May 2011 CEQA Guidelines, California Environmental Quality Act: Air Quality Guidelines (Guidelines). We will describe the air quality thresholds used to identify significant impacts based on the BAAQMD’s Guidelines, as well as the methodology used to estimate project-related emission impacts. As part of our discussion of the May 2011 BAAQMD's CEQA guidelines, we will provide substantial evidence in support of their use to evaluate impacts associated with the proposed project. We will quantify construction-related emissions of ROG, NOX, CO, PM10, and PM2.5 using the CalEEMod model and construction data (i.e., anticipated construction schedule and equipment) provided by the project applicant. The analysis of construction impacts will also address construction-related mitigation measures required by the BAAQMD. Given that the SFCJPA project is already resulting in a significant and unavoidable increase in NOX, we assume that a similar conclusion would be reached for the Golf Course project is both projects were constructed concurrently. ICF will use the traffic data from the transportation and circulation analysis (i.e., trip generation rates) and the CalEEMod model to estimate operational emissions from project-related vehicle emissions. In the event that a transportation and circulation analysis is not available, we will use default trip generation rates from CalEEMod to estimate operational motor vehicle emissions. Emissions of ROG, NOX, CO, PM10, and PM2.5, will be estimated using traffic data prepared for the proposed project and the CalEEMod model. It is anticipated that no buildings or additional infrastructure will be constructed as part of the project. Consequently, no operational emissions associated with area sources (i.e., natural gas combustion associated with heating, consumer products, architectural coatings, etc.) will also be analyzed. In addition, we will estimate emissions associated with landscaping and maintenance activities using emission factors for landscaping equipment obtained from the CalEEMod and OFFROAD models. It is anticipated that the project would have minimal impacts to nearby roadway intersections. Consequently, we will evaluate CO emissions at affected intersections using the BAAQMD’s screening-level procedure for CO impacts, as outlined in their CEQA Guidelines. Based on a review of the proposed project, no emissions of air contaminants (TAC) are anticipated to result from project operations. However, the project could expose proposed Rob de Geus September 28, 2012 Page 7 sensitive receptors to elevated health risks from surrounding sources (existing point sources, roadway traffic, etc.). Consequently, we will coordinate with BAAQMD staff to determine whether a screening-level quantitative health risk assessment (HRA) from project operations would be required consistent with BAAQMD recommended protocols and methodologies. We will also perform a screening-level analysis of construction-related health risks to nearby existing sensitive receptors, consistent with BAAQMD recommended protocols and methodologies. Where significant impacts are identified, we will identify mitigation measures (including those recommended and required by the BAAQMD designed to reduce the significance of project- related air impacts). Biological Resources The discussion will include a summary of existing information that pertains to the project site, biological resources documented on the project site during field surveys for the SFCJPA Project, and information obtained during coordination efforts with resource agencies. Potential impacts will be described and mitigation measures will be identified to reduce potential impacts to a less than significant level. This analysis will identify potential impacts to biological resources including special status plant and animal species, wildlife habitat and movements and nesting. At this time, we anticipate impacts to trees will be based on the work of Dr. Jeffrey Froke to be provided by the City. Climate Change (Greenhouse Gas Emissions) ICF will prepare an analysis of climate change impacts. The climate change analysis will describe existing environmental and regulatory climate change quality conditions, followed by an analysis of the project’s construction and operational impacts. The climate change analysis will focus on the greenhouse gases (GHG) of greatest concern, carbon dioxide, (CO2), methane (CH4) and nitrous oxide (N2O) that will be generated by construction and operation of the proposed project. ICF climate change specialists will prepare a climate change analysis describing existing conditions, the project’s impacts to climate change and impacts to the project resulting from climate change, and mitigation measures designed to reduce the significance of project-related climate change impacts. In the project setting section, ICF will describe the key concepts of climate change, the GHGs of greatest concern and their contribution towards climate change, and the current climate change regulatory environment as it applies to this project. If data is available, we will also summarize existing GHG levels in the project area. In the project impacts section, ICF will evaluate the project’s contribution towards climate change, as well as the effects of climate change on the project. We will identify significant impacts using guidance provided by the BAAQMD and the ARB. Rob de Geus September 28, 2012 Page 8 We will quantify construction-related GHG emissions using the CalEEMod emissions model and construction data (i.e., anticipated construction schedule and equipment) provided by the project applicant. ICF will use the traffic data from the transportation and circulation analysis (i.e., trip generation rates) and the CALEEMOD model to estimate CO2 emissions from vehicular trips resulting from the proposed project. GHG emissions associated with any increases in energy consumption (such as lighting), water consumption, and waste and wastewater generation will be quantified using the CALEEMOD model, as well as other accepted protocols, such as the California Climate Action Registry’s General Reporting Protocol. We will also evaluate changes to vegetation and land cover associated with the project using accepted protocols. It is difficult to accurately quantify the effects of climate change on the project area, as current tools and models do not have sufficient resolution to forecast localized changes in climate and resulting effects related to climate change. Consequently, we will present a qualitative evaluation of the consequences of climate change to the project area using studies published by, but not limited to, the ARB, California Department of Water Resources, California Energy Commission California Climate Change Center, and California Natural Resources Agency. We will use significance thresholds identified in the BAAQMD’s May 2011 CEQA Guidelines to determine project significance. Where significant impacts are identified, we will identify mitigation measures (including those recommended by the California Air Pollution Control Officer’s Association and California Attorney General) designed to reduce the significance of project- related climate change impacts. Cultural Resources The cultural resources analysis will evaluate potential impacts to historical resources, archaeological resources, and human remains. The scope of work includes both a Section 106 compliant technical report and the EIR analysis. The records search for the SFCJPA Project was contracted by the SCVWD and included the entire golf course site, so no new records search is required Geology and Soils Due to the project site and location, it is assumed that landslides and slope stability are not issues. Hazards and Hazardous Materials This section will identify if the project creates a significant hazard to the public, emits hazardous emissions or involves hazardous materials, and others issues required by CEQA. Rob de Geus September 28, 2012 Page 9 Hydrology and Water Quality This section will identify impacts including alteration of drainage patterns, stormwater runoff and drainage infrastructure, and water quality. The analysis of water quality impacts will include compliance with the Statewide Construction General Permit for construction-related activities, and stormwater treatment requirements for controlling post-construction runoff pollution. The analysis will be based on the stormwater/groundwater/hydrology report to be provided by the city. ICF will review the report upon initiation of the project to ensure it meets CEQA guidance for analyzing potential impacts related to hydrology and water quality. Land Use and Planning This section will determine consistency with relevant land use plans and policies. ICF will work with the City to identify relevant plans and policies and determine the project’s consistency, which will be summarized in tabular format. Recreation This section will also identify construction-period impacts related to closure of the golf course and any long-term operational impacts due to construction of new recreational facilities. Noise The noise analysis will identify short-term construction and long-term operational noise and vibration impacts. ICF has the information on sensitive receptors. Additional information on number of truck trips and truck routes will be requested of the City. Population and Housing This section will address the project’s potential for inducing population growth and displacing people and housing. Public Services and Utilities This section will identify impacts to water supply, wastewater collection and treatment, solid waste, police and fire service, and schools and associated infrastructure. • Water. Describe the existing water supply and delivery system. Identify water demand and water availability to meet the proposed project needs based on information provided. • Wastewater.Identify project wastewater generation and impacts upon existing collection and treatment systems. • Solid Waste. Identify impacts to collection and disposal of solid waste, green waste, and recycling, including landfill capacity. • Police and Fire Service. Describe existing services that are available in the project area and to the specific project site, including identification of response times (including ISO Rob de Geus September 28, 2012 Page 10 rating for fire), manpower and equipment. Identify impacts to police services in terms of need for additional staff, patrols and/or equipment to serve the project; and to fire service in terms of capacity to serve, response times, and/or provision of adequate fire flows. Identify interference with emergency access routes to open space areas and adopted emergency access plan. Transportation/Traffic Hexagon Transportation Consultants, as a subconsultant to ICF, will be conducting the traffic analysis in accordance with City standards. They have provided a separate scope of work and cost estimate which has been attached and is hereby incorporated by reference (see attached scope of work). Our staff will conduct a third party review of the analysis and incorporate it into the EIR. Other CEQA Required Sections Other required sections of an EIR such as Growth Inducing, Significant Irreversible Environmental Changes, Cumulative Impacts, and Alternatives will also be included. • Significant and Unavoidable Environmental Effects. This section will identify the significant impacts that cannot be mitigated to a less than significant level. It will explain why the impacts cannot be avoided and, if appropriate, reference identified project alternatives that reduce the impact. It may also explain the reasons why the project was proposed with significant effects that could not be mitigated to a less than significant level. If construction occurs concurrent with the SFCJPA project, it is highly likely that Air Quality impacts would be significant and unavoidable given that the SFCJPA project is an existing significant baseline. • Significant Irreversible Environmental Changes. This section will identify any significant irreversible environmental changes that would be involved in the proposed project should it be implemented, such as the consumption of non-renewable resources. • Growth-Inducing Impacts. This section will describe growth inducing impacts of the proposed project, including any potential fostering of economic, population, or housing growth; describe whether the project will remove obstacles to growth; create the need for expanded community service facilities; and if the project might encourage or require other activities that could cause potentially significant environmental impacts. • Cumulative Impacts. This cumulative impacts analysis will be based on a list approach (a list of past, present, and reasonably anticipated future projects that would result in significant cumulative impacts to which the project would contribute). It is presumed that the City will provide information on the list of cumulative projects. This section will address the cumulative impacts during construction due to overlapping schedules for the Rob de Geus September 28, 2012 Page 11 Flood Reduction project and the proposed project. ICF already has the information on construction schedule for the Flood Reduction project. • Alternatives.This chapter will describe and analyze project alternatives, including the no project alternative. The project alternatives will be developed in coordination with the City and will consider information obtained during the scoping process and during the impact analysis so the alternatives can be developed to reduce significant impacts. This scope assumes that a reduced density alternative will be analyzed, and additional alternatives will be considered and rejected. The alternatives will be analyzed at a level of detail allowing comparison of the impacts of the alternatives with those of the proposed project, but not at an equal level of detail to the proposed project. The environmentally superior alternative will be identified as required by CEQA Guidelines Section 15126.6(e)(2). Two rounds of review are assumed for the alternatives analysis. Deliverables  2 hard copies and 2 CDs of the Admin Draft EIR will be provided Task 4. Prepare and Circulate Public Draft EIR Once the City has reviewed the administrative draft EIR, we will revise the draft EIR accordingly and prepare the public draft EIR. This scope assumes that comments on the administrative draft will not result in new analysis or substantial additional work. We will provide 25 hard copies (15 for State Clearinghouse and 10 for City) and 15 electronic copies on CD. ICF will work with the City to compile an appropriate distribution list and determine public postings. ICF will prepare the notice of availability (NOA) and submit the NOA and 15 copies to the State Clearinghouse. Deliverables  25 hard copies and 10 CDs of the Public Draft EIR  NOA for State Clearinghouse Task 5. Prepare Preliminary Responses to Comments Following the close of the 45-day public review period on the draft EIR, ICF will review all of the written and verbal comments received on the draft EIR. ICF will compile the letters and number each comment. ICF will prepare preliminary responses for City’s review and highlight areas where additional information/direction from the City is required to respond to a comment. It is assumed that no more than 25 comment letters will be received and no new technical analysis will be necessary to respond to the comments. Revisions to the responses to comments will be included in the administrative Final EIR. Rob de Geus September 28, 2012 Page 12 Deliverables  Preliminary Responses to Comments in electronic MS Word and PDF formats Task 6. Prepare Administrative Final EIR and MMRP The Final EIR will be comprised of the draft EIR, comments received on the draft EIR, responses to those comments, and any text revisions to the draft EIR. The text revisions can be in the form of an errata without a reprint of a revised draft EIR, or in the form of a reprint. Either way, additions will be shown with underline and deletions shown with strikeout. This scope assumes an errata. Therefore, the administrative final EIR will be comprised of: • Introduction • Comments Received on the Draft EIR • Responses to Comments • Revisions to the Draft EIR. In coordination with the City, ICF will prepare the MMRP which will include the detailed mitigation measures identified in the EIR, timing for implementation, and parties responsible for implementation. We will provide a draft for City review and input, particularly in terms of responsibility. As required by CEQA, responses to any public agency comments on the Draft EIR must be provided to those agencies at least 10 days prior to certification of the EIR by the lead agency. ICF will assist in preparing responses for any public agency comments. Deliverables  Admin Final EIR– 2 hard copies and 1 electronic copy  Admin MMRP – 2 hard copies and 1 electronic copy Task 7. Prepare Final EIR, MMRP and Findings Following receipt of the City’s comments on the administrative draft responses to comments, final EIR and MMRP, ICF will prepare the Final EIR and MMRP. Additionally, ICF will assist the City to prepare findings per Sections 21081 and 21081.5 of the California Public Resources Code. Deliverables  Fifteen hard copies and twenty-five CDs of the Public Final EIR Task 8. Notice of Determination and Coordinate Filing ICF will work with the City to draft the NOD and provide one electronic copy to the City in electronic PDF format. We assume that the City will file the Notice of Determination with the County Clerk and the State Clearinghouse following discretionary approval of the project by the Rob de Geus September 28, 2012 Page 13 City. ICF will pay all applicable fees (California Department of Fish & Game EIR Filing Fee of $2,919 plus County filing fee) Deliverables  Notice of Determination in electronic PDF format Task 9. Attend Meetings ICF will be available to attend project coordination meetings with City during preparation of the EIR (2 meetings assumed) and support City staff at a public meetings/hearings. This scope assumes that ICF staff will attend and City staff will lead and coordinate the public meeting/hearing; however, the scope can be revised if the City prefers ICF to assist with public outreach, materials, or to otherwise lead this effort. Deliverables  Attendance by ICF Project Director and Project Manager at up to 4 total meetings including public meetings/hearings Task 10. Permitting Subtask 10.1. Delineate Waters of the United States. Waters of the United States, including wetlands, will be delineated on the portions of the Golf Course not covered by the current SFCJPA delineation using the routine on-site methods described in the 1987 USACE Wetlands Delineation Manual. Other waters of the United States will be identified based on an observable ordinary high water mark. ICF will prepare maps showing the locations of wetlands and other waters of the United States that are subject to regulation under Section 404 of the Clean Water Act. Wetland boundaries will be mapped using a Trimble Geo III GPS Unit. GPS data will be post-processed and exported onto geo-referenced aerial photos or topographic maps. Deliverables  Draft delineations maps and acreage summary. Subtask 10.2. Prepare Wetland Delineation Report. A ICF botanist/wetland ecologist will prepare a report documenting the methods and results of the delineation of waters of the United States, including wetlands based on the existing delineation for the SFCJPA project. A draft copy of the document will be provided to the City for their review. If approved by the City, a final version will be submitted to the USACE for verification. This scope of work includes the hours necessary to have a ICF botanist accompany a USACE representative Rob de Geus September 28, 2012 Page 14 on a field verification visit and incorporate minor comments into a revised final report for USACE approval. Deliverables  Two draft copies of the Wetland Delineation Report will be prepared for the City’s review, in addition to one final copy for agency review. Subtask 10.3. Prepare USACE Individual Permit Under Section 404 of the Clean Water Act (CWA), a permit is required from the U.S. Army Corps of Engineers (USACE) for the placement of dredged or fill material into waters of the United States, including wetlands. Based on the need to fill the golf course wetland, the project will impact greater than an acre of wetlands and will not qualify for a general Department of the Army Permit (e.g., Nationwide Permit), and, therefore, would require preparation of an Individual Permit. An application will be submitted to USACE to request an individual permit (IP) under Section 404 of the Clean Water Act for impacts affecting waters of the United States, including wetlands. The application package will include a cover letter, completed application form and continuation sheet, and information regarding Endangered Species Act compliance (see subtask 10.6) and cultural resources compliance (ICF assumes that 106 compliance can be achieved using the Cultural Resource analysis done for the SFCJPA Project, which covers the entire Golf Course). If compensatory mitigation is required as a result of the proposed project, ICF can provide the City with a scope of work and cost estimate for preparation of either a conceptual or detailed mitigation plan. Deliverables  Two draft copies of the Individual Permit application will be prepared for the City’s review, in addition to one final copy for agency review. Subtask 10.4. Prepare Water Quality Certification Application. Section 401 of the federal CWA requires that the discharge of dredged or fill material into waters of the United States, including wetlands, does not violate state water quality standards. As required by Section 404 of the CWA, water quality certification from the appropriate Regional Water Quality Control Board (RWQCB) must be obtained for permit compliance. A 401 certification package will be prepared and submitted to the RWQCB. The certification fee to be included with the request would be provided by the City. Water quality certification is contingent on compliance with the California Environmental Quality Act (CEQA). Deliverables  Five (5) copies of the certification package will be provided to the City. Rob de Geus September 28, 2012 Page 15 Subtask 10.5. Biological Assessment. ICF anticipates that the Project will require a Biological Assessment based in large part on the BA for the SFCJPA Project and the work of Dr. Froke. Suitable habitat for several species affected by the project exists within the course and the adjacent baylands that would need to be discussed. Informal consultation with the USFWS must also be included in the Biological Assessment. It is assumed that ICF staff will coordinate directly with USFWS agencies to clarify and verify agency requirements for avoidance of impacts to the species. The report will be reviewed and approved by USFWS, concluding with the issuance of a Biological Opinion. No species under the jurisdiction of the National Marine Fisheries Service would be impacted by the project.  Deliverable(s): Five (5) copies of the Biological Assessment will be provided to the City. Cost The cost estimate to prepare an EIR is $186,748.We believe this to be the maximum potential cost though and believe that efficiencies of effort with the SFCJPA project will allow us to come in under the proposed budget. Refer to Attachment A (Table 1). Schedule Our proposed schedule (Attachment B) integrates the deliverables listed in the Approach and Scope of Work with ICF’s critical project deadlines. Meeting the dates defined in this schedule depends on the City issuing a written notice to proceed. We are committed to meeting the Spring 2013 construction start date. We appreciate the opportunity to present this proposal and look forward to working with the City on this project. If you have any questions, please contact me at (408) 216-2815 or Shilpa Trisal at (408) 216-2812. Sincerely, Mathew Jones Project Director Attachments: Attachment A: Table 1. Cost Estimate to Prepare EIR Attachment B: Proposed CEQA Schedule Attachment C: Hexagon Traffic Consultants Scope of Work. Date printed 9/28/2012 4:01 PM Approved by Finance { sh }PaloAlto_EIR_CEQA_Cost_Rev_091412(client) Table 1. Cost Estimate for Palo Alto Golf Course Reconfiguration and New Athletic Fields Project EIR - Sept 5, 2012 Consulting Staff Jones M Trisal S Antin E Rivasplata A Hatcher S Dreves N Buehler D Kuo K Grant J Kuo K Antin E Christense n E White H Roberts D La Plante A Roberts D Allen L Burns J Project Director Project Manager Project Coordinato r / Lead Planner CEQA Advisor Air Quality and GHG Air Quality and GHG Noise Noise Cultural Resources Traffic Aesthetics, Hazards, Pop/Hsg, Public Services, Recreation, Utilities Ecologist GIS / Graphics Editor Hydrology / Water Quality Geo, Ag, Land Use, and Mineral Resources Permitting CEQA / Permitting Generalist Task Proj Dir Sr Consult II Assoc Consult II Tech Dir Mng Consult Assoc Consult II Proj Dir Sr Consult II Assoc Consult III Sr Consult II Assoc Consult II Assoc Consult III Assoc Consult II Assoc Consult III Sr Consult I Assoc Consult III Sr Consult III Assoc Consult I Subtotal Admin Tech Subtotal Labor Total Direct Expenses Total Price Task 1. Initiate Project and Prepare Project Description 2 12 16 4 8 $4,554 $0 $4,554 Task 2. Prepare Notice of Preparation and Conduct Scoping 1 8 16 4 $3,023 $0 $3,023 Task 3. Prepare Administrative Draft EIR 8 60 60 2 20 80 4 36 24 20 40 16 40 40 40 40 48 $62,358 40 $2,200 $64,558 Task 4. Prepare and Circulate Public Draft EIR 2 16 40 2 4 8 2 8 26 2 24 $12,898 24 $1,320 $14,218 Task 5. Prepare Preliminary Responses to Comments 8 20 40 1 4 1 2 2 4 2 8 2 2 $10,538 $0 $10,538 Task 6. Prepare Administrative Final EIR and MMRP 4 20 20 1 2 2 20 4 24 2 2 $10,877 24 $1,320 $12,197 Task 7. Prepare Final EIR, MMRP and Findings 2 16 20 2 8 $5,436 16 $880 $6,316 Task 8. Draft Notice of Determination and Coordinate Filing 1 2 8 $1,091 $0 $1,091 Task 9. Attend Meetings 12 20 8 $5,412 6 $330 $5,742 Task 10. Permitting 8 20 4 16 24 60 60 $21,040 16 $880 $21,920 Total hours 48 194 228 4 24 84 5 40 28 28 72 36 80 118 44 46 60 132 126 Billing Rates $167 $138 $81 $181 $175 $105 $223 $118 $110 $118 $81 $103 $89 $114 $121 $114 $148 $64 $55 Subtotals $8,016 $26,772 $18,468 $724 $4,200 $8,820 $1,115 $4,720 $3,080 $3,304 $5,832 $3,708 $7,120 $13,452 $5,324 $5,244 $8,880 $8,448 $137,227 $6,930 $6,930 $144,157 Direct Expenses 500.00 Subcontractor (Hexagon Transportation Consultants)$32,150 523.02 Reproductions $3,000 523.04 Postage and Delivery $500 523.05 Travel, Auto, incld. Mileage at current IRS rate (.555/mile)$50 529.00 Other Reimbursable Expenses (NOP and NOD County filing fee + CDFG NOD fees)$3,019 Mark up on all non-labor costs and subcontractors:10%$3,872 Direct expense subtotal $42,591 Total price $186,748 Production Staff Employee Name Project Role Labor Classification Oct 2012 Nov 2012 Dec 2012 Jan 2013 Feb 2013 Mar 2013 Apr 2013 May 2013 Task Description Task 1. Initiate Project and Prepare Project Description Task 2. Prepare Notice of Preparation and Conduct Scoping Task 3. Prepare Administrative Draft EIR City Review Administrative Draft EIR Task 4. Prepare and Circulate Public Draft EIR Public Review Period (45 days) Task 5. Prepare Preliminary Responses to Comments City Review Preliminary Responses Task 6. Prepare Administrative Final EIR and MMRP City Review Administrative Final EIR and MMRP Task 7. Prepare Final EIR, MMRP and Findings Task 8. Draft Notice of Determination and Coordinate Filing Task 9. Attend Meetings Prepared Sept 28, 2012 ICF International Attachment B - Anticipated Schedule for Palo Alto Golf Course Reconfiguration and Baylands Athletic Center Expansion Project EIR - September 28, 2012 September 14, 2012 Mr. Matthew Jones ICF International 75 East Santa Clara Street, Suite 300 San Jose, CA 95113 Subject: Proposal to Prepare a Transportation Impact Analysis for the Proposed Golf Course Reconfiguration and New Athletic Fields in Palo Alto, California Dear Mr. Jones: Hexagon Transportation Consultants, Inc. is pleased to submit this proposal to prepare a transportation impact analysis for the proposed golf course reconfiguration and new athletic fields in Palo Alto, California. The proposed project entails the reconfiguration of the Palo Alto Municipal Golf Course including expansion of the clubhouse meeting and banquet space and the construction of three new athletic fields and additional surface parking at the Baylands Athletic Center. Golf course access and parking on Embarcadero Way would be unchanged. The new athletic fields would be accessed via Geng Road and would include new surface parking with up to 235 additional parking spaces. This proposal and scope of work was developed by Hexagon staff based on our knowledge of the City of Palo Alto’s transportation impact analysis guidelines. It is possible that, as the transportation impact study progresses, staff may request changes to the work scope below. Scope of Services The purpose of the traffic analysis is to satisfy the requirements of the California Environmental Quality Act (CEQA), City of Palo Alto, and the Valley Transportation Agency (VTA). The VTA administers the Santa Clara County Congestion Management Program (CMP). The study will determine the traffic impacts of the proposed project in the vicinity of the site during the weekday PM peak commute hour. Traffic studies typically also include the AM peak hour. However, in this case the project is not expected to generate much, if any, traffic in the morning. Preliminarily, we estimate up to 14 intersections, 4 freeway ramps, and 2 freeway segments will require study. The tasks to be included in the analysis for the project are: 1. Site Reconnaissance and Existing Observations. The physical characteristics of the study area and the surrounding roadway network will be reviewed to identify existing roadway cross-sections, intersection lane configurations, traffic control devices, and surrounding land uses. Existing traffic conditions will be observed in the field during the PM peak period of traffic in order to identify any operational deficiencies and to confirm the accuracy of calculated levels of service. 2. Data Collection. New PM peak-hour traffic counts will be conducted at up to 5 intersections. Existing AM and PM peak hour traffic counts at 9 study intersections are currently on file with Hexagon. In addition, PM peak-hour driveway counts will be conducted to quantify the traffic generated by the existing golf course. Freeway segment traffic counts will be obtained from the latest VTA CMP monitoring report. Interchange ramp counts will Mr. Matthew Jones September 14, 2012 Page 2 of 4 be obtained from Caltrans. All new traffic counts and will include bicycle and pedestrian volumes. Additional counts will require authorization and additional budget. 3. Evaluation of Existing Conditions. The existing operations of the key intersections and freeway segments will be evaluated with a level of service analysis using current PM peak- hour volumes. All intersections will be evaluated using TRAFFIX software in accordance with the 2000 Highway Capacity Manual methodology. Study freeway segments will be analyzed in accordance with VTA CMP methods and study freeway ramps will be analyzed using demand to capacity ratios. 4. Evaluation of Background Conditions. A list of approved projects and background growth factors will be obtained from City of Palo Alto staff. Based on these data, the background no project traffic volumes will be calculated. Planned and funded improvements will be included in the background analysis. Level of service calculations will be performed to evaluate background conditions at study intersections. Study freeway ramps will be analyzed using demand to capacity ratios. 5. Trip Generation Surveys (Optional). The published trip generation data for soccer complexes is quite limited. If requested, Hexagon will conduct trip generation surveys at existing soccer complexes in the vicinity to quantify the vehicular traffic generated during the PM peak hour. The survey site(s) will be selected in consultation with City staff. 6. Site Traffic Projections. The incremental increase in traffic resulting from the proposed project will be estimated using either vehicular trip generation rates published in the Institute of Transportation Engineers’ Trip Generation, 8th Edition or local trip rates developed in the previous task. In addition, the potential increase in traffic resulting from the reconfiguration of the golf course and the proposed club house improvements will be estimated based on the increase in building area, published golf course trip rates, and future usage projections provided by the City. The directional distribution of site-generated traffic will be forecast based on existing travel patterns and relative locations of complementary land uses in the area. The site-generated traffic will be assigned to the roadway network based on the directions of approach and departure discussed above and the locations of proposed project driveways. 7. Evaluation of Project Conditions. Project-generated traffic will be added to (1) existing and (2) background traffic volumes. Intersection level of service calculations will be conducted to estimate the operating levels of service at the key intersections during the PM peak hour after the completion of the proposed development. Study freeway segments will be analyzed in accordance with VTA CMP methods and study freeway ramps will be analyzed using demand to capacity ratios. 8. Vehicle Queuing Analysis. For selected locations where the project would add a large number of left-turning vehicles, the adequacy of existing turn pocket storage will be assessed by means of comparison with expected maximum vehicle queues. Up to 4 left turn movements will be analyzed. 9. Site Access & Circulation. A planning level site circulation and access review will be conducted to determine the adequacy of the proposed site plan in accordance with generally accepted traffic engineering standards. This will include a quantitative analysis of the anticipated traffic volumes at the site’s driveways, a qualitative analysis of the proposed site access and circulation, review of the number and location of the project’s access driveways, assessment of the required control devices at the proposed driveways, and a review of Mr. Matthew Jones September 14, 2012 Page 3 of 4 parking layout. Pedestrian, transit, and bicycle travel will also be evaluated on-site and within the surrounding vicinity. 10. Evaluation of Cumulative Conditions. Hexagon is currently under contract with the City of Palo Alto to prepare an updated travel demand forecast model. However, the model is not expected to be available in time for use in this study. Thus, Hexagon will obtain a list of pending projects and cumulative growth factors from City staff. Based on these data, the cumulative no project traffic volumes will be calculated and then the project trips will be added. Level of service calculations will be conducted to estimate the operating levels of the study intersections during the PM peak hour under cumulative conditions. Study freeway segments will be analyzed in accordance with VTA CMP methods and study freeway ramps will be analyzed using demand to capacity ratios. If a significant cumulative impact occurs at any study location, Hexagon will quantify the project’s contribution to the impact. 11. Description of Impacts and Recommendations. Based on the results of the level of service calculations, impacts will be identified and described. Recommendations will be formulated that identify the locations and types of improvements or modifications necessary to mitigate significant near term or cumulative impacts. Mitigation and/or traffic impact fees associated with any individual and/or cumulative project impacts will be described. 