HomeMy WebLinkAboutStaff Report 7032City of Palo Alto (ID # 7032)
City Council Staff Report
City of Palo Alto Page 1
Report Type: Action Items Meeting Date: 6/20/2016
Summary Title: Approval of Contract and Budget Amendment for Golf Course
Reconfiguration Project
Title: Approval of one Contract and two Contract Amendments: (1)
Construction Contract with Wadsworth Golf Construction Company in the
Amount of $11,964,620 for the Palo Alto Municipal Golf Course
Reconfiguration Project, CIP PG-13003; (2) Deductive Change Order Number
1 With Wadsworth Golf Construction Company in the Amount of $1,191,800,
Reflecting Cost Savings; and (3) Amendment Number 2 to Contract
C13148028 with Golf Group, Ltd. in the Amount of $125,720 for Construction
Support and Environmental Mitigation Monitoring Services; Discussion and
Direction to Staff Regarding Updated Pro-Forma and Financing Options;
Adoption of Resolution Declaring Intention to Reimburse Expenditures From
the Proceeds of Tax-Exempt Obligations (e.g. Certificates of Participation) for
a Not-To-Exceed Par Amount of $10.5 Million To Fund a Portion of the Cost of
the Palo Alto Municipal Golf Course Reconfiguration Project; and Approval of
a Budget Amendment in the General Capital Improvement Fund
From: City Manager
Lead Department: Public Works
Recommendation
Staff recommends that Council:
1.Approve, and authorize the City Manager or his designee to execute, the
attached contract with Wadsworth Golf Construction Company
(Attachment A) in the amount of $11,964,620 for the Palo Alto Municipal
Golf Course Reconfiguration Project, Capital Improvement Program Project
PG-13003; and
2.Approve, and authorize the City Manager or his designee to execute, the
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attached deductive Change Order No. One to the contract with Wadsworth
Golf Construction Company (Attachment B) in the amount of $1,191,800 to
reflect negotiated cost savings measures to be incorporated into the
project; and
3. Authorize the City Manager or his designee to negotiate and execute one or
more additional change orders to the contract with Wadsworth Golf
Construction Company for related, additional but unforeseen, work which
may develop during the project, the total value of which shall not exceed
$1,077,282; and
4. Approve, and authorize the City Manager or his designee to execute,
Amendment No. Two to Contract No. C13148028 with Golf Group, Ltd.
(Attachment C) in the amount of $125,720 for construction support and
environmental mitigation monitoring services for the Palo Alto Municipal
Golf Course Reconfiguration Project (PG-13003). The amendment includes
$52,395 for basic services and $73,325 for additional services. The revised
total contract amount is not to exceed $1,127,751, including $831,995 for
basic services and $295,756 for additional services; and
5. Adopt the attached Resolution declaring intention to reimburse
expenditures from the proceeds of tax-exempt obligations (e.g. Certificates
of Participation) for not-to-exceed par amount of $10,500,000 to fund a
portion of the cost of the Palo Alto Municipal Golf Course Reconfiguration
Project (Attachment D); and
6. Amend the Fiscal Year 2017 Budget Appropriation Ordinance for the
General Capital Improvement Fund by either:
OPTION 1
a. Increasing the estimate for Other Revenue from financing proceeds
in the amount of $2,017,616;
b. Increasing the Capital Improvement Program appropriation for the
Golf Reconfiguration & Baylands Athletic Center Improvements
Project PG-13003 by $2,252,248; and
c. Decreasing the Capital Infrastructure Reserve by $234,632.
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OR OPTION 2
a. Increasing the estimate for Other Revenue from financing proceeds
in the amount of $3,218,955;
b. Increasing the Capital Improvement Program appropriation for the
Golf Reconfiguration & Baylands Athletic Center Improvements
Project PG-13003 by $2,252,248; and
c. Increasing the Capital Infrastructure Reserve by $966,707.
Background
On October 15, 2012, Council awarded a contract to Golf Group, Ltd. (aka Forrest
Richardson & Associates) to design a reconfigured Municipal Golf Course, prepare
final bid documents (plans, specifications, and cost estimate) for the
reconfiguration project, and prepare an Environmental Impact Report (EIR) for
the proposed Golf Course modifications based on a conceptual layout plan
approved by Council in July 2012. In accordance with the adopted renovation
plan, Forrest Richardson prepared construction documents based on a design
concept that will reconfigure the Golf Course to conform to its Baylands setting
and rebrand the facility as the Baylands Golf Links at Palo Alto. The Golf Course
Reconfiguration Project plan modifies all 18 holes of the Golf Course, a portion of
the driving range and practice facility, and replaces an outlying restroom facility,
while retaining a regulation golf course with a par of 71. The reconfigured Golf
Course will incorporate or modify existing low-lying areas into the Golf Course,
reduce the area of managed irrigated turf, and introduce areas of native grassland
and wetland habitat.
The project design has been developed to achieve the following objectives:
Create a golf course that provides a more interesting layout for golfers of all
levels, with enhanced wildlife habitat, improved wetland areas, and
reduced usage of water, pesticides, and maintenance labor for turf and
landscaping;
Expand recreation areas to satisfy existing and projected needs;
Integrate the Golf Course into the Baylands design theme;
Mitigate for impacts on the Golf Course resulting from the San Francisquito
Creek Joint Powers Authority’s (JPA) flood control project;
Improve Golf Course playing conditions – turf, drainage, and irrigation; and
Increase rounds of play and expand recreational opportunities.
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On June 17, 2013, Council awarded a contract to Don Tucker & Son for the
importation and stockpiling of soil for use on the Golf Course Reconfiguration
Project. The contractor paid the City for the right to stockpile 365,000 cubic yards
for the Golf Course Project at a soil stockpile site on the west side of the Golf
Course. The soil importation process, which was completed in late summer 2015,
generated $1.2 million that will be used to directly offset the cost of the golf
course construction work.
Implementation of the Golf Course Reconfiguration Project requires the
acquisition of regulatory permits from state and federal resource agencies.
Specifically, the project requires a Section 404 Permit from the U.S. Army Corps of
Engineers (Corps) (which also involves consultation with the U.S. Fish and Wildlife
Service with respect to potential impacts to federally-listed endangered species)
and a Section 401 Water Quality Certification from the San Francisco Bay Regional
Water Quality Control Board (Water Board). Permit applications for the Golf
Course Reconfiguration Project were submitted on December 23, 2013.
In order to increase the chances of retaining a qualifed golf course builder to build
the project, staff implemented a prequalification process for potential bidders
during Fall 2013. Interested contractors submitted information regarding their
company with respect to specific golf course construction experience, audited
financial statements, ability to provide required bonds and insurance, and on-the-
job safety records for staff review. As a primary screening tool, the
prequalification criteria required prospective bidders to hold status as Certified
Golf Course Builders with the Golf Course Builders Association of America.
Contractor submittals were reviewed and scored by staff to identify firms with the
requisite experience, financial strength, safety record, and client relations to meet
or exceed the minimum scoring criteria. As a result of the pre-qualification
process, staff identified four golf course builders who had the exclusive right to
submit a bid for the construction of the Golf Course Reconfiguration Project.
On February 3, 2014, Council granted discretionary approval for the Site and
Design Review application for the Golf Course Reconfiguration Project, certified
the final EIR for the project, and adopted a Park Improvement Ordinance
reflecting the physical changes being made to the dedicated parkland at the Golf
Course.
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On February 24, 2014, a notice inviting formal bids (IFB) for the Golf Course
Reconfiguration Project was posted at City Hall and sent to the pre-qualified golf
course builders. Bids were received from all four pre-qualified contractors on April
15, 2014 and ranged from a low of $8,987,809 to a high of $9,940,488. Council
ultimately was forced to reject all bids because the City was not able to secure the
regulatory permits needed for project construction within the bid period.
Permit acquisition became a much more significant obstacle to progress than staff
or its environmental consultant originally anticipated. The state and federal
permitting processes were slow and cumbersome, and were complicated by the
Golf Course Reconfiguration Project’s location adjacent to and connectivity with
the San Francisquito Creek Joint Powers Authority’s (JPA) Bay-to-Highway 101
Flood Protection Project. Staff received a draft Section 401 Water Quality
Certification from the Water Board for the Project on June 15, 2016, and the draft
Section 404 Permit from the Corps is forthcoming. The two final regulatory
permits are expected to be received no later than June 30, thus providing the Golf
Course Reconfiguration Project with full authorization to proceed. Staff will
provide an update on permit status during its presentation to Council on June 20.
Discussion
Bid Process
On March 1, 2016, staff implemented a second bidder prequalification process in
an attempt to identify additional qualified golf course builders who would be
eligible to submit bids for construction of the Golf Course Reconfiguration Project.
No builders responded to the solicitation, so the original four pre-qualified firms
were still the only ones authorized to submit bids for the project. On April 22,
2016, a notice inviting formal bids (IFB) for the Golf Course Reconfiguration
Project was posted on the City’s project solicitation web portal and sent to the
four pre-qualified golf course builders with a bidding period of 32 days. Bids were
received from three of the pre-qualified contractors on May 24, 2016, as listed on
the Bid Summary (Attachment E).
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Bid Name/Number Palo Alto Municipal Golf Course
Reconfiguration Project, Capital
Improvement Program Project
PG- 13003/IFB # 163847
Proposed Length of Project Through September 11, 2017
Number of Bids Issued to Contractors 4 pre-qualified contractors
Total Days to Respond to Bid 32
Pre-Bid Meeting? Yes
Number of Company Attendees at Pre-
Bid Meeting
4
Number of Bids Received 3
Bid Price Range $11,964,920 to $13,374,960
Staff has reviewed all bids submitted and recommends that the bid of
$11,964,620 submitted by Wadsworth Golf Construction Company be accepted
and that Wadsworth Golf Construction Company be declared the lowest
responsible bidder. Staff recommends that the contract scope of work include the
Base Bid only. The low bid is 20% percent above the engineer’s estimate of
$9,964,651. The elevated bid prices are attributable to a number of factors:
(a) the requirement that the contractor pay prevailing labor wages (which
was not in effect during the bid solicitation in 2014);
(b) higher construction material costs; and
(c) a less competitive bidding environment due to the active economy. In
accordance with the provisions of the bid documents, the bids are
valid through August 22, 2016.