12. Meetings & Reports. This work scope includes attendance at three meetings with project staff or City staff in connection with this project. Of these three meetings, two of these may be public hearings. Our findings and recommendations will be summarized in an administrative draft report. Hexagon will respond to administrative draft editorial comments and prepare a final report. This work scope also includes up to 8 hours of staff time to respond to comments on the DEIR. Additional Services Any work not specifically referenced in the above Scope of Work—for example analyzing a different project description, conducting additional traffic counts, analyzing additional study locations, analyzing interim phases of development, protracted project schedule, attendance at more than 3 total meetings or more than 2 public hearings, and drawing conceptual plans for mitigation measures— shall be considered additional services. Additional services will require additional budget and additional time. Schedule & Budget Excluding optional task 5, the cost for services rendered under this agreement will be $30,650 as outlined in our Scope of Services. Task 5, Trip Generation Surveys, will be conducted if authorized at an additional cost of $1,500 per site. Billings will be conducted monthly, on a percent complete basis. This price quote is good for 30 days. This price quote assumes all project-related activities will be completed within one year. Extended project schedules will require additional budget for project administration. Barring any unforeseen delays, a draft report will be submitted approximately four to five weeks after (1) a contractual agreement has been reached, (2) Hexagon receives work scope approval and approved and pending project lists from City staff. Each subsequent draft report will be delivered 5 working days after receipt of all comments. Cognizant of your desired schedule, we are ready to start work immediately upon authorization. Mr. Matthew Jones September 14, 2012 Page 4 of 4 We look forward to working with you and appreciate your consideration of Hexagon for this assignment. If you have any questions, please do not hesitate to call. Sincerely, HEXAGON TRANSPORTATION CONSULTANTS, INC. Gary Black President Professional Services Rev. June 2, 2010 EXHIBIT “B” SCHEDULE OF PERFORMANCE CONSULTANT shall perform the Services so as to complete each milestone within the number of days/weeks specified below. The time to complete each milestone may be increased or decreased by mutual written agreement of the project managers for CONSULTANT and CITY so long as all work is completed within the term of the Agreement. CONSULTANT shall provide a detailed schedule of work consistent with the schedule below within 2 weeks of receipt of the notice to proceed. Milestones Completion (Days from NTP) 1. DESIGN DEVELOPMENT (Task 1) (a) Design Development Exhibits (8) (b) Temporary Course Configuration/Phasing (8) (c) Biological Resources Evaluation Report (45) 2. SOIL IMPORTATION ASSISTANCE (Task 2) (a) Stockpile Plan (8) (b) Integration of Import Material to Grading Plan (60) 3. ENVIRONMENTAL IMPACT REPORT (Task 3) (a) Initiate Project and Prepare Project Description (14) (b) Prepare Notice of Preparation/Conduct Scoping (30) (c) Prepare Administrative Draft EIR (50) (d) Prepare and Circulate Public Draft EIR (55) (e) Prepare Preliminary Responses to Comments (70) (f) Prepare Administrative Final EIR and MMRP (85) (g) Prepare Final EIR, MMRP and Findings (105) (h) Draft Notice of Determination and Coordinate Filing (112) 4. CONSTRUCTION DOCUMENTS & SPECIFICATIONS (Task 4) (a) Final Plans (60%) (45) (b) Specifications Draft (45) (c) Final Plans & Specifications (90%) (70) (d) Final Plans & Specifications (100%) (120) 5. BIDDING ASSISTANCE (Task 5) (150) Professional Services Rev June 2, 2010 EXHIBIT “C” COMPENSATION The CITY agrees to compensate the CONSULTANT for professional services performed in accordance with the terms and conditions of this Agreement, and as set forth in the budget schedule below. Compensation shall be calculated based on the hourly rate schedule attached as exhibit C-1 up to the not to exceed budget amount for each task set forth below. The CITY agrees to compensate the CONSULTANT for reimbursable expenses subject to the conditions set forth below. The compensation to be paid to CONSULTANT under this Agreement for all services described in Exhibit “A” (“Basic Services”) and reimbursable expenses incurred during the performance of Basic Services shall not exceed $435,338. CONSULTANT agrees to complete all Basic Services, including reimbursable expenses incurred during the performance of Basic Services, within this amount. In the event CITY authorizes any Additional Services, the maximum compensation shall not exceed $545,338. Any work performed or expenses incurred for which payment would result in a total exceeding the maximum amount of compensation set forth herein shall be at no cost to the CITY. CONSULTANT shall perform the tasks and categories of work as outlined and budgeted below. The CITY’s Project Manager may approve in writing the transfer of budget amounts between any of the tasks or categories listed below provided the total compensation for Basic Services, including reimbursable expenses incurred during the performance of Basic Services, does not exceed $435,338 and the total compensation if Additional Services are authorized does not exceed $545,338. FEE & REIMBURSABLE EXPENSE SCHEDULE (Basic Services) NTE Fees NTE Reimbursable Task 1 - Design Development $ 6,785 $ – 0 – Task 2 - Soil Importation Assistance 22,200 2,400 Task 3 - Environmental Impact Report 205,423 2,400* Task 4 - Construction Documents 168,790 13,800 Task 5 - Bidding Assistance 11,140 2,400 – 0 – _______________________________ Total of Basic Services & Reimbursable Expenses: $ 414,338 $ 21,000 *Reimbursable expenses of the sub-contractor shall be as defined within the attached Scope of Professional Services Rev June 2, 2010 Services (Exhibit “A-1”) and are additional to this amount. Total Basic Services and Reimbursable expenses $ 435,338 Additional Services (Not to Exceed) $ 110,000 Maximum Total Compensation $ 545,338 REIMBURSABLE EXPENSES The administrative, overhead, secretarial time or secretarial overtime, word processing, insurance and other ordinary business expenses are included within the scope of payment for services and are not reimbursable expenses. CITY shall reimburse CONSULTANT for the following reimbursable expenses at cost. Expenses for which CONSULTANT shall be reimbursed are: (a) Telephone and communications charges; computer-aided-drafting/design (CADD) plots, photocopies and other reproductions; all expendable surveying supplies; and any required and approved travel expenses, plus a per diem amount of $50 per day per person for food when traveling or on-site for six (5) or more continuous hours. (b) Mileage at a rate of fifty-nine (59) cents per mile for use of personal or company vehicles. The “Reimbursable Expenses” as defined above has been prepared to represent the anticipated Reimbursable Expenses to be billed based on the requirements, work scope and number of meetings and site visits established for the Work. The CONSULTANT will notify the CITY when and if a planned expense may exceed the estimate. The CONSULTANT agrees to not exceed the estimate as provided without obtaining prior CITY approval. All requests for payment of Reimbursable Expenses shall be accompanied by appropriate backup information. Professional Services Rev June 2, 2010 ADDITIONAL SERVICES The CONSULTANT shall provide additional services only by advanced, written authorization from the CITY. The CONSULTANT, at the CITY’s project manager’s request, shall submit a detailed written proposal including a description of the scope of services, schedule, level of effort, and CONSULTANT’s proposed maximum compensation, including reimbursable expense, for such services based on the rates set forth in Exhibit “C-1”. The additional services scope, schedule and maximum compensation shall be negotiated and agreed to in writing by the CITY’s Project Manager and CONSULTANT prior to commencement of the services. Payment for additional services is subject to all requirements and restrictions in this Agreement. Potential Additional Service tasks are outlined in Exhibit “A” of this Agreement. Professional Services Rev June 2, 2010 EXHIBIT “C-1” HOURLY RATE SCHEDULE Principal Consultant: a rate not to exceed $180.00 per hour Project Coordinator: a rate not to exceed $120.00 per hour Design Associate: a rate not to exceed $80.00 per hour Senior Civil Engineer: a rate not to exceed $180.00 per hour Civil Design/Drafting Personnel: a rate not to exceed $120.00 per hour Irrigation (Design/Staking): a rate not to exceed $125.00 per hour Irrigation (Drafting): a rate not to exceed $65.00 per hour Services of sub-consultants shall be billed to the CITY at a multiple of 1.1 times the amount billed to the CONSULTANT for such services (i.e. the base fee of the sub-consultant plus 10%). EXHIBIT “D” INSURANCE REQUIREMENTS CONTRACTORS TO THE CITY OF PALO ALTO (CITY), AT THEIR SOLE EXPENSE, SHALL FOR THE TERM OF THE CONTRACT OBTAIN AND MAINTAIN INSURANCE IN THE AMOUNTS FOR THE COVERAGE SPECIFIED BELOW, AFFORDED BY COMPANIES WITH AM BEST’S KEY RATING OF A-:VII, OR HIGHER, LICENSED OR AUTHORIZED TO TRANSACT INSURANCE BUSINESS IN THE STATE OF CALIFORNIA. AWARD IS CONTINGENT ON COMPLIANCE WITH CITY’S INSURANCE REQUIREMENTS, AS SPECIFIED, BELOW: MINIMUM LIMITS REQUIRED TYPE OF COVERAGE REQUIREMENT EACH OCCURRENCE AGGREGATE YES YES WORKER’S COMPENSATION EMPLOYER’S LIABILITY STATUTORY STATUTORY YES GENERAL LIABILITY, INCLUDING PERSONAL INJURY, BROAD FORM PROPERTY DAMAGE BLANKET CONTRACTUAL, AND FIRE LEGAL LIABILITY BODILY INJURY PROPERTY DAMAGE BODILY INJURY & PROPERTY DAMAGE COMBINED. $1,000,000 $1,000,000 $1,000,000 $1,000,000 $1,000,000 $1,000,000 YES AUTOMOBILE LIABILITY, INCLUDING ALL OWNED, HIRED, NON-OWNED BODILY INJURY - EACH PERSON - EACH OCCURRENCE PROPERTY DAMAGE BODILY INJURY AND PROPERTY DAMAGE, COMBINED $1,000,000 $1,000,000 $1,000,000 $1,000,000 $1,000,000 $1,000,000 $1,000,000 $1,000,000 $1,000,000 $1,000,000 YES PROFESSIONAL LIABILITY, INCLUDING, ERRORS AND OMISSIONS, MALPRACTICE (WHEN APPLICABLE), AND NEGLIGENT PERFORMANCE ALL DAMAGES $1,000,000 YES THE CITY OF PALO ALTO IS TO BE NAMED AS AN ADDITIONAL INSURED: CONTRACTOR, AT ITS SOLE COST AND EXPENSE, SHALL OBTAIN AND MAINTAIN, IN FULL FORCE AND EFFECT THROUGHOUT THE ENTIRE TERM OF ANY RESULTANT AGREEMENT, THE INSURANCE COVERAGE HEREIN DESCRIBED, INSURING NOT ONLY CONTRACTOR AND ITS SUBCONSULTANTS, IF ANY, BUT ALSO, WITH THE EXCEPTION OF WORKERS’ COMPENSATION, EMPLOYER’S LIABILITY AND PROFESSIONAL INSURANCE, NAMING AS ADDITIONAL INSUREDS CITY, ITS COUNCIL MEMBERS, OFFICERS, AGENTS, AND EMPLOYEES. I. INSURANCE COVERAGE MUST INCLUDE: A. A PROVISION FOR A WRITTEN THIRTY DAY ADVANCE NOTICE TO CITY OF CHANGE IN COVERAGE OR OF COVERAGE CANCELLATION; AND B. A CONTRACTUAL LIABILITY ENDORSEMENT PROVIDING INSURANCE COVERAGE FOR CONTRACTOR’S AGREEMENT TO INDEMNIFY CITY. C. DEDUCTIBLE AMOUNTS IN EXCESS OF $5,000 REQUIRE CITY’S PRIOR APPROVAL. II. CONTACTOR MUST SUBMIT CERTIFICATES(S) OF INSURANCE EVIDENCING REQUIRED COVERAGE. III. ENDORSEMENT PROVISIONS, WITH RESPECT TO THE INSURANCE AFFORDED TO “ADDITIONAL INSUREDS” A. PRIMARY COVERAGE WITH RESPECT TO CLAIMS ARISING OUT OF THE OPERATIONS OF THE NAMED INSURED, INSURANCE AS AFFORDED BY THIS POLICY IS PRIMARY AND IS NOT ADDITIONAL TO OR CONTRIBUTING WITH ANY OTHER INSURANCE CARRIED BY OR FOR THE BENEFIT OF THE ADDITIONAL INSUREDS. B. CROSS LIABILITY Professional Services Rev June 2, 2010 S:\ASD\PURCH\SOLICITATIONS\CURRENT BUYER-CM FOLDERS\OTHERS - ADRIAN\Contracts\S13147444 Golf Course Reconfiguration Project\Large K\Contract\C13147XXX Exhibit D.doc Professional Services Rev June 2, 2010 S:\ASD\PURCH\SOLICITATIONS\CURRENT BUYER-CM FOLDERS\OTHERS - ADRIAN\Contracts\S13147444 Golf Course Reconfiguration Project\Large K\Contract\C13147XXX Exhibit D.doc MULTIPLE INSUREDS, SHALL NOT INCREASE THE TOTAL LIABILITY OF HE COMPANY UNDER THIS POLICY. . NOTICE OF CANCELLATION THE NAMING OF MORE THAN ONE PERSON, FIRM, OR CORPORATION AS INSUREDS UNDER THE POLICY SHALL NOT, FOR THAT REASON ALONE, EXTINGUISH ANY RIGHTS OF THE INSURED AGAINST ANOTHER, BUT THIS ENDORSEMENT, AND THE NAMING OF T C TY (30) DAY WRITTEN NOTICE BEFORE THE EFFECTIVE DATE OF CANCELLATION. TEN (10) DAY WRITTEN NOTICE BEFORE THE EFFECTIVE DATE OF CANCELLATION. NOTICES SHALL BE MAILED TO: ADMINISTRATION PALO ALTO, 94303 1. IF THE POLICY IS CANCELED BEFORE ITS EXPIRATION DATE FOR ANY REASON OTHER THAN THE NON-PAYMENT OF PREMIUM, THE ISSUING COMPANY SHALL PROVIDE CITY AT LEAST A THIR 2. IF THE POLICY IS CANCELED BEFORE ITS EXPIRATION DATE FOR THE NON-PAYMENT OF PREMIUM, THE ISSUING COMPANY SHALL PROVIDE CITY AT LEAST A PURCHASING AND CONTRACT CITY OF PALO ALTO P.O. BOX 10250 CA Financial Pro Formas and Supporting Analysis forReconfiguration Options A, D, F, G ForPalo Alto Municipal Golf Course Prepared For: Cityof Palo Alto Rob deGeus,DivisionManager Recreation &Golf Services 1305 Middlefield Road Palo Alto, CA 94301 Prepared By: 1150 SouthU.S.HighwayOne, Suite 401 Jupiter,FL 33477 (561)744-6006 April, 2012 Financial Pro Formas andSupporting Analysis for Reconfiguration Options A, D, F, G Palo AltoMunicipal Golf Course Table of Contents INTRODUCTION.......................................................................................................................1 PALO ALTO MUNICIPAL GOLF COURSE RECONFIGURATIONOPTIONS..........................2 Goals andObjectives..........................................................................................................2 Option A..............................................................................................................................3 AdditionalWork.............................................................................................................................4 Option D..............................................................................................................................4 AdditionalWork.............................................................................................................................5 Option F..............................................................................................................................5 AdditionalWork.............................................................................................................................6 OptionG.............................................................................................................................7 AdditionalWork.............................................................................................................................8 Defermentof CertainImprovements...................................................................................9 MARKETOVERVIEW..............................................................................................................10 Demographics Summary....................................................................................................10 Golf MarketOverview.........................................................................................................11 NationalTrends inGolf DemandandSupply..............................................................................11 Local and RegionalGolf SupplyandDemandIndicators............................................................13 Competitive Golf Market.....................................................................................................15 SummaryInformation– PrimaryCompetitors.............................................................................16 Summaryof Findings – PrimaryCompetitors .............................................................................18 Palo Alto Golf CourseMarketPositioning Assessment......................................................19 FINANCIAL PERFORMANCE MODELS FORPALO ALTO GOLFCOURSE.........................20 Recent HistoricalPalo AltoGCPerformance.....................................................................20 Projections Basedon“Option A”........................................................................................22 KeyAssumptions.........................................................................................................................22 ProFormaEstimatefor ‘Option A’Scenario–FY2012 –FY2021..............................................26 Projections Basedon“Option D”........................................................................................29 KeyAssumptions.........................................................................................................................29 ProFormaEstimatefor ‘Option D’ Scenario –FY2012 –FY2021..............................................32 Projections Basedon“Option F”........................................................................................35 KeyAssumptions.........................................................................................................................35 ProFormaEstimatefor ‘Option F’ Scenario –FY2012 –FY2021..............................................36 Projections Basedon“Option G”........................................................................................39 KeyAssumptions.........................................................................................................................39 ProFormaEstimatefor ‘Option G’ Scenario– FY2012 –FY2021.............................................42 FinancialProjectionsSummary..........................................................................................45 Summaryof Options....................................................................................................................45 SummaryResults........................................................................................................................46 Justifications for Revenue Projections........................................................................................47 Other Considerations Regarding ImprovementOptions.............................................................48 Option“G”SensitivityAnalysis...........................................................................................49 Option“G” SensitivityAnalysis - Summaryfor 2017...................................................................49 OptionG SensitivitySpreadsheets..............................................................................................50 OTHERISSUES ANDCONSIDERATIONS..............................................................................56 Market Position /Re-Branding Opportunity........................................................................56 Economics of PotentialLong-Term/ AdditionalImprovements...........................................58 CartStorage Building..................................................................................................................58 Expanded Meeting Space...........................................................................................................59 RangePerformanceCenter ........................................................................................................59 Management Structure.......................................................................................................60 Long RangeConcerns.......................................................................................................61 PotentialEconomicDevelopmentOfTheAirport& Golf “Baylands Gateway” Area............64 Private Funding Possibilities..............................................................................................65 APPENDICES...........................................................................................................................66 AppendixA – Comparative SupplyRatios – PaloAlto GC& KeyMunicipal Competitors...67 AppendixB – Comparative Scoring of Reconfiguration Options.........................................68 AppendixC–Water &Power Use Discussion &Assumptions...........................................71 AppendixD– ReviewOf Probable Cost Estimates............................................................73 AppendixE – PotentialLong-Term MasterPlan Improvements..........................................75 National GolfFoundation Consulting,Inc. – Cityof Palo AltoReport –1 Introduction NationalGolf FoundationConsulting,Inc. was retained bythe Cityof PaloAlto infurtheranceof the City’s due diligencerelative to theSan FrancisquitoCreek Flood ControlProject,which will involve the reconfiguration of sixormoreholes atthe Palo AltoGolf Course. NGF’s objective was to help theCityidentifythe expectedfinancialimpactfromtheimprovementsrelatedtothe reconfiguration work under PlanOptionsA,D, F,and G. Specifically, NGFhas crafted10-year cashflowproformasthatprojectthe estimatednet financialimpactof theproposed improvements, allowing the Cityto evaluate eachof thefour reconfiguration options under considerationfroman objective standpoint.Ouranalysis includes expected impactonrounds played,feestructure,revenue generation, operating expenses,and capitalspending/debt.The proformasalso provide an estimateforlostrevenues during thetime thatthecourse is impacted and/or closed. Other aspectsof theNGF reviewinclude: A marketoverviewof thePalo Alto area,with an emphasis onareademographics andkeygolf demand and supplyindicators. A competitive review, including aqualitative assessment ofthe impactthatthe potentialreconfigurations would have on Palo Alto Golf Course’smarket/competitive position. A reviewof Forrest Richardson’s work regarding the potentialimplicationsfromthe renovation options onfacilitybranding andmarketing. NGF willalso offeritsopinion aboutthe long-termimplications and potentialfinancial impactof improvementsassociated with thelonger rangemaster plan, including clubhouse expansion, cartstorage,event areas,rangeperformancecenter,range enlargement, entry/parking, andtheyouthtraining area. NGF willevaluate relevant options available to the Cityof Palo Altoforthecontinued operation of Palo AltoGolf Course, including (butnotlimitedto)continuing on anas- is basis oroutsourcing allmanagementandmaintenance toafull-service managementcompany.Viable options willbe identified, andadiscussionof the costs, benefits, andfinancialimplications of eachoperating scenario presented. Thestudyeffortwas managedbyNGF Directorof Consulting Services Richard B.Singerand Senior ProjectDirector Ed Getherall.Activities conducted incompletionofthis reportincluded: fieldresearch;statisticalandfinancialanalysis; meetingswithkeyCitystafffromthe Recreation & Golf Services, Administration, CommunityServices, andFinance Departments;meetingswith the HeadGolf Professional, Golf Course Superintendent, andValleyCrest Area Director;atour of thegolf course;and,interviews with areagolfers. Following is theconsultants’reportsummarizing keyfindings andrecommendations. Throughoutthisreport, we mayrefertoshortenednamesfor:the Cityof Palo Alto (“City”),the Palo Alto MunicipalGolf Course (“Palo AltoGolfCourse”,“PaloAltoGC”or “PAGC”),and NationalGolf FoundationConsulting,Inc.(“NGFConsulting”or“NGF”). National GolfFoundation Consulting,Inc. – Cityof Palo AltoReport –2 Palo Alto Municipal Golf Course Reconfiguration Options NGF Consulting was provided fourcoursereconfiguration options prepared byForrest Richardson, ASGCA.These optionswere identified bythetitles“Option A,”Option D,”“Option F” and“OptionG,”and each have uniquecharacteristics.The optionsrepresentfourpossible scenariosforadjusting the coursetoaccommodate theSFCJPAfloodmitigation project. OptionsA,D, FandGwere culledfrom seven proposed alternatives (Options B,C,and E were eliminated priortoourreview) as themost viable and potentiallyopportuneforthe City. Theprocessfordeveloping options has beenthorough, with extensive inputfromgolfers, staff, concessionaires andthepublic at large. NGF Consulting hasreviewed notes and summaries fromthesemeetingsto better understandthegoals and objectives desiredbythose who will use and operatethefacilityfollowing reconfiguration. GOALS ANDOBJECTIVES Among thegoalsand objectives setforthtoguidethe design processforreconfiguration options, inadditiontothefundamentalgoaltoaccommodatetheflood project,included: Establish amorenatural,aesthetic landscapethatincorporatesa“Baylands”theme Improve treecare andvarietyvia a themeto useappropriatetree selection Find ways to eliminategeese and burrowing animalsfromruining thecourse Improve bunkers(condition, strategyand aesthetics) Improve overallcourse conditioning (drainage,irrigation,turf,etc.) Adjustyardagesothecourse isshorterfor beginners,women and seniors Create a“wowfactor”toremain competitive with otherregionalfacilities Add interesttothecourse strategy(dog-legs,differentiation ofholes, etc.) Find ways to offer player development opportunities (shortgame area,range, etc.) Additionally, therewas astrong desiretoaddresslong range issuesthatface theagingfacility beyond those onthegolf courseitself.The Citycommissioned its own scope of work toaddress these issuesconcurrently with the coursereconfiguration planning.Theselong rangeareas included thefollowing: Clubhouse planning Entry, parking andsignage Practice areas Cartstorage andstaging On-courserestrooms Branding and image Trailconnectionsfromthe Baylands and existing trails National GolfFoundation Consulting,Inc. – Cityof Palo AltoReport –3 Theobjective of the additionallong-rangeplanning was to look beyond thegolf coursetoensure thatreconfiguration options would not precludeimprovementstotheareason theabove list. Specificgoals andobjectives included thefollowing: Find ways to bring non-golferstothefacilities (group events,restaurant,etc.) Expand the clubhousetoseat200so largergroups can beaccommodated Develop areas to hold multiple outings/eventssimultaneously Improve the arrivalexperience, entryaesthetics,trailconnections andsecurity Develop a cartstorage area/facility Make overallimprovementstotheclubhouse andgrounds(exterior andinterior) Improve and expand thepracticerange Create newplayer developmentand practice opportunities Planforupgrading the on-courserestroomfacility Develop a newbrand and imageconsistent with the reconfigurationgoalsand design A commonthreadamong thelong rangeplanning componentswas a strong designtoreturnthe facilities, withgolf courseapproaching its 60th year andtheclubhouse its30th, toa“Point of Pride” statuswithin the community.Along with this primaryobjective comethebenefits of leveraging thefacilityforeconomic development,tourism and asa hometoannualandspecial events. Secondarily, thecommunityhas astrong desire toseethegolf course bemore compatible with theBaylands environment.Thisgoalisechoed byMr. Richardson inhis reconfiguration options,each of which adds morenaturalized areas tothegolf course.In addition, long range designconcepts associatedwith theclubhouse,entryand imagegohand- in-hand with thisgoal. OPTION A Option Arepresentstheminimumreconfiguration in ordertofacilitatetheSan Francisquito Creek realignmentasrequiredbythe SFCJPA.This option shiftsholes laterallyfromwest to east,retaining muchofthe samerouting ofthe existing course.Golf holes aremoved awayfrom the levee on aminimalbasis.Improvementsareprimarilyrestrictedtotheholesmoved, with the remaining holes largelyunchanged. Bunker work and naturalization enhancements aremade throughoutthe courseinordertoprovide amoreconsistentgolf experience and landscape. Thehighlightsof changes in thisoption include: 6.5golf holesrelocated 5 newgreens constructed Par 72 6,900/ 6,500/ 5,200 yards Allbunkersreconstructed and/or new 38.5 acrestransformedto naturalized areas (non-managedturf) Revised Hole No. 18 (naturalized hazard) AdjustedHole No.12 AdjustedHole Nos.13 and 14 National GolfFoundation Consulting,Inc. – Cityof Palo AltoReport –4 The totalprojected cost forthisoptionis$3,537,622,includingall professionalfees, project managementand contingency. Additional Work Additional(“alternate”)items within thegolf course itself maybe undertaken bythe City concurrentlywith the development ofOption A.These optionalitemsinclude: Sand capping of newturfareas(newfairways to be constructed) Use (spreading) of imported soilfromthe Stanford University MedicalCenterProject Reconstruction of allgreens (13additionaltothose covered) Re-turfing of allexistingfairways (23.5 acresadditional) Replacement ofthebalance of theexisting irrigation system Reconstruction andfeatures atthe existing practicegreenarea Construction of anewon-courserestroomfacility Projected Costfor AdditionalItems: $3,250,500 Among the additional(alternate) work,Mr. Richardson and NGFrecognize thatthefull replacement ofthe existing irrigationsystemwillbecome aneventualnecessity. Our understanding isthattheexisting system,installed in 1998,presentsregular issuesdueto deteriorating pipefittings. Nowentering its 14th year of service, thesystem isonthe decline due tothe highsalts inherentwithin the soils. Even if the balance ofthe systemremains in commissionfor anothersixyears (20 years isareasonable longevityforirrigation systems) thereexistsgood probabilitythat emergencyrepairs andcostsmayescalate. Forthis reason, we have studied this additionalcost($857,500)as an alternative scopetobe consideredfor Option A. OPTION D Option Drepresents anenhanced reconfiguration versionfromOption A.This optionfacilitates the SanFrancisquitoCreek realignment asrequired bythe SFCJPA.Theprimarydifference fromOptionA isthatOption Drealignsholes withmorevariety, departingfromthe common parallelrouting ofthe existing course.Golf holesaremoved awayfromthe levee, butgo beyond Option Atoform newviews and variation. Bunkerwork and naturalization enhancements are madethroughoutthecourse in ordertoprovide amoreconsistentgolf experience and landscape.Thesearemore prevalent thanthat affordedthroughOptionA. Thehighlightsof changes in thisoption include: 8.5golf holesrelocated 8 newgreens constructed Par 72 6,900/ 6,400/ 5,000 yards Allbunkersreconstructed and/or new 43 acrestransformedtonaturalized areas(non-managedturf) NewIsland GreenHoleNo. 13(elevated teeandBayview) NewDouble Green Nos.3 and 15 NewHole No. 5 (elevatedgreenand BayView) NewHole No. 7 (splitfairway) National GolfFoundation Consulting,Inc. – Cityof Palo AltoReport –5 NewHole No. 18 (par-5and naturalized hazard) NewHole No. 4 NewHole No. 17 NewHole No. 16 Futurespace affordedfor anewpracticegreen/shortgamearea The totalprojected cost forthisoptionis$4,118,748,includingall professionalfees, project managementand contingency. Additional Work Additional(“alternate”)items within thegolf course itself maybe undertaken bythe City concurrentlywith the development ofOption D.These optionalitemsinclude: Sand capping of newturfareas(newfairways to be constructed) Use (spreading) of imported soilfromthe Stanford University MedicalCenterProject Reconstruction of allgreens (10additionaltothose covered) Re-turfing of allexistingfairways (21.5 acresadditional) Replacement ofthebalance of theexisting irrigation system Reconstruction andfeatures atthe existing practicegreenarea Construction of anewon-courserestroomfacility Futuredevelopment of anewpracticegreen/shortgamearea Projected Costfor AdditionalItems: $3,096,250 As with Option A, we recognize thatthefullreplacementof theexisting irrigation systemwill become aneventualnecessity.The samecomments applytoOption DasnotedforOption A. Wehave studiedtheadditionalcost($740,000), which is lowerforOptionDasmoreof the existing systemis covered within areas impactedbythe reconfiguration, as an alternative scope to beconsideredforOption D. OPTION F Option Frepresents anopportunitytoremove landfromgolf courseuseand transformittouse forathleticfield(s).Thisoption was added tothereconfiguration scopeofthegolf course architect basedon previous studieswith thesame objective. ForOption F, ageneralconstraint placed on the planning work was toretain yardage (6,800 yards)anda par of 72. Safetyfrom the newtrailsystem andwithin adjoining holes was tobemaintained with no compromiseto standardguidelines. Option Ffacilitatesthe San FrancisquitoCreek realignment asrequiredbytheSFCJPA.The option is primarilydistinguished bytheremovalof approximately2.5 acresfromthegolf course parcel.Thisland areaisshown as athleticfielduse, accommodating afullNCAA sized soccer field orcombinationoffields andfieldtypes of thesame proportion andarea.This area would have limited roomforparking expansion. Option Frealigns holeswith more varietythaninOption A. Aswith Option D,thereconfiguration departsfromthecommon parallelrouting of theexisting course.Golf holes aremoved away fromthe levee toformnewviews and variation. Bunker work andnaturalization enhancements aremadethroughoutthecoursein ordertoprovide amoreconsistentgolf experience and National GolfFoundation Consulting,Inc. – Cityof Palo AltoReport –6 landscape. Asaresultof the“domino effect”of moving holes tomakeroomfortheathleticfield area,theseenhancements are asprevalent asthat affordedthroughOption D. Thehighlightsof changes in thisoption include: 12.5golf holesrelocated 12 newgreens constructed Par 72 6,700/ 6,300/ 5,000 yards Allbunkersreconstructed and/or new 43.4 acrestransformedto naturalized areas (non-managedturf) NewIsland GreenHoleNo. 13(elevated teeandBayview) NewDouble Green Nos.3 and 15 NewHole No. 5 (elevatedgreenand BayView) NewHole No. 7 (splitfairway) Revised Hole No. 18 (naturalized hazard) NewHole No. 4 NewHole No. 17 NewHole No. 16 NewHole No. 3 NewHole No. 3 NewHole No. 15 Newpracticegreen/shortgameareadeveloped along with reconfiguration Temporarypreparation ofthe athleticfieldarea(notfield development or improvement) The totalprojected cost forthisoptionis$5,855,454,includingall professionalfees, project managementand contingency. Additional Work Additional(“alternate”)items within thegolf course itself maybe undertaken bythe City concurrentlywith the development ofOption F.These optionalitemsinclude: Sand capping of newturfareas(newfairways to be constructed) Use (spreading) of imported soilfromthe Stanford University MedicalCenterProject Reconstruction of allgreens (6additionaltothose covered) Re-turfing of allexistingfairways (21.5 acresadditional) Replacement ofthebalance of theexisting irrigation system Reconstruction andfeatures atthe existing practicegreenarea Construction of anewon-courserestroomfacility Projected Costfor AdditionalItems: $2,530,000 As with OptionsA andD,we recognize thatthefullreplacement ofthe existing irrigation system willbecome an eventualnecessity.ThesamecommentsapplytoOptionF as notedforprevious National GolfFoundation Consulting,Inc. – Cityof Palo AltoReport –7 options.Wehave studied theadditionalcost($425,000), which is lowerforOption F(thanfor A or D)asmore ofthe existing systemis coveredwithin areasimpactedbythe reconfiguration, as an alternative scopeto be consideredforOptionF. OPTION G OptionGrepresents aplan toremove more landfromgolf courseuse,transformingthis landto useformultiple athleticfield and non-golf recreation purposes.This optionwas added tothe reconfiguration scopeofthegolf course architectbased onthe direction oftheCityto investigate whethertheviabilityof thegolf coursecould be preserved while opening more area (thanwith OptionF)for non-golf recreation. Theconstraintplaced ontheplanning work wasto retain aregulation layout with a par of 70or 71. Safetyfromthenewtrailsystem and within adjoining holes was to bemaintained with no compromisetostandardguidelines. NGF Consulting was inthe veryearlystages of our consulting workforthe Citywhen OptionG was put intomotion. Among theforemostquestions we were askedwas whethera significantly shorter courseand/or asignificantlylower par would be advisable fortheCityof Palo Alto.Our conclusion was thatthePalo Alto market,especiallyin the City’s situation as asingle-course owner, is bestserved in this locale bya regulation18-holegolf course witha parof 72 being preferred.Thisconclusion is basedon severalfactors, including thefollowing: A strong historyof thisgolf course producing annualrounds inexcess of 80,000 Statedpreferencesbythe currentcustomer basetomaintain lengthand par Viabilityto hostgroupgolf events“demanding”afull-lengthcourseexperience Competitiveness toareacourses Long termviabilityto hostregionalevents (qualifying, largertournaments,etc.) Regionalofferingsof shortercourses Plan options thataccommodatemoreflexible (shorter)yardagesflexibilityas part of thereconfiguration work NGF Consulting sharedthis conclusion with the Cityand thegolf coursearchitect, recommending thatOption Gshould,if possible,preserve aregulation length of about 6,500 yards (back tees) andapar of 72preferred.If pressed tochoosebetweena reduction in par(to 71) or areduction in yardagelower than 6,500,we opined that it would bebetterto preserve yardage at 6,500 andallowpar to dropto71.(Note:A par71coursemeasuring 6,500yards is perceived as more difficult, andcanbemarketedsuch,thana coursemeasuring thesame yardage but holding apar of 72.Thisis becausethe ratio of partoyardage ismore challenging.) OptionGalsofacilitatesthe San Francisquito Creek realignment asrequired bythe SFCJPA. Theoption involves the removalof approximately10.5 acresfromthegolf course parcel.This land area isshown as athleticfield use(threefullsized NCAA soccerfields orcombination of fieldsandfieldtypes of the sameproportionandarea), andadditionallyshows areasfor asmall playground, wetlands park andpicnic space, andtrails connecting tothe San Francisquito Creek levee trails,Baylands and neighborhood. OptionGrealigns holeswith more varietythaninOption A. Aswith Option Dand F,the reconfiguration departsfromthe common parallelrouting ofthe existing course.Golf holesare moved awayfromthe levee toformnewviews and variation. Bunker work and naturalization National GolfFoundation Consulting,Inc. – Cityof Palo AltoReport –8 enhancements aremadethroughoutthecourse inorderto provide a moreconsistentgolf experience and landscape. Aswith OptionF,butto an evengreaterextent,virtuallyallareas of the existing course would bereconstructed,enhanced and improved. Thehighlightsof changes in thisoption include: 18golf holesrelocated 18 newgreens constructed Par 71 6,600/ 6,100/ 5,000 yards Allbunkersreconstructed and/or new 43 acrestransformedtonaturalized areas(non-managedturf) IrrigatedTurf Reducedfrom 135acresto 92acres NewIsland GreenHoleNo. 12(elevated teeandBayview) NewDouble Green Nos.3 and 15 NewHole No. 5 (elevatedgreenand BayView) NewHole No. 7 (splitfairway) NewHole No. 18 (par-5,naturalized hazard) NewHole No. 4 NewHole No. 14 NewHole No. 10 NewHole No. 17 NewHole No. 16 NewHole No. 3 NewHole No. 3 NewHole No. 15 Newpracticegreen/shortgameareadeveloped along with reconfiguration Fullirrigation systemreplacement(allareas ofthe18-holegolf course) Reconstruction andfeatures atthe existing practicegreenarea Construction of anewon-courserestroomfacility Temporarypreparation ofthefield/recreation area(notfield development or improvement) The totalprojected cost forthisoptionis$7,573,262,includingall professionalfees, project managementand contingency. Additional Work Additional(“alternate”)items within thegolf course itself maybe undertaken bythe City concurrentlywith the development ofOptionG.These optionalitemsinclude: Sand capping of newturfareas(newfairways to be constructed) Use (spreading) of imported soilfromthe Stanford University MedicalCenterProject Reconstruction of allgreens (3additionaltothose covered) Re-turfing of allexistingfairways (21.5 acresadditional) Replacement ofthebalance of theexisting irrigation system National GolfFoundation Consulting,Inc. – Cityof Palo AltoReport –9 Projected Costfor AdditionalItems: $1,675,236 Unlike other options,Option G includesfullirrigation replacement.This isbecause thereis no viable methodof leaving onlythreegolf holes withoutreplacement.Variables include pumping pressure,controlzonesand other logisticsthat had tobe considered. DEFERMENT OFCERTAINIMPROVEMENTS Other additionalwork listed undereach option above has notbeen incorporatedtothepro formas preparedbyNGFConsulting duetothecomplexityof attaching incrementalrounds, revenues and expensestothese improvements.However, both NGF andMr. Richardson believe thatdeferring some or allofthe alternative (optional) improvements, including long- range work tothe clubhouse building,grounds,entry, practiceareas,etc.,willlikelyhave a negative affect onrevenues and constrain somewhat the City’s abilityto “re-brand” PaloAlto GC. Over theyears,NGFConsulting has witnessedthe implications ofroundsandrevenues ongolf facilities that have deferred maintenance and/orcapitalimprovements.Eventually, golf course conditions and/orthe overallgolf experiencefallto a levelwhere rounds,pricing and,as a result,revenues are constrained,asis themunicipality’s abilityto effectivelymarketthegolf course as anything otherthana“value” provider.Golf consumersbegin tomigrateawayfrom facilities that are not well maintainedwhen thereare otherproximatefacilities offering better conditions and/or equalor even slightlyhigherprice points. Among the optional/alternative improvementsassociated with Palo AltoGolf Course, wefindthe mostpressing are: Course conditions, especiallygreens,drainage and turf condition Yardageflexibility(to attract beginners,youth, women andseniors) Geese andburrowing animalintrusion and damage On-courserestroomreplacement Clubhouse condition andavailable space Most of the above arewellcorrected ormitigatedthoughthereconfiguration options.However, replacement ofthe irrigation system,asan example, is notfullyaffordedwithin thebasework of OptionsA,Dand F. Especiallyin the caseof A and D,this alternate costmaybe prudentto examine closer asconditions cannotdramaticallyimprove course-wide without aplan toreplace the system.Ifthesystemis allowed to runfor along period withoutreplacement,revenue is bound todropincrementallyas turf conditionsdecline. Intermsof substantive clubhouse improvements,such asexpanding themeeting space, improvements are not likelyto payfor themselves underthe current operating structurewherebyonly7% of food& beveragerevenue accruestotheCity. Yardageflexibilityis accommodated inmost ofthe options,butmoreso as more work is covered.OptionsD, Fand Gadequatelyallowformoreflexibilityand willtherefore have the potentialtoattractmoreplayer types.Thegeeseand burrowing animalissues, according tothe golf course architect,will be positivelymitigated byallreconfigurationoptions. Yet,plan options with more area impactedwilllikelyresult inmoreappropriatehabitatandareasforthese animals touseratherthan theturf areascurrentlyintendedforgolfers. National GolfFoundation Consulting,Inc. – Cityof Palo AltoReport –10 Market Overview Below, NGF Consultingprovides a summaryof key“external”factorsthatcharacterize thetrade area in which the PaloAltoGolf Course operates.Weincludebasic demographic variables that have the potentialtoaffectthe economicperformance of thegolffacility, as wellas an analysis of supplyand demand indicatorsin thepublicgolf market. DEMOGRAPHICSSUMMARY Utilizing researchmaterials provided byApplied GeographicSolutions,Inc.(a supplierof demographicresearch based on U.S.Censusresults),NGFConsulting has examined relevant characteristicsof thelocalpopulation.Inthefollowing tables, NGF Consulting indicatesthe population,median age,and median household incometrendsforSan Mateo andSantaClara counties,as wellas the3-,10-, and15-milemarketrings surrounding thegolf courseandthe totalUnitedStates. Palo Alto Golf Course 3mi 10mi 15mi San Mateo County Santa Clara County U.S. SummaryDemographics Population1990 Census 94,021 697,234 1,482,687 649,622 1,496,702 248,710,012 Population2000 Census 100,652 765,828 1,662,257 707,161 1,682,585 281,421,906 CAGR1990-2000 0.68%0.94% 1.15%0.85% 1.18%1.24% Population2010 Census 104,099 806,139 1,750,080 718,376 1,781,728 308,699,447 CAGR2000-2010 0.34%0.51% 0.52%0.16% 0.57%0.93% Population2016 Projected 105,110 817,407 1,775,178 725,980 1,805,397 325,288,086 CAGR2010-2016 0.16%0.23% 0.24%0.18% 0.22%0.88% Median HH Inc $94,304 $96,743 $91,334 $88,233 $88,860 $53,908 Median Age 37.5 37.2 37.1 39.4 36.2 36.9 CAGR=CompoundAnnual GrowthRate Fromthedatacollectedforthis study, NGFConsulting hasmadethefollowing observations regarding the demographics of Palo Alto andsurrounding areas: The10-mile and 15-milemarketsaroundPalo Alto GCaredense,with 2010 estimates of about 806,000 and 1.775million residents,respectively, in these two submarkets.The10-mile markethasaddedmorethan 40,000 net newresidents since 2006,while the 15-mile marketgrewbynearly88,000 people.Population growth is projectedto beverymoderatethrough2016. TheMedian Ages inthesubjectmarket areasaregenerallysimilar tothenational median age of36.9years,though SanMateo Countyoverallis significantlyhigher at 39.4 years.Ingeneral,the propensityto playgolf withgreaterfrequencyincreases with age,making relativelyolder marketsmore attractive togolf facilityoperators,all otherfactorsbeing equal. Median Household Incomes intheareaaremuch higherthanthe nationalmedian. For instance,the10-mile marketexhibits incomesnearly80% higherthanthe nationalmedian incomeof $53,908.Ingeneral, higher incomeresidentsare more likelyto participate ingolf,andtheyplaymorefrequentlythan lower income National GolfFoundation Consulting,Inc. – Cityof Palo AltoReport –11 residents.Thesehighfigures aremitigatedconsiderablybythe veryhighcost of living in theBayArea. GOLFMARKET OVERVIEW Belowwe provide an overviewof recent andemerging nationaltrends withrespecttogolf participation andmunicipalgolf, as wellas a summaryofgolf demandandsupplyindicators in the localmarketsfor Palo AltoGolf Course. NGFConsulting utilizes predictive models as benchmarksforestimating potentialmarketstrength.Themethodologyfordetermining the relative strength ofthesubjectmarket isdescribed in thefollowing section. National Trendsin GolfDemand and Supply Participation Golf participationin theU.S. hasgrownfrom3.5% ofthe populationin the early1960sto about 9.2%of thepopulationtoday. NGF estimatesthatthe numberofgolfersfellslightlyin 2011 to 26.1million; it was encouraging news thatthenumberofgolfersgained in2010-11held steady vs. previous years while the numberof lostgolfers droppedsignificantly. For researchpurposes, agolferis definedasa person age6 or above who plays at leastoneround ofgolf inagiven year. All U.S. Golfers (in millions) 1985 1990 1995 2000 2005 2010 Allgolfers age 6+ 19.5 27.4 24.7 28.8 30.0 26.1 Source: National Golf Foundation Thenumber ofroundsofgolf alsofell2.3%during thepastyear,from486million in 2009to 475 million in 2010 (mostrecent year NGF has published),corroborating the decline in the number of golfers.Inthe PacificRegion,which includes California,thestatisticsare somewhat more favorable: Regional Profile Participation Rate Numberof Golfers Percent of Golfers Total Annual Rounds(millions) Pacific Region 7.3% 3,276,000 12.5% 50.4 United States 9.2% 26,122,000 100.0% 475.0 Source:Golf ParticipationintheU.S., 2011edition, National Golf Foundation Considering theseverityof therecession anditseffects onboth discretionaryincome andtime, golf has helduprather well. Multiple NGF studiesof golferssince 2008would attributethe gradualdecline ingolfersandrounds primarilyto the impact of lower jobsecurityand concern over personalfinances,not waning appealforthegame. Over thepast 50years,golf demandgrewatabout 4% per year while facilitysupplygrewat about 2% per year.However, since 1990,thesituation hasreversed –demand hasgrown at only0.5% peryear while facilitysupplyhasgrown at1.4% per year.Withthe increasein supply, National GolfFoundation Consulting,Inc. – Cityof Palo AltoReport –12 we are seeing amarkedincrease in competition,and thesupplyisgreaterthanthedemandin somemarkets. In additiontoincreasedcompetition, otherfactorshave contributedtoa decline in the numberof rounds per coursenationallyfrom 2002to2011.In theNGF’smostrecentsurveyof coregolfers conducted inSeptember2011, wefoundthatfearfulfinancialoutlooks,weak consumer confidence,and negativegolferattitudeshave also played a role.The combination of thesehas causedmanygolffacilities tobecome distressed,particularlythosethathave a high debtload because of higherconstruction costs andthe perceived need to build high-end courses. Thenumber ofgolf course closingsquadrupledfrom anannualaverage of24 coursesperyear in the 1993-2001timeperiod tomorethan100 courses in2005.In2006,therewas negative net growthin golffacilitiesforthefirsttimeinsix decades,with 146 18-holeequivalents closingand 119.5 opening.In2007,there were113 openingsand121.5closures,and in 2008, 72golf courseopenings and106closures.In 2009,49.5openingsminus 139.5closures equatedto anetloss of90 18-hole equivalents.Closures continue tobedisproportionately public, stand-alone 9-holefacilities or shortcourses (executive or par-3length)with a value price point. Netgrowth insupplyhas been negative nowforfourconsecutive years, with the largest drop of90 courses in 2009.However, U.S.openingsaveraged 200+ (net)for20 years, and total18-holeequivalent supplyis up5%since 2000,indicating aslowmarketcorrection is underway. In October 2011, NGF projected2011netgrowth of aboutnegative 106.5 (openings minus closings), andprojected actualclosuresfor2011 would be closerto150. NGF estimatesthatnationalrounds played experienced an overalldropfrom 2000to2010 of -9.5%.Bythe endof 2011,rounds hadfurther declined 2.5%in theU.S.,butrounds inthe PacificRegionhad increased 1.2% andCalifornia was up 2.3%. Onthe positive side, thegrowth ingolf coursedevelopment has slowed considerablynationally and in themajorityof localmarkets, atrendthatshould help ease someof thecompetitive pressure. Anotherpositive trend istheaging of America.BabyBoomers are rapidlyapproaching retirementage whengolf activityflourishes.The babyboomersrepresentnot onlythelargest single demographicin the US, buttheyalso approach retirementage with more disposable incomethan anypreviousgeneration. National GolfFoundation Consulting,Inc. – Cityof Palo AltoReport –13 Local and Regional GolfSupplyand Demand Indicators Thefollowing table summarizes somekeygolf supplyand demandmeasuresforthelocal marketsbased onNGFresearch andgolf demand predictive models. Palo Alto Golf Course 3mi 10mi 15mi San Mateo County Santa Clara County U.S. Golf Demand Indicators #of Golfing Households 6,989 55,008 116,506 49,136 116,439 21,237,600 Number of Rounds Played 226,453 1,769,537 3,717,852 1,571,308 3,765,371 498,831,616 GolfingHouseholdIndex 101 104 103 105 106 100 Rounds Played Index 140 142 141 143 146 100 Golf SupplySummary TotalGolf Facilities 2 13 25 14 33 15,902 Public Golf Facilities 2 8 16 6 20 11,633 Private Golf Facilities 0 5 9 8 13 4,269 TotalGolf Holes 36 207 378 279 576 268,443 Public Golf Holes 36 117 225 108 342 191,214 Private Golf Holes 0 90 153 171 234 77,229 Household/Golf SupplyIndicators Households per 18Holes: Total 19,132 25,655 29,805 16,754 19,127 7,733 Households per 18Holes: Public 19,132 45,390 50,073 43,282 32,214 10,856 Households per 18Holes: Private NA 59,007 73,636 27,336 47,082 26,879 Households SupplyIndex: Total 242 325 378 212 242 100 Households SupplyIndex: Public 171 405 447 387 288 100 Households SupplyIndex: Private 0 221 275 102 176 100 Golf CourseConstruction Activity 2001-2010 Totalholes addedpast 10 years 0 0 18 0 72 24,318 Public holes added past10 years 0 0 0 0 54 17,469 Private holes addedpast10 years 0 0 18 0 18 6,849 PercentTotalHoles Added 0.00%0.00%4.80%0.00%12.50%9.10% Percent Public Holes Added 0.00%0.00%0.00%0.00%15.80%9.10% Percent PrivateHoles Added NA 0.00%11.80%0.00%7.70%8.90% National GolfFoundation Consulting,Inc. – Cityof Palo AltoReport –14 Golf participationrates inthesubjectmarkets around Palo AltoGCare verysimilar to the nationalbenchmark,while rounds demandedper household areabout40% higherthanthenationalfigure.Thehighrounds demanded per householdare indicative of theyear-roundgolf climate,the highnumberofgolf courses,and a demographicprofilethatis generallyconducive to highgolf demand, particularlyas it relatestomedian household income. There arethirteentotal,including eightpublic,golffacilities (including Palo AltoGC) in the 10-milemarketarea, while there are 25totalfacilities, including 21 public, within 15 miles of Palo AltoGC. As thetablesindicates,the subjectmarkets havesignificantlymore households per 18 holes ofgolf thanthenation overall. Forexample, in the10-milemarket area surrounding Palo AltoGC, there are nearlyfourtimes asmanyhouseholds pertotal 18 holes and4.5times as manyhouseholdsperpublic 18 holes than inthe overall U.S.(Wecontrastthesesupplyratios tosome ofPalo Alto’skeycompetitors in AppendixA). There was a spate of newgolf courseconstruction in theBayArea inthe1990s and early2000s. Forthe nine-countyBayArearegion,27totalgolffacilities were added between 1997 and 2006.This included 6 private (comprising 90holes)and 21 public (360 holes)facilities. However, as with therestof thecountry, newgolf course construction hasslowed to acrawlin thesubsequent years,andtheNGFdatabase reveals no newgolf course projects currentlyin planning or under construction within 15 miles of Palo AltoGC. Palo Alto andthegreaterBayArea arehometo alargenumber ofmajorcorporate and public employers,including manyhigh-techand internet companies.These large employers areprimetargetsforsoliciting tournament/outing play, and could be akey elementto boosting playlevels and revenues atthe Baylands GC.Outingsare generallysold at the highestgreenfee,andalso expose a number ofgolfers tothe facilityforthefirsttime. Visitorstothe Palo Altoarea have thepotentialto significantlyimpactdemand atgolf courses.Thoughvisitation numbers were not available for Palo Altospecifically, it is estimatedthataboutsixteen million people visit San Franciscoalone eachyear, and the overallBayArea hasconsiderablymore visitorsthanthat. NGFresearch shows thatroughlyone-third ofallgolfers participatein the activitywhile traveling, playing .557rounds per dayoftravel. This supplementalmarketshould be atarget of marketing effortsoncethe improved Baylands Golf Club is opened. National GolfFoundation Consulting,Inc. – Cityof Palo AltoReport –15 COMPETITIVE GOLFMARKET One ofthe objectives of this effortisto identifyanyopportunitiesthatmayexistfortheimproved “Baylands Golf Club”toincreasemarketshare,fees andrevenues.Inthissection,we present an overviewof thepublic accessgolf marketin which thecurrentPalo Alto GCoperates,with a focus onkeycompetitors.Themapbelowshows the location ofthesefacilities inrelation to Palo Alto Golf Course. Inthetablesthatfollow, NGF Consulting presents summaryoperationalinformationforthegolf facilities identified asdirect competition tothe Palo AltoGolf Course. NGFConsulting identified the primarycompetitorsbased on anumberoffactors, including price point,location,NGF experience in thismarket, andinputfrombothfacilitymanagementandCitystaff. National GolfFoundation Consulting,Inc. – Cityof Palo AltoReport –16 SummaryInformation – PrimaryCompetitors Thetable belowprovides summaryinformationregarding thegolf courseswe have identified as Palo Alto GC’s primarycompetitors. Palo Alto MunicipalGolfCourse KeyCompetitors – SummaryInformation Golf Facility Location Type Year Open Par/ Slope Front Tee/ Back Tee LocationRelative to PAGC* Palo Alto Municipal Golf Course Palo Alto MU18H 1956 72 / 122 5,744/ 6,833 -- Crystal SpringsGolf Course Burlingame MU18H 1924 72 / 127 5,580/ 6,628 16 mi NW Poplar Creek Golf Course San Mateo MU18H 1933 70 / 115 4,768/ 6,042 14.5mi NW San Jose Municipal Golf Course San Jose MU18H 1968 72 / 119 4,200/ 6,700 13 mi SE Santa Clara Golf & Tennis Club Santa Clara MU18H 1987 72 / 118 5,521/ 6,723 8.5 mi SE Santa Teresa Golf Club San Jose DF 27H 1963 71 / 126 4,011/ 6,742 24.5mi SE Shoreline Golf Links Mountain View MU18H 1983 72 / 129 5,437/ 6,996 2.5 mi SE Spring ValleyGolf Course Milpitas DF 18H 1956 70 / 113 5,453/ 6,116 15 mi E Sunnyvale Golf Course Sunnyvale MU18H 1969 70 / 118 5,170/ 5,742 5.5 mi SE *Air milesfrom subject site,roundedtohalf-mile; actual drivingdistances will likelybegreater. Type: DF–DailyFee; MU–Municipal National GolfFoundation Consulting,Inc. – Cityof Palo AltoReport –17 Thetable belowshows summaryfacilityinformation regarding Palo Alto MunicipalGolf Course andits primarycompetitors.Reported roundsfor2007 arefromthe2008 Economic Research Associatesreportto theCity. Averagegreen/cartrevenue perroundfor San Jose and SantaTeresaare estimated basedonERA 2007 numbers. SummaryOperating Data –Palo Alto MunicipalGolf CourseandPrimaryCompetitors Golf Facility Total 2007 Rounds Total 2011 Rounds Average Green / Cart Fee per Round 18-Hole Resident Green Fee (WD/WE) 18-Hole Non- Resident Green Fee (WD/WE) PerPerson 18-Hole Cart Fee 18-Hole Twilight Green Fee (WD/WE) 18-Hole Senior Resident Green Fee (WD/WE) 18-Hole Super-Twi Green Fee (WD/WE) Palo Alto Municipal GC 76,241 66,740 $30.20 / $4.50 $37/$47 $39/$49 $14 $30/$34 $28/DNA1 $26/$28 Crystal SpringsGolf Course 73,654 63,000* $24 /$8 DNA $44/$66 $16 $36/$43 $30/DNA $26/$36 Poplar Creek Golf Course 86,315 70,709 $33.11 / N/A $33$45 $38/$53 $13.50 $27/$33 $22/DNA1 $19/$25 San Jose Municipal GC 86,991 78,000* $32 /$5 DNA $37/$51 $14 $26/$33 $23/DNA $20/$24 Santa Clara Golf & Tennis 87,120 81,000 $26 /$10 $25/$34 $37/$50 $14 $17/$23 res $26/$29 n/r DNA2 $12/$14 res $16/$18 n/r Santa Teresa Golf Club 75,0003 65,000*$29.60 / $5.70 DNA $40/$46/$60 $13.50 $25/$29/$34 DNA $17/$19/$25 Shoreline Golf Links 67,135 50,000 $28 /$5.60 $31/$47 $38/$54 $12 $25/$28 $21/DNA1 $17/$17 Spring ValleyGolf Course N/A N/A N/A DNA $37/$55 $14 DNA/$45 $28 M-F $27/$30 Sunnyvale Golf Course 80,513 72,535 $28 /$4.50 DNA/$44 $35/$48 $13.50 $25/$26 res $25/$30 n/r DNA1 $16/$20 KEY *NGFConsultingestimate N/A–Informationnot available DNA–Does not apply/ Not offered Note: For SanJose, SantaTeresa, “afternoon” rates usedfor twilight and“twilight” forsupertwilight; for SpringValley, “midday” andafternoonusedfor twi /supertwi. 1 Non-resident seniors pay$33 at PaloAlto, $28at Shoreline; senior discounts at Poplar Creekarefor residents only. 2 SantaClaraoffers senior monthlyticket; Sunnyvaleoffers senior discount card. 3 Rounds listedareforregulation18-holecourseonly. National GolfFoundation Consulting,Inc. – Cityof Palo AltoReport –18 SummaryofFindings – PrimaryCompetitors Based on datareportedto NGFConsulting byareagolf operators, Palo Alto Golf Course is positionedquite similarlyto itschiefmunicipalcompetitors.Thereported averagegreenfeerevenue perroundamong thesubjectmunicipalfacilities in 2011 generallyfellbetween $28 and $32, while average cartrevenue perroundwas most commonlybetween $4.50 and $5.70. Postedgreenfees havebeengenerallyflat inthismarketforthelastseveralyears, with onlyperiodic marginalincreases aimed at costrecoveryat somecourses. Non-residentgreenfeesfallwithin a relativelynarrowrangeamong Palo Alto GC and itsmunicipalcompetitors,butNGFdid notethat Palo Altois atthe lowend ofthe non-residentpricing spectrum,particularlyon weekends.Webelieve thatan improved andre-branded Palo Altofacilityshould be ableto absorb$5to$10 increasesfornon-residentrounds,depending onthereconfiguration option chosen and varying byfeecategory. Of themunicipalgolf courses profiled(leased SantaTeresa excluded),allbut San Jose Municipaloffered afee discountforresidents (Sunnyvale restrictedthe discount to weekends). Most people NGF spoketo considerthe cityof Mountain View’s Shoreline Golf Links Courseto bePalo AltoGC’s mostdirectcompetitor.Shoreline’s reputationin terms of maintenancestandards hasreportedlytakenahit in recentyears,andthegolf course appearedtobe inonlyfair conditionduring NGF’s visit.Shoreline has dropped about one-thirdof itsrounds sincethemid 2000s andwas the least active facilityamong thekeycompetitorsin 2011,with areported 50,000rounds.Due to its location, Shoreline probablysuffersmorethanmost BayAreagolf courseswith the Canadian Geese problem.Therewere also a largenumber of cootsonthe course during ourvisit. As was the casewith nearlyeverygolfmarket NGF examined nationally, average annualrounds played atmanyBayAreagolf courses droppedby25%ormore between the late1990s/2000 andthemiddle part ofthe 2000s.Based onrounds reportedto NGF aspartof this studyeffort,rounds played among the direct competitive set have continued todecline sincethe 2006-07timeperiod,though variations in themostrecent years are atleast partlyattributable toweather variations. Even with thefalling activitylevels, roundsplayed per18 holesamong the subject municipalgolf coursesremain among the highestwe’ve observed anywhere in the U.S. Santa ClaraGolf &Tennis andSanJose Municipal, at±80,000rounds in recent years, arecurrentlythemostactive among the competitive set. Because of heightenedcompetitionandtoday’s economicrealities,fee discounting (e.g.,through internalyield management, useof internet wholesalers suchas golfnow.com),even among high-end dailyfeecourses,is nowcommonin theBay Areagolf market.As aresult,the linescan become blurredbetween “rack”ratesand what themajorityof customersareactuallypayingfor aroundofgolf.Thisdisparity is notcommon among the municipalgolf courseswe surveyed. National GolfFoundation Consulting,Inc. – Cityof Palo AltoReport –19 PALO ALTOGOLF COURSE MARKET POSITIONING ASSESSMENT NGF hasattemptedtoprovide a qualitative, or subjective,reviewof howPalo Alto GC, under both itscurrent configuration andthe alternatereconfiguration options being considered, stacks up against itskeycompetitorsasidentified above.The objective of thisrelative assessment isto provide somejustificationfor assuming anincrease inmarket share(andsustainablegreen fees)for Palo AltoGC, especiallywith themore intensive renovation options. NGF Consulting has scoredthekeycompetitorsto theplan options(A, D,F andG)for Palo Alto GC.A baseline score isalso providedfortheexisting Palo Altogolf courseandfacility. This scoring hasbeen accomplished bylooking attheamenities,coursequalityandreputation associated with eachcompetitivefacility. Reliance has beenmade onavailable reviews, NGF data,discussions with BayAreagolf writers/course reviewers and ourvisitstothesubject courses. Torank thereconfiguration plansfor PaloAlso we relied ontheschematicplanning work developed as of this date,together with ourratingsforthe planoptions.Scores are expressed as A+, A,A-, B+,B,etc.through D-. Because ofthe options(alternate) work tobe considered, no overall“average”grade is provided. Rather, categories ofcomparisons areprovided. Such scorings are both subjective and objective, combining impressionswithfacts aboutthefacilities, and in thiscase, proposed plans. Because ofthesubjective componentofthis review, personal opinion and disagreement with someoftherelative scoring should beexpected.Assuch,the scoring should beusedas amethodforthereadertoform opinions incombination with the otherreporting coveredwithin this report. ComparisonofPalo Alto GCto KeyCompetitors Golf Facility Clubhouse Facilities Practice Facilities Consumer Reputation Golf Conditions* Palo Alto(Existing) C- C+ C+ C Palo Alto(Option A) C- C+ B B- Palo Alto(OptionD) C- C+ A- B+ Palo Alto(OptionF) C- B A A- Palo Alto(OptionG) C- B+ A+ A SanJose Golf Course D A- A- B- SantaClaraGolf &Tennis B A- A- C+ ShorelineGolf Links B+ B+ C C- SunnyvaleGolf Course C- D- D- C+ Crystal Springs Golf Course A- B+ B+ B Poplar Creek Golf Course A- D B- B SantaTeresaGolf Club B- B B- B- Spring Valley B- B- C+ C+ *As observedJanuary-February 2012 National GolfFoundation Consulting,Inc. – Cityof Palo AltoReport –20 Financial Performance Models for Palo Alto Golf Course As part ofthis studyeffort,NGFConsulting hasprepared ananalysis to showwhat the potential economic performance of Palo AltoMunicipalGolf Course could beconsidering the reconfiguration options presentedin thisreport.Inthissection,we estimate thefacility’s economic performance based on aset of assumptions thatmayormaynot becomereality.We feelthattheseestimatesrepresentthe besteffortto createa“fairestimateof performance”for thisfacilitybased on ourunderstanding ofthegolffacilityoperation, itsplace in themarket and the changesproposed inthevarious renovation options. ThePalo Alto Municipal GCperformancehasbeen projectedunderthe assumption thatthe operation iscontinued‘as-is’with threeseparatecontractsformaintenance, pro shopand food/beverage.The basic contractterms inplacein FY2012 areassumedto continuethrough FY2021.TheNGFhas also assumed a“standard”setof externalassumptionsforregional economic performance,consumerdiscretionaryincome,and weather, with neithersevere declines nor increases inanyof thesemeasuresthrough 2021. RECENT HISTORICAL PALO ALTOGC PERFORMANCE In ordertoputtheproforma projections incontext, we have summarized thefive-year performancehistoryof Palo Alto GCin thetable below. Palo Alto MunicipalGolfCourse HistoricalRevenue Performance(2008-2011) Revenues FY2008 FY2009 FY2010 FY2011 GreenFees $2,169,230 $2,073,809 $1,958,234 $1,859,473 CartFees 345,656 313,224 339,090 302,815 Driving Range 346,447 365,908 399,773 343,878 MonthlyPlayCards 161,368 161,544 135,848 154,933 Tournament/LeagueFees 2,227 2,651 1,921 2,190 Class Program /Other Fees 0 0 0 11,844 TotalGolf CourseRevenues $3,024,928 $2,917,136 $2,834,866 $2,675,133 OtherRevenue Merchandise Sales 718,450 737,050 684,725 663,400 Food Sales 667,000 0 610,725 637,800 Liquor Sales 172,000 0 141,850 149,000 F &BConcession Payments FixedLease $0 $43,811 $0 $0 Variable Portion $58,730 $0 $52,680 $55,076 UtilityPayment $25,920 $19,440 $28,080 $25,920 TotalF &BConcession Payments $84,650 $63,251 $80,760 $80,996 Pro Shop Concession Payments FixedLease $0 $0 $0 $0 Merchandise(4%) $28,738 $29,482 $27,389 $26,536 TotalPro Shop Concession Payments $28,738 $29,482 $27,389 $26,536 TotalGrossMargin to City $3,138,316 $3,009,869 $2,943,015 $2,782,665 RoundsPlayed 77,989 75,511 69,791 67,381 National GolfFoundation Consulting,Inc. – Cityof Palo AltoReport –21 Palo Alto MunicipalGolfCourse HistoricalExpense andNetIncomePerformance (2008-2011) Expenses FY2008 FY2009 FY2010 FY2011 Salaries & Benefits $951,786 $929,335 $721,596 $259,455 RangeFees 138,579 152,745 142,267 130,152 CartFees 131,789 127,836 121,630 117,529 ClubFees 6,473 6,198 5,424 5,576 FixedLozares ManagementFee 373,435 409,989 388,898 381,544 Contract Maintenance ---475,000 Repairs &maintenance 34,791 39,295 33,321 21,943 Advertising & Publish 5,560 6,583 4,299 10,765 Supplies and Materials 129,891 144,037 119,458 43,742 Gen.,Rents,Fac. & Equip 5,959 2,736 944 675 Water Expense 279,326 409,132 271,495 361,870 Other DirectCharges 36,998 39,255 38,882 45,263 IndirectCharges 108,641 132,072 110,343 102,571 TotalCityOperating Expenses $2,203,228 $2,399,213 $1,958,557 $1,956,085 Net Income From Operations(Loss)$935,088 $610,656 $984,458 $826,580 Incomefrom Sale of Property $35,230 D/SIncome $33,629 $32,855 $32,200 $0 TotalNon-Operating 33,629 32,855 32,200 35,230 TotalIncome(Incl.Non-operating)$968,717 $643,511 $1,016,658 $861,810 Debt Service $559,795 $555,686 $560,674 $559,539 PaymenttoGeneralFund $94,849 $94,849 $47,684 $94,849 CostPlan Charges $337,590 $318,969 $332,155 $41,455 TotalDebt /OtherCharges $992,234 $969,504 $940,513 $695,843 Net Income or(Loss)($23,517)($325,993)$76,145 $165,967 Source: Cityof PaloAlto Rounds played at Palo Alto GCdecreased steadilyfromFY2008to FY2011,falling bya totalof 10,608,or13.6%. During thesametime,bothgolf revenues andnet incomefrom operations declined by11.6%. Despite thesignificantdecline in rounds andrevenues, net income afterdebt service, generalfundpaymentsand costplan chargesimproved bynearly$500,000 between FY2009 and FY2011 due toareductionin operating expenses andasignificant decrease incostplan charges associated withthe conversion toprivatizedgolf course maintenance. National GolfFoundation Consulting,Inc. – Cityof Palo AltoReport –22 PROJECTIONSBASEDON “OPTION A” NGF Consulting has created acashflowmodelforthe continued operation of Palo Alto MunicipalGolf Course(to bere-branded as“Baylands Golf Club)underthe assumption ofthe “Option A”improvements.Theseimprovementsassumethebasicminimum upgrades needed to improve thefacilitywithin the SFCJPAfloodmitigation project,with no substantialchangeto the character ofthegolf course.The NGFrevenue estimatehas beencombined with the presentoperating structureto provide afullestimate of Baylands GCperformanceforthenext 10 years, assuming successfulcompletion ofthe“Option A” upgrades.TheNGFhas projected growth to over$2.8million in totalgrossfacilityrevenue to theCity(from allsources)by2016. KeyAssumptions TheBase assumptions in preparing theprojectedfinancialperformanceestimates covers severalcategories, including rounds activity, greenfees, averagerevenues (carts,range, concessions,etc.),totalrevenue, expenses, capitaland debt. Under allscenarios, we have assumeduse ofmorecomplimentaryand discountrounds intheinitialyears afterreopeningfor the purposesofgaining back lostcustomers,stimulatingtrial, andgeneralpromotions. Rounds Performance Theroundsactivityperformanceassumptionsinclude: Rounds in FY2012 assume a3%reductionfromFY2011 totalroundsbased on actualperformanceinthefirst 6monthsof FY2012 asreported bystaff. Rounds in FY2013 assume ‘as-is’operationon 18 holesforthefirst 9months,then operation ononly9 holesforthe last 3months. During thelastthreemonths a reduction of 50%off historicalroundsforthe corresponding month isassumed.All roundsfrom April-June 2013 areassumedto be9-hole rounds. Rounds in FY2014 assume operation on9holesforthefirst6months,then operation with an upgraded 18 holesfor January-June 2014.Allroundsfrom July- December2013 are assumedto be9-holerounds with a reduction of 50% off historicaltotalsforthecorresponding month. Rounds projectionsassume increasesto astabilized levelof 68,200by2017. Theoveralldistribution ofrounds bycategoryis shown in the table below: National GolfFoundation Consulting,Inc. – Cityof Palo AltoReport –23 Palo Alto MunicipalGolfCourse(Baylands GC) Projected Activityfor Option A(2012-2021) As-Is 9-Mos.18-H/ 3Mos.9-H 6-Mos.18-H/ 6Mos.9-H Operateon 18-holeswith modest upgrade to thegolf coursedesign FY2012 FY2013 FY2014 FY2015 FY2016 FY2017 -2021 Weekday 18-Hole 5,400 3,500 2,200 5,200 5,300 5,600 Senior Non-Resident 6,300 4,200 2,300 5,850 6,200 6,500 9-Hole 1,500 6,400 11,500 1,500 1,600 1,700 Senior 900 600 500 900 1,000 1,000 Junior 1,400 1,000 600 1,350 1,400 1,500 EarlyBird 700 500 300 600 700 700 Twilight 11,300 7,800 4,500 10,800 11,000 11,600 Specials 7,500 5,400 3,500 9,400 7,600 8,000 Junior Card 1,100 800 500 1,050 1,200 1,200 Senior Card 800 600 400 900 1,000 1,000 Non-ResidentSenior Card 4,000 2,600 1,500 3,750 4,000 4,200 Sub-TotalWeekday 40,900 33,400 27,800 41,300 41,000 43,000 Weekend 18-Hole 10,200 7,000 4,000 8,550 9,800 10,300 9Hole 1,900 8,700 12,500 1,850 2,000 2,100 Junior 800 600 400 800 900 900 Twilight 6,200 4,100 2,400 5,800 6,000 6,400 Sub-TotalWeekend 19,100 20,400 19,300 17,000 18,700 19,700 ComplimentaryPlay 2,500 1,700 1,200 2,500 2,500 2,500 Tournaments 2,200 1,500 1,000 2,000 2,500 3,000 TOTAL ROUNDS 64,700 57,000 49,300 62,800 64,700 68,200 Average Fees / Revenue Theaveragegreenfeesperround bycategoryare shown in thetablethatfollows. Key assumptions driving thisestimate include: There is nochangein averagefeesforFY2012 over FY2011. Theonlyadjustmentin FY2013 isforthe 9-holerate,which has been adjusted downward to reflectthevariousforms of discounting expectedto bepresent when thefacilityis operating on only9 holes inthefinal3monthsof FY2013and thefirst6 monthsof FY2014.NGFhas assumed 9-holegreenfeewillgo as lowas $12.00 per round in somediscountcategories(e.g.,lateafternoon replayrate). Upon re-opening on 18holes (assumedJanuary1, 2014),averagefees ineach categoryareincreasedapproximately5% over FY2012 (rounded). For FY2015through FY2021, NGF hasassumed1% annualincreases inallfee categories. Average Cartfeeand driving rangerevenue perround in FY2012 isbasedonthe actuals in FY2011. For FY2013, average cart/rangerevenue perroundisreduced by20% (from 2011)toreflecttheoperation on only9 holes thelast3months. For National GolfFoundation Consulting,Inc. – Cityof Palo AltoReport –24 FY2014, average cartand rangerevenue isreduced by30%(fromFY2011)toreflect 6 months on9holes. ByFY2015, average cartand rangerevenue isrestored atthe 2011 leveland then increased by1%peryear through 2021. Averagemerchandisesales in FY2012 arebasedon theactualin FY2011.Average sales arereducedby20% (from2011)in FY2013 toreflect9 holes-onlythe last 3 months, and30% in FY2014 toreflect6monthson 9 holes.ByFY2015,average