Initial Deductive Contract Change Order
As the low bid exceeds the budget established for the Municipal Golf Course
Reconfiguration Project CIP, staff has been meeting with the low bidder to
identify cost-saving changes that can be made to the project design in order to
reduce construction costs without sacrificing project quality or functionality.
Based upon discussions with the golf course architect and the low bidder, staff
has negotiated a deductive change order that will eliminate or modify several
non-essential components of the project without significantly affecting its
functionality. For example, cost savings have been achieved by slight reductions in
earthwork quantities, green and tee sizes, and cart path width, elimination of the
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soil moisture sensors and weather station, and minor modifications to the project
specifications without impacting the overall scope and appeal of the new golf
course. The change order also incorporates cost-saving value engineering ideas
generated by the low bidder including modified fertilizer and soil amendments
and alternative sand specifications that will result in further cost reductions. One
moderately impactful cost savings item included in the proposed change order is
the deferral of a new golf course restroom building. The work to install new
sanitary sewer and electrical connections to the site of the new restroom is
retained in the contract to facilitate the construction of the restroom at a later
date. Inclusion of the restroom building in the proposed construction contract
would increase the contract price by $225,000. An existing, but aged restroom
will no longer be demolished and will be retained for use. The combination of
recommended cost savings measures results in a deductive change order in the
amount of $1,191,800.
Staff recommends that Council approve, and authorize the City Manager or his
designee to execute, the attached deductive Change Order No. One with
Wadsworth Golf Construction Company in the amount of $1,191,800 that will be
applicable concurrently with the construction contract. As modified by Change
Order No. One, the base construction cost is $10,772,820.
In addition, staff requests authority to execute future change orders to the
contract with Wadsworth Golf Construction Company in the amount of
$1,077,282 (which equals 10 percent of the net contract amount following
execution of Change Order No. One) for related, additional but unforeseen work
which may develop during the project. Therefore, the total construction contract
would be $11,850,102.
Amendment No. Two to Golf Course Architect Agreement
During construction of the Golf Course Reconfiguration Project, there will be a
continuing need for the professional services of Golf Course Architect Forrest
Richardson and his environmental sub-consultants. Services include construction
support services such as review of contractor submittals, responses to requests
for information from the construction contractor, construction progress payment
and change order review, and periodic site visits by Forrest Richardson to provide
design guidance, inspect project progress, and ensure conformance with the Golf
Course design aesthetic and functionality. In addition, Dale Siemens, a close
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associate of Forrest Richardson with extensive golf course construction
experience, will be retained as a subcontractor to serve as an on-site project
representative conducting quality control inspections and acting as the liaison
between the contractor, City staff, and the Golf Course architect. The final
component of the construction stage services is monitoring of the environmental
mitigation measures stipulated in the EIR to be implemented during construction
of the project. Monitoring tasks, including contractor training, site surveys and
implementation of measures for the protection of sensitive plants, birds,
wetlands, and cultural and paleontological resources, and other environmental
control measures, will be performed by ICF International or Dr. Jeffrey Froke in
their role as sub-consultants to Forrest Richardson. Some of the construction
stage services described above were incorporated into Amendment No. One to
the professional services agreement with Golf Group, Ltd. (aka Forrest Richardson
& Associates), which was approved in June 2014. Much of the previously
approved construction stage funding included in Amendment No. One was
exhausted during the extensive project permitting process. The attached
Amendment No. Two includes the supplemental funding needed for construction
support services throughout the anticipated project duration.
Financial Analysis
In order to help assess the potential financial performance of the Golf Course
during and after construction, staff entered into a contract with the National Golf
Foundation (NGF) in 2012 to provide an independent Return on Investment
analysis on the design options and long-range Golf Course plan. The NGF report
was updated in 2014 to reflect the new project cost information received during
the initial construction bidding process and revised service contracts for golf
course management and maintenance. Once again, staff has retained NGF to
update the pro-forma to reflect updated project costs and current economic
conditions facing the golf course industry. The updated NGF report, pro formas,
and sensitivity analysis (Attachment F) discuss the changes in project cost and the
resulting changes to the projected future operational profit/loss status of the Golf
Course that have occurred since the last Council update in 2014.
NGF’s updated analysis does show a modest net attrition in golf participation
nationwide, but that our regional area remains a strong golfing market with
demographic profiles to support golf including population growth, higher median
income, and higher average age. Despite the closure of some area golf courses
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due to supply and demand equilibrium and the existence of some local golf
courses not able to fully recover overwhelming debt service expenses, NGF
reports Palo Alto’s Option G reconfiguration should result in a desirable course
with regional draw. NGF estimates the new Golf Course will generate sufficient
revenues to cover both operating costs and debt service once the new course has
reestablished itself in the region within one to two years after re-opening.
Although staff concurs with the overall NGF analysis, there are risks and
assumptions which do have the potential to negatively impact the course
financially. The re-opening of the reconfigured golf course and rebranding as
Baylands Golf Links relies heavily on the course being the highest quality public
golf course experience in the region and a local economy that will continue to
support high incomes, corporate presence, and visitation to the area. To
supplement the reconfigured golf course in providing a superior golf experience
resulting in a resurgence of rounds played and revenue, NGF emphasizes pairing
with quality control, effective branding, customer service, and cosmetic
improvements to the course entryway, buildings, and grounds.
Because pro formas are based on some assumptions which we can control, such
as pricing and golf course maintenance, and others we cannot, such as weather
and the economy, staff asked NGF to run several scenarios of sensitivity analysis
representing deviations from a “base” model. The three additional pro forma
scenarios reflect
a) Number of rounds of golf played reduced to moderately lower than
projected performance, continuing a downward trend;
b) Average green fees increasing over current fees by less than half the
15% projected increase in the base model; and
c) Number of rounds of golf played and average green fees both lower, in
combination.
Because of the virtually limitless number of combinations, other variables such as
fixed operating expenses remain the same as in the base scenario.
Table 1 and Table 2 below represent adjusted NGF pro formas for two debt
financing scenarios. The dollar amounts listed in the tables are Net Revenue
(Loss).
Table 1 represents the lowest level of financing and assumes $1.2 million of
project soft costs (design, environmental impact report, and attributed staff
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salaries and benefits) would be funded by the City’s General Capital
Infrastructure Reserve.
Table 2 represents a higher level of financing that is inclusive of these $1.2
million in softs costs, assuming no support from the General Capital
Infrastructure Reserve.
Both tables reflect adjustments to NGF’s pro formas to account for updated
financing and debt service amounts from what was provided to NGF to prepare its
report. Full details of NGF’s pro formas are contained in their report. (Attachment
F)
Pro forma scenario assumptions outlined in Table 1 and Table 2:
Base assumes 71,000 annual Rounds of Golf, Fee increase of 15% from
current fees, and 10% of Revenue set aside for an Operating/Capital
Reserve
Reduced Rounds assumes 61,000 Rounds of Golf instead of 71,000
Reduced Fees assumes only about half of the 15% fee increase
Reduced Rounds and Fees incorporates both of the above
Table 1. Net Revenue (Loss) of Base and Three Pro Forma Scenarios in $000s:
$8,166,053 Financing w/ $495,529 annual Debt Service
FY 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026
Base ($842) ($733) $94 $406 $390 $374 $367 $370 $372 $374
Reduced
Rounds ($842) ($1,011) ($261) $0 ($22) ($45) ($60) ($67) ($75) ($84)
Reduced
Fees ($842) ($837) ($45) $247 $229 $210 $200 $189 $187 $184
Reduced
Rounds
and Fees
($842) ($1,100) ($380) ($136) ($160) ($185) ($203) ($214) ($225) ($238)
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Table 2. Net Revenue (Loss) of Base and Three Pro Forma Scenarios in $000s:
$9,367,392 Financing w/ $566,484 annual Debt Service
FY 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026
Base ($842) ($733) $23 $335 $319 $303 $296 $299 $301 $303
Reduced
Rounds ($842) ($1,011) ($332) ($71) ($93) ($116) ($131) ($138) ($146) ($155)
Reduced
Fees ($842) ($837) ($115) $176 $158 $139 $129 $118 $116 $113
Reduced
Rounds
and Fees
($842) ($1,100) ($451) ($207) ($231) ($256) ($274) ($285) ($296) ($309)
Fiscal Years 2017 and 2018 reflect operational losses between $842,000 and
$1,100,000 due primarily to course closure and debt service incurred for prior
debt issuance from 1998 ($429,020 annual debt service) and new debt issuance
costs for the Project. The debt service from the 1998 financing will be retired in
Fiscal Year 2018. Also, contained within the pro formas is an annual Operating
and Capital Reserve, set at 10% of gross green fee revenue.
The adjusted NGF pro forma analysis, especially for the reduced rounds of golf
and reduced fee scenarios, shows that there are risks in the ability of the Golf
Course to generate revenues sufficient to cover operating and debt service
expenses. Should such a scenario emerge, it will be necessary for the City’s
General Fund to subsidize Golf Course operations. There are limited cost
reduction options once the Golf Course is back in operation. Since the majority of
the work will be under contract, the operating expenses will have to be
maintained at the recommended level to keep the course in desirable playing
condition. In addition, the debt service is a binding legal obligation. It is difficult
to predict if a future General Fund subsidy will be needed, but the potential
exists. Staff would have to reduce other expenses in non-golf activities to reduce
any impacts to General Fund reserves in the event future subsidies are required.
The pro formas summarized above and in the NGF report include the full Golf
Reconfiguration & Baylands Athletic Center Improvements (PG-13003) costs going
forward. As described earlier, the estimated $1.2 million for golf course design,
preparation of the Environmental Impact Report, and attributed staff salaries and
benefits are not included in the assumed bond financing in Table 1. Also not
included in the financial analysis in Table 1 or Table 2 is recovery of the Golf
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Course’s estimated losses over Fiscal Years 2014, 2015, and 2016 due to project
permitting delays for both the JPA Flood Protection and Golf Course projects, in
the amount of $2.2 million in the City’s General Fund. Should the $2.2 million in
historical estimated losses be included in the bond financing, annual cost recovery
for the Golf Course will be very difficult to attain as the debt service is expected to
be higher than what the Golf Course will be able to cover through revenue and
would likely result in annual General Fund subsidies to operate the Golf Course.