sales arerestoredtothe2011 level with 1% increases through2021. Averagefood andbarsales in FY2012 arebasedon theactualin FY2011.Average sales arereducedby20% (from2011)in FY2013 toreflect9 holes-onlythe last 3 months, and30% in FY2014 toreflect6monthson 9-holes.ByFY2015, average sales arerestoredtothe2011 level with 1% increases through2021. Theaveragegreenfeesbycategoryand ancillaryrevenue perroundareshown in thetable below(assume1% annualincreasesforFY2018-2021 asnoted): Palo Alto MunicipalGolfCourse(Baylands GC) Projected Average Green FeesforOption A(2012-2021) As-Is 9-Mos. 18-H/3 Mos.9-H 6-Mos. 18-H/6 Mos.9-H Operateon 18-holeswith modest upgradeto thegolf coursedesign FY2012 FY2013 FY2014 FY2015 FY2016 FY2017 Weekday 18-Hole $37.00 $37.00 $39.00 $39.39 $39.78 $40.18 Senior Non-Resident $32.00 $32.00 $33.50 $33.84 $34.17 $34.52 9-Hole $23.00 $18.00 $17.00 $25.00 $25.25 $25.50 Senior $28.00 $28.00 $29.50 $29.80 $30.09 $30.39 Junior $14.75 $14.75 $15.50 $15.66 $15.81 $15.97 EarlyBird $23.00 $23.00 $24.00 $24.24 $24.48 $24.73 Twilight $30.00 $30.00 $31.50 $31.82 $32.13 $32.45 Specials $19.00 $19.00 $20.00 $20.20 $20.40 $20.61 Junior Card $19.70 $19.70 $20.75 $20.96 $21.17 $21.38 Senior Card $23.50 $23.50 $24.75 $25.00 $25.25 $25.50 Non-ResidentSenior Card $27.50 $27.50 $29.00 $29.29 $29.58 $29.88 Weekend 18-Hole $47.00 $47.00 $49.50 $50.00 $50.49 $51.00 9Hole $27.00 $24.75 $25.75 $28.75 $29.04 $29.33 Junior $15.80 $15.80 $16.50 $16.67 $16.83 $17.00 Twilight $34.00 $34.00 $35.75 $36.11 $36.47 $36.83 Tournaments $34.60 $34.60 $36.50 $36.87 $37.23 $37.61 Avg.Cart Fee/ Round $4.54 $3.63 $3.18 $4.54 $4.58 $4.63 Avg.Range Revenue /Round $5.15 $4.12 $3.61 $5.15 $5.20 $5.26 Merchandise Sales /Round $9.94 $7.95 $6.96 $9.94 $9.94 $10.14 Foodper Round $9.56 $7.64 $6.69 $9.56 $9.65 $9.75 Bar per Round $2.23 $1.79 $1.56 $2.23 $2.26 $2.28 National GolfFoundation Consulting,Inc. – Cityof Palo AltoReport –25 Other Revenue Assumptions Totalgreenfeerevenue includes alldiscount(10-play) cards andmonthlypasses. Ancillaryrevenue per round (carts,merchandise,range,food,bar, other) isderived fromtotalrounds, including complimentaryrounds. Concession revenue tothe Cityof Palo Altoassumesthesamecurrentcontract basics through FY2021,with nominimumsafter April 2013.The Cityisassumed to collect:(1)7%of allF& B revenue;and(2)4%of merchandise sales. Expense Assumptions Labor expenses areforCityoversight only.These include allocationsforcontract oversight, Parks andRecreation Director,Division manager,etc.The estimateis intended toinclude bothsalaryand benefitsallocation and isincreasedby4.5% per year throughFY2021. Commissions paidtotheproshop vendorinclude 38%of driving rangegross revenue and 40%ofgross cartrevenue (aspercontract). Theproshopmanagementfee isfixed at $28,775 permonthforthefullduration of the NGF projection. Reimbursementsformerchantfees(mostlycreditcardfees)areassumedto be 1.4%of totalfacilityrevenue. Contractmaintenanceexpense totheCityof Palo Alto assumes: $62,500 permonthfor FY2012. $62,500 permonthforthefirst 9months,then$37,500 permonthsforthe last 3months of FY2013. $37,500 permonthforthefirst 6months,then$66,667 permonthsforthe last 6months of FY2014. $66,667 permonthin FY2015,growing at1.5% annuallythrough2021. Other expensessuch asrepairs,maintenance,supplies, clubfees,materials and otherindirectexpensesare allbasedon actualfiguresforFY2011 with 20% reduction inFY2013 and30%reduction in FY2014,returning toFY2011 levels in FY2015 plus 1.5% increases assumedthrough FY2021. Advertising andpublishing expense is reduced by50% during constructionand operation on9 holes,totaling 15%reduction in FY2013. Uponre-opening thegolf coursethis expense isassumedtoincreaseto$45,000to accountfor enhanced marketing ofthe upgradedfacilityand re-themeas “Baylands GC.”Advertising and publishing expense is then reducedin subsequent yearstoa“standard”of around $17,000 per year. Water expense hasbeenhighlyvariable and NGFprojectionsarebasedon the4- year average(2008-2011),with assumptions of reductions in useasdescribed previously: 25%reduction during construction 28%reduction uponre-opening Annualincreases are assumed at 20%for 2013,15%for2014,9%for 2015, 3%for2016,2%for 2017 and 4.5%for FY2018through FY2021. National GolfFoundation Consulting,Inc. – Cityof Palo AltoReport –26 Other directcharges(including electric) arebased on actualfiguresforFY2011 with 20%reduction inFY2013 and 30%reductionin FY2014. Aslightreductionexpected upon re-opening thegolfcourse inFY2015 (as described bythearchitect).Annual increase of 1.5%is assumedfrom FY2015through FY2021. Debt Service andOtherNon-Operating Expense Assumptions Non-operating revenue attributedto debtservice is assumedto continue at6%of debt service payment aslong aspaymentscontinue (throughFY2019). Debt service paymentswere provided bythe Cityof Palo Alto. ThepaymenttotheGeneralFund($94,849) expires after FY2012. There is anewpaymentof ± $107,000totheGeneralFundfrom FY2015–FY2019 forrepaymentof aloanforthe difference between theestimatedcapitalcostfor Option Aandthe expected reimbursementfromthe SFCJPA. TheCostPlan Chargesare basedon actual2011 chargeswith historical3%growth throughtheend of FY2021. TheNGFhas addeda new“Operating & CapitalReserve” line totheproforma beginning in FY2015, setat10%ofgreenfeerevenue. Option Aalso assumesthatthefullirrigationreplacementwillbe completed in FY2020 (orby2020)atacostof $750,000(real2012 dollars). Pro Forma Estimate for ‘Option A’ Scenario – FY2012– FY2021 Utilizing theabove assumptionsand activity/revenue estimates, NGF Consulting has prepareda proformaforthenext 10years of operation,including FY2012(alreadyunderway).Thetable shows thattherenovated Baylands Golf Clubcould produce netincometo theCityin therange of $690,000to $950,000(before debt,cost plan and reserve) throughthetermof thecurrent debt program.AftertheCityis no longerresponsible for debt payments(beginning in FY2020), thefacilityis expected toproducenetincometothe City, afterallexpenses and charges, inthe range of±$620,000,althougha one-timeexpense of $750,000is projectedfor 2020toupgrade the irrigation system.Asthis is aprojection, allfigures after FY2012have been roundedtothe nearest$100forsimplicity. National GolfFoundation Consulting,Inc. – Cityof Palo AltoReport –27 Palo Alto Golf CourseRevenue / Expense -Option A Revenues FY2011 Actual FY2012 Projected FY2013 Projected FY2014 Projected FY2015 Projected FY2016 Projected FY2017 Projected FY2018 Projected FY2019 Projected FY2020 Projected FY2021 Projected Golf Course Revenues Green Fees (Incl. Cards) $2,016,537 $1,960,100 $1,605,200 $1,313,900 $1,967,700 $2,090,000 $2,233,100 $2,255,400 $2,278,000 $2,300,700 $2,323,800 Cart Fees 302,799 293,500 206,900 156,600 284,900 296,500 315,600 318,800 322,000 325,200 328,500 Driving Range 343,911 333,400 235,000 177,800 323,600 336,700 358,500 362,100 365,700 369,400 373,100 Tournament /League Fees 2,196 2,100 1,900 1,600 2,100 2,100 2,200 2,200 2,200 2,200 2,200 Other 11,813 11,500 8,100 6,100 11,100 11,500 12,300 12,300 12,600 12,600 12,800 Total Golf Course Revenues $2,677,256 $2,600,600 $2,057,100 $1,656,000 $2,589,400 $2,736,800 $2,921,700 $2,950,800 $2,980,500 $3,010,100 $3,040,400 ConcessionPayments FoodandBeverage Concession Variable Portion $55,076 $53,400 $37,600 $28,500 $51,800 $53,900 $57,400 $58,000 $58,600 $59,200 $59,700 UtilityPayment $25,920 $25,900 $26,400 $26,400 $26,900 $26,900 $27,400 $27,400 $27,900 $27,900 $28,500 Total fromF &B Concession $80,996 $79,300 $64,000 $54,900 $78,700 $80,800 $84,800 $85,400 $86,500 $87,100 $88,200 ProShop Lease Merchandise (4%) $26,536 $25,700 $18,100 $13,700 $25,000 $25,700 $27,700 $27,700 $28,200 $28,200 $28,800 Total FromProShop Concession $26,536 $25,700 $18,100 $13,700 $25,000 $25,700 $27,700 $27,700 $28,200 $28,200 $28,800 Total Gross toCity $2,784,788 $2,705,600 $2,139,200 $1,724,600 $2,693,100 $2,843,300 $3,034,200 $3,063,900 $3,095,200 $3,125,400 $3,157,400 OperatingExpenses FY2011 Actual FY2012 Projected FY2013 Projected FY2014 Projected FY2015 Projected FY2016 Projected FY2017 Projected FY2018 Projected FY2019 Projected FY2020 Projected FY2021 Projected Salaries&Benefits $259,455 $139,000 $145,300 $151,800 $158,600 $165,700 $173,200 $181,000 $189,100 $197,600 $206,500 Range Fees 130,152 126,700 89,300 67,600 123,000 127,900 136,200 137,600 139,000 140,400 141,800 Cart Fees 117,529 117,400 82,800 62,600 114,000 118,600 126,200 127,500 128,800 130,100 131,400 Club Fees 5,576 5,700 4,600 4,000 5,700 5,800 5,900 6,000 6,100 6,200 6,300 Fixed Lozares ManagementFee 345,333 345,300 345,300 345,300 345,300 345,300 345,300 345,300 345,300 345,300 345,300 Merchant Fees Reimbursement 36,211 36,400 28,800 23,200 36,300 38,300 40,900 41,300 41,700 42,100 42,600 Contract Maintenance 475,000 750,000 675,000 625,000 800,000 812,000 824,200 836,600 849,100 861,800 874,700 Repairs&maintenance 21,943 22,300 17,800 15,600 22,300 22,600 22,900 23,200 23,500 23,900 24,300 Advertising&Publish 10,765 10,900 9,300 45,000 30,000 17,000 17,300 17,600 17,900 18,200 18,500 Supplies and Materials 44,417 45,100 36,100 31,600 45,100 45,800 46,500 47,200 47,900 48,600 49,300 WaterExpense 361,870 246,000 277,400 207,000 195,000 200,900 204,900 214,100 223,700 233,800 244,300 National GolfFoundation Consulting,Inc. – Cityof Palo AltoReport –28 Palo Alto Golf CourseRevenue / Expense -Option A Revenues FY2011 Actual FY2012 Projected FY2013 Projected FY2014 Projected FY2015 Projected FY2016 Projected FY2017 Projected FY2018 Projected FY2019 Projected FY2020 Projected FY2021 Projected Other DirectCharges (Incl.Electric) 45,263 45,900 36,700 32,100 44,700 45,400 46,100 46,800 47,500 48,200 48,900 Indirect Charges 102,571 104,100 83,300 72,900 104,100 105,700 107,300 108,900 110,500 112,200 113,900 Total CityOperating Expenses $1,956,085 $1,994,800 $1,831,700 $1,683,700 $2,024,100 $2,051,000 $2,096,900 $2,133,100 $2,170,100 $2,208,400 $2,247,800 Net IncomeFromOperations (Loss)$828,703 $710,800 $307,500 $40,900 $669,000 $792,300 $937,300 $930,800 $925,100 $917,000 $909,600 Non-operating Incomefrom Sale ofProperty 35,230 D/SIncome $0 $29,900 $25,700 $25,700 $25,700 $25,800 $25,900 $25,900 $25,900 $0 $0 Total Non-operating $35,230 $29,900 $25,700 $25,700 $25,700 $25,800 $25,900 $25,900 $25,900 $0 $0 Total Income(Incl.Non-operating)$863,933 $740,700 $333,200 $66,600 $694,700 $818,100 $963,200 $956,700 $951,000 $917,000 $909,600 DebtService $559,539 $499,000 $428,200 $429,000 $428,200 $430,800 $432,200 $432,300 $431,200 $0 $0 PaymenttoGeneral Fund $94,849 $94,800 $0 $0 $107,600 $107,600 $107,600 $107,600 $107,600 $0 $0 NewDebtService $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 Additional Capital $0 $0 $0 $0 $0 $0 $0 $0 $0 $750,000 $0 Reserve for Replacement $0 $0 $0 $0 $196,800 $209,000 $223,300 $225,500 $227,800 $230,100 $232,400 CostPlan Charges $41,455 $42,700 $44,000 $45,300 $46,700 $48,100 $49,500 $51,000 $52,500 $54,100 $55,700 Total Debt /OtherCharges $695,843 $636,500 $472,200 $474,300 $779,300 $795,500 $812,600 $816,400 $819,100 $1,034,200 $288,100 Net Incomeor (Loss)$168,090 $104,200 ($139,000)($407,700)($84,600)$22,600 $150,600 $140,300 $131,900 ($117,200)$621,500 National GolfFoundation Consulting,Inc. – Cityof Palo AltoReport –29 PROJECTIONSBASEDON “OPTIOND” TheNGFcashflowmodelforoperation under“Option D”assumes amore significant upgrade tothefacilitywith a“more dramatictransformation” asdescribed bythegolf course architect. TheNGFrevenue estimate hasbeencombinedwith thepresent operating structuretoprovide a fullestimate of BaylandsGCperformanceforthenext 10 years,assumingsuccessful completion ofthe“Option D” upgrades.TheNGFhas projectedgrowthtoover $3.0million in totalgrossrevenue (fromallsources)totheCityby2016. KeyAssumptions TheBase assumptions in preparing theprojectedfinancialperformancematchthosepresented in the projectionforOption A,exceptthefollowing changes noted below: Rounds Performance Theroundsactivityperformanceassumptionsinclude: Rounds in FY2013 assume ‘as-is’operationon 18 holesforthefirst 9months,then operation ononly9 holesforthe last 3months. During thelastthreemonths a reduction of 50%off historicalroundsforthe corresponding month isassumed.All roundsfrom April-June 2013 areassumedto be9-hole rounds. Rounds in FY2014 assume operation on9holesforthefirst7months,then operation with an upgraded 18 holesfor February-June 2014. AllroundsfromJuly 2013 through January2014 areassumedto be9-hole rounds with areduction of 50% offhistoricaltotalsforthe corresponding months. Rounds in FY2015throughFY2021 assumeincreases toastabilized levelof 73,300 by2017. Theoveralldistribution ofrounds bycategoryis shown in the table below: National GolfFoundation Consulting,Inc. – Cityof Palo AltoReport –30 Palo Alto MunicipalGolfCourse(Baylands GC) Projected Activityfor OptionD(2012-2021) As-Is 9-Mos.18- H/3Mos. 9-H 5-Mos.18- H/7Mos. 9-H Operateon 18-holeswith upgraded golf design and moreappealing features FY2012 FY2013 FY2014 FY2015 FY2016 FY2017 -2021 Weekday 18-Hole 5,400 3,500 1,800 5,500 5,800 6,100 Senior Non-Resident 6,300 4,200 2,100 6,200 6,550 6,900 9-Hole 1,500 6,400 11,000 1,600 1,600 1,700 Senior 900 600 300 1,100 1,150 1,200 Junior 1,400 1,000 400 1,350 1,400 1,500 EarlyBird 700 500 200 800 850 900 Twilight 11,300 7,800 3,700 11,200 11,750 12,400 Specials 7,500 5,400 3,000 7,550 8,000 8,400 Junior Card 1,100 800 400 1,150 1,250 1,300 Senior Card 800 600 300 1,000 1,050 1,100 Non-ResidentSenior Card 4,000 2,600 1,200 3,950 4,200 4,400 Sub-TotalWeekday 40,900 33,400 24,400 41,400 43,600 45,900 Weekend 18-Hole 10,200 7,000 3,500 9,900 10,450 11,000 9Hole 1,900 8,700 11,900 2,000 2,150 2,200 Junior 800 600 300 900 950 1,000 Twilight 6,200 4,100 2,100 6,000 6,350 6,700 Sub-TotalWeekend 19,100 20,400 17,800 18,800 19,900 20,900 ComplimentaryPlay 2,500 1,700 1,000 2,500 2,500 2,500 Tournaments 2,200 1,500 800 3,000 3,500 4,000 TOTAL ROUNDS 64,700 57,000 44,000 65,700 69,500 73,300 Average Fees / Revenue Theaveragegreenfeesperround bycategoryare shown in thetablethatfollows. Key assumptions driving thisestimate include: Theonlyadjustmentin FY2013 isforthe 9-holerate,which has been adjusted downward to reflectthevariousforms of discounting expectedto bepresent when thefacilityis operating on only9 holes inthefinal3monthsof FY2013and thefirst7 monthsof FY2014. Upon re-opening on 18holes (assumedJanuary1, 2014),averagefees ineach categoryareincreasedapproximately10% over FY2012 (rounded). Average Cartfeeand driving rangerevenue perround in FY2012 isbasedonthe actuals in FY2011. For FY2013, average cart/rangerevenue perroundisreduced by20% (from 2011)toreflecttheoperation on only9 holes thelast3months. For FY2014, average cartand rangerevenue isreduced by30%(fromFY2011)toreflect 7 months on9holes. ByFY2015, average cartand rangerevenue isrestored atthe 2011 leveland then increased by1%peryear through 2021. National GolfFoundation Consulting,Inc. – Cityof Palo AltoReport –31 Averagemerchandisesales in FY2012 arebasedon theactualin FY2011.Average sales arereducedby20% (from2011)in FY2013 toreflect9 holes-onlythe last 3 months, and30% in FY2014 toreflect7monthson 9 holes.ByFY2015,average sales arerestoredtothe2011 level with 1% increases through2021. Averagefood andbarsales in FY2012 arebasedon theactualin FY2011.Average sales arereducedby20% (from2011)in FY2013 toreflect9 holes-onlythe last 3 months, and30% in FY2014 toreflect7monthson 9 holes.ByFY2015,average sales arerestoredtothe2011 level with 1% increases through2021. Theaveragegreenfeesbycategoryand ancillaryrevenue perroundareshown in thetable below(assume1% annualincreasesforFY2018-2021 asnoted): Palo Alto MunicipalGolfCourse(Baylands GC) Projected Average Green FeesforOptionD(2012-2021) As-Is 9-Mos. 18-H/3 Mos.9-H 5-Mos. 18-H/7 Mos.9-H Operateon 18-holeswith upgraded golf design and more appealing features FY2012 FY2013 FY2014 FY2015 FY2016 FY2017 Weekday 18-Hole $37.00 $37.00 $41.00 $41.41 $41.82 $42.24 Senior Non-Resident $32.00 $32.00 $35.00 $35.35 $35.70 $36.06 9-Hole $23.00 $18.00 $17.00 $25.00 $25.25 $25.50 Senior $28.00 $28.00 $31.00 $31.31 $31.62 $31.94 Junior $14.75 $14.75 $16.25 $16.41 $16.58 $16.74 EarlyBird $23.00 $23.00 $25.50 $25.76 $26.01 $26.27 Twilight $30.00 $30.00 $33.00 $33.33 $33.66 $34.00 Specials $19.00 $19.00 $21.00 $21.21 $21.42 $21.64 Junior Card $19.70 $19.70 $21.75 $21.97 $22.19 $22.41 Senior Card $23.50 $23.50 $26.00 $26.26 $26.52 $26.79 Non-ResidentSenior Card $27.50 $27.50 $30.00 $30.30 $30.60 $30.91 Weekend 18-Hole $47.00 $47.00 $52.00 $52.52 $53.05 $53.58 9Hole $27.00 $24.75 $27.25 $28.75 $29.04 $29.33 Junior $15.80 $15.80 $17.50 $17.68 $17.85 $18.03 Twilight $34.00 $34.00 $37.50 $37.88 $38.25 $38.64 Tournaments $34.60 $34.60 $38.00 $38.38 $38.76 $39.15 National GolfFoundation Consulting,Inc. – Cityof Palo AltoReport –32 Expense Assumptions Contractmaintenanceexpense totheCityof Palo Alto assumes: $62,500 permonthfor FY2012. $62,500 permonthforthefirst 9months,then$37,500 permonthsforthe last 3months of FY2013. $37,500 permonthforthefirst 7months,then$71,000 permonthsforthe last 5months of FY2014. $71,000 permonthin FY2015,growing at1.5% annuallythrough2021. Other expensessuch asrepairs,maintenance,supplies, clubfees,materials and otherindirectexpensesare allbasedon actualfiguresforFY2011 with 20% reduction inFY2013 and30%reduction in FY2014,returning toFY2011 levels in FY2015 plus 1.5% increases assumedthrough FY2021. Water expense hasbeenhighlyvariable and NGFprojectionsarebasedon the4- year average(2008-2011),with assumptions of reductions in useasdescribed previously: 25%reduction during construction 32%reduction uponre-opening Annualincreases are assumed at 20%for 2013,15%for2014,9%for 2015, 3%for2016,2%for 2017 and 4.5%for FY2018through FY2021. Other directcharges(including electric) arebased on actual2011totals,based on actualfiguresforFY2011 with 20%reductioninFY2013 and 30%reduction in FY2014. Aslightreduction expected uponre-opening thegolf course inFY2015 (as described bythearchitect). Annualincrease of 1.5% is assumedfrom FY2015 throughFY2021. Debt Service andOtherNon-Operating Expense Assumptions There is anewpaymentof ± $223,700totheGeneralFundfrom FY2015–FY2019 forrepaymentof aloanforthe difference between theestimatedcapitalcostfor Option Dandthe expected reimbursementfromthe SFCJPA. Option Dalso assumesthatthefullirrigationreplacementwillbe completed in FY2020 (orby2020)atacostof $500,000(real2012 dollars). Pro Forma Estimate for ‘Option D’ Scenario – FY2012– FY2021 Utilizing theabove assumptionsand activity/revenue estimates, NGF Consulting has prepareda proformaforthenextfive years of operation,including FY2012(alreadyunderway).Thetable shows that with amorecomprehensive renovation,the Baylands GCcould producenetincome tothe Cityintherange of $930,000to $1.27million (beforedebt, costplan andreserve)through theterm ofthecurrentdebt program.AftertheCityis no longerresponsiblefor debt payments (beginning inFY2020),thefacilityis expectedtoproduce net incometothe Cityin therangeof $915,000 per year,althoughthere is aone-timeexpense of $500,000forirrigation in 2020. National GolfFoundation Consulting,Inc. – Cityof Palo AltoReport –33 Palo Alto Golf CourseRevenue / Expense -OptionD Revenues FY2011 Actual FY2012 Projected FY2013 Projected FY2014 Projected FY2015 Projected FY2016 Projected FY2017 Projected FY2018 Projected FY2019 Projected FY2020 Projected FY2021 Projected Golf Course Revenues Green Fees (Incl. Cards) $2,016,537 $1,960,100 $1,605,200 $1,213,500 $2,204,500 $2,361,900 $2,522,200 $2,547,500 $2,572,900 $2,598,700 $2,624,600 Cart Fees 302,799 293,500 206,900 139,700 298,100 318,500 339,200 342,600 346,100 349,500 353,000 Driving Range 343,911 333,400 235,000 158,700 338,600 361,700 385,300 389,200 393,100 397,000 401,000 Tournament /League Fees 2,196 2,100 1,900 1,400 2,200 2,300 2,400 2,400 2,400 2,400 2,400 Other 11,813 11,500 8,100 5,500 11,600 12,300 13,200 13,200 13,500 13,500 13,800 Total Golf Course Revenues $2,677,256 $2,600,600 $2,057,100 $1,518,800 $2,855,000 $3,056,700 $3,262,300 $3,294,900 $3,328,000 $3,361,100 $3,394,800 ConcessionPayments FoodandBeverage Concession Variable Portion $55,076 $53,400 $37,600 $25,400 $54,200 $57,900 $61,700 $62,300 $62,900 $63,600 $64,200 UtilityPayment $25,920 $25,900 $26,400 $26,400 $26,900 $26,900 $27,400 $27,400 $27,900 $27,900 $28,500 Total fromF &B Concession $80,996 $79,300 $64,000 $51,800 $81,100 $84,800 $89,100 $89,700 $90,800 $91,500 $92,700 ProShop Lease Merchandise (4%) $26,536 $25,700 $18,100 $12,200 $26,100 $27,600 $29,700 $29,700 $30,300 $30,300 $30,900 Total FromProShop Concession $26,536 $25,700 $18,100 $12,200 $26,100 $27,600 $29,700 $29,700 $30,300 $30,300 $30,900 Total Gross toCity $2,784,788 $2,705,600 $2,139,200 $1,582,800 $2,962,200 $3,169,100 $3,381,100 $3,414,300 $3,449,100 $3,482,900 $3,518,400 OperatingExpenses FY2011 Actual FY2012 Projected FY2013 Projected FY2014 Projected FY2015 Projected FY2016 Projected FY2017 Projected FY2018 Projected FY2019 Projected FY2020 Projected FY2021 Projected Salaries&Benefits $259,455 $139,000 $145,300 $151,800 $158,600 $165,700 $173,200 $181,000 $189,100 $197,600 $206,500 Range Fees 130,152 126,700 89,300 60,300 128,700 137,400 146,400 147,900 149,400 150,900 152,400 Cart Fees 117,529 117,400 82,800 55,900 119,200 127,400 135,700 137,000 138,400 139,800 141,200 Club Fees 5,576 5,700 4,600 4,000 5,700 5,800 5,900 6,000 6,100 6,200 6,300 Fixed Lozares ManagementFee 345,333 345,300 345,300 345,300 345,300 345,300 345,300 345,300 345,300 345,300 345,300 Merchant Fees Reimbursement 36,211 36,400 28,800 21,300 40,000 42,800 45,700 46,100 46,600 47,100 47,500 Contract Maintenance 475,000 750,000 675,000 595,800 852,000 864,800 877,800 891,000 904,400 918,000 931,800 Repairs&maintenance 21,943 22,300 17,800 15,600 22,300 22,600 22,900 23,200 23,500 23,900 24,300 Advertising&Publish 10,765 10,900 9,300 45,000 30,000 17,000 17,300 17,600 17,900 18,200 18,500 Supplies and Materials 44,417 45,100 36,100 31,600 45,100 45,800 46,500 47,200 47,900 48,600 49,300 WaterExpense 361,870 246,000 277,400 204,000 161,000 165,800 169,100 176,700 184,700 193,000 201,700 National GolfFoundation Consulting,Inc. – Cityof Palo AltoReport –34 Palo Alto Golf CourseRevenue / Expense -OptionD Revenues FY2011 Actual FY2012 Projected FY2013 Projected FY2014 Projected FY2015 Projected FY2016 Projected FY2017 Projected FY2018 Projected FY2019 Projected FY2020 Projected FY2021 Projected Other DirectCharges (Incl.Electric) 45,263 45,900 36,700 32,100 43,500 44,200 44,900 45,600 46,300 47,000 47,700 Indirect Charges 102,571 104,100 83,300 72,900 104,100 105,700 107,300 108,900 110,500 112,200 113,900 Total CityOperating Expenses $1,956,085 $1,994,800 $1,831,700 $1,635,600 $2,055,500 $2,090,300 $2,138,000 $2,173,500 $2,210,100 $2,247,800 $2,286,400 Net IncomeFromOperations (Loss)$828,703 $710,800 $307,500 ($52,800)$906,700 $1,078,800 $1,243,100 $1,240,800 $1,239,000 $1,235,100 $1,232,000 Non-operating Incomefrom Sale ofProperty 35,230 D/SIncome $0 $29,900 $25,700 $25,700 $25,700 $25,800 $25,900 $25,900 $25,900 $0 $0 Total Non-operating $35,230 $29,900 $25,700 $25,700 $25,700 $25,800 $25,900 $25,900 $25,900 $0 $0 Total Income(Incl.Non-operating)$863,933 $740,700 $333,200 ($27,100)$932,400 $1,104,600 $1,268,500 $1,266,700 $1,264,900 $1,235,100 $1,232,000 DebtService $559,539 $499,000 $428,200 $429,000 $428,200 $430,800 $423,200 $432,300 $431,200 $0 $0 PaymenttoGeneral Fund $94,849 $94,800 $0 $0 $223,700 $223,700 $223,700 $223,700 $223,700 $0 $0 Additional Capital $0 $0 $0 $0 $0 $0 $0 $0 $0 $500,000 $0 Reserve for Replacement $0 $0 $0 $0 $220,500 $236,200 $252,200 $254,800 $257,300 $259,900 $262,500 CostPlan Charges $41,455 $42,700 $44,000 $45,300 $46,700 $48,100 $49,500 $51,000 $52,500 $54,100 $55,700 Total Debt /OtherCharges $695,843 $636,500 $472,200 $474,300 $919,100 $938,800 $948,600 $961,800 $964,700 $814,000 $318,200 Net Incomeor (Loss)$168,090 $104,200 ($139,000)($501,400)$13,300 $165,800 $319,900 $304,900 $300,200 $421,100 $913,800 National GolfFoundation Consulting,Inc. – Cityof Palo AltoReport –35 PROJECTIONSBASEDON “OPTIONF” TheNGFcashflowmodelforoperation under“Option F”assumes amoresignificant upgradeto thefacility, with a two-thirds completerenovationthe additionof a soccerfield and a comparable “dramatictransformation” asproposedinOptionD.The NGF estimateshows the Baylands GC revenue performance underOption Foverthe next 10 years would be comparabletoOption D. KeyAssumptions TheBase assumptions in preparing theprojectedfinancialperformancematchthosepresented in the projectionforOption D,exceptthefollowing changes noted below: Rounds and Average Fee Performance Theroundsactivityandaveragefee performance assumptions arethesame asproposed in “Option D,” except: Rounds in FY2014 assume operation on9holesforthefirst9months,then operation with an upgraded 18 holesfor April- June 2014.AllroundsfromJuly2013 throughMarch 2014 areassumedtobe 9-hole rounds with totalsreducedby50%for each corresponding month. Palo Alto MunicipalGolfCourse(Baylands GC) Projected Activityfor OptionF(2012-2021) As-Is 9-Mos.18- H/3Mos. 9-H 3-Mos.18- H/9Mos. 9-H Operateon 18-holeswith nearly completerenovation FY2012 FY2013 FY2014 FY2015 FY2016 FY2017 -2021 Weekday 18-Hole 5,400 3,500 1,000 5,500 5,800 6,100 Senior Non-Resident 6,300 4,200 1,100 6,200 6,550 6,900 9-Hole 1,500 6,400 12,800 1,600 1,600 1,700 Senior 900 600 200 1,100 1,150 1,200 Junior 1,400 1,000 300 1,350 1,400 1,500 EarlyBird 700 500 200 800 850 900 Twilight 11,300 7,800 2,000 11,200 11,750 12,400 Specials 7,500 5,400 2,200 7,550 8,000 8,400 Junior Card 1,100 800 300 1,150 1,250 1,300 Senior Card 800 600 200 1,000 1,050 1,100 Non-ResidentSenior Card 4,000 2,600 800 3,950 4,200 4,400 Sub-TotalWeekday 40,900 33,400 21,100 41,400 43,600 45,900 Weekend 18-Hole 10,200 7,000 2,100 9,900 10,450 11,000 9 Hole 1,900 8,700 13,700 2,000 2,150 2,200 Junior 800 600 200 900 950 1,000 Twilight 6,200 4,100 1,000 6,000 6,350 6,700 Sub-TotalWeekend 19,100 20,400 17,000 18,800 19,900 20,900 ComplimentaryPlay 2,500 1,700 1,100 2,500 2,500 2,500 Tournaments 2,200 1,500 500 3,000 3,500 4,000 TOTAL ROUNDS 64,700 57,000 39,700 65,700 69,500 73,300 Averagegreen andancillaryfees in“OptionF”areidenticaltothose presentedfor “Option D.” National GolfFoundation Consulting,Inc. – Cityof Palo AltoReport –36 Expense Assumptions Contractmaintenanceexpense totheCityof Palo Alto assumes: $62,500 permonthfor FY2012 $62,500 permonthforthefirst 9months,then$37,500 permonthsforthe last 3months of FY2013 $37,500 permonthforthefirst 9months,then$66,667 permonthsforthe last 3months of FY2014 $66,667 permonthin FY2015,growing at1.5% annuallythrough2021. Other expensessuch asrepairs,maintenance,supplies, clubfees,materials and otherindirectexpensesare allbasedon actualfiguresforFY2011 with 20% reduction inFY2013 and40%reduction in FY2014,returning toFY2011 levels in FY2015 plus 1.5% increases assumedthrough FY2021. Water expense hasbeenhighlyvariable and NGFprojectionsarebasedon the4- year average(2008-2011),with assumptions of reductions in useasdescribed previously: 20%reduction during construction 32%reduction uponre-opening Annualincreases are assumed at 20%for 2013,15%for2014,9%for 2015, 3%for2016,2%for 2017 and 4.5%for FY2018through FY2021 Other directcharges(including electric) arebased on actual2011totals,based on actualfiguresforFY2011 with 20%reductioninFY2013 and 40%reduction in FY2014. Aslightreduction expected uponre-opening thegolf course inFY2015 (as described bythearchitect). Annualincrease of 1.5% is assumedfrom FY2015 throughFY2021. Debt Service andOtherNon-Operating Expense Assumptions TheNGFhas assumedthatthe $2,855,400in additionalcost neededto complete Option F,over and above theamount estimatedto bereimbursed bytheSFCJPA, willbe fundedvia the issuance of a newdebtprogram(revenue orGeneral Obligation Bond), with termsof 4.5% interestfor20 years, with paymentsbeginning in FY2015. Option Falso assumesthatthefullirrigationreplacementwillbe completed in FY2020 (orby2020)atacostof $250,000(real2012 dollars). Pro Forma Estimate for ‘Option F’ Scenario – FY2012– FY2021 Based onthe inputs described above,the proforma estimateforfutureperformanceunder “Option F”shows that with thismore comprehensive renovation, theBaylands GCcould produce net incometothe Cityin therangeof $960,000to $1.34million (beforeexisting and newdebt, cost planandreserve)throughtheterm ofthe currentdebtprogram. Afterthe Cityis no longerresponsibleforits older(1999 issue) debt payments,beginning in FY2020,thefacility is expected toproduce net incometothe Cityinthe rangeof $720,000per year,althoughthere is a one-timeexpense of $250,000for irrigation in2020. National GolfFoundation Consulting,Inc. – Cityof Palo AltoReport –37 Palo Alto Golf CourseRevenue / Expense -OptionF Revenues FY2011 Actual FY2012 Projected FY2013 Projected FY2014 Projected FY2015 Projected FY2016 Projected FY2017 Projected FY2018 Projected FY2019 Projected FY2020 Projected FY2021 Projected Golf Course Revenues Green Fees (Incl. Cards) $2,016,537 $1,960,100 $1,605,200 $969,500 $2,204,500 $2,361,900 $2,522,200 $2,547,500 $2,572,900 $2,598,700 $2,624,600 Cart Fees 302,799 293,500 206,900 126,100 298,100 318,500 339,200 342,600 346,100 349,500 353,000 Driving Range 343,911 333,400 235,000 143,200 338,600 361,700 385,300 389,200 393,100 397,000 401,000 Tournament /League Fees 2,196 2,100 1,900 1,300 2,200 2,300 2,400 2,400 2,400 2,400 2,400 Other 11,813 11,500 8,100 4,900 11,600 12,300 13,200 13,200 13,500 13,500 13,800 Total Golf Course Revenues $2,677,256 $2,600,600 $2,057,100 $1,245,000 $2,855,000 $3,056,700 $3,262,300 $3,294,900 $3,328,000 $3,361,100 $3,394,800 ConcessionPayments FoodandBeverage Concession Variable Portion $55,076 $53,400 $37,600 $22,900 $54,200 $57,900 $61,700 $62,300 $62,900 $63,600 $64,200 UtilityPayment $25,920 $25,900 $26,400 $26,400 $26,900 $26,900 $27,400 $27,400 $27,900 $27,900 $28,500 Total fromF &B Concession $80,996 $79,300 $64,000 $49,300 $81,100 $84,800 $89,100 $89,700 $90,800 $91,500 $92,700 ProShop Lease Merchandise (4%) $26,536 $25,700 $18,100 $11,000 $26,100 $27,600 $29,700 $29,700 $30,300 $30,300 $30,900 Total FromProShop Concession $26,536 $25,700 $18,100 $11,000 $26,100 $27,600 $29,700 $29,700 $30,300 $30,300 $30,900 Total Gross toCity $2,784,788 $2,705,600 $2,139,200 $1,305,300 $2,962,200 $3,169,100 $3,381,100 $3,414,300 $3,449,100 $3,482,900 $3,518,400 OperatingExpenses FY2011 Actual FY2012 Projected FY2013 Projected FY2014 Projected FY2015 Projected FY2016 Projected FY2017 Projected FY2018 Projected FY2019 Projected FY2020 Projected FY2021 Projected Salaries&Benefits $259,455 $139,000 $145,300 $151,800 $158,600 $165,700 $173,200 $181,000 $189,100 $197,600 $206,500 Range Fees 130,152 126,700 89,300 54,400 128,700 137,400 146,400 147,900 149,400 150,900 152,400 Cart Fees 117,529 117,400 82,800 50,400 119,200 127,400 135,700 137,000 138,400 139,800 141,200 Club Fees 5,576 5,700 4,600 3,400 5,700 5,800 5,900 6,000 6,100 6,200 6,300 Fixed Lozares ManagementFee 345,333 345,300 345,300 345,300 345,300 345,300 345,300 345,300 345,300 345,300 345,300 Merchant Fees Reimbursement 36,211 36,400 28,800 17,400 40,000 42,800 45,700 46,100 46,600 47,100 47,500 Contract Maintenance 475,000 750,000 675,000 537,500 800,000 812,000 824,200 836,600 849,100 861,800 874,700 Repairs&maintenance 21,943 22,300 17,800 13,400 22,300 22,600 22,900 23,200 23,500 23,900 24,300 Advertising&Publish 10,765 10,900 9,300 45,000 30,000 17,000 17,300 17,600 17,900 18,200 18,500 Supplies and Materials 44,417 45,100 36,100 21,700 45,100 45,800 46,500 47,200 47,900 48,600 49,300 WaterExpense 361,870 246,000 280,400 217,600 182,400 187,900 191,700 200,300 209,300 218,700 228,500 National GolfFoundation Consulting,Inc. – Cityof Palo AltoReport –38 Palo Alto Golf CourseRevenue / Expense -OptionF Revenues FY2011 Actual FY2012 Projected FY2013 Projected FY2014 Projected FY2015 Projected FY2016 Projected FY2017 Projected FY2018 Projected FY2019 Projected FY2020 Projected FY2021 Projected Other DirectCharges (Incl.Electric) 45,263 45,900 36,700 22,000 42,500 43,100 43,700 44,400 45,100 45,800 46,500 Indirect Charges 102,571 104,100 83,300 50,000 104,100 105,700 107,300 108,900 110,500 112,200 113,900 Total CityOperating Expenses $1,956,085 $1,994,800 $1,834,700 $1,529,900 $2,023,900 $2,058,500 $2,105,800 $2,141,500 $2,178,200 $2,216,100 $2,254,900 Net IncomeFromOperations (Loss)$828,703 $710,800 $304,500 ($224,600)$938,300 $1,110,600 $1,275,300 $1,272,800 $1,270,900 $1,266,800 $1,263,500 Non-operating Incomefrom Sale ofProperty 35,230 D/SIncome $0 $29,900 $25,700 $25,700 $25,700 $25,800 $25,900 $25,900 $25,900 $0 $0 Total Non-operating $35,230 $29,900 $25,700 $25,700 $25,700 $25,800 $25,900 $25,900 $25,900 $0 $0 Total Income(Incl.Non-operating)$863,933 $740,700 $330,200 ($198,900)$964,000 $1,136,400 $1,300,700 $1,298,700 $1,296,800 $1,266,800 $1,263,500 DebtService $559,539 $499,000 $428,200 $429,000 $428,200 $430,800 $423,200 $432,300 $431,200 $0 $0 PaymenttoGeneral Fund $94,849 $94,800 $0 $0 $0 $0 $0 $0 $0 $0 $0 Additional Capital $0 $0 $0 $0 $0 $0 $0 $0 $0 $250,000 $0 NewDebtService $0 $0 $0 $0 $219,500 $219,500 $219,500 $219,500 $219,500 $219,500 $219,500 Reserve for Replacement $0 $0 $0 $0 $220,500 $236,200 $252,200 $254,800 $257,300 $259,900 $262,500 CostPlan Charges $41,455 $42,700 $44,000 $45,300 $46,700 $48,100 $49,500 $51,000 $52,500 $54,100 $55,700 Total Debt /OtherCharges $695,843 $636,500 $472,200 $474,300 $914,900 $934,600 $944,400 $957,600 $960,500 $783,500 $537,700 Net Incomeor (Loss)$168,090 $104,200 ($142,000)($673,200)$49,100 $201,800 $356,300 $341,100 $336,300 $483,300 $725,800 NOTE:OptionFwould likelyinclude additional revenue fromsoccerfieldsofapproximately$78,000per field peryear. National GolfFoundation Consulting,Inc. – Cityof Palo AltoReport –39 PROJECTIONSBASEDON “OPTION G” TheNGFprojectionmodelfor“OptionG”represents asignificantchangefromother options presented.Thisoption would involve a completerenovation ofthe Palo Alto MunicipalGolf Course (tobere-branded as“Baylands Golf Club).The project would involve afullclosureof thegolf coursefrom April2013throughMarch 2014,re-opening asabrand newgolf coursewith the highestqualitygolf featurescommanding higherfeesthan anyotheroption presented.The fullgolf course irrigationsystem would be replaced andthreenewsoccerfields would be added tothe site.Subsequentto theinitialdraftreport,the CityFinance Committee recommendedthat this optioninclude rebuilding of all18greens,re-turfing of allfairways, construction of anon- courserestroom,andrebuilding thepracticegreen area.Thesechangesshouldfurtherenhance the product’smarketabilityand thegolferexperience. TheNGFrevenue estimate hasbeencombinedwith thepresent operating structuretoprovide a fullestimate of BaylandsGCperformanceforthenext 10 years,assumingsuccessful completion ofthe proposed “OptionG” upgrades.TheNGFhas projectedgrowth to almost$3.2 million in totalgrossrevenues (from allsources)to theCityby2016. KeyAssumptions TheBase assumptions in preparing theprojectedfinancialperformanceestimates covers severalcategories, including rounds activity, greenfees, averagerevenues (carts,range, concessions,etc.),totalrevenue, expenses, capitaland debt. Rounds Performance Theroundsactivityperformanceassumptionsinclude: Rounds in FY2012 assume a3%reductionfromFY2011 totalroundsbased on actualperformanceinthefirst 6monthsof FY2012. Rounds in FY2013 assume ‘as-is’operationon 18 holesforthefirst 9months.The golf coursethen closesentirelyforthenext 12months(April2013 –March2014),re- opening asanupgradednewfacilityon April1,2014. Upon re-opening,roundsareassumedtogrowto67,900 in FY2015, stabilizing at 75,700rounds by2017. Theoveralldistribution ofrounds bycategoryis shown in the table below: National GolfFoundation Consulting,Inc. – Cityof Palo AltoReport –40 Palo Alto MunicipalGolfCourse(Baylands GC) Projected Activityfor OptionG(2012-2021) As-Is 9-Mos.18- H/3Mos. closed 3-Mos.18- H/9Mos. Closed Operateon 18-holeswith maximum renovation and upgrade FY2012 FY2013 FY2014 FY2015 FY2016 FY2017-2021 Weekday 18-Hole 5,400 4,000 1,000 5,500 5,800 6,100 Senior Non-Resident 6,300 4,700 1,300 6,200 6,550 6,900 9-Hole 1,500 1,100 400 1,550 1,600 1,700 Senior 900 600 250 1,100 1,150 1,200 Junior 1,400 1,000 400 1,450 1,500 1,600 EarlyBird 700 500 200 800 850 900 Twilight 11,300 8,400 2,800 11,500 12,150 12,800 Specials 7,500 5,600 2,200 7,650 8,050 8,500 Junior Card 1,100 800 300 1,150 1,250 1,300 Senior Card 800 600 200 1,000 1,050 1,100 Non-ResidentSenior Card 4,000 3,000 1,000 4,000 4,300 4,500 Sub-TotalWeekday 40,900 30,300 10,050 41,900 44,250 46,600 Weekend 18-Hole 10,200 7,600 2,500 10,050 10,650 11,200 9Hole 1,900 1,400 500 2,000 2,100 2,200 Junior 800 600 200 900 950 1,000 Twilight 6,200 4,600 1,500 6,050 6,350 6,700 Sub-TotalWeekend 19,100 14,200 4,700 19,000 20,050 21,100 ComplimentaryPlay 2,500 1,800 650 3,500 3,500 3,500 Tournaments 2,200 1,600 600 3,500 4,000 4,500 TOTAL ROUNDS 64,700 47,900 16,000 67,900 71,800 75,700 Average Fees / Revenue Theaveragegreenfeesperround bycategoryare shown in thetablethatfollows. Key assumptions driving thisestimate include: There is nochangein averagefeesforFY2012 over FY2011. Upon re-opening on 18holes (assumed April1,2014),averagefees in each categoryareincreasedapproximately15% over FY2012 (rounded). For FY2015through FY2021, NGF hasassumed1% annualincreases inallfee categories. Allother ancillaryrevenue centersmirrorestimates madeinOptionsDandF. Theaveragegreenfeesbycategoryand ancillaryrevenue perroundareshown in thetable below(assume1% annualincreasesforFY2018-2021 asnoted): National GolfFoundation Consulting,Inc. – Cityof Palo AltoReport –41 Palo Alto MunicipalGolfCourse(Baylands GC) Projected Average Green FeesforOptionG(2012-2021) As-Is 9-Mos.18- H/3Mos. closed 3-Mos.18- H/9Mos. Closed Operateon 18-holeswith maximum renovation and upgrade FY2012 FY2013 FY2014 FY2015 FY2016 FY2017 Weekday 18-Hole $37.00 $37.00 $42.50 $42.93 $43.35 $43.79 Senior Non-Resident $32.00 $32.00 $37.00 $37.37 $37.74 $38.12 9-Hole $23.00 $18.00 $24.00 $25.00 $25.25 $25.50 Senior $28.00 $28.00 $32.00 $32.32 $32.64 $32.97 Junior $14.75 $14.75 $17.00 $17.17 $17.34 $17.52 EarlyBird $23.00 $23.00 $26.50 $26.77 $27.03 $27.30 Twilight $30.00 $30.00 $34.50 $34.85 $35.19 $35.55 Specials $19.00 $19.00 $22.00 $22.22 $22.44 $22.67 Junior Card $19.70 $19.70 $22.50 $22.73 $22.95 $23.18 Senior Card $23.50 $23.50 $27.00 $27.27 $27.54 $27.82 Non-ResidentSenior Card $27.50 $27.50 $31.50 $31.82 $32.13 $32.45 Weekend 18-Hole $47.00 $47.00 $54.00 $54.54 $55.09 $55.64 9Hole $27.00 $24.75 $28.50 $28.75 $29.04 $29.33 Junior $15.80 $15.80 $18.00 $18.18 $18.36 $18.55 Twilight $34.00 $34.00 $39.00 $39.39 $39.78 $40.18 Tournaments $34.60 $34.60 $40.00 $40.40 $40.80 $41.21 Other Revenue Assumptions Totalgreenfeerevenue includes alldiscount(10-play) cards andmonthlypasses. Ancillaryrevenue per round (carts,merchandise,range,food,bar, other) isderived fromtotalrounds, including complimentaryrounds. Concession revenue tothe Cityof Palo Altoassumesthesamecurrentcontract basics through FY2021,with nominimumsafter April 2013.The Cityisassumed to collect:(1)7%of allfood and beveragerevenue; and(2) 4% ofmerchandise sales. Expense Assumptions Labor expenses areforCityoversight only.These include allocationsforcontract oversight, Parks andRecreation Director,Division manager,etc.The estimateis intended toinclude bothsalaryand benefitsallocation and isincreasedby4.5% per year throughFY2021. Commissions paidtotheproshop vendorinclude 38%of driving rangegross revenue and 40%ofgross cartrevenue (aspercontract). Theproshopmanagementfee isfixed at $28,775 permonth while thegolf course is open. Nomanagementfees areassumedforApril2013 throughMarch 2014. Reimbursementsformerchantfees(mostlycreditcardfees)areassumedto be 1.4%of totalfacilityrevenue. National GolfFoundation Consulting,Inc. – Cityof Palo AltoReport –42 Contractmaintenanceexpense totheCityof Palo Alto assumes: $62,500 permonthfor FY2012 $62,500 permonthforthefirst 9monthsof FY2013 No contractmaintenanceexpenseforApril2013through March 2014 $68,750 permonth(fixed) uponre-opening in April2014 (3monthsin FY2014),then$68,750permonthin FY2015,growing at 1.5%annually through2021 Other expensessuch asrepairs,maintenance,supplies, clubfees,materials and otherindirectexpensesare allbasedon actualfiguresforFY2011 with 20% reduction inFY2013 and70%reduction in FY2014,returning toFY2011 levels in FY2015 plus 1.5% increases assumedthrough FY2021. Advertising andpublishing expense is reduced by50% during constructionand operation on9 holes,totaling 15%reduction in FY2013. Uponre-opening thegolf coursethis expense isassumedtoincrease$45,000 toaccountforenhanced marketing ofthe upgradedfacilityand re-themeas “Baylands GC.”Advertising and publishing expense is then reducedin subsequent yearstoa“standard”of around $17,000 per year. Water expense hasbeenhighlyvariable and NGFprojectionsarebasedon the4- year average(2008-2011),with assumptions of reductions in useasdescribed previously: 60%reduction during construction 32%reduction uponre-opening Annualincreases are assumed at 20%for 2013,15%for2014,9%for 2015, 3%for2016,2%for 2017 and 4.5%for FY2018through FY2021 Other directcharges(including electric) arebased on actual2011totals,based on actualfiguresforFY2011 with 20%reductioninFY2013 and 70%reduction in FY2014. Aslightreduction expected uponre-opening thegolf course inFY2015 (as described bythearchitect). Annualincrease of 1.5% is assumedfrom FY2015 throughFY2021. Debt Service andOtherNon-Operating Expense Assumptions TheNGFhas assumedthatthe $4,570,000in additionalcost neededto complete OptionG, over andabove theamountreimbursedbythe SFCJPA,willbe funded via the issuanceof a newdebt program(revenue orGeneralObligation Bond),with terms of 4.5%interestfor 20years, with payments beginning in FY2015. Pro Forma Estimate for ‘Option G’ Scenario – FY2012– FY2021 Based onthe inputs described above,the proforma estimateforfutureperformanceunder “OptionG”shows thatwiththis completerenovation,the Baylands GCcould produce net incometothe Cityintherange of $1.07to $1.42million (beforeexisting and newdebt,costplan and reserve) throughthetermof thecurrent debtprogramthatendsin 2019. Afterthe Cityis no longerresponsibleforitsolder(1999 issue) debtpayments,thefacilityisexpected toproduce net incometothe City, afterallexpenses and other charges,intherangeof $740,000 per year. National GolfFoundation Consulting,Inc. – Cityof Palo AltoReport –43 Palo Alto Golf CourseRevenue / Expense -OptionG Revenues FY2011 Actual FY2012 Projected FY2013 Projected FY2014 Projected FY2015 Projected FY2016 Projected FY2017 Projected FY2018 Projected FY2019 Projected FY2020 Projected FY2021 Projected Golf Course Revenues Green Fees (Incl. Cards) $2,016,537 $1,960,100 $1,445,100 $544,300 $2,341,500 $2,510,600 $2,680,900 $2,707,800 $2,734,800 $2,762,200 $2,789,800 Cart Fees 302,799 293,500 173,900 72,600 311,100 332,300 353,900 357,400 361,000 364,600 368,200 Driving Range 343,911 333,400 197,500 82,400 353,400 377,400 401,900 405,900 410,000 414,100 418,200 Tournament /League Fees 2,196 2,100 1,600 500 2,200 2,400 2,500 2,500 2,500 2,500 2,500 Other 11,813 11,500 6,800 2,800 12,000 12,700 13,700 13,700 13,900 13,900 14,200 Total Golf Course Revenues $2,677,256 $2,600,600 $1,824,900 $702,600 $3,020,200 $3,235,400 $3,452,900 $3,487,300 $3,522,200 $3,557,300 $3,592,900 ConcessionPayments FoodandBeverage Concession Variable Portion $55,076 $53,400 $31,600 $13,200 $56,600 $60,400 $64,400 $65,000 $65,700 $66,300 $67,000 UtilityPayment $25,920 $25,900 $26,400 $26,400 $26,900 $26,900 $27,400 $27,400 $27,900 $27,900 $28,500 Total fromF &B Concession $80,996 $79,300 $58,000 $39,600 $83,500 $87,300 $91,800 $92,400 $93,600 $94,200 $95,500 ProShop Lease Merchandise (4%) $26,536 $25,700 $15,200 $6,400 $27,000 $28,500 $30,700 $30,700 $31,300 $31,300 $31,900 Total FromProShop Concession $26,536 $25,700 $15,200 $6,400 $27,000 $28,500 $30,700 $30,700 $31,300 $31,300 $31,900 Total Gross toCity $2,784,788 $2,705,600 $1,898,100 $748,600 $3,130,700 $3,351,200 $3,575,400 $3,610,400 $3,647,100 $3,682,800 $3,720,300 OperatingExpenses FY2011 Actual FY2012 Projected FY2013 Projected FY2014 Projected FY2015 Projected FY2016 Projected FY2017 Projected FY2018 Projected FY2019 Projected FY2020 Projected FY2021 Projected Salaries&Benefits $259,455 $139,000 $145,300 $151,800 $158,600 $165,700 $173,200 $181,000 $189,100 $197,600 $206,500 Range Fees 130,152 126,700 75,100 31,300 134,300 143,400 152,700 154,200 155,800 157,400 158,900 Cart Fees 117,529 117,400 69,600 29,000 124,400 132,900 141,600 143,000 144,400 145,800 147,300 Club Fees 5,576 5,700 4,600 1,700 5,700 5,800 5,900 6,000 6,100 6,200 6,300 Fixed Lozares ManagementFee 345,333 345,300 259,000 86,300 345,300 345,300 345,300 345,300 345,300 345,300 345,300 Merchant Fees Reimbursement 36,211 36,400 25,500 9,800 42,300 45,300 48,300 48,800 49,300 49,800 50,300 Contract Maintenance 475,000 750,000 562,500 206,300 825,000 837,400 850,000 862,800 875,700 888,800 902,100 Repairs&maintenance 21,943 22,300 17,800 6,700 22,300 22,600 22,900 23,200 23,500 23,900 24,300 Advertising&Publish 10,765 10,900 8,700 45,000 30,000 17,000 17,300 17,600 17,900 18,200 18,500 Supplies and Materials 44,417 45,100 36,100 13,500 45,100 45,800 46,500 47,200 47,900 48,600 49,300 WaterExpense 361,870 246,000 250,900 133,000 183,000 188,500 192,300 201,000 210,000 219,500 229,400 National GolfFoundation Consulting,Inc. – Cityof Palo AltoReport –44 Palo Alto Golf CourseRevenue / Expense -OptionG Revenues FY2011 Actual FY2012 Projected FY2013 Projected FY2014 Projected FY2015 Projected FY2016 Projected FY2017 Projected FY2018 Projected FY2019 Projected FY2020 Projected FY2021 Projected Other DirectCharges (Incl.Electric) 45,263 45,900 36,700 13,800 41,500 42,100 42,700 43,300 43,900 44,600 45,300 Indirect Charges 102,571 104,100 83,300 31,200 104,100 105,700 107,300 108,900 110,500 112,200 113,900 Total CityOperating Expenses $1,956,085 $1,994,800 $1,575,100 $759,400 $2,061,600 $2,097,500 $2,146,000 $2,182,300 $2,219,400 $2,257,900 $2,297,400 Net IncomeFromOperations (Loss)$828,703 $710,800 $323,000 ($10,800)$1,069,100 $1,253,700 $1,429,400 $1,428,100 $1,427,700 $1,424,900 $1,422,900 Non-operating Incomefrom Sale ofProperty 35,230 D/SIncome $0 $29,900 $25,700 $25,700 $25,700 $25,800 $25,900 $25,900 $25,900 $0 $0 Total Non-operating $35,230 $29,900 $25,700 $25,700 $25,700 $25,800 $25,900 $25,900 $25,900 $0 $0 Total Income(Incl.Non-operating)$863,933 $740,700 $348,700 $14,900 $1,094,800 $1,279,500 $1,454,800 $1,454,000 $1,453,600 $1,424,900 $1,422,900 DebtService $559,539 $499,000 $428,200 $429,000 $428,200 $430,800 $423,200 $432,300 $431,200 $0 $0 PaymenttoGeneral Fund $94,849 $94,800 $0 $0 $0 $0 $0 $0 $0 $0 $0 NewDebtService $0 $0 $0 $0 $351,300 $351,300 $351,300 $351,300 $351,300 $351,300 $351,300 Operating& Capital Reserve $0 $0 $0 $0 $234,200 $251,100 $268,100 $270,800 $273,500 $276,200 $279,000 CostPlan Charges $41,455 $42,700 $44,000 $45,300 $46,700 $48,100 $49,500 $51,000 $52,500 $54,100 $55,700 Total Debt /OtherCharges $695,843 $636,500 $472,200 $474,300 $1,060,400 $1,081,300 $1,092,100 $1,105,400 $1,108,500 $681,600 $686,000 Net Incomeor (Loss)$168,090 $104,200 ($123,500)($459,400)$34,400 $198,200 $362,700 $348,600 $345,100 $743,300 $736,900 NOTE:OptionG would likelyinclude additional revenue fromsoccerfieldsestimated byCityatapproximately$78,000per fieldper year ($234,000 for 3fields). National GolfFoundation Consulting,Inc. – Cityof Palo AltoReport –45 FINANCIAL PROJECTIONS SUMMARY SummaryofOptions Comparative tablefor options in 2015and 2020are shown below: Summaryin 2015 Summaryin FY2015 ModestUpgrade Option A More significant upgrade /nicer features Option D Nearly complete renovation Option F Maximum renovation Option G TOTAL ROUNDS 62,800 65,700 65,700 67,900 ANNUAL ROUNDS REVENUE $1,967,709 $2,204,512 $2,204,512 $2,341,455 AVERAGE GREENFEE PER ROUND $31.33 $33.55 $33.55 $34.48 Revenues FY2015 Projected FY2015 Projected FY2015 Projected FY2015 Projected Total Golf Course Revenues $2,589,400 $2,855,000 $2,855,000 $3,020,200 Concessions Total fromF & B Concession $78,700 $81,100 $81,100 $83,500 Total FromPro Shop Concession $25,000 $26,100 $26,100 $27,000 Total Gross to City $2,693,100 $2,962,200 $2,962,200 $3,130,700 Expenses Water 195,000 161,000 182,400 225,600 Maintenance Contract 800,000 852,000 800,000 825,000 Total to Pro Shop Contract 618,600 633,200 633,200 646,300 All Other Expenses 410,500 409,300 408,300 407,300 Total CityOperating Expenses 2,024,100 2,055,500 2,023,900 2,061,600 Net Income From Operations (Loss)$669,000 $906,700 $938,300 $1,069,100 Total Income (Incl. Non-operating)$694,700 $932,400 $964,000 $1,094,800 Total Debt/OtherCharges $779,300 $1,501,100 $914,900 $1,060,400 Net Income or (Loss)($84,600)($568,700)$49,100 $34,400 Footnotes Partial irrigation Partial irrigation Potential for additional $78,000Soccer revenue Potential for additional $234,000 Soccer revenue National GolfFoundation Consulting,Inc. – Cityof Palo AltoReport –46 Summaryin 2020 Summaryin FY2020 ModestUpgrade Option A More significant upgrade /nicer features Option D Nearly complete renovation Option F Maximum renovation Option G TOTAL ROUNDS 68,200 73,300 73,300 75,700 ANNUAL ROUNDS REVENUE $2,300,746 $2,598,658 $2,598,658 $2,762,185 AVERAGE GREENFEE PER ROUND $33.74 $35.45 $35.45 $36.49 Revenues FY2015 Projected FY2015 Projected FY2015 Projected FY2015 Projected Total Golf Course Revenues $3,010,100 $3,361,100 $3,361,100 $3,557,300 Concessions Total fromF & B Concession $87,100 $91,500 $91,500 $94,200 Total FromPro Shop Concession $28,200 $30,300 $30,300 $31,300 Total Gross to City $3,125,400 $3,482,900 $3,482,900 $3,682,800 Expenses Water 233,800 193,000 218,700 219,500 Maintenance Contract 861,800 918,000 861,800 888,800 Total to Pro Shop Contract 657,900 683,100 683,100 698,300 All Other Expenses 454,900 453,700 452,500 451,300 Total CityOperating Expenses $2,208,400 $2,247,800 $2,216,100 $2,257,900 Net Income From Operations (Loss)$917,000 $1,235,100 $1,266,800 $1,424,900 Total Income (Incl. Non-operating)$917,000 $1,235,100 $1,266,800 $1,424,900 Total Debt/OtherCharges $1,034,200 $814,000 $783,500 $681,600 Net Income or (Loss)($117,200)$421,100 $483,300 $743,300 Footnotes Partial irrigation Partial irrigation Potential for additional $78,000Soccer revenue Potential for additional $234,000 Soccer revenue SummaryResults Theresults ofthe NGF Consultingfinancialprojectionsfor Palo AltoGolf Course,basedonthe various reconfiguration options andtheanalysis and assumptions presented in thisreport, show thatthefacilitywillgenerate,tovarying degreesbased ontherenovation option, improved rounds andrevenue performancecomparedtothe base“as is” scenario.In relationto estimating lostroundsand revenues during construction, NGF has assumedfor alloptions under which thefacilitywillremain openfor9-holeplaythattheCitywillstill be ableto provide a qualitygolf experiencethat isminimallydisruptive tothegolfer. National GolfFoundation Consulting,Inc. – Cityof Palo AltoReport –47 Keyobservations regarding projected“BaylandsGolf Club at PaloAlto”financialperformance: NGF hasestimatedthattotalrevenuestothe Citywilldecrease byvarying amounts during constructionforthefour options evaluated.Forinstance, underOption A,the totaltwo-year cumulative reduction ingrossrevenue totheCityis nearly$1.5million. This isbased onestimated FY 2012grossrevenues. However, becauseof expense reductions(e.g.,range and cart payments,contractmaintenance, water, indirect charges)during thetimeof construction,netincomefrom operations(before debt, othercosts)is estimatedto decrease by±$1.08million over thetwo-year period, based on actualestimated FY 2012netoperatingincome. OptionG, which involves a 12-month closure of all18 holes,naturallyresults inthe greatestreductionin revenue, with only$748,600grossincomefrom operations in FY 2014,when the course is closedfor9months.Thetwo-year cumulative loss in grossrevenue totheCity, using FY2012 as abase, is estimated atnearly$2.7 million, while the loss innet income is estimateat±$1.1million. Rounds played, afteryears of decline,areprojected toreboundunderallofthe reconfiguration options,with options Dand Fatstabilized totalroundsat73,300, representing a 5,100round improvement overOption A.OptionG –fullrenovation – resultsin thehigheststabilized activitylevel, atnearly76,000 annualrounds. Option D, which is expectedto cost±$600,000morethan baseOption A, is projectedto producesignificantlyhighernetoperating incomethanOptionA, resulting in aquick payback of the investment. Stabilized NetOperatingIncome(beforedebt andother costssuchas capital, reserve, andcost plan) is projectedto behighestunderOptionG,with 2021 NOI projected at about$1.42million. OptionF issecond with ±$1.26million,followed closelybyOption Databout $1.23million. Afteradditionaldebt associated with improvements isconsidered,OptionG is projectedto produceoverallNetIncometothe Citythat ismoderatelylowerthanthat of OptionD. However,further down theroadwhen thedebtforOption Gis paid off,it is expected toproducethe highest NetIncomeforthe Cityof Palo Alto. Justificationsfor Revenue Projections NGF isconfident,given the inputs(e.g., expectedqualityand appealfollowing improvements) foreach option,thattherounds,fees,revenues, and expenses projected under eachscenario arereasonable andachievable. The higheststabilized rounds activity we have projected under anyscenario was less than 76,000totalrounds,alevelthat was achieved as recentlyas 2007- 08 (andwasfarexceeded in thepast)with a productthatwas inferiortowhat areconfigured and re-brandedgolf course willbring tomarket.Also, wefeelwe have been conservative in terms ofthefeeincreases thatthe improvedfacility willbe able tosustain.Likewise, we believe it ismoredifficulttoestimatetheimpact onrevenues during thetimeof construction,asthere aremanyvariables, notthe least of which aregolfer behavior and preferences. Proformas are,bytheirnature,models basedona set of assumptionsthatmayormaynot becomerealityand which aresubjecttoa number of uncontrollablefactors (e.g., weather variations, theeconomy,quality/quantityofthe competition),butNGFbelieves thatour projectionsrepresent a“reasonable” estimateof performanceforthe“Baylands”facilitybased on thefactors discussedin thisreport.Among thefactorsconsideredwhen crafting our projectionsforeachmodelare: National GolfFoundation Consulting,Inc. – Cityof Palo AltoReport –48 Expected higherqualityof the Palo AltoMunicipalGolf Course(levelof improvement depends on intensityofReconfigurationOption chosen, levelof “additional” work). Re-branding andeffective marketing of the“Baylands Golf Club at Palo Alto”,along with more proactive direct selling of largertournamentsand events. Reinventing the productshould re-energize the current customerbase,resulting in increasedfrequencyof play, and also positionthefacilitytocompetemoreeffectively fornon-residentrounds.Results of ERA’s 2008surveyrevealed that thenumberone reason Palo AltoGCwas not theprimarycourseof respondentswas “course quality/playexperience”.Maintenance conditionsthat willposition thefacilityin the mid-to-uppertierofmunicipalgolf courses inthismarket. Non-residentgreenfeesat Palo Alto, especiallyon weekends,areatthelowend of the price rangeamong the directmunicipalcompetitors.Withan improvedproduct, thereshould belittleresistancetomodest price increasesatthe“Baylands”. Maintaining a strong price/value proposition willensurethattheimproved golf course remains verycompetitive in theareamarket despite expectedmodestfeeincreases. Palo Alto MunicipalGolf Course is operating atrounds levels thatarewillbelowpeak levelsfrom 1990s andearly-to-mid2000s.Thefacilityhas achieved rounds played levels close towhat NGFConsulting is projecting underthemostfavorable option as recentlyas FY2008. TheBayArea remainsone of themostactive marketsformunicipalgolf inthe nation. Atthe peak ofthemarket, Palo Alto andseveralof itschief competitors realized annualactivitylevels approaching,oreven exceeding,100,000rounds. Thoughplaylevels maynever approachtheseextraordinarynumbers again, we believe themarket hasthe potentialtomakearecovery. NGF believes thereis alack of trulyoutstanding directcompetitorsto PaloAlto GC. Also, it islikelythat nonewgolf course inventorywillbe added tothismarketforthe foreseeablefuture. Potentialforregionaleconomic recovery, increased discretionaryincome,etc.The BayArea and Silicon Valleyhave some specific economic attributesthat act as naturaldemand driversforqualitygolf courses, including high incomes,anextremely robustcorporatepresence, andone veryhighvisitation numbers. Other ConsiderationsRegarding ImprovementOptions Asidefromthe expectedeconomic impactof thevarious baseReconfiguration Options,there remainquestionsthat willneed tobe addressedas theCityweighs thereconfiguration options, theirrespective forecastsin terms ofrounds/revenue and what additionalwork willstillbe required inthe instanceof doing lessnowand deferring certain improvementsto later.The overriding decisionto bemade isplan option(A,D, F orG)togowith and howthatfundamental decision willaffectfuturedecisions. For example,reconfigurationOptionA,while least costlyof thoseto beconsidered,precludesrouting improvementsbeyond thoseofthefewholes being shifted andplacesoverallrestrictionsonfuture improvementstothegolf asset.Largely,thegolf course would remain thesamein itsanatomyforthe long term underA, but of coursethegolf coursemaybe inmuchbetter conditionandmaybe complemented bybetter supportamenities in thefuture.Themisconnectionmaybe thecourse itself —muchnicer, but asourgrading exercise concludes, notto thelevelof theother options becauseof their improvementsto hole- orientation,varietyand excitement. National GolfFoundation Consulting,Inc. – Cityof Palo AltoReport –49 Thesuccessratefor increased revenues,betterreputation andtheabilityto betruetotheidea of atransformedgolf experience, increaseswith a more intensive re-working of thegolf course. Thedecision on which option toadoptwillneed to takeintoaccountmanyfactors,togetherwith thefinancialforecastsprepared. OPTION “G” SENSITIVITY ANALYSIS As noted, proforma projections have beenmadeundera set of assumptions thatmayormay not cometofruition. Also, projections are subjectto severaluncontrollablefactorssuchas yearlyweather variations, economic conditions,and thenature ofthecompetition.Therefore, in the interestof conservatism we have preparedasensitivityanalysis forOption G(identified by the Cityasthepreferredoption) oftwo keyvariables relatedtorevenues –rounds played and averagegreenfee.Specifically, we have run three scenariosthat presentdeviations fromthe “base”modelpresentedabove: (1)Roundsreduced tomoderatelylower than projectedFY 12 performance,continuingdownward trend;(2) Averagegreenfee increasing over currentbyjust less thanhalf the 15% projectedincreasein basemodel; and(3) Roundsand averagegreen fees both lower, incombination. Because ofthe virtuallylimitless number of combinations,other variables, such asfixedoperating expenses,remain the sameas inthebase scenario. Thesensitivityscenarios revealthatthe lower than projected(base)greenfeegrowth would result inareduction innet income of approximately47% over thebasecase. Reducedrounds result ina±$500,000reduction in net income,while the“worst case”– both roundsandgreen fee increases belowtheprojected basemodel–produces about$640,000 lower net income. Option “G” Sensitivity Analysis -Summaryfor 2017 Summaryin FY2017 Expected Case Option G Reduced Rounds Option G ReducedFees Option G Reduced Rounds +Fees Option G TOTAL ROUNDS 75,700 63,100 75,700 63,100 ANNUAL ROUNDS REVENUE $2,680,949 $2,221,879 $2,487,511 $2,062,380 AVERAGE GREENFEE PER ROUND $35.42 $35.21 $32.86 $32.68 Revenues FY2017 Projected FY2017 Projected FY2017 Projected FY2017 Projected Total Golf Course Revenues $3,452,900 $2,865,400 $3,259,500 $2,705,900 Concessions Total fromF & B Concession $91,800 $81,100 $91,800 $81,100 Total FromPro Shop Concession $30,700 $25,600 $30,700 $25,600 Total Gross to City $3,575,400 $2,972,100 $3,382,000 $2,812,600 Expenses Total CityOperating Expenses 2,146,000 2,088,800 2,143,300 2,086,600 Net Income From Operations (Loss)$1,429,400 $883,300 $1,238,700 $726,000 Total Income (Incl. Non-operating)$1,454,800 $908,700 $1,264,100 $751,400 Total Debt/OtherCharges $1,092,100 $1,046,200 $1,072,800 $1,030,200 Net Income or (Loss)$362,700 ($137,500)$191,300 ($278,800) National GolfFoundation Consulting,Inc. – Cityof Palo AltoReport –50 Option G SensitivitySpreadsheets Palo Alto Golf CourseRevenue / Expense -OptionG(ReducedRounds Sensitivity) FY2011 Actual FY2012 Projected FY2013 Projected FY2014 Projected FY2015 Projected FY2016 Projected FY2017 Projected FY2018 Projected FY2019 Projected FY2020 Projected FY2021 Projected Total Rounds 66,740 64,700 47,900 16,000 53,150 58,100 63,100 67,900 67,900 67,900 67,900 Golf Course Revenues Green Fees (Incl. Cards) $2,016,537 $1,960,100 $1,445,100 $544,300 $1,810,100 $2,013,600 $2,221,900 $2,424,700 $2,448,900 $2,473,400 $2,498,200 Cart Fees 302,799 293,500 173,900 72,600 243,600 268,900 295,000 320,600 323,800 327,000 330,300 Driving Range 343,911 333,400 197,500 82,400 276,600 305,400 335,000 364,100 367,700 371,400 375,100 Tournament /League Fees 2,196 2,100 1,600 500 1,700 1,900 2,100 2,200 2,200 2,200 2,200 Other 11,813 11,500 6,800 2,800 9,400 10,300 11,400 12,300 12,500 12,500 12,800 Total Golf Course Revenues $2,677,256 $2,600,600 $1,824,900 $702,600 $2,341,400 $2,600,100 $2,865,400 $3,123,900 $3,155,100 $3,186,500 $3,218,600 ConcessionPayments FoodandBeverage Concession Variable Portion $55,076 $53,400 $31,600 $13,200 $44,300 $48,900 $53,700 $58,300 $58,900 $59,500 $60,100 UtilityPayment $25,920 $25,900 $26,400 $26,400 $26,900 $26,900 $27,400 $27,400 $27,900 $27,900 $28,500 Total fromF &B Concession $80,996 $79,300 $58,000 $39,600 $71,200 $75,800 $81,100 $85,700 $86,800 $87,400 $88,600 ProShop Lease Merchandise (4%) $26,536 $25,700 $15,200 $6,400 $21,100 $23,100 $25,600 $27,500 $28,100 $28,100 $28,600 Total FromProShop Concession $26,536 $25,700 $15,200 $6,400 $21,100 $23,100 $25,600 $27,500 $28,100 $28,100 $28,600 Total Gross toCity $2,784,788 $2,705,600 $1,898,100 $748,600 $2,433,700 $2,699,000 $2,972,100 $3,237,100 $3,270,000 $3,302,000 $3,335,800 OperatingExpenses FY2011 Actual FY2012 Projected FY2013 Projected FY2014 Projected FY2015 Projected FY2016 Projected FY2017 Projected FY2018 Projected FY2019 Projected FY2020 Projected FY2021 Projected Salaries&Benefits $259,455 $139,000 $145,300 $151,800 $158,600 $165,700 $173,200 $181,000 $189,100 $197,600 $206,500 Range Fees 130,152 126,700 75,100 31,300 105,100 116,100 127,300 138,400 139,700 141,100 142,500 Cart Fees 117,529 117,400 69,600 29,000 97,400 107,600 118,000 128,200 129,500 130,800 132,100 Club Fees 5,576 5,700 4,600 1,700 5,700 5,800 5,900 6,000 6,100 6,200 6,300 Fixed Lozares ManagementFee 345,333 345,300 259,000 86,300 345,300 345,300 345,300 345,300 345,300 345,300 345,300 Merchant Fees Reimbursement 36,211 36,400 25,500 9,800 32,800 36,400 40,100 43,700 44,200 44,600 45,100 Contract Maintenance 475,000 750,000 562,500 206,300 825,000 837,400 850,000 862,800 875,700 888,800 902,100 Repairs&maintenance 21,943 22,300 17,800 6,700 22,300 22,600 22,900 23,200 23,500 23,900 24,300 Advertising&Publish 10,765 10,900 8,700 45,000 30,000 17,000 17,300 17,600 17,900 18,200 18,500 Supplies and Materials 44,417 45,100 36,100 13,500 45,100 45,800 46,500 47,200 47,900 48,600 49,300 National GolfFoundation Consulting,Inc. – Cityof Palo AltoReport –51 Palo Alto Golf CourseRevenue / Expense -OptionG(ReducedRounds Sensitivity) FY2011 Actual FY2012 Projected FY2013 Projected FY2014 Projected FY2015 Projected FY2016 Projected FY2017 Projected FY2018 Projected FY2019 Projected FY2020 Projected FY2021 Projected WaterExpense 361,870 246,000 250,900 133,000 183,000 188,500 192,300 201,000 210,000 219,500 229,400 Other DirectCharges (Incl.Electric) 45,263 45,900 36,700 13,800 41,500 42,100 42,700 43,300 43,900 44,600 45,300 Indirect Charges 102,571 104,100 83,300 31,200 104,100 105,700 107,300 108,900 110,500 112,200 113,900 Total CityOperating Expenses $1,956,085 $1,994,800 $1,575,100 $759,400 $1,995,900 $2,036,000 $2,088,800 $2,146,600 $2,183,300 $2,221,400 $2,260,600 Net IncomeFromOperations (Loss)$828,703 $710,800 $323,000 ($10,800)$437,800 $663,000 $883,300 $1,090,500 $1,086,700 $1,080,600 $1,075,200 Non-operating Incomefrom Sale ofProperty 35,230 D/SIncome $0 $29,900 $25,700 $25,700 $25,700 $25,800 $25,900 $25,900 $25,900 $0 $0 Total Non-operating $35,230 $29,900 $25,700 $25,700 $25,700 $25,800 $25,900 $25,900 $25,900 $0 $0 Total Income(Incl.Non-operating)$863,933 $740,700 $348,700 $14,900 $463,500 $688,800 $908,700 $1,116,400 $1,112,600 $1,080,600 $1,075,200 DebtService $559,539 $499,000 $428,200 $429,000 $428,200 $430,800 $423,200 $432,300 $431,200 $0 $0 PaymenttoGeneral Fund $94,849 $94,800 $0 $0 $0 $0 $0 $0 $0 $0 $0 NewDebtService $0 $0 $0 $0 $351,300 $351,300 $351,300 $351,300 $351,300 $351,300 $351,300 Operating& Capital Reserve $0 $0 $0 $0 $181,000 $201,400 $222,200 $242,500 $244,900 $247,300 $249,800 CostPlan Charges $41,455 $42,700 $44,000 $45,300 $46,700 $48,100 $49,500 $51,000 $52,500 $54,100 $55,700 Total Debt /OtherCharges $695,843 $636,500 $472,200 $474,300 $1,007,200 $1,031,600 $1,046,200 $1,077,100 $1,079,900 $652,700 $656,800 Net Incomeor (Loss)$168,090 $104,200 ($123,500)($459,400)($543,700)($342,800)($137,500)$39,300 $32,700 $427,900 $418,400 NOTE:OptionG would likelyinclude additional revenue fromsoccerfieldsofapproximately$78,000per field peryear ($234,000 for 3fields). National GolfFoundation Consulting,Inc. – Cityof Palo AltoReport –52 Palo Alto Golf CourseRevenue / Expense -OptionG(ReducedFeesSensitivity) FY2011 Actual FY2012 Projected FY2013 Projected FY2014 Projected FY2015 Projected FY2016 Projected FY2017 Projected FY2018 Projected FY2019 Projected FY2020 Projected FY2021 Projected Total Rounds 66,740 64,700 47,900 16,000 67,900 71,800 75,700 75,700 75,700 75,700 75,700 Golf Course Revenues Green Fees (Incl. Cards) $2,016,537 $1,960,100 $1,445,100 $503,800 $2,172,600 $2,329,500 $2,487,500 $2,512,400 $2,537,500 $2,562,900 $2,588,500 Cart Fees 302,799 293,500 173,900 72,600 311,100 332,300 353,900 357,400 361,000 364,600 368,200 Driving Range 343,911 333,400 197,500 82,400 353,400 377,400 401,900 405,900 410,000 414,100 418,200 Tournament /League Fees 2,196 2,100 1,600 500 2,200 2,400 2,500 2,500 2,500 2,500 2,500 Other 11,813 11,500 6,800 2,800 12,000 12,700 13,700 13,700 13,900 13,900 14,200 Total Golf Course Revenues $2,677,256 $2,600,600 $1,824,900 $662,100 $2,851,300 $3,054,300 $3,259,500 $3,291,900 $3,324,900 $3,358,000 $3,391,600 ConcessionPayments FoodandBeverage Concession Variable Portion $55,076 $53,400 $31,600 $13,200 $56,600 $60,400 $64,400 $65,000 $65,700 $66,300 $67,000 UtilityPayment $25,920 $25,900 $26,400 $26,400 $26,900 $26,900 $27,400 $27,400 $27,900 $27,900 $28,500 Total fromF &B Concession $80,996 $79,300 $58,000 $39,600 $83,500 $87,300 $91,800 $92,400 $93,600 $94,200 $95,500 ProShop Lease Merchandise (4%) $26,536 $25,700 $15,200 $6,400 $27,000 $28,500 $30,700 $30,700 $31,300 $31,300 $31,900 Total FromProShop Concession $26,536 $25,700 $15,200 $6,400 $27,000 $28,500 $30,700 $30,700 $31,300 $31,300 $31,900 Total Gross toCity $2,784,788 $2,705,600 $1,898,100 $708,100 $2,961,800 $3,170,100 $3,382,000 $3,415,000 $3,449,800 $3,483,500 $3,519,000 OperatingExpenses FY2011 Actual FY2012 Projected FY2013 Projected FY2014 Projected FY2015 Projected FY2016 Projected FY2017 Projected FY2018 Projected FY2019 Projected FY2020 Projected FY2021 Projected Salaries&Benefits $259,455 $139,000 $145,300 $151,800 $158,600 $165,700 $173,200 $181,000 $189,100 $197,600 $206,500 Range Fees 130,152 126,700 75,100 31,300 134,300 143,400 152,700 154,200 155,800 157,400 158,900 Cart Fees 117,529 117,400 69,600 29,000 124,400 132,900 141,600 143,000 144,400 145,800 147,300 Club Fees 5,576 5,700 4,600 1,700 5,700 5,800 5,900 6,000 6,100 6,200 6,300 Fixed Lozares ManagementFee 345,333 345,300 259,000 86,300 345,300 345,300 345,300 345,300 345,300 345,300 345,300 Merchant Fees Reimbursement 36,211 36,400 25,500 9,300 39,900 42,800 45,600 46,100 46,500 47,000 47,500 Contract Maintenance 475,000 750,000 562,500 206,300 825,000 837,400 850,000 862,800 875,700 888,800 902,100 Repairs&maintenance 21,943 22,300 17,800 6,700 22,300 22,600 22,900 23,200 23,500 23,900 24,300 Advertising&Publish 10,765 10,900 8,700 45,000 30,000 17,000 17,300 17,600 17,900 18,200 18,500 Supplies and Materials 44,417 45,100 36,100 13,500 45,100 45,800 46,500 47,200 47,900 48,600 49,300 National GolfFoundation Consulting,Inc. – Cityof Palo AltoReport –53 Palo Alto Golf CourseRevenue / Expense -OptionG(ReducedFeesSensitivity) FY2011 Actual FY2012 Projected FY2013 Projected FY2014 Projected FY2015 Projected FY2016 Projected FY2017 Projected FY2018 Projected FY2019 Projected FY2020 Projected FY2021 Projected WaterExpense 361,870 246,000 250,900 133,000 183,000 188,500 192,300 201,000 210,000 219,500 229,400 Other DirectCharges (Incl.Electric) 45,263 45,900 36,700 13,800 41,500 42,100 42,700 43,300 43,900 44,600 45,300 Indirect Charges 102,571 104,100 83,300 31,200 104,100 105,700 107,300 108,900 110,500 112,200 113,900 Total CityOperating Expenses $1,956,085 $1,994,800 $1,575,100 $758,900 $2,059,200 $2,095,000 $2,143,300 $2,179,600 $2,216,600 $2,255,100 $2,294,600 Net IncomeFromOperations (Loss)$828,703 $710,800 $323,000 ($50,800)$902,600 $1,075,100 $1,238,700 $1,235,400 $1,233,200 $1,228,400 $1,224,400 Non-operating Incomefrom Sale ofProperty 35,230 D/SIncome $0 $29,900 $25,700 $25,700 $25,700 $25,800 $25,900 $25,900 $25,900 $0 $0 Total Non-operating $35,230 $29,900 $25,700 $25,700 $25,700 $25,800 $25,900 $25,900 $25,900 $0 $0 Total Income(Incl.Non-operating)$863,933 $740,700 $348,700 ($25,100)$928,300 $1,100,900 $1,264,100 $1,261,300 $1,259,100 $1,228,400 $1,224,400 DebtService $559,539 $499,000 $428,200 $429,000 $428,200 $430,800 $423,200 $432,300 $431,200 $0 $0 PaymenttoGeneral Fund $94,849 $94,800 $0 $0 $0 $0 $0 $0 $0 $0 $0 NewDebtService $0 $0 $0 $0 $351,300 $351,300 $351,300 $351,300 $351,300 $351,300 $351,300 Operating& Capital Reserve $0 $0 $0 $0 $217,300 $233,000 $248,800 $251,200 $253,800 $256,300 $258,900 CostPlan Charges $41,455 $42,700 $44,000 $45,300 $46,700 $48,100 $49,500 $51,000 $52,500 $54,100 $55,700 Total Debt /OtherCharges $695,843 $636,500 $472,200 $474,300 $1,043,500 $1,063,200 $1,072,800 $1,085,800 $1,088,800 $661,700 $665,900 Net Incomeor (Loss)$168,090 $104,200 ($123,500)($499,400)($115,200)$37,700 $191,300 $175,500 $170,300 $566,700 $558,500 NOTE:OptionG would likelyinclude additional revenue fromsoccerfieldsestimated byCitytobe approximately$78,000 perfieldper year ($234,000 for 3fields). National GolfFoundation Consulting,Inc. – Cityof Palo AltoReport –54 Palo Alto Golf CourseRevenue / Expense -OptionG(ReducedRounds +Fees Sensitivity) FY2011 Actual FY2012 Projected FY2013 Projected FY2014 Projected FY2015 Projected FY2016 Projected FY2017 Projected FY2018 Projected FY2019 Projected FY2020 Projected FY2021 Projected Total Rounds 66,740 64,700 47,900 16,000 53,150 58,100 63,100 67,900 67,900 67,900 67,900 Golf Course Revenues Green Fees (Incl. Cards) $2,016,537 $1,960,100 $1,445,100 $503,800 $1,680,700 $1,869,300 $2,062,400 $2,250,400 $2,272,900 $2,295,600 $2,318,600 Cart Fees 302,799 293,500 173,900 72,600 243,600 268,900 295,000 320,600 323,800 327,000 330,300 Driving Range 343,911 333,400 197,500 82,400 276,600 305,400 335,000 364,100 367,700 371,400 375,100 Tournament /League Fees 2,196 2,100 1,600 500 1,700 1,900 2,100 2,200 2,200 2,200 2,200 Other 11,813 11,500 6,800 2,800 9,400 10,300 11,400 12,300 12,500 12,500 12,800 Total Golf Course Revenues $2,677,256 $2,600,600 $1,824,900 $662,100 $2,212,000 $2,455,800 $2,705,900 $2,949,600 $2,979,100 $3,008,700 $3,039,000 ConcessionPayments FoodandBeverage Concession Variable Portion $55,076 $53,400 $31,600 $13,200 $44,300 $48,900 $53,700 $58,300 $58,900 $59,500 $60,100 UtilityPayment $25,920 $25,900 $26,400 $26,400 $26,900 $26,900 $27,400 $27,400 $27,900 $27,900 $28,500 Total fromF &B Concession $80,996 $79,300 $58,000 $39,600 $71,200 $75,800 $81,100 $85,700 $86,800 $87,400 $88,600 ProShop Lease Merchandise (4%) $26,536 $25,700 $15,200 $6,400 $21,100 $23,100 $25,600 $27,500 $28,100 $28,100 $28,600 Total FromProShop Concession $26,536 $25,700 $15,200 $6,400 $21,100 $23,100 $25,600 $27,500 $28,100 $28,100 $28,600 Total Gross toCity $2,784,788 $2,705,600 $1,898,100 $708,100 $2,304,300 $2,554,700 $2,812,600 $3,062,800 $3,094,000 $3,124,200 $3,156,200 OperatingExpenses FY2011 Actual FY2012 Projected FY2013 Projected FY2014 Projected FY2015 Projected FY2016 Projected FY2017 Projected FY2018 Projected FY2019 Projected FY2020 Projected FY2021 Projected Salaries&Benefits $259,455 $139,000 $145,300 $151,800 $158,600 $165,700 $173,200 $181,000 $189,100 $197,600 $206,500 Range Fees 130,152 126,700 75,100 31,300 105,100 116,100 127,300 138,400 139,700 141,100 142,500 Cart Fees 117,529 117,400 69,600 29,000 97,400 107,600 118,000 128,200 129,500 130,800 132,100 Club Fees 5,576 5,700 4,600 1,700 5,700 5,800 5,900 6,000 6,100 6,200 6,300 Fixed Lozares ManagementFee 345,333 345,300 259,000 86,300 345,300 345,300 345,300 345,300 345,300 345,300 345,300 Merchant Fees Reimbursement 36,211 36,400 25,500 9,300 31,000 34,400 37,900 41,300 41,700 42,100 42,500 Contract Maintenance 475,000 750,000 562,500 206,300 825,000 837,400 850,000 862,800 875,700 888,800 902,100 Repairs&maintenance 21,943 22,300 17,800 6,700 22,300 22,600 22,900 23,200 23,500 23,900 24,300 Advertising&Publish 10,765 10,900 8,700 45,000 30,000 17,000 17,300 17,600 17,900 18,200 18,500 Supplies and Materials 44,417 45,100 36,100 13,500 45,100 45,800 46,500 47,200 47,900 48,600 49,300 National GolfFoundation Consulting,Inc. – Cityof Palo AltoReport –55 Palo Alto Golf CourseRevenue / Expense -OptionG(ReducedRounds +Fees Sensitivity) FY2011 Actual FY2012 Projected FY2013 Projected FY2014 Projected FY2015 Projected FY2016 Projected FY2017 Projected FY2018 Projected FY2019 Projected FY2020 Projected FY2021 Projected WaterExpense 361,870 246,000 250,900 133,000 183,000 188,500 192,300 201,000 210,000 219,500 229,400 Other DirectCharges (Incl.Electric) 45,263 45,900 36,700 13,800 41,500 42,100 42,700 43,300 43,900 44,600 45,300 Indirect Charges 102,571 104,100 83,300 31,200 104,100 105,700 107,300 108,900 110,500 112,200 113,900 Total CityOperating Expenses $1,956,085 $1,994,800 $1,575,100 $758,900 $1,994,100 $2,034,000 $2,086,600 $2,144,200 $2,180,800 $2,218,900 $2,258,000 Net IncomeFromOperations (Loss)$828,703 $710,800 $323,000 ($50,800)$310,200 $520,700 $726,000 $918,600 $913,200 $905,300 $898,200 Non-operating Incomefrom Sale ofProperty 35,230 D/SIncome $0 $29,900 $25,700 $25,700 $25,700 $25,800 $25,900 $25,900 $25,900 $0 $0 Total Non-operating $35,230 $29,900 $25,700 $25,700 $25,700 $25,800 $25,900 $25,900 $25,900 $0 $0 Total Income(Incl.Non-operating)$863,933 $740,700 $348,700 ($25,100)$335,900 $546,500 $751,400 $944,500 $939,100 $905,300 $898,200 DebtService $559,539 $499,000 $428,200 $429,000 $428,200 $430,800 $423,200 $432,300 $431,200 $0 $0 PaymenttoGeneral Fund $94,849 $94,800 $0 $0 $0 $0 $0 $0 $0 $0 $0 NewDebtService $0 $0 $0 $0 $351,300 $351,300 $351,300 $351,300 $351,300 $351,300 $351,300 Operating& Capital Reserve $0 $0 $0 $0 $168,100 $186,900 $206,200 $225,000 $227,300 $229,600 $231,900 CostPlan Charges $41,455 $42,700 $44,000 $45,300 $46,700 $48,100 $49,500 $51,000 $52,500 $54,100 $55,700 Total Debt /OtherCharges $695,843 $636,500 $472,200 $474,300 $994,300 $1,017,100 $1,030,200 $1,059,600 $1,062,300 $635,000 $638,900 Net Incomeor (Loss)$168,090 $104,200 ($123,500)($499,400)($658,400)($470,600)($278,800)($115,100)($123,200)$270,300 $259,300 NOTE:OptionG would likelyinclude additional revenue fromsoccerfieldsestimated byCityatapproximately$78,000per fieldper year ($234,000 for 3fields). National GolfFoundation Consulting,Inc. – Cityof Palo AltoReport –56 OtherIssues and Considerations MARKET POSITION /RE-BRANDINGOPPORTUNITY NGF Consulting hasreviewed the image andbrand recommendationsmade totheCityas part of the expanded scopeof services to addresslong rangeconsiderations.Weconcludethat closer integration ofthegolf coursetothe Palo Alto Baylands Preserve,“The Baylands”, should positivelyaffecttheCity’s effortstobrandthisarea as adestinationfor Palo Altoresidentsand visitors alike.Celebratedas anopenspace andnaturepreserve area,theBaylands represents a rich andpositive locale within Palo Alto and theSilicon ValleyRegion and willbe enhanced with an improved andre-brandedgolf product. Currently, Palo AltoMunicipalGolf Course effectivelylacks abrandimage,and thefacilityis verycloselyassociatedwith thelong-timegolf concessionaire –somuchso thatthe website addressforthegolf course is bradlozaresgolfshop.com, andrecordedphone messagesmention onlythe golf shopandnotthegolf course.Webelieve thata namechange to“Baylands Golf Club at Palo Alto”represents apositive move thatwillhave the effectof repositioning thegolf course,distancing itfroma“muni”layout. Additionally, it willsignalatransformationfrom an older,“worn down” layoutto onethat hasrenewed excitementand positive change.The recommendation toretain “Palo Alto” aspart ofthe courseimageand brand is agoodwayto connect with the existing name, aswellas the Cityitself. Useof “Golf Club” in lieu of“Golf Course” isan additionalsignalthatthegolf experience is not onlysomething new, butata higherquality. Themarketing theme “Public only in price,access and pride”is an excellentmessagetoremind the customerthatthegolffacilityremains accessible, opentothe public and pricedto provide one of thebettergolfing values in the BayArea.Thismessagealsoreinforcesthe transformation, ideallya win-win forthegolf consumertoreceive highqualityat a“municipal” price point. Sample magazine ads provided as partof theMarketing andThemerecommendationshit on importantconcepts,including: Silicon ValleyLocation Tradition –Thedesign legacyof BillyBell TheTransformation(i.e.,thechanges) The“Green” EnvironmentalCommitmentof theFacility Ourbelief isthatproperimplementation(adequate budgets,qualitycontroland propermedia placement) ofthe program willhave a dramaticeffecton driving newbusiness tothe“new” golf facility. Equallyimportantwillbe the affectthatthese messages andthe newbrand willhave on existing customers,andresidents of Palo Altoandits neighboring communities who currently playgolf elsewhere.In essence,theprogramforre-branding, introducing a newimageand theme, andthemarketing program, hasthe potentialto have averypositive affectonrounds and associatedrevenues. National GolfFoundation Consulting,Inc. – Cityof Palo AltoReport –57 A commitmentonthe City’s partto becoming certifiedwith Audubon internationalas a “SanctuaryGolf Facility” is an integralpart oftheabilityto marketthecourse as a“green”aware and operatedgolffacility.Thisgoalshould be undertakenregardless of which reconfiguration option is opted bytheCityand should be workablegiven the operation and/ormarketing budgets afforded.(Note:Beginning thisprocess now, priorto anyreconfiguration work,willhelp guidethereconfigurationwork and willalso establish agreaterdegree of improvement bywhich to attainthe Audubonstatusforthefacility). Plan Option Aposesthegreatest challengeto beconsistentwith the image, brand and marketing changesrecommendedbecauseitdoes notgo as deepintothe manyareas ofthe course intermsof newfeaturesandreconstructed areas. However, thefactthatPlanOption A willdramaticallyreduce turf throughthe course-wide work tocreate native areas andnew “Baylands” themed areas should bean adequatelyappreciated change. Plan OptionsD,F and G willhave no issues aligning with anyof thethemes andmessagesrecommended. With emphasis onaquality, outstandinggolffacility, theCitymaybe ableto realize what we have referredto as a“destination”publicgolf experience.IntheBayareawe would point to such courses as Pasatiempo in Santa CruzandHarding Park in San Francisco asmeeting this definition.Thesetwo courses aregoodexamplesof coursesthat have attained a reputation throughthefollowing attributes: Legacyofthe originaldesign Transformationfrommarginaltoexcellent conditions Commitmentbythemunicipalowners toreinvest in theassets Qualityrebuilding efforts Goodmarketing ofthefinished coursesandfacilities While both oftheabove examples are classiceradesigns(PasatiempobyAlister MacKenzie, and Harding Park byWillieWatson) it isstillappropriatetoreferencetheirsuccessesrelative to what Palo Alto Golf Course could attain.Whetherundertakenunderone,largerreinvestment project,orcarried out overtime,thepotentialtransformationof Palo AltoGolf Courseis bolstered byanumber offactorsinherent inthefacility: A designlegacythatcanbe leveraged—WilliamP. andWilliamF.Bell, theformer responsiblefor designssuch as Stanford,Riviera and Bel-Air A location thatsitsattheheart of Silicon Valley A seaside setting thathasgreaterpotentialtotake advantageof itsnatural landscape —theBaylands environment, Bayandadjoining Sanfrancisquito Creek A population basethat isrobustforgolf roundsbynon-residents A location thatis in oneof thetoptourist areas inthenation Obviously, undertakingmoreintensive reconfiguration(suchas with Plan G) willtransformmore of the existing course and is likelytomeetthisgoalon a strongerbasis.So,too,mayinvesting in moreof thealternate,optionalimprovements,including manyof thelong rangeimprovements beforetheCityforconsideration. National GolfFoundation Consulting,Inc. – Cityof Palo AltoReport –58 ECONOMICS OFPOTENTIAL LONG-TERM / ADDITIONAL IMPROVEMENTS Forrest Richardson hasproposedthattheCitystudythefeasibilityof certainfacility improvementsthat are inaddition tothe baseimprovementsrecommended within ReconfigurationOptionsA, D,F,andG(pleasesee AppendixEforsummarytable of potential improvementsand estimated costs).Though NGF believes thatmanyof these improvements would improve theoverallqualityof thegolfer(and non-golf customer)experience, as wellas the imageofthefacilityin theeyes of areagolfers, itis not practicaltoassign incremental rounds played andrevenue dollarstomanyof these improvements(e.g., exterior and entry upgrades,signage/parking,rebuilding practicegreens,“alternate”golf course improvements, designatedyouth area).Practically, theseimprovements,tovarying degrees individuallyand certainlyas asumof their parts, are likelyto drawmore patronsoverall,keep them on-site longer, andincreasetheir propensitytospend while atthegolf course. Wehave confinedourbreak-even analysis to severalpotentialimprovementsthattiemore directlytorevenue: (1)The cart storagebuilding;(2) Expandedmeeting space; and(3) Range PerformanceCenter. CartStorage Building Atjust$4.54perroundin FY 2011,the averagegrosscartfeerevenue per round at Palo Alto Golf Coursesignificantlytrailsthe average of its chief competitive set(seeERA 2008 reportfor City).While the lowcartutilization is partiallya function ofthe“walkability” of thegolf course, ridership andrevenues have also likelybeen constrained bytheverylimited cart storage.Palo Alto GChas only46 carts available, some of which areoldergasoline powered cartsstoredin open storage outsidetheclubhouse(fewer than 35 cartscan bestored belowthe clubhouse).A moretypicalinventoryformostregulation length18-holegolf coursesis±70 carts.Wearetold thatfor largertournaments,additionalcartsmustbe leased andbrought infromoff-site.In summary, NGF believes it is likelythatthelimitedcartinventoryand storage space available has constrainedridership andmayhave actuallynegativelyaffected demandfor dailyfee and, especially, tournament playon occasion. As part of Forrest Richardson’s overallcapitalimprovement planfor PaloAlto GC, hehas included construction ofa newcartstorage building atan estimated costof $440,000.Inthe table below, we illustrate thenumber of yearsit willtakeforthe Cityto break even onthis investment,assuming different levels of incremental gross cartrentalrevenue perround,the currentrentpercentageof 60%,and stabilized rounds activityunderOptions DandF –73,300 rounds.Ofcourse, as noted,it ispossible that having additionalcarts willhave a positive effect on roundsplayed as well, butforpurposes of conservatism we areillustrating onlyincreasesin cartrevenue perround.Wealso assumethatallexpenses associated with thecart leaseand maintenancewillremaintheresponsibilityof thevendor,andthatthere will be noincremental Cityoperating costs associated with thenewbuilding. Palo Alto Golf Course Break-Even Analysis for Cart Storage Building AverageGrossCart RevenuePerRound Increase $0.50 $1.00 $1.50 $2.00 $2.50 IncrementalGross Revenue* $36,650 $73,300 $109,950 $146,600 $183,250 IncrementalRevenuetoCity* $21,990 $43,980 $65,970 $87,960 $109,950 Years to B/E* 20.0 10.0 6.7 5.0 4.0 *Assumes $440,000estimatedcost andstabilizedrounds played of 73,300from Options D,F National GolfFoundation Consulting,Inc. – Cityof Palo AltoReport –59 Expanded Meeting Space Theexisting restaurant at Palo AltoGChas limited meeting spacethat has significantly constrainedmeeting andbanquetbusiness atthefacility. Notbeing ableto accommodate larger events of ±250people precludes thefacilityfromcompetingforthemost lucrative, highmargin food &beveragebusiness. Assuch, expanding the meeting/banquet space is another componentofthe long rangeimprovement plan preparedfortheCitybyMr. Richardson. Based onthe estimatedcost provided of $1.7million, and assuming theCityincurs allofthe cost oftheimprovement,theannualdebtservice on a 20-year noteat3.5% would be $120,000 (rounded).NGFhas calculated thatthe incremental annualgrossfood& beveragerevenue necessarytogenerate $120,000 in additionalrentstothe Citytomeettheannualdebtservice is morethan$1.71million. Thiscalculation is basedonthe currentrentpercentage of 7%. In its2008study, ERAnoted: “Based ontheexperience of similargolf course oriented banquet facilities andthe demographics of thearea, expanding the clubhousetoaccommodatespecial events with up to250 attendees would add $600,000 to$700,000in annualspecialevent revenue.Thisrentalincome would justifyaboutone-half ofthecostof theimprovements.”NGF concursthat achieving this levelof incrementalgross revenue would likelybe an achievable goal,butwith updatedcost estimates,this levelof revenue would justifyonlyabout 40%of the investment cost.Therefore,thebalance ofthe Cityinvestment inthe expandedfacilitywould have to bejustifiedthroughtheincrementalrounds and associatedrevenues attributabledirectly tothe expandedmeetingfacilities.Based oncurrent andprojected averagegreen+cart(City share)feerevenue perround, itwould take 2,000to3,000of theseroundstohelpfundthe expanded facilities.Of course,theequationwould changemarkedlyif gross revenues accrued tothe Cityunderan alternate operating structure. Range PerformanceCenter Inthetable below, we provide a similar break-even analysis to the oneforthe cartstorage building. Mr. Richardson’s cost estimatefortherangeperformancecenter,plus theadditional6- bayrangeexpansion (we assume both are undertakentogether), is$600,000.Inthetable below, we illustratethe numberof years itwilltakeforthe Citytobreak even onthis investment, assuming different levels of incrementalgrossdriving rangerevenue perround (gross perround was $5.15 in FY 11),therentpercentage of 62%,and stabilized rounds activityunder Options D and F –73,300rounds.Of course,itcannotbe determined what percentageof rangeactivityis afunction of numberof bays as opposedtorounds played, so we have chosen todo a sensitivityanalysis byincreasing averagerevenue perroundratherthanpertee station. Another factor driving thismethodologyis thatthe performancecenter bays willbe usedforteaching, and willlikelyhave less utilization than thealreadyexisting bays. Wealso assumethatallincrementalexpenses associated with theexpanded rangeremain the responsibilityof theconcessionaire, andthatthere willbe no incrementalCityoperating costs associated with thenewbuilding. Finally, we assumethattheCityreceives no lessonrevenue. National GolfFoundation Consulting,Inc. – Cityof Palo AltoReport –60 Palo Alto Golf Course– B/E Analysis for Range PerformanceCenter+6-BayExpansion AverageGrossRangeRevenuePer Round Increase $0.50 $0.75 $1.00 $1.25 $1.50 IncrementalGross Revenue* $36,650 $54,975 $73,300 $91,625 $109,950 IncrementalRevenuetoCity* $22,723 $34,085 $45,446 $56,808 $68,169 Years to B/E* 26.4 17.6 13.2 10.6 8.8 *Assumes $600,000estimatedcost andstabilizedrounds played of 73,300from Options D,F MANAGEMENT STRUCTURE NGF was toldthatsomeCitystaff would like tofurtherexplore - via issuance of an RFP in advance ofthe ProShopand Maintenance agreementsexpiring inApril, 2013 -theimplications of changing theoperating structure atPalo AltoGolf Courseto amanagementcontract.We have been askedto offerouropinion asto whetherthis type of structurewould be more effective, orproducehigher net operating incometotheCity, thanthe current“hybrid” structure thatinvolves both amanagementfeeand aconcession onthegolf operations side, privatized maintenance, anda separatefood& beverage concession. As EconomicResearchAssociates(ERA) noted in their2008OperationsReviewof the Palo Alto MunicipalGolf Course,the currentagreementforgolf operationsevolved due toIRS regulationsrelatedtothetax-exemptfinancing utilized forthelate1990srenovation ofthegolf course.Specifically, at least 50% ofthecompensation within a management agreementmust befixedfeein sucha case. ERA,afterdoing thefulloperationsanalysis,concluded thatthe current pro shopdealwas “slightlyfavorable”tothe concessionaire. Afterrunning cashflowmodels under various operating scenarios,ERA concluded that CityNet Incomewas maximized with privatemaintenance(subsequentlyput inplace) and“marketrate” concession terms.However, theyalso notedthat“marketrate”, which involved lower concession rentstotheCityand an elimination ofthemanagementfee, was notpermissible by theIRS without arestructuring ofthecurrentdebt. ERA concludedthat,among the operating modelsthat were permissible within the current debtframework,thestructurethatis nowin place at Palo AltoGolf Course –no change in contractterms, but with private maintenance– producedthe highest CityNet Income.Afull-service Management Agreement producedthe second highestCityNetIncome. Withoutdoing afulloperations review, NGF doesnothave sufficient informationtocritically evaluate ERA’s analysis orto identifythe operating structurethat would be thebestfitforPalo Alto GC.Whiletherearea number of advantagestothefullservice managementcontract structure, it is alsotruethat“no onesizefitsall”.There aremanyfactorsand variables to consider when evaluating options,andit would be unfairtoboththeCityand thecurrent vendorsforaconsultanttomake arecommendation regarding theoptimalstructurewithout being retainedtodo afullfacilityanalysis. Carefullyevaluating thevalue proposition that eachof the current vendorsbrings tothetablewould be just onecomponentof such an analysis. For instance,thegolfersurveythat ERA implemented as partof their 2008studyshowed that Brad Lozares was ratedquitehigh bygolfers,indicating considerablegoodwilland “equity” builtup in thegolf shop. Similarly,NGF hasbeentold of improved maintenanceconditions (aswellas considerable cost savings) sinceValleyCrest was brought on. National GolfFoundation Consulting,Inc. – Cityof Palo AltoReport –61 Having saidthat,we dofeel confident recommendingthattheCityretainthe current structure atleastthrough thecompletion ofthe renovation project.However, delaying consideration of afundamental changeinoperatingstructure shouldnotpreclude modifyingterms.Forinstance,theCityandthe golf vendormaycome toan agreement resultinginloweringthe managementfeetoreflect reducedresponsibilitiesand concession revenues duringrenovation(especially underOptionG),while stilladhering toIRS guidelines.Not only willthe project substantiallydisrupt business,but significant unknowns include thetiming of theproject andhowthe newlyimprovedfacility willcashflow after being broughtbacktomarket and“re-branded”.Also,thefood &beverage contract doesn’t expire until2018, so some of theadvantages ofthe singleoperatormanagementstructuremay be lessened unlessan earlytermination totheagreement canbesuccessfullynegotiated with the current vendor. Finally, negotiating anewagreementduring construction, when proposers themselves willnot have fullinformation abouthowthe improvedfacilitywillcashflow, may result intheCitynot entering intothe bestdealpossible. NGF believes thatthesearejustafewof the important variables thatmake issuing an RFP at this stage lessthanoptimal.Werecommendthatthe Citywait untilafterrenovation is completedandthe improved facilityhas beenupand running fora yearormore before considering a substantive change instructure.This strategywillprovide additionalinformation thatwillput theCityin abetter positiontomake an informed decision regarding operating structure(forinstance,the Citymayfindthattheimproved “Baylands GolfClub” has significant upside revenue potential,thusmaking itrelatively more attractive tocontrolallrevenues under themanagementcontract structure). LONGRANGE CONCERNS Concernsraisedthroughthepublic process ofreviewing reconfiguration options have included thefollowing long term implications: High saltspresentin thenative soils Intrusion bygeese andburrowing animals Potentialforthe adjacentairportto negativelyaffectthegolf experience In essence,thequestionraised is:“CanthePaloAlto Golf Coursebeexpectedto becomea significantlybettergolf experience given theseissues?” NGF Consulting relies on theopinions of professionals associatedwith individualgolf facilities to addresscertainquestions. For example,inthe case of thehigh salts we look toagronomists, the coursesuperintendent and/orthegolf coursearchitect.Inthecaseofanimalintrusion, because these are oftensite specific, we look tonearbyfacilities toseehowtheyhave dealt with theissue. High Salts Soils high in salts are notuncommontogolf courses locatedalong coastalwaterways and oceans.Inthecaseof Palo Alto thesoils arenotonlyaffectedbythelocation bySan Francisco Bay, but bythepoorlydraining soiltypes.Additionally, theuse of effluent(recycled) water, which typicallyhas higher saltcontent, exacerbates thecondition.While our work hasnot included agronomicevaluation, we have endeavoredto understandthegeneralsituation by comparing outcomeswe have observed at othergolf operations. National GolfFoundation Consulting,Inc. – Cityof Palo AltoReport –62 “Linkscourses,”thoselayouts along thedunesformedcoasts ofthe British Islesand similar locales aroundthe world,arepronetosaltysoils.Yet, with their sandysoilbasis,these sites supportgoodturf because thesaltsareleachedregularlydownward bynaturalrains.This isthe hallmark of links courses, andwhytheir development onthesenatural,sandysoils were so appropriate.When soils are not sandyandporous,the build-upof saltsbecomesproblematic. This isthecaseatPaloAlto Golf Course,where management overtheyears hasbeento periodicallyirrigate withfresh water, driving saltsdownward, and toaddgypsum tothesoils. Additionally, themostrecentremodeling work added a capof sandand better soilmixto several fairways, making themmuch easiertomanageand support healthyturf.These bestpractices have resulted inreasonablyhealthyturf growth despite thesaltysoilconditions. According tostaff,while salts are high,theturf has “learned”to adapt.There is adefinite differencebetweenfairways where the sandcaphas been placedand areas where drainage is not asgood andwhere older native soils arepresent.Also, Paspalumturfvarieties have flourished atthegolf course in afewareas.These areasappeartohavemuch bettersuccess ratesof healthygrowth because thenatureof Paspalumgrass istotolerate saltstoa significantlyhigher degree. NGF Consulting posedthequestionof managing highsaltstoForrest Richardson &Associates, specificallyasking whatadditionalmeasures would be affordedthroughthe reconfiguration options toaddressthis issue.Theresponse summaryis asfollows: Management ofexisting sand capping andhealthyturf rootzone material(the uppermost layers ofrootzone) willbe managedthroughthereconfiguration,replacing thatmaterialas“topsoil”to newfairwayand turf areas;thiscostisrepresented inthe probable cost estimatespresentedtotheCityforreconfiguration options. Newsoils willbe imported as possible within thebudgets,potentiallyfromthe StanfordUniversityMedicalCenterproject(s);these additionalcosts(andrevenue potential) have beenaccounted in probable costestimates. Paspalum turfgrasswillbe usedtosod allnewareas offairways, roughsand tees (Note:Thespecific variety is yetto bedetermined). Theirrigationsystemwill provide dualwatering capabilities, able todeliver potable water toselectedareasand amixof effluent(higher saltcounts)andfresh water; this capabilityallowsflushing (leaching of saltsdownward) as is being done currently. Significantlyimproved drainage isaffordedin each reconfigurationoption,helping to prevent build-up of saltsbyquickertransportationof surfacewater awayfromturf areas andthesoilrootzone, andtherebyreducing thebuild-up of saltsthatoccurs when water is allowed to standandslowlyseep intotherootzone. Theseareprudentmeasuresthatarecommonamong golf course sites with highsaltspresent in the soil.Additionally, we understandthattheCityhas agoaltoreducesaltcountswithin its effluentwater system,agoalthatis not necessarilyaimed at improving conditions atthegolf course,butwillhave a definite value to City’sgolf operation asset. Whilethesuccessrate of overallcondition improvementcannotbeguaranteed, we can look at comparableoperationswhere high salts are effectivelymanaged.Thereare numerous examples of thisthroughout California,including the BayArea.California examples include National GolfFoundation Consulting,Inc. – Cityof Palo AltoReport –63 Monarch Bay(San Leandro), LasPositas(Livermore), Metropolitan(Oakland),Olivas Linksand Buenaventura (Ventura),andIrvine (ShadyCanyon Club). Manycourses with salt issues areturning to Paspalum turfgrassas ananswer. Some ofthe example coursescited have moved to 100% Paspalumgrass.NGFConsulting notesthatthis trendis widespread in Florida,the Caribbean, Mexico, SouthTexas, andHawaii. In Hawaii,for example, Paspalum varieties have literallytransformedthegolf landscapefroma struggling Bermudagrassregiontoone that nowpredominantlyuses Paspalumin orderto overcome high saltsfrom water, soils and theproximitytotheocean. Even in Montereywe areseeing Paspalum use. Atthe MontereyPeninsula Club,forexample, some areaslocated onthe shore thatwere never ingoodcondition, have beencompletelyre-plantedwith Paspalum and arenow in excellent condition. Ourconclusion isthatPalo Alto can enjoyagoodsuccess overthelong term atthe existinggolf coursesite.Managing salts willhave a goodresult,notonlythroughgoodmaintenance practices, but incombination with thereconfiguration work, which should maketheCity’s efforts tomanage saltsmoreproductive, less costlyand,ultimately, more impacting toa positive golf experience. Ourcautionis thattheplan options(A,D,F andG)each have anassociatedresultthat is specific totheinvestment.Plan A,for example,addressesonlya minorityof the courseturf areas(drainage,rootzone,topsoilmanagement,irrigation,etc.) andwilltherefore not produce positive results acrossthefullgolf course.Plan G, atthe otherend ofthespectrum,resolves virtuallyallareas. Animal Intrusion Managing CanadianGeese infestation isoften dependent onregulationsand restriction placed on locales.Ouradvice totheCityis tostudyavailable mitigationmeasuresandto carefullynote themeasurestaken byneighboring courses.Geese populations have been successfully managedthroughthefollowing measures: Traineddogs,suchasbordercollies Reducing standing waterand openwater(ponds,lakes, swamps) Increasing habitatsurrounding thegolf coursethat willappealtogeese populations Implementing noise,reflective or otherrepellants Sterilization agentsto stopgenerationalreturnofgeesetothegolf courseareas Among themostsuccessfuloperations in Northern California arethecourses of the Monterey Peninsula, notablyPebble Beach Companies andtheprivate clubsin thearea.Withfew exceptions, these operators have usedtrained dogstomanagegeeseawayfromtheirturf areas.An on-sitedog specificallytrainedtomanagegeese populations remainsthemost efficientmeasuretoridgeese infestationfromgolf coursesin theU.S. Notonlyis thismethod humane,butithasthe benefit of alower costthan manyothermeasures,and is less interruptive tothegolf experience.Weunderstand there is added complexityrelative tothe adjacentairportoperation andtherequirementsassociated with making surethatgeese are not diverted totheairport,but awayfromboththegolf courseandtheairport.Forthis reason,we recommendthatthe Citytakea look atjointlyworking out aplanforboththegolf andairport needs. National GolfFoundation Consulting,Inc. – Cityof Palo AltoReport –64 Withregardtotheground squirrelinfestation,we understandthatthis isbeing metwith ongoing mitigation effortsthatareallowed under stateguidelines. Also,the increaseof naturalized areas afforded byallreconfiguration optionswillhelp drive habitat awayfromturf and in-playareasof thegolf course. Airport Effects Manygolf facilities arelocated immediatelyadjacentto airports,and yet enjoyagoodreputation and highqualityof golfing experience.Weseenoundue negative associated with therelatively smallprivate plane airport, especiallygiven thattheflight pathsdo not directlyovertop thegolf course itself. Moreover, Silicon Valley appearsto beutilizing the airportforcorporateflights infavor ofthe largerregionalairportsthat posedelays and complexities due totheir scheduled, commercial flightbusiness.Thisfactmayactuallyprove beneficialto thegolf operationshould thegolf course anditsfacilities be elevated a “destination” levelof qualityandreputation.Theresultwith nominalairport useisthatmorevisitorsto Palo Alto willknowaboutthegolf course andbe able toget afirsthandviewofits offerings. Summary Based on experience and inputfrom ForrestRichardson,NGFConsulting believes thatlong- termmitigation oftheconcerns ofthis site isworkable andworththe premiumsrequiredfor maintenanceandmanagement.Inmanycases,golf courses are located on degradedland because thatland cannot beusedforotherpurposes.Wesuspectthis isthe case inPalo Alto and would find itdifficulttojustifyalternate solutions totherenovationsthatmight be considered:(a) continued operation in adeclined state;(b) abandonmentof the assetinfavorof a newlocation,given land values in the area;or(c) abandonmentoftherecreation amenity altogether,given itshighuse andthefinancialforecastspresented. POTENTIALECONOMICDEVELOPMENTOFTHE AIRPORT&GOLF “BAYLANDSGATEWAY” AREA Thegolf course“corner”and sharedentrywith the airport are considereda “gateway” to the Baylands Preserve areas. Assuch,this intersection hasgreatpotentialtobecomemorethan justagolf clubhouseandairport with nominalretailofferings. According tothe CommunityServices Department,forward and creative thinking hasbeen aimed atthepotentialforthis areatobecomeamore user-friendlyand service-oriented destination.Thusfar,thinking has included whetherthe area couldsupportamodestcollection of cafes,retailshops, and perhapseven a hotel.While noformalplans have been commissioned,the Cityhas discussedageneral,long rangeapproachto looking more in depth atthis possibility. Such development,especiallyif it included asmallhotel, would add naturaldemanddrivers in immediateproximitytothegolf course,thusresulting in increasedroundsand revenues. As an example, a 130-room business hotelina high demand localemayhave as manyas28,000 roomnightsbased onanaverage60%occupancyrate.Using amultiplierof 1.3guestsper room,this equatesto approximately36,000guests per year.Using apercentage of 10%golfers and assuming thatthegolf course couldgeteven 20%of thesegueststoplay, the resulting bump would be near1,000 additionalgolfersperyear. Also,thesegolferswould comprisenon- residentspaying the highest applicable rates, andtraveling golferstypically exhibit less price National GolfFoundation Consulting,Inc. – Cityof Palo AltoReport –65 sensitivityand would be likelyto alsospendmoneyon the practice range,pro shop, and/or restaurant. PRIVATEFUNDING POSSIBILITIES Of course,asidefromreceiving compensatorymoneyfromtheSan FrancisquitoCreek Joint Powers Authority,the Citymayhave tograpplewith howtofundadditionalmoneyrequiredif ReconfigurationOptionsD, F,orG ischosen,and/orif anywork identifiedas “additional”or “alternate”in thisreportitundertaken.One ofthemechanismsthatwould obviouslybe very preferable totheCityis raising privatemoneytofund some, or even all,of theneededmoney. Based on preliminarydiscussion held between Forrest Richardson,NGF, and theCity, the privatefunding mechanismmaytakea combination of thefollowing avenues thatthe Citywill have to explorefurther: Naming rightsforsomecomponentsofthefacility(e.g.,rangeperformancecenter, certain holes,teemarkers, designated youth area);thismaybefeasible dotothe numberof verywealthyindividuals in Palo Alto, as wellas the verystrong corporate (especiallyhigh-tech/ internet-based)presence. Grants –forexample,the FirstTee,which is very active in thearea. Lease-Back –some within theCityhave mentioned thepossibilityoffinding a design/build entitythatmightbe interested in undertaking allofthe improvements, including soccerfieldsif Option ForG ischosen,and restructuring thefinancing packagetogetthe entireproject, including someor alloptionalmasterplan improvements, doneat one time.Inthiscase,the±$3million the Cityreceives from the SFCJPA couldbe used toward paying offtheold debt anda newarrangement put in placeforthe work torebuild thegolf course. TheStanfordSoilImportis a wildcard in the equation. It could bring revenue intothe equation, but likelynotmorethan $500,000.Thismayprovide a partialfunding mechanismtohelp payfor some ofthemiscellaneous suggested work that willnot have a revenue streamattacheddirectlyto it(entryexperience, trails,signage, parking, etc.). National GolfFoundation Consulting,Inc. – Cityof Palo AltoReport –66 Appendices APPENDIX A– COMPARATIVE SUPPLY RATIOS –PALO ALTO GC&KEY MUNICIPAL COMPETITORS APPENDIX B– COMPARATIVE SCORINGOFRECONFIGURATIONOPTIONS APPENDIX C– WATER &POWERUSE DISCUSSION&ASSUMPTIONS APPENDIX D– REVIEWOF PROBABLE COSTESTIMATES APPENDIX E – POTENTIAL LONG-TERMMASTERPLANIMPROVEMENTS National GolfFoundation Consulting,Inc. – Cityof Palo AltoReport –67 APPENDIX A–COMPARATIVESUPPLYRATIOS– PALO ALTOGC&KEY MUNICIPALCOMPETITORS NGF haspresenteda comparisonof somekeygolf supplymeasuresforPalo Alto GCand its keymunicipalcompetitors, with the5-mile radiusaround eachfacilitythe basisfor comparison. Wenotethatallof thesubjectfacilities, exceptforSantaTeresa, have veryhigh household/supplyratios,which is one ofthekeyfactorsthatexplains the veryhighrounds figuresrealized per 18 holes among municipalgolf courses inthismarket. Also of note,in its2009publication “The Futureof PublicGolf in America,”NGFhypothesized thatthebestpredictorofa publicgolf course’ssuccess was thenumberofgolfersper18holes within a 10-mile radius,with 4,000identified asthekeynumberforprojectedfinancialstability. As shown in thesecondtable below, allof thesubjectcourses(again withexception of Santa Teresa)exceed this numberforthe 5-mile market. Golf FacilitySupply– 2011 (5-MileRadius) 5-mileRings TotalNo.of Golf Facilities TotalNo.of Golf Holes Households per18holes Households per18Hole Index (US=100) Palo AltoGolf Course 4 72 19,836 251 Poplar Creek Golf Course 5 81 17,942 227 SanJose MunicipalGolf Course 6 90 31,377 398 SantaClaraGolf &Tennis Club 6 90 21,027 266 SantaTeresa 6 135 7,841 99 ShorelineGolf Links 4 72 24,206 307 SunnyvaleGolf Course 8 126 19,435 246 Source: National Golf Foundation Golfersper 18 Holes(5-MileRadius) 5-mileRings Golfing Households Est.No.of Golfers1 Total18-H Equivalent Golfersper 18holes Palo AltoGolf Course 14,206 21,309 4 5,327 Poplar Creek Golf Course 14,243 21,365 4.5 4,748 SanJose MunicipalGolf Course 30,527 45,791 5 9,158 SantaClaraGolf &Tennis Club 17,855 26,783 5 5,357 SantaTeresa 12,250 18,375 7.5 2,450 ShorelineGolf Links 16,695 25,043 4 6,261 SunnyvaleGolf Course 24,118 36,177 7 5,168 TotalU.S.