Overall Project Funding Plan
In order to minimize financing and administrative expense, staff is planning for
the possibility of issuing Certificates of Participation (COPs) in late September or
early October 2016 covering both the Golf Course renovation and the purchase of
the Hamilton Avenue Post Office (PO). Council will meet on August 27 to consider
buying the downtown Post Office. Should Council decide to move forward with
this acquisition, escrow would close by the end of September, thereby allowing
staff to issue COPs for both projects simultaneously, reducing financing and
administrative expense accordingly. Moreover, by combining the COP issues,
savings also will be realized for legal, financial and other bond issuance costs.
Staff is providing Council with two financing options: 1) have the project cost
funded via the General Fund Infrastructure Reserve will all but $1.2 million in
project costs reimbursed by the issuance of COPs (Table 1); or 2) have the project
cost funded via the General Fund Infrastructure Reserve (IR) with reimbursement
of all costs by the issuance of the COPs (Table 2). Either scenario calls for the Golf
Course operations to generate the net revenues needed to make the annual debt
service, although there is risk of revenues being insufficient to meet future
obligations.
Project Funding and Certificates of Participation
Staff estimates net funding of $9.4 million will be required to complete the Golf
Course reconfiguration project, after accounting for outside revenue sources. The
City has received $1.2 million in revenue from the importation of soil for the Golf
Course reconfiguration and will receive $3.0 million from the San Francisquito
Creek JPA as a mitigation payment for impacts to the Golf Course in calendar year
2017. The JPA will reimburse the City after $3.0 million in Flood Protection Project
work is completed and it receives that amount in grant reimbursements from the
State Department of Water Resources (estimated to be received in FY 2017).
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Table 3 shows the breakdown of total capital costs for the Golf Course
Reconfiguration Project (including costs already incurred in prior years). Table 4
shows the net amount to be financed through COPs after accounting for receipt
of outside reimbursements.
Table 3: Breakdown of Golf Course Reconfiguration Project Capital Costs
A. Construction Contract (Attachment A) $ 11,964,620
B. Deductive Change Order (Attachment B) (1,191,800)
C. Revised Contract $ 10,772,820
D. 10% Contingency 1,077,282
E. Contract Total w/ Contingency $ 11,850,102
F. Construction Support / Monitoring Services (Att C) 125,720
G. Tree Removal Mitigation 220,000
H. Signage 66,000
I. Design and Environmental Impact Report 1,002,031
J. Salary & Benefits 199,308
K. Miscellaneous 84,061
L. Total Capital Costs for Project $ 13,547,222
Table 4: Calculation of Golf Course Reconfiguration Project Costs to be Financed
by COPs
A. Total Capital Costs for Project $13,547,222
B. Soil Import Revenue ($1,179,830)
C. Net Funding Needed for Project $12,367,392
D. JPA Reimbursement ($3,000,000)
E. Net Costs of Project to be financed $ 9,367,392
In 2012 Council approved the Golf Reconfiguration Improvements CIP PG-13003,
and approximately $1 million has been spent to-date on soft costs for project
design, environmental assessment, and permitting. At the time of the printing of
this report, the current available CIP balance is estimated at $9.9 million, slightly
lower than levels assumed in the development of the FY 2017 Adopted Capital
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Budget ($10.3 million). Therefore, the funds needed to award the project, after
adjusting for prior year expenditures, is $12.5 million, a variance of $2.6 million
from the estimated available CIP balance (a variance of $2.3 million when
compared to the FY 2017 Adopted Capital Budget). This increase in cost is
recommended to be recovered through additional COP proceeds. A table
outlining the necessary FY 2017 budget adjustments is outlined in the Resource
Impacts section of this report.
As outlined in Table 1 and Table 2 and the recommendation language in this
report, there are two potential financing levels. Below is a summary of those
options. Staff is requesting Council adopt a reimbursement resolution for a
maximum of $10,500,000 to provide some flexibility in case interest rates move
from the current estimate to the date of issuance of the COPs. A bond
reimbursement resolution is attached (Attachment D) for Council consideration
and is recommended for adoption.
Option 1
Council may opt to fund the $1.2 million in “soft costs” from the General Capital
Infrastructure Reserve. This option would result in a lower financed amount of
$9,011,212. The consideration of the lower debt issuance amount is to improve
the ability of the reconfigured golf course to achieve full cost recovery once back
in operation. The components of this figure are outline below:
A. Net project financing of $8,166,053
B. Cost of capitalized interest would be $604,909
Expense to defer debt service payments until golf course opens
C. Cost of issuance $240,250
Based on borrowing $8.2 million for 30 years at an estimated 3.51% interest rate,
annual average debt service for the Golf Course is estimated at $495,529.
Option 2
Council may adopt to include all costs associated with the capital project to be
funded through financing, with no draw on the General Capital Infrastructure
Reserve. This option would result in an estimated $10,301,541 in financing. The
components of this figure are outline below:
A. Net project financing of $9,367,392
This estimated net project financing level assumes staff’s recommended
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reimbursement to the Infrastructure Reserve for $1.2 million in “soft
costs.” This amount includes all of the Golf Course’s project costs (minus
soil import revenue and JPA mitigation contribution).
B. Capitalized interest $693,899
Expense to defer debt service payments until golf course opens
C. Cost of issuance of $240,250
Based on borrowing $9.4 million for 30 years at an estimated 3.51% interest rate,
annual average debt service for the Golf Course is estimated at $566,484.
Timeline
Implementation of the Golf Course Reconfiguration Project is scheduled to
conform to the following milestone dates:
June 20, 2016 Award of construction contract
July 1, 2016 Start of construction
Closure of Golf Course for public use
Sept/Oct, 2016 Issuance of Certificates of Participation
October 1, 2017 Open Baylands Golf Links for public use
Staff has received confirmation from Bond Counsel that the City may lawfully
issue debt after construction has begun.
Resource Impact
The construction phase of the project and attributed staff salaries and benefits is
estimated at $12.5 million, of which $10.3 million has been appropriated as part
of the FY 2017 Adopted Capital Budget which also assumes $3 million in revenue
from the San Franscisquito Creek JPA and $1.2 million in revenue from the
imported soil. Therefore, staff is requesting an additional $2,252,248
appropriation for Capital Improvement Program Project PG-13003, Golf Course
Reconfiguration Project.
As previously discussed, the Council has an option to have all funds reimbursed
through financing or have the General Capital Infrastructure Reserve (IR) absorb
$1.2 million for the soft costs. Should the Council opt to finance the lower level,
the $1.2 million draw on the IR could potentially be mitigated by updated FY 2016
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General Fund tax revenue projections. As reference in the Finance Committee 3rd
Quarter Financial Report, based on current FY 2016 projections, revenue receipts
may reach $1.1 million above assumptions, primarily due to increased property
and utility tax revenues. These increased revenues would be transferred between
the General Fund and the General Capital Improvement Fund as part of the FY
2016 year end process.
The details of the two financing options and the impacts on the FY 2017 Adopted
Budget are outlined below.
OPTION 1
Prior Year
Actuals
FY 2017
Adopted
Budget
Recommended
Adjustment
FY 2017
Revised
Budget
PROJECT
TOTAL
Revenues
Soil Imports 1,179,830 0 1,179,830 1,179,830
SF Creek Joint Powers* 2,935,944 0 2,935,944 2,935,944
Financing Proceeds 6,148,437 2,017,616 8,166,053 8,166,053
Total Revenues 10,264,211 2,017,616 12,345,883 12,345,883
Expenses
Golf Course
Reconfiguration
1,003,979 10,291,001 2,252,248 12,543,249 13,547,222
Impact to IR (234,632) (1,201,339)
* It is anticipated that actual reimbursements will be $3.0 million.
OPTION 2
Prior Year
Actuals
FY 2017
Adopted
Budget
Recommended
Adjustment
FY 2017
Revised
Budget
PROJECT
TOTAL
Revenues
Soil Imports 1,179,830 0 1,179,830 1,179,830
SF Creek Joint Powers* 2,935,944 0 2,935,944 2,935,944
Financing Proceeds 6,148,437 3,218,955 9,367,392 9,367,392
Total Revenues 10,264,211 3,218,955 13,547,222 13,547,222
Expenses
Golf Course
Reconfiguration
1,003,979 10,291,001 2,252,248 1,543,249 13,547,222
Impact to IR 966,707 0
* It is anticipated that actual reimbursements will be $3.0 million.
City of Palo Alto Page 17
Environmental Review
An Environmental Impact Report (EIR) was prepared to evaluate the proposed
potential impacts of the Palo Alto Municipal Golf Course Reconfiguration Project
and to identify the appropriate mitigation measures in accordance with the
provisions of the California Environmental Quality Act (CEQA). Council, acting on
behalf of the City of Palo Alto in its role as lead agency for purposes of CEQA,
adopted a resolution on February 3, 2014, certifying the final EIR for the project.