“Threshold” forSuccessfulPublicGolf (10-mile Ring) 4,000 1 GolfingHouseholds x1.5 Source: National Golf Foundation National GolfFoundation Consulting,Inc. – Cityof Palo AltoReport –68 APPENDIXB –COMPARATIVESCORINGOFRECONFIGURATION OPTIONS As a usefultoolinformulating proformaprojections, NGF hascomparedthe Reconfiguration Optionsusing a“scorecard approach”wherebyattributes andbenefits areassignedscores(1- 10).Thismethodallows a side-by-side comparison, providing a wayto reviewpluses and minuses associated witheach option.Webaseour scoring onseveralfactors,including the following: Details presented(plans,conceptualimages, etc.) Public commentsand historicaluseof thefacility(rounds anduse) NGF Market Analysis (localand regionaltrendsandgolf participation) Competition within themarketarea Details and othergivensregarding the changestotakeplace(golf designconsultant involved, howfaralong the proposedchangeshave been studied,budgets, etc.) Long termviabilityof thechangesandmarketacceptance Known preferencesofgolfersrelative tocourseconditioning,consistency,etc. Qualityof theconsultants involved In situations wheregolffacilities are proposedtobe reconfigured,thereare bothsubjective and objective considerations.Additionally, there isoften difficultyin verifying to what degree proposed changes willbe carried out. Fortunatelyin thecaseof thePalo Alto Golf Course,the Cityand SFCJPA have accommodateda verythorough processand detailso we areable to look attheplans, beforeand afterimages, andother documentationthatquantifythechanges associated with theoptions. Scoring is onefactorconsidered in estimating potentialchanges inthefinancialperformanceof thegolffacility. For example, agolf course with significantlymorepracticeopportunities, especiallywhen such use is in demand,willpotentiallybring in newuse and associated revenue. Inthecaseof asignificanttransformation of agolf coursefrom an averageorbelow average experienceto one with newholes, views and overalllandscape improvement,it islikely thatan increase in use and/orrevenue willbe realized. And, where we cansee potentialto marketthefacilitybeyond theimmediate area,itis possible torealize an added price-per-round fornon-resident use.Inthis latter example we often citetheabilityofgolf coursessuch as TorreyPines toadopt agreenfee structurethatholds lowratesforresidents ofthe area while chargingmarketratesthat are veryhighfor playersfrom out ofstate.Inthe case ofTorrey Pines, thegap between resident ratesand visitorratesareamongthe widest inthegolf business.Thoughthistype ofgap willnot berealisticforPalo Alto,we doexpect that, depending onthereconfiguration option chose, non-residents willeffectivelybe “subsidizing” to some degree ahighquality, butstillaffordable,golf experiencefor cityresidents. Thefollowing ratingsusea 1-10 scalewhere 1 isthe lowest and 10 isthehighest.Thisranking includes somefinancialconsiderations,butis ancillaryto theproformafinancialanalysis for each option.Therankings hereareusedtoformsome oftheforecastswithin the proforma analyses. Scoring is based onthe basereconfiguration work foreach option (i.e.,less all optional/alternate work listed). Asummarytable ofrankings is presentedfollowing thecategory descriptions. National GolfFoundation Consulting,Inc. – Cityof Palo AltoReport –69 Thefollowing arecategories usedtoformthescoring: Yardage & Par –Accommodation of yardage(regulation length)for acourse andpar thatwillbe viable and competitive within themarket andregion Interruption ofPlay During Reconfiguration –Abilityof theplantoretainsome holes (9-hole play) andpractice during reconfigurationwork Consistency of Bunkers& Hazards –Overall impact ofthe planrelative tobunker consistency, aestheticsand other hazards Consistency ofGreens –Overall result ofgreensqualityand consistency Drainage Improvement –Overall positive impacton drainage;eliminating wet conditions Irrigation Improvement –Overallpositive impact on irrigationcontrol,consistency and associatedturfquality Pace-of-Play – Degreeto which the plan accommodatespositive pace-of-playand long range abilitytomanageforgoodpace Improved VisualImpact–Overalllandscape enhancements(added naturalizes areas andvisualimpact) Improved Views –Accommodation ofmoreviews totheBayandterritorialvistas ImprovedGolfExperience Impact-Overallplan benefitstostrategy, excitementof holes, variation of direction, orientationtowind, etc.) Competitivenesswith Area Courses–Abilityof the coursetocompetewith courses in the immediatearea Competitivenesswith RegionalCourses –Abilityof the coursetocompetewith coursesin theregion Likelihood for Destination Visits –Abilityof thecourseto attract specificvisits expresslyto playthe course Ability to Leverage“Green”Marketing –Consistencyof theplan with a“green” environmentalmessage(Baylands tie-in,morenaturalized areas,naturallandscape, etc.) ConsistencywithLong Range Planning –Integration of theplan withfutureplanning (clubhouse,practice,etc.) TurfReduction(irrigation) –Reduction ofmanaged turf acreagefor lesswateruse and reducedpumping TurfReduction(managed care) –Reductionof managedturf in relation tothe ability to shiftmaintenance emphasisfromout-of-playareastogolffeatures andareas moreappreciated bythegolfer National GolfFoundation Consulting,Inc. – Cityof Palo AltoReport –70 Comparative Scoring of ReconfigurationOptions Option A Option D Option F Option G Yardage & Par 8 8 8 6 Interruptionof Play during Reconfiguration 5 4 3 1 Consistency ofBunkers & Hazards 7 8 9 10 Consistency ofGreens 3 5 6 8 Drainage Improvement 4 6 8 9 Irrigation Improvement 3 6 7 10 Pace-of-Play 5 10 7 7 Improved VisualImpact 4 6 7 8 Improved Views 2 7 7 8 Improved Golf Experience Impact 3 7 8 8 Competitiveness with Area Courses 5 8 8 8 Competitiveness with RegionalCourses 2 6 7 8 Likelihood for Destination Visits 1 5 7 7 Ability toLeverage“Green” Marketing 5 7 8 9 Consistency with LongRangePlanning 7 9 9 9 TurfReduction(irrigation) 4 6 8 9 TurfReduction(managedcare) 4 7 8 9 National GolfFoundation Consulting,Inc. – Cityof Palo AltoReport –71 APPENDIXC –WATER&POWER USE DISCUSSION & ASSUMPTIONS NGF Consulting was notcharged with afullwateror power useanalysis. However,forecasting costsassociatedwith each reconfiguration optionrequiresreasonable estimatesontheaffects of amore efficientirrigation systemcombined with lessturf acreage. Ourconclusions onwater andpower use are based onthefollowing assumptions, derived from CityStaff andthegolf course architect/designteam: Currentirrigation (managed)turf acreage:135 Newirrigation areas efficiencyover/above the existing system:+10% Currentirrigation inefficiencydue toleaks andbreaks(loss):-5% Currentpower inefficiency: -10% Newpower efficiencyrealized withfullcourse better watering times/durations:+15% Annualcostforirrigationrepair duetoage andcondition: $30,000 Using the data andassumptions, NGF Consulting has developed thefollowing forecastfor water and power usedifferences with eachreconfiguration option. Option A Totalirrigatedturffollowing reconfiguration: 96.5acres Water usereduction based on newirrigatedacreage: 28% Approximate areaof reconfigured coursewith newirrigation system:35acres Percentageof irrigated Area with NewIrrigation: 36% Water usereduction of newusage basedon efficiencies of newsystem area: 3.6% (10%efficiencyx36%=3.6%) Water efficiencyof newusagegained duetofewer leaks/breaks: 2%(5%efficiencyx 36%= 2%) Power efficiencyrealized with better watering times/duration:+5% Conclusions ReducedWaterCostEst.(effluent)$- 0- ReducedWaterCostEst.(potable)$72,800(28%x$260,000) ReducedWaterCostEst.(potable efficiencies)$5,645([3.6%+2%] x$100,800) Reduced Power Cost Est.(efficienciesrealized) $1,200(5%x$24,000) TotalEst. Reduction inWater & Power Cost $79,645/ annual Option D Totalirrigatedturffollowing reconfiguration: 92 acres Water usereduction based on newirrigatedacreage: 32% Approximate areaof reconfigured coursewith newirrigation system:40acres Percentageof irrigated Area with NewIrrigation: 43% Water usereduction of newusage basedon efficiencies of newsystem area: 4.3% (10%efficiencyx43%=4.3%) Water efficiencyof newusagegained duetofewer leaks/breaks: 2%(5%efficiencyx 43%= 2%) National GolfFoundation Consulting,Inc. – Cityof Palo AltoReport –72 Power efficiencyrealized with better watering times/duration:+10% Conclusions ReducedWaterCostEst.(effluent)$-0- ReducedWaterCostEst.(potable)$83,200(32%x$260,000) ReducedWaterCostEst.(potable efficiencies)$7,258([4.3%+2%] x$115,200) Reduced Power Cost Est.(efficienciesrealized) $2,400(10%x$24,000) TotalEst. Reduction inWater & Power Cost $92,858/ annual Option F Totalirrigatedturffollowing reconfiguration: 91.5acres Water usereduction based on newirrigatedacreage: 32% Approximate areaof reconfigured coursewith newirrigation system:58acres Percentageof irrigated Area with NewIrrigation: 63% Water usereduction of newusage basedon efficiencies of newsystem area: 6% (10%efficiencyx63%=6.3%) Water efficiencyof newusagegained duetofewer leaks/breaks: 3%(5%efficiencyx 63%= 3%) Power efficiencyrealized with better watering times/duration:+12.5% Conclusions ReducedWaterCostEst.(effluent)$- 0- ReducedWaterCostEst.(potable)$83,200(32%x$260,000) ReducedWaterCostEst.(potable efficiencies)$10,711([6.3%+3%] x$115,200) Reduced Power Cost Est.(efficienciesrealized)$ 3,000 (12.5% x$24,000) TotalEst. Reduction inWater & Power Cost $96,911/ annual OptionG Totalirrigatedturffollowing reconfiguration: 92acres Water usereduction based on newirrigatedacreage: 32% Approximate areaof reconfigured coursewith newirrigation system:92acres Percentageof irrigated Area with NewIrrigation: 100% Water usereduction of newusage basedon efficiencies of newsystem area: 10% (10%efficiencyx100%= 10%) Water efficiencyof newusagegained duetofewer leaks/breaks: 5%(5%efficiencyx 100%= 5%) Power efficiencyrealized with better watering times/duration:+15% Conclusions ReducedWaterCostEst.(effluent)$- 0- ReducedWaterCostEst.(potable)$83,200(32%x$260,000) ReducedWaterCostEst.(potable efficiencies)$23,040([15%+ 5%]x$115,200) Reduced Power Cost Est.(efficienciesrealized) $3,600(15%x$24,000) TotalEst. Reduction inWater & Power Cost $109,840/ annual National GolfFoundation Consulting,Inc. – Cityof Palo AltoReport –73 APPENDIXD –REVIEWOF PROBABLE COSTESTIMATES NGF Consulting hasreviewed the probable costestimates provided tothe Cityfor reconfigurationOptionsA, D,F,andG.In orderto objectivelyevaluate proposed budgets we look fora baseline of comparison.Thebestresources aresimilar public sectorgolf course projectsinvolving reconfiguration.All golf courseprojectsareunique, as arethe conditionsof the site,construction costs,availabilityof construction materials(sand, proximityof sodgrowing, etc.),andterrain.Additionally, in a situation where theproposedmodifications tothecourseare underway, as in this case, we look toother projects bythe samegolf course architect. Thebestcomparisonsare three projectsbyForrest Richardson,ASGCA: Buenaventura Golf Course (Cityof Ventura,California) PeacockGapGolf Course (San Rafael, California – privatelyowned) Olivas Links(Cityof Ventura, California) TheBuenaventura project was undertakentorebuild an existing 18-holefacilityoriginally designed byWilliam P. andWilliamF.Bell.Thescope was to largelyretain hole corridors throughexisting maturetrees,buttore-turf allof thegolf course.Theproject involved approximately88 acresof fullre-turfing,greensrebuilding (19),newponds (3) andcomplete rebuilding of allfeatures(bunkers,teesandfairways).This projecthad astatedbudgetof $4.5 million which also included site work foranewmaintenance area,a newmaintenancebuilding and improvementstotheentryand parking areas.The work was completed in 2005 andwas funded bytheCityof Venturathrough acapitalbond program. NGF was told thatthegolf course specific work totaled approximately$3.6million and themarketconditionsatthattimewere very similar tocurrentconditions. ThePeacock Gapproject was a completere-build of an 18-holegolf course (also anoriginal design ofWilliamF.Bell), associatedre-routing work forsafetyreasons,anewpond, new drainage,fullnewirrigation system, andallnewfeaturesincluding anewpracticerange.The totalacreage involved was approximately94 acres and included similar naturalized area development as has been proposedfor Palo Alto.The project was carriedout overtwo phases beginning in 2004for areportedinvestmentof $5.1million. Of note isthattopsoilmanagement was verysimilar tothat covered in the PaloAlto Probable CostEstimates. TheOlivas Linksprojectis most similar toPalo Alto among thesethree examples.This course was originallydesignedbyWilliam P.andWilliam F. Belland alsoborders ariver at itsestuary termination point.Thecourse was pronetoflooding and hadverypoor soilconditions asaresult of effluentirrigation and inherentsaltsbywayof its seaside locale.Also apartof thecapital bond programof theCityof Ventura,this 2006-07work was contracted at$5 million in termsof directgolf course improvements.These includedfullre-building using on-site soils. Paspalum grass was usedforfairways, with Bentgrassonthegreens.Ourestimation of thetiming of this work was that itfellduring themostaggressive contracting time inthepast10-15years.The work appearsto have been publicallybid with six qualified bids,eachveryclose tothelowest bid atthe $5million point.TheCityspentadditionalfundstorelocateandreplace their maintenancefacilityover and above thegolf course construction contract. Thoughthere are variables that could affectcost,such astheultimatetiming of theproject and a change inregionaleconomic conditions, NGF’sgeneralassessmentgiven ourexchangeswith Forrest Richardson onthis matter isthatthe probable costestimatespreparedfortheCity (Options A,D,F andG)appearto coverthescope of thework shownforthe options,andare National GolfFoundation Consulting,Inc. – Cityof Palo AltoReport –74 conservative in approach. According torepresentatives of theGolf CourseBuilders Association of America(GCBAA) theBayArea represents one of themostcostlyworking locales in NorthernCalifornia based on available labor, housing andthegeneralcost offuel, operations and logistics.Wenotethatthe architect,recognizing thisreality, hasincluded a significant degree of projectmanagementand contingencyin estimatespreparedforthe City-important componentsthatwe often see omitted atthis stage of planning. National GolfFoundation Consulting,Inc. – Cityof Palo AltoReport –75 APPENDIXE –POTENTIAL LONG-TERM MASTERPLAN IMPROVEMENTS Thetables belowsummarize some ofthe long-term and/oroptionalimprovementsthathave been presented byForrest Richardsontothe Cityof Palo Altoforconsideration. ClubhouseImprovements Exterior Condition &Upgrades - Estimate:$250,000 Aestheticimprovement to facings, color, materials Replace, upgrade landscaping ExpandMeeting Spaces - Estimate:$1,700,000 Current Space: 75 in one room + 70 on patio Expand main pavilion room to hold 200 Expand/open patio to hold 100 additional(300 total) Create outdoor wedding garden Reconfigure grillas potentialrestaurant space (60) Reconfigure bar as pub seating w/ patio for 60 addl. Expand/improve kitchen Expand/screen service yard Expand/open patio to hold 100 additional(300 total) Golf ShopUpgrades - Estimate:$100,000 Expand office/storage Free-up 1,000 s.f. retailspace CreateCartStorage Building- Estimate:$440,000 Currentlystorage for 15 carts; balance kept outdoors and leased temporarily as needed for groups Newbuilding for 70 carts Arrival& EntryImprovements NewEntry, SignageandParking- Estimate: $400,000 Newentry Newsignage Resurfaced parking w/ Landscaping &Lighting (expand to 300 spaces) NewEntry, SignageandParking- Estimate: $200,000 Newtrailconnections (to Baylands, etc.) Bike racks, signage, etc. Practice Facility Improvements RangePerformanceCenter - Estimate:$500,000 Newbuilding &hitting bays for Instruction Smallmeeting spaces and offices RangeExpansion- Estimate:$100,000 (6) Additionalhitting bays(adjusted netting to north) RebuildExistingPracticeGreen- Estimate: $180,000 Newgreen complex as short game area CreateDesignated Youth Area- Estimate:$200,000 Along Embarcadero (2 Acres) RangePerformanceCenter - Estimate:$500,000 Newbuilding &hitting bays for Instruction Smallmeeting spaces and offices National GolfFoundation Consulting,Inc. – Cityof Palo AltoReport –76 Other“Alternate” Improvements On-courseRestroom Replacement- Estimate:$95,000 Newstructure and demo existing Replace Balance of IrrigationSystem (Varies w/ Plan Option)Complete newsystem &control RebuildAll Greens onCourse(Varies w/PlanOption)Rebuild allgreens to USGAspecs Resodall Fairways onCourse(Varies w/ Plan Option)Newand consistent turf variety throughout NewEvent PracticeGreen/Area- Estimate:$80,000 Separate event green and area (Plan Donly) SandPlateNewFairways (Varies w/PlanOption)Sand cap to 6 in. ORDINANCE NO. XXXX ORDINANCE OF THE COUNCIL OF THE CITY OF PALO ALTO AMENDING THE BUDGET FOR FISCAL YEAR 2013 TO PROVIDE AN APPROPRIATION OF $545,338 FOR CAPITAL IMPROVEMENT PROJECT PG-13003 GOLF COURSE RECONFIGURATION AND BAYLANDS ATHLETIC CENTER IMPROVEMENTS The Council of the City of Palo Alto does ordain as follows: SECTION 1. The Council of the City of Palo Alto finds and determines as follows: A. Pursuant to the provisions of Section 12 of Article III of the Charter of the City of Palo Alto, the Council on June 18, 2012 did adopt a budget for Fiscal Year 2013; and B. On July 23, 2012 City Council approved a Golf Course Reconfiguration that includes a reconfiguration of the Course and 10.5 acres for playing fields or other recreational amenities; and C. Adding the 10.5 acre multi-use athletic center project requires additional design work and an expanded Environmental Impact Report; and D. CIP Project PG-13003 Golf Course Reconfiguration and Baylands Athletic Center Improvements is now established to expand the current contract with Golf Course Architect Forrest Richardson, to develop Golf Course design options and complete the required Environmental Impact Report; and E. Five Hundred Forty-Five Thousand Three Hundred and Thirty-Eight Dollars ($545,338) is needed to amend the contract; and F. City Council authorization is needed to amend the 2013 budget as hereinafter set forth. SECTION 2. The sum of Five Hundred Forty-Five Thousand Three Hundred and Thirty-Eight Dollars ($545,338) is hereby appropriated to CIP Project PG-13003 Golf Course Reconfiguration and Baylands Athletic Center Improvements, and the Infrastructure Reserve is correspondingly reduced. SECTION 3. The Capital Fund Infrastructure Reserve is hereby reduced by Five Hundred Forty-Five Thousand Three Hundred and Thirty-Eight Dollars ($545,338) to Four Million Nine Hundred Eighty Thousand Thirteen Dollars ($4,980,013). 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 6. As provided in Section 2.04.330 of the Palo Alto Municipal Code, this ordinance shall become effective upon adoption. SECTION 7. The Council of the City of Palo Alto hereby finds that the Golf Course Reconfiguration and athletic center capital project is subject to environmental review under the provisions of the California Environmental Quality Act and, therefore, will engage Forrest Richardson to conduct an environmental impact report. INTRODUCED AND PASSED: AYES: NOES: ABSTENTIONS: ABSENT: ATTEST: APPROVED: __________________________ ___________________________ City Clerk Mayor APPROVED AS TO FORM: ___________________________ City Manager __________________________ ___________________________ Senior Asst. City Attorney Director of Community Services ___________________________ Director of Administrative Services ATTACHEMENT E EXCERPT from City Council Meeting Minutes of July 23, 2012 Finance Committee recommendation to Reconfigure the Palo Alto Golf Course, and Staff Recommendation to Negotiate an Amendment to Existing Contract with Golf Course Architect Forest Richardson & Associates to Complete Finance Committee's Recommended Design and Environmental Impact Analysis for up to $336,835. Recreation and Golf Division Manager, Rob De Geus said Staff was transmitting a recommendation from the Finance Committee. The recommendation was that Staff be directed to pursue golf course redesign Option G which added space for up to three full sized athletic fields and reconfigured the entire golf course as part of the mitigation for the San Francisquito Creek realignment project. Secondarily Staff asked Council to authorize the City Manager to negotiate an amended contract with golf course architect Forrest Richardson and Associates to complete the design and environmental impact analysis for up to $336,000. He showed a picture of the golf course in its current configuration and an overlay of the new levy system, which encroached onto the course and impacted several holes. At minimum six to seven holes needed to be reconfigured. The objective was to deal with flood control, improve the natural habitat, find recreational opportunities, and improve the golf course. The last time the item was before Council was in December 2011 when they had a study session on the golf course. Since that time there were numerous community meetings with the Parks and Recreation Commission Golf Advisory Committee. Staff went to the Finance Committee in March 2012 for its review and opinion. He discussed several reconfiguration options. Option A was the most minimal reconfiguration, Option D enhanced the golf course fairly significantly at a low cost, Option F added one playing field, and Option G, which was the Finance Committee’s preferred option, reconfigured the entire golf course and added 10.5 acres which allowed for up to three playing fields. The Finance Committee’s recommendation was for Option G because the opportunity to gain 10.5 acres was unique in a built out city. Option G was the most environmentally sensitive design with a complete baylands themed experience. The financial analysis by the National Golf Foundation (NGF) suggested that Option G would outperform the other designs over time. Option G also replaced the entire irrigation system, which was currently in a state of disrepair. Forrest Richardson, Forrest Richardson and Associates said the two part process was the San Francisquito Creek realignment, which was the part of the contract that was handled by the JPA and then the City undertook a parallel effort to look at long range planning for the golf course. At the December 2011 study session the Council had Options A, D, and F, and requested that they look at expanding the area of the athletic fields which led to Option G. They met with the Finance Committee who provided additional direction on the base plan of Option G. They had evaluated conditions, safety, irrigation, and arbor assets. He explained there were chronic irrigation problems as the system was approaching 12 years of age in a very high salt soil condition. Other problems were irrigation coverage, a growing animal problem, several arbor issues including trees that were not appropriate or in declining health, and a lack of interest in the course itself. He said that practice areas could bring golfers to the recreation amenity. The course currently offered too few views of the bay despite being on the edge of it. There were wetlands on the property that needed to be preserved and expanded. A public forum was conducted at the end of 2011 and the golfers shared their views. He said Option A was the baseline option where they reconfigured approximately six holes. It had the lowest area of impact and the lowest cost. Option D realigned about eight and a half holes and had a nominal area of impact. It failed to address all of the irrigation replacement and left approximately $900,000 that would need to be addressed at a future date. Option F included one athletic field and reconfigured a significant portion of the course. Council requested the team review expanding the athletic field which led to Option G. They concluded that approximately 10 acres could be used for athletic fields and recreation apart from golf. Option G reconfigured roughly 15 holes. He showed how the costs compared between the options. Option A was approximately $3.5 million, Option D was $4.1 million, Option F was $5.8 million, and then Option G was just over $7 million. The Finance Committee made a series of comments and directions, one of which was rebuilding all of the golf holes so that they would all be new and equal. It was also suggested that the practice greens should be built along with the new greens. There was a small area of turf that could have been preserved in Option G and they were asked to explore replacing all of the turf so it all was self-tolerant grass of the same variety. He stated the last thing was to replace the on course restroom building which was in disrepair and move it to its new location. He said that lead to the refined plan for Option G, which was a design developed plan that took into account the Finance Committee directions. He said Option G reduced turf by roughly 43 acres, the net acreage of the golf course would be just about 90 acres in managed turf whereas the golf course was currently somewhere over 135 acres. The probable cost for Option G was $7.5 million. He said that in the northwest corner of the property they would create a very large baylands wetlands habitat with an island green. The eighteenth hole had a new clubhouse. He showed the objectives for the facilities. The most pressing objective was to make the facilities inviting to non- golfers and bring other members of the community into the golf facility to generate more revenue. He discussed the site of the clubhouse and said they looked at improving the entry, the signage, enhancing the parking, integrating landscape, improving customer arrival, allowing vehicles to exit onto Embarcadero to avoid congestion at the main entrance, integrating trails to the golf course to encourage the public to come in along Embarcadero Road. They looked at the heritage of the clubhouse and said that the clubhouse had previously been featured in the NGF’s book “Great Clubhouses.” He reviewed the long range conceptual plan for the clubhouse and its outdoor additions. It had expanded areas and a new façade and surfaces. The cart storage facility and the range performance center would have the state of the art video and digital facilities. Mr. De Geus said the NGF did a significant report on the different options. He thought that was very helpful in considering what was the right path. Regarding Option G they assumed in their 10 year pro formas that rounds would rebound from 68,000 rounds annually to 76,000 rounds. They assumed that the terms of the cost of the contracts for maintenance and management would remain relatively the same, with a slight increase in maintenance and that there was a new 20 year debt of $4.5 million at 4.5 percent. The Finance Committee recommended Option G. Staff asked the NGF to re- examine the numbers with some sensitivity analysis. They asked what it would look like if the rounds did not rebound and if the market did not allow for the increased fees. They also asked about the worst case scenario which was that the rounds did not come back and they could not increase fees. He said that if there were lower rounds than expected they would see several years where the golf course lost money. Lower fees had an impact as well, but lower rounds and fees, which was the worst case scenario, showed that the golf course was unable to cover costs through 2019. It was important to recognize that was not the expectation, but it was a risk. Option G was the most ambitious plan, so it was important to understand the risk. The Parks and Recreation Commission (PARC) essentially agreed with the Finance Committee. They were a bit tempered on a few things and thought more study was needed regarding the athletic field. He said they did significant work over the last ten years of brokering the field space more efficiently. They added synthetic turf and lights to some fields. The PARC felt that the clubhouse improvements needed to happen in order to realize the full potential of the golf course. The Golf Advisory Committee preferred Option D because it was less risky. They were concerned that Option G placed too great a burden on the golfers to pay the additional debt. The Golf Advisory Committee was also a little skeptical about the NGF forecasts and about closing the course for a full year for construction. Council Member Shepherd said the Finance Committee felt that the City wanted a “wow” factor golf course by setting aside land for playing fields, and by moving forward on the floodplain reconfiguration. Some alternate items were incorporated into the refurbishment of Option G. One that could easily be seen was updating the irrigation system. Council Member Espinosa asked Staff to address the issue of possible noise coming from the playing fields. The design tried to create a separation, but he heard from golfers that the sounds from spectators and referees with their whistles would have a significant impact on the golf experience. Mr. De Geus said that concern was raised at a community meeting by the golfers. They were concerned about the noise and indicated that it was not compatible. There was quite a distance between the playing fields and the holes. Mr. Richardson said in the design development of Option G they moved the 10th fairway over as far as they were comfortable with. It was about 200 feet on the length of the hole. The 11th tees were the closest, depending on where golfers played the 11th hole. He thought they still had the potential to bring soil in from Stanford and so the area between the athletic fields could be raised and bermed when the athletic fields were developed. He said that if the soil was not available currently, it could be a future potential sound mitigation. Council Member Espinosa asked them to address the issue of staffing in Option G. Mr. De Geus said that there was very little City Staff involved in the golf course since the City outsourced that maintenance. He said it was less than half of a full time employee, and that would stay the same. Greg Betts, Community Services Director, said it was also helpful to repeat what Mr. Richardson said about the reduction of managed turf from 135 acres to 90 acres. That would not only result in a reduction of water use, but also a reduction of fertilizers, pest controls, and staffing time. Council Member Espinosa asked about the photos that showed the before and after. The first time he looked at them there seemed to be a greater focus on hills and creating natural habitats. He said that it may just be the shots that were included but he wanted to make sure that was discussed. He asked if any concerns had come up about what could really be done in terms of creating the ideal golf landscape from the flat homogenic approach there was currently. Mr. Richardson said they would attain change in all the Options aside by lowering areas to form wetlands and using that material to create elevation changes elsewhere. He thought the elevation changes could vary from +/- 5 feet over the old course to +/- 15 feet. Council Member Burt asked if the new stress analysis assumed certain changes in both economic conditions more broadly as well as changes in golf patterns and play. He asked if there were factors that went into what would drive the lower numbers of rounds and green fees. Mr. De Geus said Staff asked the NGF about Option G and pushed them to look at a “what if” scenario because weather and the economy were uncontrollable. Council Member Burt asked if the stressors they placed on Option G would apply to the existing golf course. Mr. De Geus said they would. He noted they did not do sensitivity or stress analysis on the other three options, and that would also have an impact on them. Council Member Burt was concerned that they had looked at Option G in isolation. He thought it was a legitimate exercise, but wanted it in context. Ed Getherall, National Golf Foundation said they had not done the sensitivity analysis on the other three options. Many of the factors that could cause stress on Option G would also apply to the other options. What they did under the reduced round scenario was have the rounds come down to lower than the projected Fiscal Year 2012, which was a very significant drop. What they had as the expected base case stabilized rounds at 12,000 fewer rounds and then they reduced fees by reducing the projected growth rate. He said that when they discussed the average fees increasing by 15 percent that was not every single fee. One of the things Mr. Richardson had discussed was making it the type of golf course where there could be segregation in the fees between resident and nonresidents. He said that Palo Alto’s immediate competitive set was not spectacular, the green fees were tightly grouped, and there was no one facility that really stood out. The average green fee would raise 15 percent, but not every fee would go up. Junior resident fees would not increase at the same rate as the fees for a nonresident playing on a Saturday morning. He said the number one reason that people said they did not play golf more frequently at the Palo Alto golf course was a lack of interest in the course itself. He thought Option G addressed that to the biggest extreme. Council Member Burt said it sounded like that was included in the pro forma. He thought he saw in the Staff report that there was reference to an approval for certain amounts from the San Francisquito Creek Joint Powers Authority (JPA) contribution. He wanted to make sure that everyone knew that had not been put through a final vote at the JPA. The other related issue was that two months prior JPA had a presentation from UC Berkeley that offered a scenario where there was gated tidal flow into the course area and created actual tidal wetlands within the course. He said they were interested in exploring using the configuration in Option G but with the possibility that some of the native vegetation area in the vicinity of holes 12-15 would potentially be gated tidal wetlands. Connected with that was the possibility of three perspective grant sources, which would reduce the City’s cost and enhance the environmental impact. If the opportunity occurred in the coming months, Option G could be allowed for some of those marsh areas to be tidal flow wetlands. Mr. De Geus said that Staff had seen a few of the ideas that the students had come up with. It seemed that Option G was most consistent with an idea like that. Mr. Richardson said his environmental consultant would be very happy with that because the difference between stagnant saline wetlands and a tidal change wetland were dramatic. He said they could work with the JPA to figure out how handle it. He said that much depended on the engineering of the San Francisquito Creek itself. Council Member Burt confirmed Option G completely redid the irrigation and all of the greens. Mr. De Geus said that was correct. Council Member Burt asked if they were able to establish any economic value to that. Mr. De Geus felt that within the next five to seven years it was likely they would have to replace the entire irrigation system if they did not do so now. He said that it failed frequently. The NGF’s pro forma added the capital improvement later for Options A, D, and F. That was partly why Option G fared better. Council Member Klein was excited about the playing field options because several years prior the Council was told it was not feasible. He thought it was appropriate to call them playing fields because they were not necessarily soccer fields. He asked how they planned to get rid of the geese. Mr. Richardson said there were a number of low and high tech ways. The geese were attracted to the grass turf habitat, which was not their natural habitat. Reducing the grass turf from 135 acres to 90 acres helped that. Some of the other measures were to eliminate standing water and fresh water. They also recommended trained dogs to move the geese north. Council Member Klein said there were still 90 acres that the geese were interested in. Mr. Richardson said they were successful at other courses and he had given Staff a number of people to contact. He thought they had already made progress over the last year. Council Member Klein was pleased to hear that. He asked why the noise from the playing fields would be different from cheers for golf tournaments. Mr. De Geus said that the cheers at golf tournaments were after players had hit the ball. Council Member Klein said it was after the players on the 18th hole hit the ball, not the rest of the players on the course. Mr. De Geus said that was true. He thought opinions varied on the noise and said the neighboring airport also made noise. Council Member Klein said that Staff stated that the pursuit of Option G required debt financing. He thought that was