Attachments:
Attachment A - Contract (PDF)
Attachment B - Deductive Change Order (PDF)
Attachment C - Contract Amendment (PDF)
Attachment D - Resolution Golf Course COPs Reimbursement (PDF)
Attachment E - Bid Summary (PDF)
Attachment F - NGF Palo Alto Report - 2016 Final Version (PDF)
Invitation for Bid (IFB) Package 1 Rev. April 27, 2016
CONSTRUCTION CONTRACT
CONSTRUCTION CONTRACT
Contract No. C16163847
City of Palo Alto
Palo Alto Municipal Golf Course Reconfiguration Project
Invitation for Bid (IFB) Package 2 Rev. April 27, 2016
CONSTRUCTION CONTRACT
CONSTRUCTION CONTRACT
TABLE OF CONTENTS
SECTION 1 INCORPORATION OF RECITALS AND DEFINITIONS…………………………………….…………..6
1.1 Recitals…………………………………………………………………………………………………………………….6
1.2 Definitions……………………………………………………………………………………………………………….6
SECTION 2 THE PROJECT………………………………………………………………………………………………………...6
SECTION 3 THE CONTRACT DOCUMENTS………………………………………………………………………………..7
3.1 List of Documents…………………………………………………………………………………………….........7
3.2 Order of Precedence……………………………………………………………………………………………......7
SECTION 4 CONTRACTOR’S DUTY…………………………………………………………………………………………..8
4.1 Contractor's Duties…………………………………………………………………………………………………..8
SECTION 5 PROJECT TEAM……………………………………………………………………………………………………..8
5.1 Contractor's Co-operation………………………………………………………………………………………..8
SECTION 6 TIME OF COMPLETION…………………………………………………………………………………….......8
6.1 Time Is of Essence…………………………………………………………………………………………………….8
6.2 Commencement of Work…………………………………………………………………………………………8
6.3 Contract Time…………………………………………………………………………………………………………..8
6.4 Liquidated Damages…………………………………………………………………………………………………8
6.4.1 Other Remedies……………………………………………………………………………………………………..9
6.5 Adjustments to Contract Time………………………………………………………………………………….9
SECTION 7 COMPENSATION TO CONTRACTOR……………………………………………………………………….9
7.1 Contract Sum……………………………………………………………………………………………………………9
7.2 Full Compensation……………………………………………………………………………………………………9
SECTION 8 STANDARD OF CARE……………………………………………………………………………………………..9
8.1 Standard of Care…………………………………………………………………………………..…………………9
SECTION 9 INDEMNIFICATION…………………………………………………………………………………………..…10
9.1 Hold Harmless……………………………………………………………………………………………………….10
9.2 Survival…………………………………………………………………………………………………………………10
SECTION 10 NON-DISCRIMINATION……..………………………………………………………………………………10
10.1 Municipal Code Requirement…………….………………………………..……………………………….10
SECTION 11 INSURANCE AND BONDS.…………………………………………………………………………………10
Invitation for Bid (IFB) Package 3 Rev. April 27, 2016
CONSTRUCTION CONTRACT
11.1 Evidence of Coverage…………………………………………………………………………………………..10
SECTION 12 PROHIBITION AGAINST TRANSFERS…………………………………………………………….…11
12.1 Assignment………………………………………………………………………………………………………….11
12.2 Assignment by Law.………………………………………………………………………………………………11
SECTION 13 NOTICES …………………………………………………………………………………………………………….11
13.1 Method of Notice …………………………………………………………………………………………………11
13.2 Notice Recipents ………………………………………………………………………………………………….11
13.3 Change of Address……………………………………………………………………………………………….12
SECTION 14 DEFAULT…………………………………………………………………………………………………………...12
14.1 Notice of Default………………………………………………………………………………………………….12
14.2 Opportunity to Cure Default…………………………………………………………………………………12
SECTION 15 CITY'S RIGHTS AND REMEDIES…………………………………………………………………………..13
15.1 Remedies Upon Default……………………………………………………………………………………….13
15.1.1 Delete Certain Services…………………………………………………………………………………….13
15.1.2 Perform and Withhold……………………………………………………………………………………..13
15.1.3 Suspend The Construction Contract…………………………………………………………………13
15.1.4 Terminate the Construction Contract for Default………………………………………………13
15.1.5 Invoke the Performance Bond………………………………………………………………………….13
15.1.6 Additional Provisions……………………………………………………………………………………….13
15.2 Delays by Sureties……………………………………………………………………………………………….13
15.3 Damages to City…………………………………………………………………………………………………..14
15.3.1 For Contractor's Default…………………………………………………………………………………..14
15.3.2 Compensation for Losses…………………………………………………………………………………14
15.4 Suspension by City……………………………………………………………………………………………….14
15.4.1 Suspension for Convenience……………………………………………………………………………..14
15.4.2 Suspension for Cause………………………………………………………………………………………..14
15.5 Termination Without Cause…………………………………………………………………………………14
15.5.1 Compensation………………………………………………………………………………………………….15
15.5.2 Subcontractors………………………………………………………………………………………………..15
15.6 Contractor’s Duties Upon Termination………………………………………………………………...15
SECTION 16 CONTRACTOR'S RIGHTS AND REMEDIES……………………………………………………………16
16.1 Contractor’s Remedies……………………………………..………………………………..………………….16
Invitation for Bid (IFB) Package 4 Rev. April 27, 2016
CONSTRUCTION CONTRACT
16.1.1 For Work Stoppage……………………………………………………………………………………………16
16.1.2 For City's Non-Payment…………………………………………………………………………………….16
16.2 Damages to Contractor………………………………………………………………………………………..16
SECTION 17 ACCOUNTING RECORDS………………………………………………………………………………….…16
17.1 Financial Management and City Access………………………………………………………………..16
17.2 Compliance with City Requests…………………………………………………………………………….17
SECTION 18 INDEPENDENT PARTIES……………………………………………………………………………………..17
18.1 Status of Parties……………………………………………………………………………………………………17
SECTION 19 NUISANCE……………………………………………………………………………………………………….…17
19.1 Nuisance Prohibited……………………………………………………………………………………………..17
SECTION 20 PERMITS AND LICENSES…………………………………………………………………………………….17
20.1 Payment of Fees…………………………………………………………………………………………………..17
SECTION 21 WAIVER…………………………………………………………………………………………………………….17
21.1 Waiver………………………………………………………………………………………………………………….17
SECTION 22 GOVERNING LAW AND VENUE; COMPLIANCE WITH LAWS……………………………….18
22.1 Governing Law…………………………………………………………………………………………………….18
22.2 Compliance with Laws…………………………………………………………………………………………18
22.2.1 Palo Alto Minimum Wage Ordinance…………….………………………………………………….18
SECTION 23 COMPLETE AGREEMENT……………………………………………………………………………………18
23.1 Integration………………………………………………………………………………………………………….18
SECTION 24 SURVIVAL OF CONTRACT…………………………………………………………………………………..18
24.1 Survival of Provisions……………………………………………………………………………………………18
SECTION 25 PREVAILING WAGES………………………………………………………………………………………….18
SECTION 26 NON-APPROPRIATION……………………………………………………………………………………….19
26.1 Appropriation………………………………………………………………………………………………………19
SECTION 27 AUTHORITY……………………………………………………………………………………………………….19
27.1 Representation of Parties…………………………………………………………………………………….19
SECTION 28 COUNTERPARTS………………………………………………………………………………………………..19
28.1 Multiple Counterparts………………………………………………………………………………………….19
SECTION 29 SEVERABILITY……………………………………………………………………………………………………19
29.1 Severability………………………………………………………………………………………………………….19
SECTION 30 STATUTORY AND REGULATORY REFERENCES …………………………………………………..19
Invitation for Bid (IFB) Package 5 Rev. April 27, 2016
CONSTRUCTION CONTRACT
30.1 Amendments of Laws…………………………………………………………………………………………..19
SECTION 31 WORKERS’ COMPENSATION CERTIFICATION………………………………………………….….19
31.1 Workers Compensation…………………………………………………………………………………….19
SECTION 32 DIR REGISTRATION AND OTHER SB 854 REQUIREMENTS………………………………..…20
32.1 General Notice to Contractor…………………………………………………………………………….20
32.2 Labor Code section 1771.1(a)…………………………………………………………………………….20
32.3 DIR Registration Required…………………………………………………………………………………20
32.4 Posting of Job Site Notices…………………………………………………………………………………20
32.5 Payroll Records…………………………………………………………………………………………………20
Invitation for Bid (IFB) Package 6 Rev. April 27, 2016
CONSTRUCTION CONTRACT
CONSTRUCTION CONTRACT
THIS CONSTRUCTION CONTRACT entered into on June 20, 2016 (“Execution Date”) by and between the
CITY OF PALO ALTO, a California chartered municipal corporation ("City"), and Wadsworth Golf
Construction Company ("Contractor"), is made with reference to the following:
R E C I T A L S:
A. City is a municipal corporation duly organized and validly existing under the laws of the State of
California with the power to carry on its business as it is now being conducted under the statutes of the
State of California and the Charter of City.
B. Contractor is a Corporation duly organized and in good standing in the State of Delaware,
Contractor’s License Number 455877 and Department of Industrial Relations Registration Number
1000029901. Contractor represents that it is duly licensed by the State of California and has the
background, knowledge, experience and expertise to perform the obligations set forth in this Construction
Contract.
C. On April 22, 2016, City issued an Invitation for Bids (IFB) to contractors for the Palo Alto Municipal
Golf Course Reconfiguration Project (“Project”). In response to the IFB, Contractor submitted a Bid.
D. City and Contractor desire to enter into this Construction Contract for the Project, and other
services as identified in the Contract Documents for the Project upon the following terms and conditions.
NOW THEREFORE, in consideration of the mutual promises and undertakings hereinafter set forth
and for other good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, it is mutually agreed by and between the undersigned parties as follows:
SECTION 1 INCORPORATION OF RECITALS AND DEFINITIONS.
1.1 Recitals.
All of the recitals are incorporated herein by reference.
1.2 Definitions.
Capitalized terms shall have the meanings set forth in this Construction Contract and/or in the General
Conditions. If there is a conflict between the definitions in this Construction Contract and in the General
Conditions, the definitions in this Construction Contract shall prevail.
SECTION 2 THE PROJECT.
The Project is the Palo Alto Municipal Golf Course Reconfiguration Project, located at 1875 Embarcadero
Road, Palo Alto, CA. 94303.
Invitation for Bid (IFB) Package 7 Rev. April 27, 2016
CONSTRUCTION CONTRACT
SECTION 3 THE CONTRACT DOCUMENTS.
3.1 List of Documents.
The Contract Documents (sometimes collectively referred to as “Agreement” or “Bid Documents”) consist
of the following documents which are on file with the Purchasing Division and are hereby incorporated by
reference.
1) Change Orders
2) Field Orders
3) Contract
4) Bidding Addenda
5) Special Provisions
6) General Conditions
7) Project Plans and Drawings
8) Technical Specifications
9) Instructions to Bidders
10) Invitation for Bids
11) Contractor's Bid/Non-Collusion Declaration
12) Reports listed in the Contract Documents
13) Public Works Department’s Standard Drawings and Specifications (most current version at
time of Bid)
14) Utilities Department’s Water, Gas, Wastewater, Electric Utilities Standards (most current
version at time of Bid)
15) City of Palo Alto Traffic Control Requirements
16) City of Palo Alto Truck Route Map and Regulations
17) Notice Inviting Pre-Qualification Statements, Pre-Qualification Statement, and Pre-
Qualification Checklist (if applicable)
18) Performance and Payment Bonds
3.2 Order of Precedence.
For the purposes of construing, interpreting and resolving inconsistencies between and among the
provisions of this Contract, the Contract Documents shall have the order of precedence as set forth in the
preceding section. If a claimed inconsistency cannot be resolved through the order of precedence, the City
shall have the sole power to decide which document or provision shall govern as may be in the best
interests of the City.
Invitation for Bid (IFB) Package 8 Rev. April 27, 2016
CONSTRUCTION CONTRACT
SECTION 4 CONTRACTOR’S DUTY.
4.1 Contractor’s Duties
Contractor agrees to perform all of the Work required for the Project, as specified in the Contract
Documents, all of which are fully incorporated herein. Contractor shall provide, furnish, and supply all
things necessary and incidental for the timely performance and completion of the Work, including, but not
limited to, provision of all necessary labor, materials, equipment, transportation, and utilities, unless
otherwise specified in the Contract Documents. Contractor also agrees to use its best efforts to complete
the Work in a professional and expeditious manner and to meet or exceed the performance standards
required by the Contract Documents.
SECTION 5 PROJECT TEAM.
5.1 Contractor’s Co-operation.
In addition to Contractor, City has retained, or may retain, consultants and contractors to provide
professional and technical consultation for the design and construction of the Project. The Contract
requires that Contractor operate efficiently, effectively and cooperatively with City as well as all other
members of the Project Team and other contractors retained by City to construct other portions of the
Project.
SECTION 6 TIME OF COMPLETION.
6.1 Time Is of Essence.
Time is of the essence with respect to all time limits set forth in the Contract Documents.
6.2 Commencement of Work.
Contractor shall commence the Work on the date specified in City’s Notice to Proceed.
6.3 Contract Time.
Work hereunder shall begin on the date specified on the City’s Notice to Proceed and shall be completed
not later than September 11, 2017.
within calendar days () after the commencement date specified in City’s Notice to
Proceed.
By executing this Construction Contract, Contractor expressly waives any claim for delayed early
completion.
6.4 Liquidated Damages.
Pursuant to Government Code Section 53069.85, if Contractor fails to achieve Substantial Completion of
the entire Work within the Contract Time, including any approved extensions thereto, City may assess
liquidated damages on a daily basis for each day of Unexcused Delay in achieving Substantial Completion,
based on the amount of Three Thousand Five Hundred dollars ($3500) per day, or as otherwise specified in
the Special Provisions. Liquidated damages may also be separately assessed for failure to meet milestones
specified elsewhere in the Contract Documents, regardless of impact on the time for achieving Substantial
Completion. The assessment of liquidated damages is not a penalty but considered to be a reasonable
Invitation for Bid (IFB) Package 9 Rev. April 27, 2016
CONSTRUCTION CONTRACT
estimate of the amount of damages City will suffer by delay in completion of the Work. The City is entitled
to setoff the amount of liquidated damages assessed against any payments otherwise due to Contractor,
including, but not limited to, setoff against release of retention. If the total amount of liquidated damages
assessed exceeds the amount of unreleased retention, City is entitled to recover the balance from
Contractor or its sureties. Occupancy or use of the Project in whole or in part prior to Substantial
Completion, shall not operate as a waiver of City’s right to assess liquidated damages.
6.4.1 Other Remedies. City is entitled to any and all available legal and equitable remedies City may
have where City’s Losses are caused by any reason other than Contractor’s failure to achieve Substantial
Completion of the entire Work within the Contract Time.
6.5 Adjustments to Contract Time.
The Contract Time may only be adjusted for time extensions approved by City and memorialized in a
Change Order approved in accordance with the requirements of the Contract Documents.
SECTION 7 COMPENSATION TO CONTRACTOR.
7.1 Contract Sum.
Contractor shall be compensated for satisfactory completion of the Work in compliance with the Contract
Documents the Contract Sum of Eleven Million Nine Hundred Sixty-Four Thousand Six Hundred Twenty
Dollars ($11,964,620).
[This amount includes the Base Bid and Additive Alternates N/A.]
7.2 Full Compensation.
The Contract Sum shall be full compensation to Contractor for all Work provided by Contractor
and, except as otherwise expressly permitted by the terms of the Contract Documents, shall cover all
Losses arising out of the nature of the Work or from the acts of the elements or any unforeseen difficulties
or obstructions which may arise or be encountered in performance of the Work until its Acceptance by
City, all risks connected with the Work, and any and all expenses incurred due to suspension or
discontinuance of the Work, except as expressly provided herein. The Contract Sum may only be adjusted
for Change Orders approved in accordance with the requirements of the Contract Documents.
SECTION 8 STANDARD OF CARE.
8.1 Standard of Care.
Contractor agrees that the Work shall be performed by qualified, experienced and well-supervised
personnel. All services performed in connection with this Construction Contract shall be performed in a
manner consistent with the standard of care under California law applicable to those who specialize in
providing such services for projects of the type, scope and complexity of the Project.
Invitation for Bid (IFB) Package 10 Rev. April 27, 2016
CONSTRUCTION CONTRACT
SECTION 9 INDEMNIFICATION.
9.1 Hold Harmless.
To the fullest extent allowed by law, Contractor will defend, indemnify, and hold harmless City, its City
Council, boards and commissions, officers, agents, employees, representatives and volunteers (hereinafter
individually referred to as an “Indemnitee” and collectively referred to as "Indemnitees"), through legal
counsel acceptable to City, from and against any and liability, loss, damage, claims, expenses (including,
without limitation, attorney fees, expert witness fees, paralegal fees, and fees and costs of litigation or
arbitration) (collectively, “Liability”) of every nature arising out of or in connection with the acts or
omissions of Contractor, its employees, Subcontractors, representatives, or agents, in performing the Work
or its failure to comply with any of its obligations under the Contract, except such Liability caused by the
active negligence, sole negligence, or willful misconduct of an Indemnitee. Contractor shall pay City for any
costs City incurs to enforce this provision. Except as provided in Section 9.2 below, nothing in the Contract
Documents shall be construed to give rise to any implied right of indemnity in favor of Contractor against
City or any other Indemnitee.
Pursuant to Public Contract Code Section 9201, City shall timely notify Contractor upon receipt of
any third-party claim relating to the Contract.
9.2 Survival.
The provisions of Section 9 shall survive the termination of this Construction Contract.
SECTION 10 NON-DISCRIMINATION.
10.1 Municipal Code Requirement.
As set forth in Palo Alto Municipal Code section 2.30.510, Contractor 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. Contractor 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 will comply with all requirements of Section
2.30.510 pertaining to nondiscrimination in employment.
SECTION 11 INSURANCE AND BONDS.
11.1 Evidence of coverage.
Within ten (10) business days following issuance of the Notice of Award, Contractor shall provide City with
evidence that it has obtained insurance and shall submit Performance and Payment Bonds satisfying all
requirements in Article 11 of the General Conditions.
Invitation for Bid (IFB) Package 11 Rev. April 27, 2016
CONSTRUCTION CONTRACT
SECTION 12 PROHIBITION AGAINST TRANSFERS.
12.1 Assignment.
City is entering into this Construction Contract in reliance upon the stated experience and qualifications of
the Contractor and its Subcontractors set forth in Contractor’s Bid. Accordingly, Contractor shall not
assign, hypothecate or transfer this Construction Contract or any interest therein directly or indirectly, by
operation of law or otherwise without the prior written consent of City. Any assignment, hypothecation or
transfer without said consent shall be null and void, and shall be deemed a substantial breach of contract
and grounds for default in addition to any other legal or equitable remedy available to the City.
12.2 Assignment by Law.
The sale, assignment, transfer or other disposition of any of the issued and outstanding capital stock of
Contractor or of any general partner or joint venturer or syndicate member of Contractor, if the Contractor
is a partnership or joint venture or syndicate or co-tenancy shall result in changing the control of
Contractor, shall be construed as an assignment of this Construction Contract. Control means more than
fifty percent (50%) of the voting power of the corporation or other entity.
SECTION 13 NOTICES.
13.1 Method of Notice.
All notices, demands, requests or approvals to be given under this Construction Contract shall be given in
writing and shall be deemed served on the earlier of the following:
(i) On the date delivered if delivered personally;
(ii) On the third business day after the deposit thereof in the United States mail, postage prepaid, and
addressed as hereinafter provided;
(iii) On the date sent if sent by facsimile transmission;
(iv) On the date sent if delivered by electronic mail; or
(v) On the date it is accepted or rejected if sent by certified mail.
13.2 Notice to Recipients.
All notices, demands or requests (including, without limitation, Change Order Requests and Claims) from
Contractor to City shall include the Project name and the number of this Construction Contract and shall be
addressed to City at:
To City: City of Palo Alto
City Clerk
250 Hamilton Avenue
P.O. Box 10250
Palo Alto, CA 94303
Copy to: City of Palo Alto
Public Works Administration
250 Hamilton Avenue
Palo Alto, CA 94301
Attn: Joe Teresi
AND
[Include Construction Manager, If Applicable.]
Invitation for Bid (IFB) Package 12 Rev. April 27, 2016
CONSTRUCTION CONTRACT
City of Palo Alto
Utilities Engineering
250 Hamilton Avenue
Palo Alto, CA 94301
Attn:
In addition, copies of all Claims by Contractor under this Construction Contract shall be provided to the
following:
Palo Alto City Attorney’s Office
250 Hamilton Avenue
P.O. Box 10250
Palo Alto, California 94303
All Claims shall be delivered personally or sent by certified mail.