likely but asked if they might find other ways to handle the funds. He asked where the money would come from to finance the deficit during the year the course was under construction. Mr. De Geus said Staff should look far and wide to see how they could fund the project without going into debt. That was their intention. Joe Saccio, Administrative Services, Assistant Director, said that regarding the years where there was a deficit, they understood that there would be reduced revenue in 2013 and 2014, so that would be covered by a loan from the General Fund. He thought the department would make every effort to reduce costs as much as possible during those years. That was included in the pro formas. What was not included in the pro formas was a payback for those years, but under Option G there seemed to be adequate revenues and net surpluses in the future to be able to pay that back. Mr. De Geus had discussions with the JPA about the $3.1 million and the loss of revenue during that time and had asked if the City should be made whole for that. He understood there was an ongoing conversation about that. If that was not the case, the City needed to cover the expenses. If Community Services had any additional cost reductions they could use those or the General Fund Budget Stabilization or Infrastructure Reserve would have to be used. With respect to borrowing money they had used Certificates of Participation (COP) in 1998 totaling $7 million to pay for the improvements. It seemed reasonable to use the debt service and that was included in the pro formas. Otherwise they would have to use the Infrastructure Reserve at that time. There was a larger question, and it was raised tangentially, which was to consider the golf course as part of the overall infrastructure program and rehabilitation that the City wanted to do. He did not know if that was part of what the Council had envisioned as far. Council Member Schmid said in other discussions there were uncertainties about what was included in irrigation. He asked if different assumptions about exactly what would be done and a timeline was included in the packet. Mr. Richardson said Option G showed the Finance Committee’s recommendation. That included the full irrigation replacement, full turf replacement, and replacement of the restroom building. Council Member Schmid asked what Option D included. Mr. Richardson said Option D did not include the full irrigation. The amount of deferred irrigation replacement was approximately $800,000. Council Member Schmid confirmed that cost would come after five years. Mr. Richardson corrected himself and said the cost was $740,000. He said that the system was failing and would continue to fail until it was replaced. Council Member Schmid said at the bottom of the page there was another set of numbers ranging from $2.5-3 million for things such as modified fairways and dirt. He asked how those differed from what was shown in Option G. Mr. Richardson said rebuilding the additional greens, the restroom, the re-sodding of the fairways, and the rebuilding of the existing putting green were all included. They only included the sand plating because it was mentioned early last year. By re-harvesting the material that was put there in the 1990’s they did not feel that sand plating was needed, especially when going from 135 to 90 acres. Council Member Schmid said the other discussion that came from the Parks and Recreation Commission was about the clubhouse. They said it was essential. He asked if those numbers were included or if that was additional. Mr. De Geus said that was not included. Staff considered that under long term long range planning. Council Member Schmid inquired about the financial scale of that project. Mr. Richardson said there were direct construction costs that were based on the conceptual plans created for the clubhouse, the cart storage building, the range performance center, the parking, the entryway, the lighting of the parking lot, and all of those options. Council Member Schmid confirmed it was $3-3.5 million. He said that under the packet page 989 there were “cost and value added” but there was no number under flood protection. He assumed that was an important number if the goal was to remove houses from flood insurance areas. He said that could be calculated and if the reconfiguration contributed to 50 percent of the removal it would gain a certain amount of money. Mr. De Geus said that Council Member Schmid was talking about the table that began on page 11 of the Staff report. He said that it was a work in progress and that Council Member Schmid was right, the value number for flood protection was unknown. They had talked to the JPA about that and they recognized that there was a great value there. How much of a value was difficult to ascertain. Council Member Schmid said that homeowners knew what they paid in flood insurance and the City knew how many homes were in the flood zone. It was a large and important number. If that could be used as a benefit he thought it was helpful. He was concerned with the financial risk. He asked what the annual cost was and if the $4.5 million was financed over 10 or 15 years. Mr. Getherall said they assumed 20 years at 4.5 percent based on input from the City. Council Member Schmid asked if 20 years was reasonable and safe given that the City was still paying off the 1998 bond. Mr. Getherall said they projected positive net income even after all debt payments including the old debt payment and a ten percent capital reserve. The facility even in its current condition had been historically profitable. It had netted over $1 million in its best years. That was also when the cost plan charges were higher. They were over $300,000. That figure was reduced considerably when the City privatized the maintenance. Those charges were around $50,000 currently. Even though the rounds had decreased as recently as fiscal year 2010 the golf course was close to $1 million in net operating income before cost plan charges. They projected that all of the debt service and below the line charges were covered in addition to the operating expenses. Mr. Saccio said one of the most important things was the irrigation system and the saline conditions. He was around during the 1998 improvements and thought there was a measure of disappointment in the irrigation system as it had not lasted as long as anticipated. That was an early concern that he and Mr. Perez had expressed to Community Services Staff. The technology at the time was unable to withstand the moving conditions underneath the earth. They talked with Staff about the new materials and irrigation system and how it had to last 20 years. He said that the old debt would be paid off by 2019 and was included in the pro formas. He said that if the decision of the Council was to move forward with the golf course it was probably better to do it right. Therefore Option G made sense. Council Member Schmid voiced concerns about children crossing the highway to get to the playing fields during commute hour. He thought that on the baseball field it was essentially only 13-14 year olds that went out there. He stressed that it was important to make sure that the more intensely used fields which were the neighborhood fields were taken care of. He did not want to be in a situation where they were drawing on Community Services or the Infrastructure Fund to pay for the golf course bonds and had problems paying for neighborhood fields like Cubberley. He asked if Staff had taken that into consideration. Mr. De Geus said Staff shared Council Member Schmid’s concern. . Mr. Betts said under the field allocation policy they strived to put the right group on the right field. There were different categorizations of fields based on how close they were to parking facilities, bathrooms, lighting, public transit, and other factors. There was a great potential for adjusting some of play the City currently had on Greer and moving some of the more adult groups to the baylands. Staff was in line with Council Member Schmid’s thinking and wanted to avoid causing problems in neighborhoods whether that was traffic or encouraging kids to ride their bikes to places that were not safe. Council Member Schmid said that many of the fields smaller children used were not City land, they were rented space. He said that the City’s ability to maintain the rental spaces was critical. Council Member Holman said other than at a tournament golf courses were typically very quiet. She said that 200 feet was not very far and the question of how the sound might be mitigated still lingered. She was not sure if a berm would mitigate it. She asked if they had other information. Mr. De Geus said it was a good question, but that they had not designed the area yet. Mr. Richardson had laid out how some playing fields might look, but they really needed another architect to come in and design the park. There was a significant amount of thought that needed to go into what the 10.5 acres would be, whether that was three playing fields or something else. Council Member Holman asked if the playing fields would be lighted. Mr. De Geus said more conversation needed to happen for that decision to be made, but his initial reaction was that they would get more play out of lighted fields. There was lighting at the driving range which was already on in the evenings. Council Member Holman said synthetic turf was popular, but noted it broke down. She said that they were below sea level and asked if synthetic turf would affect the baylands. Mr. De Geus said the geese would not like the synthetic turf. He said they needed to spend more time looking at that and how to design it in such a way that it was safe and environmentally friendly. There were definitely environmental advantages to synthetic turf because there were no pesticides used, no irrigation, and no water use. However it was synthetic material that had to be disposed of at some point. Council Member Holman said that even though synthetic turf broke down it did not go away. She understood it was a permanent residual. She discussed the level of service at East Bayshore and Embarcadero. She asked if the City added playing fields if it would further congest the area or if they would be used during off peak hours that would not have a negative impact on the intersection. Mr. De Geus said they had not looked at that closely. The playing fields would be used mostly during the after work and school hours and on weekends. That was when they saw the most impact on the other fields. That also spoke to the noise issue because he thought there would be much of the time during the day when there would be no noise from the playing fields. Council Member Holman said during the summer golfers would play until 9:00 p.m. She asked if there was any opportunity to build Option G in phases. For instance, she asked if holes 6, 7, 8, 9, 1, 16, 10, 17 and 18 be phased so the golf course was not completely shut down during the construction. Mr. De Geus said they discussed phasing in detail. Option G was more intensive and so much needed to occur across the whole space that they believed getting in and out quickly was the preferred option. Phasing would cause a number of challenges and the playing experience on the nine holes that remained open would not be ideal. Mr. Richardson said that they were asked by the NGF to provide phasing possibilities and options and he believed that all of them were costly and increased the amount of time that the golf course would be under a temporary condition. He believed the NGF concluded that was more detrimental overall than a 12 month construction cycle where they could have agreements with other area courses to have residents play there. Mr. Getherall agreed and thought it was best done all at once. Phasing the project opened many variables that could be detrimental. With the large scale Option G the best plan was to close the course down and finish it. Council Member Holman asked if Staff considered breaking out the costs so that the golf community was not subject to funding the whole program. She said that it was the most expensive program by far. Mr. De Geus asked Council Member Holman to define break out costs. Council Member Holman said that Option G was the most expensive iteration and fees were based on cost recovery as well as a number of other factors. In that way the golf community picked up the load for the configuration, which also supported playing fields. Mr. De Geus said that was correct and that the way the pro formas were defined there was fairly substantial net income at the end of the plan being built. They could consider not increasing the fees quite as much and accept a lower net income and that would have a positive effect for the golfing community. Council Member Holman said that Council Member Klein asked questions about how the City addressed the funding for the program. She asked what would happen if whatever the incremental cost was between Options D and G was added to the City’s infrastructure load as opposed to the golf course. Mr. De Geus said that was a good question, but the way they had looked at it was that the golfers would pay the debt for the improvements. There were alternatives such as the golfers paying half the debt with the rest coming from some other fund. Mr. Saccio said the way he interpreted Council Member Holman’s question was regarding the incremental cost or the portion of the $7 million project that was attributable to setting aside the fields and how that part should be funded so that the golfers were not paying for that. He believed the golfers were concerned about that as well. He said that he did not have the details of the cost. Council Member Holman said that was basically her question. She said that there was a line item for Stanford fill with a cost of $325,000. She asked if that was really a cost to the City because she thought Stanford was paying them to take the soil. Mr. Richardson said that when they prepared the options they showed the cost to relocate the soil once it was delivered to the site. They never received an answer on how much the contractor was willing to compensate the City to take the soil, even though there were several meetings. Absent that information it was hard to put the equation together of whether it would be a net income to the City or a cost. They concluded through a study done by the construction management consultant that there was a $5-6 per yard savings to Stanford’s contractor to the City to get the soil. Under that scenario there was a $2-3 cost per yard to move it and $5-6 per yard of income to receive it, but they could not state that because they did not received the $5-6 number from the Stanford contractor. What they had said when the question came up at the Finance Committee was that if they brought in soil it would be a wash in the worst case scenario and at best case a $2-3 per yard revenue. It was not a question that could be answered until the City received an accurate number from Stanford. Council Member Price asked if the probable costs in the California Environmental Quality Act (CEQA) review had included the full cost of that recovery. She saw “additional environmental consulting” and believed it said $40,000 for Option G. She asked if they fully reflected the anticipated cost of the environmental review. Mr. Richardson said they had. The number was sought from the environmental consultant who had been to the site and was for the golf course reconfiguration, not the San Francisquito Creek work which was separate. The parking, clubhouse, and entryway were not part of the base plan for Option G. Council Member Price said on the topic of lighting they could gain information from Twin Creeks in Sunnyvale in terms of their lighting standards and how they dealt with that on their fields. She asked if they had happened upon any burrowing owls. She knew that was an issue and then they would have to develop a habitat. Mr. De Geus said no. Council Member Price hoped they did not find burrowing owls because that was an issue at Twin Creeks. Mayor Yeh had questions about the pro forma. He said he was looking at the sensitivity analysis on packet page 1076. He thought he heard that the existing debt was going to be refinanced as part of a new issuance. Mr. Getherall said that was the assumption they made for 20 years at 4.5 percent. The sensitivity analysis was nothing below the line, nothing changed; it was all operating, so they changed operating issues like rounds played and average fees. He said that nothing below the line changed in terms of the sensitivity analysis the debt was all the same. Mayor Yeh said it looked as though the existing debt service payments would continue until 2019. Mr. Saccio thought they would pay off the 1998 debt by 2019 and then would issue new debt just before the construction of the golf course. The old one would go away and the new debt was amortized over 20 years. Mr. Getherall said the debt service fell off in 2019 and the additional debt picked up in fiscal year 2015. Mayor Yeh did not know the interest rate on the existing debt and asked if it made sense to refinance it. Mr. Saccio said Staff could look at that. They had not looked at it recently because they usually received warnings about the wisdom of refinancing. He said that they only had approximately five years left of debt service at that point so it might be appropriate to pay it. They could ask for the analysis on it and see what the net present value savings would be by refinancing. However, that was not the current plan. Mayor Yeh was interested because in the event there were reduced rounds or lower fees then the backstop for paying debt service, existing or new, would have impacts on the General Fund. Because of the timing of it, 2015 was right after a potential infrastructure bond measure. Any impacts to the General Fund had to be taken into context of some potential vote that might occur in 2014. He wanted people to understand how the timing and prioritization of projects that had potential General Fund impacts was understood and communicated. He asked if Staff had any perspective on the timing of the bond issuance and how it related to the broader discussions on infrastructure needs and financing. Mr. Saccio said there were considerations that the Council needed to take into account as it looked at a measure to fund the other infrastructure. In one sense one could say that any debt issued for the golf course was being paid by the users of the course. That was an isolated example. They were also not burdening the other residents or businesses in the City. On the other hand people might say that if the City could pay for that improvement out of the revenue streams of the golf course, were there other ways that Council could pay for infrastructure improvements. It could be seen from two different positions. He thought that would be part of the conversation as the Council considered what to do in November 2014. He said they could look at refinancing to lower the debt service on an annual basis, but then there would be costs further down that would not have been borne if it was paid off. He said that Mayor Yeh’s question was a good one that probably needed further discussion. Mayor Yeh understood that was not the decision Council had to make that evening, but it was part of the analysis of the continuing process. With respect to his colleague’s points about the golfers assuming all of the costs, he assumed there would be rental fees associated with the use of the playing fields. He said the City had that on some of its other playing fields. He asked if there was any consideration for some of those funds to go toward the bond. Ultimately any bond financing would reconfigure the entire site, which included the area for potential playing fields. If there was income associated with the playing fields and the bond financing went to reconfiguration, then from a project perspective he saw some nexus between the income coming from the playing fields and other sources. Mr. Saccio said the income from the playing field was mentioned in the report, but he thought it was appropriate to look at that revenue at the time improvements were made to the playing fields because there was a significant amount of capital costs and operating costs associated with bringing those fields up to playing conditions. That revenue was mentioned, but was not part of the pro formas. There was one piece in the pro formas that was mentioned in the staff report. There was a $233,000 sinking fund that the consultant included in the pro forma and the idea was that they were accumulating money to make improvements in the future. If in the early years it was necessary to relieve some of the expense for the golf course that fund might be able to be pushed to the future a bit to relieve pressure from the General Fund. Mayor Yeh confirmed that was the operating capital reserve line. Mr. Saccio answered yes and said it was escalated into the future. Mr. Getherall said it was 10 percent of the green fees. He said he read the Economic Research and Associates Report and it was extremely unusual for a golf course to make as much money for a city’s General Fund as the Palo Alto course had. It contributed greatly to other City services over the years. He said that was public policy, but it was another way to look at it. It was one of the highest cash flowing municipal facilities in the country. James Keene, City Manager, clarified that the City would need to look at the alternatives much more specifically as they moved forward. He thought that they would be thinking similarly to a revenue bond. They would have done the analysis about the increased revenues generated by the improved play and the effectiveness of the golf course to help fund the debt service. He thought the ultimate test would be if the public had confidence in the City’s overall financial management. Part of the appeal of Option G was the fact that it made the golf course more popular and revenue generating. With respect to revenues from the playing fields, he noted that they did not have expenditure dollars in the pro forma related to the development of the playing fields themselves. It had not been a situation where the golf course had spun off money to the General Fund. They developed a methodology where the golf course was designed to cover all of the costs associated with the golf operation including the direct operational costs, the capital costs, the debt service costs, and the overhead spread from the General Fund associated with the golf course. That was really a charge that was the full carrying cost for the golf course. The comment was correct in that the City had a much more aggressive program in capturing all of the potential costs related to the golf course through the Golf Fund itself. Mayor Yeh knew that there were Council Members that wished to speak again. He said that would happen following the public comment. Jeff Seqol, Golf Course Advisory Committee Member, said he prepared the letter that the other members of the Golf Course Advisory Committee signed expressing their consensus opinion that they had concerns about Option G and were in favor of Option D. He took the cost of Option D and the cost of Option G and tried to aggregate which of the additional Option G costs were attributable solely to the additional encroachment that occurred on the golf course in order to create the 10 acre athletic field site. Fixing the irrigation system and doing drainage work was something that clearly needed to be done fairly soon on the golf course, but the other costs only had to be done in order to create the athletic field site. The difference between Option D and Option G was about $3 million. Of that $3 million, he estimated that $1 million were things that would have to be done in any case and $2 million were attributable to the encroachment required for creating the athletic field site. The second point he wanted to make had to do with the issue of the risk the City was taking on in doing the expanded project and financing it. That came down to whether or not the NGF’s pro forma was correct. A number of the Golf Course Advisory Committee Members looked at the pro forma and were concerned about it. Craig Allen, Palo Alto Golf Club President, said he had been a resident of Palo Alto since 1969. The Palo Alto Golf Club consisted of over 350 golfers, both men and woman, who played the course and were very interested in the upcoming decision on the changes proposed for the course. The Club’s Board of Directors voted in favor of Option D for the course primarily out of concern for the financial risks involved. If the Council chose Option G he asked them to look at the disproportionate share of the revenue costs which would rest on the golfers. He thought it was inappropriate to ask the golfers to pay for athletic fields and the Council needed to find another way to do that. Second, he asked that Council ensure the project was completed in a timely manner because a closed golf course did not generate revenue. MOTION: Council Member Burt moved, seconded by Council Member Price to direct Staff to: 1) pursue Golf Course redesign Option G, which adds space for up to three full-size athletic fields and re-configures the entire Golf Course for the Palo Alto Municipal Golf Course to mitigate impacts from the San Francisquito Creek realignment project, and; 2) authorize the City Manager to negotiate an amended contract with Golf Course Architect Forrest Richardson & Associates to complete said design and environmental impact analysis for up to $336,835.00 (in order to pursue the final designs for the Golf Course). Council Member Burt said this was a great opportunity and that all change had uncertainties associated with it. When they looked at the analysis and the credibility of the NGF they said that Option G was a very sound alternative that would significantly increase revenue over the other alternatives. The revenue was not a tax on golfers. He said that they had heard that built into the proposal was the prerogative to have subsidies for resident players and resident seniors. He said that the overwhelming majority of rounds on the golf course were not paid by residents. So if the market based payment was paid by nonresidents then they were the ones who would pay for the changes. It was the market that would use the project as was said by the two consultants. He said that they had five “wins” on the horizon. Not only did the City receive the critical flood protection that they were partnering with the JPA on, they had also heard that the course would be very exciting, it had the strongest economic model and the independent consultant has said that this was the best return, the lands had the opportunity for needed playing fields for the community’s current needs and for the growth they had on the horizon. The fifth one was the environmental win. The current course was a long, flat, turf course. It would be turned into an exciting course that had natural habitat and would be integrated with the baylands. He thought it was a great opportunity and he looked forward to it. He counted on Staff to continue with sound and prudent forecasting and financial controls on the project and that it was actually something that the independent analysis showed as a good investment for the City. Council Member Price said the project was long overdue and met several of the City’s goals related to the Comprehensive Plan. There was significant deliberation about the needs to redesign the golf course and address the long term irrigation issues. She thought Option G was thoughtful and well designed. It promoted issues related to improvements in operations and the playing experience for the golfers. She said that Palo Alto was one of the few cities that had a golf course within its boundaries and they were very fortunate with that. They had a responsibility to take care of and improve it. She was comfortable with the financial analysis and assumed based on the conversation that the City would seek other partners and potential funding. She looked forward to the project, thought it was very exciting, and thanked everyone involved. Vice Mayor Scharff said that when the project came to the Finance Committee he thought there would be many tradeoffs deciding between options. Option G really stood out and there really were not any negatives. He said it was a win for the community to get the three playing fields. Land was very hard to find in Palo Alto. He said that the fact that they could do the project and end up with a fantastic golf course that would stand out among its competition was fabulous. He thought the program was fantastic for the community and was great for everyone. He was very pleased with the direction the project went and thanked everyone for their hard work. Council Member Holman asked when the Council would be able to look at the environmental analysis and funding options. She said that they were not making a decision on funding that evening. Mr. De Geus said the timeline was defined by the JPA and when they were ready to do the levy work. The soonest they would be able to move dirt and work on the levy was likely to be summer 2013. Staff wanted to move aggressively with Mr. Richardson to continue the design and environmental work and go through the process of Council, architectural review, and planning in the fall. Council Member Holman said she did not like COP Bonds. She confirmed that when they returned to Council Staff would bring a scenario of different financial kinds of means. Mr. De Geus said yes. Council Member Holman thought Mr. Richardson had done a very good job. She was the Parks and Recreation Liaison when the project first came to them and there was significant excitement there. She was disappointed when it came forward the first time that the building component was not included. She said that it was a shame that they lost the original A. Quincy Jones designs. The buildings were fabulous and she was pleased to see that there was the potential for that design to return to its original location. She was more comfortable with Option D because of the financial components, but she recognized the opportunities with Option G. She wanted to see the funding options and scenarios and have the environmental impacts for the noise and lighting. Mayor Yeh said he would support the Motion but had similar sentiments as Council Member Holman. He said that while they were not in the same office, he had worked at the same firm as Mr. Seqol and he respected and appreciated the analysis he provided. Part of the issue for him was on the pro forma there was a potential for projected deficit if there were reduced rounds. That was his greater concern. He wanted to anticipate the rebound in the interest in golf and having a great course. If that did not occur, those funds would come from the General Fund prior to 2014 and he wanted to be sure that the Council was as confident as possible that they did not find themselves in that situation. He said that was not a good situation for the City. That was enough to raise concerns and see how they could do their best to ensure that they do not get into the situation where the General Fund would subsidize golf operations. He was very excited by the fields and the opportunity to put more recreation activities in that part of the city, but within the challenging financial context he thought the earlier the Council had the opportunity to discuss the revenue options the better served and positioned they would be to decide how to move forward with the financing. Council Member Schmid was concerned when he heard the statement that the Community Services budget could absorb some of the cost. He asked if Staff was comfortable accepting Mr. Seqol’s numbers and that $2.1 million was directly attributable to the difference of Option G over Option D. Mr. De Geus said that he had not had the opportunity to look closely at the numbers. Council Member Schmid said it would be helpful for Staff to do that. He understood that there would still be the need to pay for the fields. He clarified that somewhere in the 2014 budget the City would have to find the funds for the field. Mr. De Geus said that was correct and that they would also have to fund the ongoing maintenance. Mr. Betts said that they would look at the potential of using park development impact fees because it would expand recreational opportunities at the golf course. INCORPORATED INTO THE MOTION WITH THE CONSENT OF THE MAKER AND SECONDER that this Fall the Finance Committee will assess the risk and assumptions inherent in Option G and funding options prior to proceeding with the project. Mr. Keene said he did not want to commit to the fall, but there was no way the Council could implement the direction without the risk analysis and further information. Council Member Burt said he hoped it went to the Finance Committee in the fall. Council Member Klein said not doing anything was a greater risk. They had an opportunity to create 10 acres of land for $4 million. He said that if the City tried to purchase 10 acres of land in the residential areas the cost would be between $5-10 million per acre, so that would be $50-100 million. He thought that was a great deal. The City had a deteriorating golf course. The rounds had decreased and they had reports that people regarded the course as boring. The entire golf industry was suffering, but it seemed to him that it was like many other businesses and if they did not invest in the business it would become a wasting asset. He said that whether they did any of the options, the City was still on the hook for subsidizing any deficits with the General Fund. There were risks moving forward on Option G and they might not cover all the operating expenses, but the same risks existed currently with regard to an old obsolete golf course. He thought the risks were outweighed by the idea that they could create something that was a great community asset. The financing was yet to be determined, but he thought COP Bonds made sense and noted that almost every city in the State used them. He did not see any problem with having that included in the green fees for the use of the golf course due to the significant proportion of people who were not residents of Palo Alto. There were two items that golf course users got from the City but did not pay for. The first was the use of a very sizable portion of land and second was that COP Bonds were a way to finance things and were equivalent to revenue bonds. Even though the City was not legally obligated to pay the COP Bonds from the General Fund if they ever had a problem they probably would to maintain the City’s credit rating. The point was that the golf course users were in effect benefiting from the City of Palo Alto’s AAA credit rating. When those things were added together it was fair for the City to move forward in the way Staff suggested and he was very pleased to vote in favor of the Motion. Mr. De Geus asked what was required of Staff by the Finance Committee. He thought they had clearly defined the risks of Option G in the Staff report. Council Member Burt said it was an update as Staff narrowed its understanding of the costs, funding options, and grant availability. Council Member Schmid thought one of the things Staff needed to bring to the Finance Committee included the funding options available and the sensitivity analysis regarding rounds of golf. He thought the point was made that they were in almost a decade long period of time where golf rounds in general decreased. They had a key assumption that they would rise back to their old level. Council Member Burt clarified that the pro forma was not based upon an overall recovery in the golf market. He did not believe that was what this was about; he thought it was an analysis of recovery on rounds at the Palo Alto course as a result of the increased attractiveness. Mr. De Geus said that was correct. He said that another way to think about the fee increase was that it was not so much to pay for debt, but rather what the market would bear for that type and quality of course given the competition in the area. MOTION PASSED: 9-0