All notices, demands, requests or approvals from City to Contractor shall be addressed to:
Wadsworth Golf Construction Company
600 North 195th Avenue
Buckeye, Az 85326
Attn: Patrick Karnick
13.3 Change of Address.
In advance of any change of address, Contractor shall notify City of the change of address in writing. Each
party may, by written notice only, add, delete or replace any individuals to whom and addresses to which
notice shall be provided.
SECTION 14 DEFAULT.
14.1 Notice of Default.
In the event that City determines, in its sole discretion, that Contractor has failed or refused to perform any
of the obligations set forth in the Contract Documents, or is in breach of any provision of the Contract
Documents, City may give written notice of default to Contractor in the manner specified for the giving of
notices in the Construction Contract, with a copy to Contractor’s performance bond surety.
14.2 Opportunity to Cure Default.
Except for emergencies, Contractor shall cure any default in performance of its obligations under the
Contract Documents within two (2) Days (or such shorter time as City may reasonably require) after receipt
of written notice. However, if the breach cannot be reasonably cured within such time, Contractor will
commence to cure the breach within two (2) Days (or such shorter time as City may reasonably require)
and will diligently and continuously prosecute such cure to completion within a reasonable time, which
shall in no event be later than ten (10) Days after receipt of such written notice.
Invitation for Bid (IFB) Package 13 Rev. April 27, 2016
CONSTRUCTION CONTRACT
SECTION 15 CITY'S RIGHTS AND REMEDIES.
15.1 Remedies Upon Default.
If Contractor fails to cure any default of this Construction Contract within the time period set forth above
in Section 14, then City may pursue any remedies available under law or equity, including, without
limitation, the following:
15.1.1 Delete Certain Services. City may, without terminating the Construction Contract, delete
certain portions of the Work, reserving to itself all rights to Losses related thereto.
15.1.2 Perform and Withhold. City may, without terminating the Construction Contract, engage
others to perform the Work or portion of the Work that has not been adequately performed by
Contractor and withhold the cost thereof to City from future payments to Contractor, reserving to
itself all rights to Losses related thereto.
15.1.3 Suspend The Construction Contract. City may, without terminating the Construction
Contract and reserving to itself all rights to Losses related thereto, suspend all or any portion of
this Construction Contract for as long a period of time as City determines, in its sole discretion,
appropriate, in which event City shall have no obligation to adjust the Contract Sum or Contract
Time, and shall have no liability to Contractor for damages if City directs Contractor to resume
Work.
15.1.4 Terminate the Construction Contract for Default. City shall have the right to terminate
this Construction Contract, in whole or in part, upon the failure of Contractor to promptly cure
any default as required by Section 14. City’s election to terminate the Construction Contract for
default shall be communicated by giving Contractor a written notice of termination in the manner
specified for the giving of notices in the Construction Contract. Any notice of termination given to
Contractor by City shall be effective immediately, unless otherwise provided therein.
15.1.5 Invoke the Performance Bond. City may, with or without terminating the Construction
Contract and reserving to itself all rights to Losses related thereto, exercise its rights under the
Performance Bond.
15.1.6 Additional Provisions. All of City’s rights and remedies under this Construction Contract
are cumulative, and shall be in addition to those rights and remedies available in law or in equity.
Designation in the Contract Documents of certain breaches as material shall not waive the City’s
authority to designate other breaches as material nor limit City’s right to terminate the
Construction Contract, or prevent the City from terminating the Agreement for breaches that are
not material. City’s determination of whether there has been noncompliance with the
Construction Contract so as to warrant exercise by City of its rights and remedies for default under
the Construction Contract, shall be binding on all parties. No termination or action taken by City
after such termination shall prejudice any other rights or remedies of City provided by law or
equity or by the Contract Documents upon such termination; and City may proceed against
Contractor to recover all liquidated damages and Losses suffered by City.
15.2 Delays by Sureties.
Time being of the essence in the performance of the Work, if Contractor’s surety fails to arrange for
completion of the Work in accordance with the Performance Bond, within seven (7) calendar days from the
date of the notice of termination, Contractor’s surety shall be deemed to have waived its right to complete
the Work under the Contract, and City may immediately make arrangements for the completion of the
Work through use of its own forces, by hiring a replacement contractor, or by any other means that City
determines advisable under the circumstances. Contractor and its surety shall be jointly and severally
Invitation for Bid (IFB) Package 14 Rev. April 27, 2016
CONSTRUCTION CONTRACT
liable for any additional cost incurred by City to complete the Work following termination. In addition, City
shall have the right to use any materials, supplies, and equipment belonging to Contractor and located at
the Worksite for the purposes of completing the remaining Work.
15.3 Damages to City.
15.3.1 For Contractor's Default. City will be entitled to recovery of all Losses under law or
equity in the event of Contractor’s default under the Contract Documents.
15.3.2 Compensation for Losses. In the event that City's Losses arise from Contractor’s default
under the Contract Documents, City shall be entitled to deduct the cost of such Losses from
monies otherwise payable to Contractor. If the Losses incurred by City exceed the amount
payable, Contractor shall be liable to City for the difference and shall promptly remit same to City.
15.4 Suspension by City
15.4.1 Suspension for Convenience. City may, at any time and from time to time, without
cause, order Contractor, in writing, to suspend, delay, or interrupt the Work in whole or in part for
such period of time, up to an aggregate of fifty percent (50%) of the Contract Time. The order
shall be specifically identified as a Suspension Order by City. Upon receipt of a Suspension Order,
Contractor shall, at City’s expense, comply with the order and take all reasonable steps to
minimize costs allocable to the Work covered by the Suspension Order. During the Suspension or
extension of the Suspension, if any, City shall either cancel the Suspension Order or, by Change
Order, delete the Work covered by the Suspension Order. If a Suspension Order is canceled or
expires, Contractor shall resume and continue with the Work. A Change Order will be issued to
cover any adjustments of the Contract Sum or the Contract Time necessarily caused by such
suspension. A Suspension Order shall not be the exclusive method for City to stop the Work.
15.4.2 Suspension for Cause. In addition to all other remedies available to City, if Contractor
fails to perform or correct work in accordance with the Contract Documents, City may
immediately order the Work, or any portion thereof, suspended until the cause for the suspension
has been eliminated to City’s satisfaction. Contractor shall not be entitled to an increase in
Contract Time or Contract Price for a suspension occasioned by Contractor’s failure to comply
with the Contract Documents. City’s right to suspend the Work shall not give rise to a duty to
suspend the Work, and City’s failure to suspend the Work shall not constitute a defense to
Contractor’s failure to comply with the requirements of the Contract Documents.
15.5 Termination Without Cause.
City may, at its sole discretion and without cause, terminate this Construction Contract in part or in whole
upon written notice to Contractor. Upon receipt of such notice, Contractor shall, at City’s expense, comply
with the notice and take all reasonable steps to minimize costs to close out and demobilize. The
compensation allowed under this Paragraph 15.5 shall be the Contractor’s sole and exclusive
compensation for such termination and Contractor waives any claim for other compensation or Losses,
including, but not limited to, loss of anticipated profits, loss of revenue, lost opportunity, or other
consequential, direct, indirect or incidental damages of any kind resulting from termination without cause.
Termination pursuant to this provision does not relieve Contractor or its sureties from any of their
obligations for Losses arising from or related to the Work performed by Contractor.
Invitation for Bid (IFB) Package 15 Rev. April 27, 2016
CONSTRUCTION CONTRACT
15.5.1 Compensation. Following such termination and within forty-five (45) Days after receipt
of a billing from Contractor seeking payment of sums authorized by this Paragraph 15.5.1, City
shall pay the following to Contractor as Contractor’s sole compensation for performance of the
Work :
.1 For Work Performed. The amount of the Contract Sum allocable to the portion of the
Work properly performed by Contractor as of the date of termination, less sums previously paid to
Contractor.
.2 For Close-out Costs. Reasonable costs of Contractor and its Subcontractors:
(i) Demobilizing and
(ii) Administering the close-out of its participation in the Project (including, without
limitation, all billing and accounting functions, not including attorney or expert fees) for a
period of no longer than thirty (30) Days after receipt of the notice of termination.
.3 For Fabricated Items. Previously unpaid cost of any items delivered to the Project Site
which were fabricated for subsequent incorporation in the Work.
.4 Profit Allowance. An allowance for profit calculated as four percent (4%) of the sum of
the above items, provided Contractor can prove a likelihood that it would have made a profit if
the Construction Contract had not been terminated.
15.5.2 Subcontractors. Contractor shall include provisions in all of its subcontracts, purchase
orders and other contracts permitting termination for convenience by Contractor on terms that
are consistent with this Construction Contract and that afford no greater rights of recovery against
Contractor than are afforded to Contractor against City under this Section.
15.6 Contractor’s Duties Upon Termination.
Upon receipt of a notice of termination for default or for convenience, Contractor shall, unless the notice
directs otherwise, do the following:
(i) Immediately discontinue the Work to the extent specified in the notice;
(ii) Place no further orders or subcontracts for materials, equipment, services or facilities,
except as may be necessary for completion of such portion of the Work that is not
discontinued;
(iii) Provide to City a description in writing, no later than fifteen (15) days after receipt of the
notice of termination, of all subcontracts, purchase orders and contracts that are
outstanding, including, without limitation, the terms of the original price, any changes,
payments, balance owing, the status of the portion of the Work covered and a copy of
the subcontract, purchase order or contract and any written changes, amendments or
modifications thereto, together with such other information as City may determine
necessary in order to decide whether to accept assignment of or request Contractor to
terminate the subcontract, purchase order or contract;
(iv) Promptly assign to City those subcontracts, purchase orders or contracts, or portions
thereof, that City elects to accept by assignment and cancel, on the most favorable terms
reasonably possible, all subcontracts, purchase orders or contracts, or portions thereof,
that City does not elect to accept by assignment; and
(v) Thereafter do only such Work as may be necessary to preserve and protect Work already
in progress and to protect materials, plants, and equipment on the Project Site or in
transit thereto.
Upon termination, whether for cause or for convenience, the provisions of the Contract
Documents remain in effect as to any Claim, indemnity obligation, warranties, guarantees,
Invitation for Bid (IFB) Package 16 Rev. April 27, 2016
CONSTRUCTION CONTRACT
submittals of as-built drawings, instructions, or manuals, or other such rights and obligations
arising prior to the termination date.
SECTION 16 CONTRACTOR'S RIGHTS AND REMEDIES.
16.1 Contractor’s Remedies.
Contractor may terminate this Construction Contract only upon the occurrence of one of the following:
16.1.1 For Work Stoppage. The Work is stopped for sixty (60) consecutive Days, through no act
or fault of Contractor, any Subcontractor, or any employee or agent of Contractor or any
Subcontractor, due to issuance of an order of a court or other public authority other than City
having jurisdiction or due to an act of government, such as a declaration of a national emergency
making material unavailable. This provision shall not apply to any work stoppage resulting from
the City’s issuance of a suspension notice issued either for cause or for convenience.
16.1.2 For City's Non-Payment. If City does not make pay Contractor undisputed sums within
ninety (90) Days after receipt of notice from Contractor, Contractor may terminate the
Construction Contract (30) days following a second notice to City of Contractor’s intention to
terminate the Construction Contract.
16.2 Damages to Contractor.
In the event of termination for cause by Contractor, City shall pay Contractor the sums provided for in
Paragraph 15.5.1 above. Contractor agrees to accept such sums as its sole and exclusive compensation
and agrees to waive any claim for other compensation or Losses, including, but not limited to, loss of
anticipated profits, loss of revenue, lost opportunity, or other consequential, direct, indirect and incidental
damages, of any kind.
SECTION 17 ACCOUNTING RECORDS.
17.1 Financial Management and City Access.
Contractor shall keep full and detailed accounts and exercise such controls as may be necessary for proper
financial management under this Construction Contract in accordance with generally accepted accounting
principles and practices. City and City's accountants during normal business hours, may inspect, audit and
copy Contractor's records, books, estimates, take-offs, cost reports, ledgers, schedules, correspondence,
instructions, drawings, receipts, subcontracts, purchase orders, vouchers, memoranda and other data
relating to this Project. Contractor shall retain these documents for a period of three (3) years after the
later of (i) Final Payment or (ii) final resolution of all Contract Disputes and other disputes, or (iii) for such
longer period as may be required by law.
Invitation for Bid (IFB) Package 17 Rev. April 27, 2016
CONSTRUCTION CONTRACT
17.2 Compliance with City Requests.
Contractor's compliance with any request by City pursuant to this Section 17 shall be a condition precedent
to filing or maintenance of any legal action or proceeding by Contractor against City and to Contractor's
right to receive further payments under the Contract Documents. City many enforce Contractor’s
obligation to provide access to City of its business and other records referred to in Section 17.1 for
inspection or copying by issuance of a writ or a provisional or permanent mandatory injunction by a court
of competent jurisdiction based on affidavits submitted to such court, without the necessity of oral
testimony.
SECTION 18 INDEPENDENT PARTIES.
18.1 Status of parties.
Each party is acting in its independent capacity and not as agents, employees, partners, or joint ventures’
of the other party. City, its officers or employees shall have no control over the conduct of Contractor or
its respective agents, employees, subconsultants, or subcontractors, except as herein set forth.
SECTION 19 NUISANCE.
19.1 Nuisance Prohibited.
Contractor shall not maintain, commit, nor permit the maintenance or commission of any nuisance in
connection in the performance of services under this Construction Contract.
SECTION 20 PERMITS AND LICENSES.
20.1 Payment of Fees.
Except as otherwise provided in the Special Provisions and Technical Specifications, The Contractor shall
provide, procure and pay for all licenses, permits, and fees, required by the City or other government
jurisdictions or agencies necessary to carry out and complete the Work. Payment of all costs and expenses
for such licenses, permits, and fees shall be included in one or more Bid items. No other compensation
shall be paid to the Contractor for these items or for delays caused by non-City inspectors or conditions set
forth in the licenses or permits issued by other agencies.
SECTION 21 WAIVER.
21.1 Waiver.
A waiver by either party of any breach of any term, covenant, or condition contained herein shall not be
deemed to be a waiver of any subsequent breach of the same or any other term, covenant, or condition
contained herein, whether of the same or a different character.
Invitation for Bid (IFB) Package 18 Rev. April 27, 2016
CONSTRUCTION CONTRACT
SECTION 22 GOVERNING LAW AND VENUE; COMPLIANCE WITH LAWS.
22.1 Governing Law.
This Construction Contract shall be construed in accordance with and governed by the laws of the State of
California, and venue shall be in a court of competent jurisdiction in the County of Santa Clara, and no
other place.
22.2 Compliance with Laws.
Contractor shall comply with all applicable federal and California laws and city laws, including, without
limitation, ordinances and resolutions, in the performance of work under this Construction Contract.
22.2.1 Palo Alto Minimum Wage Ordinance. Contractor shall comply with all requirements of
the Palo Alto Municipal Code Chapter 4.62 (Citywide Minimum Wage), as it may be amended from
time to time. In particular, for any employee otherwise entitled to the State minimum wage, who
performs at least two (2) hours of work in a calendar week within the geographic boundaries of
the City, Contractor shall pay such employees no less than the minimum wage set forth in Palo
Alto Municipal Code section 4.62.030 for each hour worked within the geographic boundaries of
the City of Palo Alto. In addition, Contractor shall post notices regarding the Palo Alto Minimum
Wage Ordinance in accordance with Palo Alto Municipal Code section 4.62.060.
SECTION 23 COMPLETE AGREEMENT.
23.1 Integration.
This Agreement represents the entire and integrated agreement between the parties and supersedes all
prior negotiations, representations, and contracts, either written or oral. This Agreement may be amended
only by a written instrument, which is signed by the parties.
SECTION 24 SURVIVAL OF CONTRACT.
24.1 Survival of Provisions.
The provisions of the Construction Contract which by their nature survive termination of the Construction
Contract or Final Completion, including, without limitation, all warranties, indemnities, payment
obligations, and City’s right to audit Contractor’s books and records, shall remain in full force and effect
after Final Completion or any termination of the Construction Contract.
SECTION 25 PREVAILING WAGES.
This Project is not subject to prevailing wages. Contractor is not required to pay prevailing wages in the
performance and implementation of the Project in accordance with SB 7, if the public works contract does
not include a project of $25,000 or less, when the project is for construction work, or the contract does not
include a project of $15,000 or less, when the project is for alteration, demolition, repair, or maintenance
(collectively, ‘improvement’) work.
Or
Contractor is required to pay general prevailing wages as defined in Subchapter 3, Title 8 of the
California Code of Regulations and Section 16000 et seq. and Section 1773.1 of the California Labor Code.
Pursuant to the provisions of Section 1773 of the Labor Code of the State of California, the City Council has
obtained the general prevailing rate of per diem wages and the general rate for holiday and overtime work
Invitation for Bid (IFB) Package 19 Rev. April 27, 2016
CONSTRUCTION CONTRACT
in this locality for each craft, classification, or type of worker needed to execute the contract for this
Project from the Director of the Department of Industrial Relations (“DIR”). Copies of these rates may be
obtained at the Purchasing Division’s office of the City of Palo Alto. Contractor shall provide a copy of
prevailing wage rates to any staff or subcontractor hired, and shall pay the adopted prevailing wage rates
as a minimum. Contractor shall comply with the provisions of all sections, including, but not limited to,
Sections 1775, 1776, 1777.5, 1782, 1810, and 1813, of the Labor Code pertaining to prevailing wages.
SECTION 26 NON-APPROPRIATION.
26.1 Appropriations.
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 the City does not appropriate funds for the following fiscal year for this event, 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 Construction Contract 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 27 AUTHORITY.
27.1 Representation of Parties.
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.
SECTION 28 COUNTERPARTS
28.1 Multiple Counterparts.
This Agreement may be signed in multiple counterparts, which shall, when executed by all the parties,
constitute a single binding agreement.
SECTION 29 SEVERABILITY.
29.1 Severability.
In case a provision of this Construction Contract is held to be invalid, illegal or unenforceable, the validity,
legality and enforceability of the remaining provisions shall not be affected.
SECTION 30 STATUTORY AND REGULATORY REFERENCES.
30.1 Amendments to Laws.
With respect to any amendments to any statutes or regulations referenced in these Contract Documents,
the reference is deemed to be the version in effect on the date that the Contract was awarded by City,
unless otherwise required by law.
SECTION 31 WORKERS’ COMPENSATION CERTIFICATION.
31.1 Workers Compensation.
Pursuant to Labor Code Section 1861, by signing this Contract, Contractor certifies as follows:
Invitation for Bid (IFB) Package 20 Rev. April 27, 2016
CONSTRUCTION CONTRACT
“I am aware of the provisions of Section 3700 of the Labor Code which require every employer to be
insured against liability for workers’ compensation or to undertake self-insurance in accordance with the
provisions of that code, and I will comply with such provisions before commencing the performance of the
Work on this Contract.”
SECTION 32 DIR REGISTRATION AND OTHER SB 854 REQUIREMENTS.
32.1 General Notice to Contractor.
City requires Contractor and its listed subcontractors to comply with the requirements of SB 854.
32.2 Labor Code section 1771.1(a)
City provides notice to Contractor of the requirements of California Labor Code section 1771.1(a), which
reads:
“A contractor or subcontractor shall not be qualified to bid on, be listed in a bid proposal, subject to the
requirements of Section 4104 of the Public Contract Code, or engage in the performance of any contract
for public work, as defined in this chapter, unless currently registered and qualified to perform public work
pursuant to Section 1725.5. It is not a violation of this section for an unregistered contractor to submit a
bid that is authorized by Section 7029.1 of the Business and Professions Code or Section 10164 or 20103.5
of the Public Contract Code, provided the contactor is registered to perform public work pursuant to
Section 1725.5 at the time the contract is awarded.”
32.3 DIR Registration Required.
City will not accept a bid proposal from or enter into this Construction Contract with Contractor without
proof that Contractor and its listed subcontractors are registered with the California Department of
Industrial Relations (“DIR”) to perform public work, subject to limited exceptions.
32.4 Posting of Job Site Notices.
City gives notice to Contractor and its listed subcontractors that Contractor is required to post all job site
notices prescribed by law or regulation and Contractor is subject to SB 854-compliance monitoring and
enforcement by DIR.
32.5 Payroll Records.
City requires Contractor and its listed subcontractors to comply with the requirements of Labor Code
section 1776, including:
(i) Keep accurate payroll records, showing the name, address, social security
number, work classification, straight time and overtime hours worked each day
and week, and the actual per diem wages paid to each journeyman, apprentice,
worker, or other employee employed by, respectively, Contractor and its listed
subcontractors, in connection with the Project.
(ii) The payroll records shall be verified as true and correct and shall be certified
and made available for inspection at all reasonable hours at the principal office
of Contractor and its listed subcontractors, respectively.
Invitation for Bid (IFB) Package 21 Rev. April 27, 2016
CONSTRUCTION CONTRACT
(iii) At the request of City, acting by its project manager, Contractor and its listed
subcontractors shall make the certified payroll records available for inspection
or furnished upon request to the project manager within ten (10) days of receipt
of City’s request.
City requests Contractor and its listed subcontractors to submit the certified
payroll records to the project manager at the end of each week during the
Project.
(iv) If the certified payroll records are not produced to the project manager within
the 10-day period, then Contractor and its listed subcontractors shall be subject
to a penalty of one hundred dollars ($100.00) per calendar day, or portion
thereof, for each worker, and City shall withhold the sum total of penalties from
the progress payment(s) then due and payable to Contractor. This provision
supplements the provisions of Section 15 hereof.
(v) Inform the project manager of the location of contractor’s and its listed
subcontractors’ payroll records (street address, city and county) at the
commencement of the Project, and also provide notice to the project manager
within five (5) business days of any change of location of those payroll records.
IN WITNESS WHEREOF, the parties have caused this Construction Contract to be executed the
date and year first above written.
CITY OF PALO ALTO
____________________________
Purchasing Manager
City Manager
APPROVED AS TO FORM:
____________________________
City Attorney or designee
APPROVED:
____________________________
Public Works Director
CONTRACTOR
By:___________________________
Name:________________________
Title:__________________________
Date: _________________________
GOLF COURSE RECONFIGURATION PROJECT ‐ CIP PG‐13003
No cost change: N/A
Increase cost by $0.00 days
Decrease cost by ‐$1,191,800.00 •days Excusable Delay
•days Compensable Delay
days
The date of completion as of this change order is
Unit Price(s)
Lump sum
CONTRACT CHANGE ORDER
CITY OF PALO ALTO
DEPARTMENT: PUBLIC WORKS ENGINEERING SERVICES
Contract Change Order #1
C16163847
This change order will:
Change Order:
Project Title:
Contract Number:
GOLF COURSE RECONFIGURATION PROJECT
WADSWORTH GOLF CONSTRUCTION COMPANY
Description of Work to be Performed:
Incorporates Field Order Number(s):
The low bid received for the project exceeded the available project budget. Staff and the golf course
architect negotiated the terms of this change order with the low bidder to reduce the cost of this project
without compromising the quality and functionality of the reconfigured golf course.
The contract modifications listed below are necessary to lower the project cost to within the available
project budget.
See attached itemization of the cost savings proposals accepted by the City.
N/A
Contractor:
Project No.:
Date:
PG‐13003
June 20, 2016
1
This change order will:
Description of Change Order
Background Information:
Change Order Justification:
Basis for change in cost:
Compensation for Compensable Delay
Time and Materials
G/L account number (s):
Monday, September 11, 2017
Cost
Increase time by
Decrease time by
No change time
Time
PAGE 1 OF 6 CONTRACT CHANGE ORDER – REV. FEBRUARY 2013
By:
Date:
By:
Date:
By:
Date:
Title:Assistant Director, Public Work Engineering
Title:Mike Sartor
Signature required on all change orders
Signature required when any individual Change Order exceeds $10,000.
Director of Public Works
Brad Eggleston
City Approval ‐ Department Head
Document Preparation
Senior Engineer
Joe Teresi Title:
City Approval ‐ Division Head
Summary of Amounts Payable Under Contract (For Internal Purposes Only)
Change orders shall not be initiated for Council‐approved contracts if the revised contract total exceeds the total authorized funding amount.
Original Contract Amount:
Previous Change Orders:
This Change Order:
Revised Contract Amount:
11,964,620.00$
‐$
‐$
1,077,282.00$
10,772,820.00$
‐$
1,077,282.00$
11,850,102.00$
Contract Change Order ‐ Continued
Contingency:
Contingency added:
Used to date:
Balance remaning:
Original Contract Authorization:
Contract Amendement Authorizations:
Contingency Authorizations:
Total Authorized Funding:
Compare to:
1,077,282.00$
‐$
(1,191,800.00)$
10,772,820.00$
PAGE 3 OF 6 CONTRACT CHANGE ORDER – REV. FEBRUARY 2013
PALO ALTO MUNICIPAL GOLF COURSE RECONFIGURATION PROJECT
Value Engineering Cost Savings Proposal by Wadsworth Golf Construction Company
DEDUCTIVE CHANGE ORDER #1 JUNE 7, 2016
Bid Item #Description Value Engineering Idea Cost Adjustment
6 Existing Feature & Restroom Removal Ex. Restroom to remain (5,000.00)$
8 Existing Turf Removal Disc Ex. Turf in lieu of Strip & Bury (20,000.00)$
11 Imported Fill Distribution of Stockpile to be adjusted *(100,000.00)$
15 4" Perforated Pipe Reduce Quantity by 50%
Proposal Qnty Qnty Reduction Unit Cost
17,800 ‐8,900 10.00$ (89,000.00)$
6" Solid Pipe Reduce Quantity by 15%
Proposal Qnty Qnty Reduction Unit Cost
27,640 ‐4,000 10.50$ (42,000.00)$
20 Modified Greens Construction
Reduce Gravel Layer: 4" to 3" (30,000.00)$
Reduce Mix Layer: 12" to 11" (30,000.00)$
Increase Tile Spacing to 25' (20,000.00)$
Reduce Green Area by an average of 10%(40,000.00)$
21 Modified Tee Construction
4" Screened Sand in lieu of Specified Sand (45,000.00)$
Reduce Tee Area by an average of 10%(7,000.00)$
22 Modified Bunker Construction
Reduce Bunker Area by 10% (18,000.00)$
23 Irrigation Eliminate Soil Sensors
Proposal Qnty Qnty Reduction Unit Cost
44 ‐44 1,850.00$ (81,400.00)$
Delete weather station (10,000.00)$
31 Cart and Foot Paths ‐ Concrete Decrease width at Fairways from 7' to 6.5' **
net change (45,760.00)$
Increase Expansion Joint Spacing : 25' to 100' (20,000.00)$
35‐37 Fertilizer & Amendment Package Revise specification for native areas ***(40,000.00)$
40 Grassing ‐ Fairways & Roughs Reduce Quantity by 6 Acres
Proposal Qnty Qnty Reduction Unit Cost
16 ‐6 28,185.00$ (169,110.00)$
41 Grassing ‐ Tees, Fairways & Roughs Increase Quantity by 6 Acres (In place of Sod)
Proposal Qnty Qnty Addition Unit Cost
62 6 6,620.00$ 39,720.00$
47 Youth Area Fence Delete fence; City to construct separately (40,000.00)$
52 New Synthetic Turf Delete synthetic turf (200,000.00)$
Irrigation system modification allowance 15,000.00$
53 Restroom Building Defer new restroom building (225,000.00)$
54 Sewer Discharge System Sewer line only ‐ no connections included **** (750.00)$
55 Electrical System Electric conduit only ‐ no connections ***** (18,500.00)$
Allowance for Plugging Wetlands Allowance ‐ final price to be negotiated ****** 50,000.00$
TOTAL POTENTIAL COST ADUSTMENTS (1,191,800.00)$
WADSWORTH BID PROPOSAL 11,964,620.00$
TOTAL POTENTIAL ADJUSTED COST 10,772,820.00$
* = The proposed cost reduction is based on raising the proposed grades within the existing stockpile area by approximately
two (2) vertical feet in an effort to reduce the amount of material required to be hauled from the stockpile. In conjuction,
the proposed grades on the remainder of the golf course would be adjusted to account for the decreased quantity of
fill material. Globally, the quantity equates to reducing the proposed fill by approximately three inches. Wadsworth Golf
and the Design Team would work together to manage the reduced fill. This Item would subsequently become a
LUMP SUM PRICE of $1,638,800.00.
** = Quantity Reduction of 214,000 sf @$4.84/sf = $1,035,760
Quantity Addition of 200,000 sf @ $4.95/sf = $990,000
Net Deduction of $45,760
*** = The proposed cost reduction is based on a revised fertilizer and amendment package as agreed upon by the
Design Team for the Native Areas only.
**** = The proposed cost reduction is based on installing the force main sewer line ONLY and capping both ends of the sewer
line with no connections at either end.
***** = The proposed cost reduction is based on installing the electrical conduit ONLY and capping both ends of the
conduit for future use.
****** =New requirement to vegetate a portion of the Baylands native areas with additional plant species and to plug some of
the plants with dee pot‐sized specimens. The $50,000 is an allowance; final price will be negotiated with the Contractor.
6/7/2016
DocuSign Envelope ID: 4209E41D-9476-4780-8595-5BA9624F8529
1 Revision April 28, 2014
AMENDMENT NO. TWO TO CONTRACT NO. C13148028
BETWEEN THE CITY OF PALO ALTO AND
GOLF GROUP, LTD.
This Amendment No. Two to Contract No. C13148028 (“Contract”) is entered into
June 7, 2016 by and between the CITY OF PALO ALTO, a California chartered municipal
corporation (“CITY”), and GOLF GROUP, LTD., an Arizona corporation authorized to do business
in the State of California, dba FORREST RICHARDSON & ASSOCIATES, located at 2337 East
Orangewood Avenue, Phoenix, AZ 85020 (“CONSULTANT”).
R E C I T A L S
A. The Contract was entered into between the parties for the provision of golf
course architecture and environmental services for the design of the Palo Alto Municipal Golf
Course Reconfiguration Project.
B. The parties wish to amend the Contract to increase the scope of services to
include additional construction stage services and environmental mitigation monitoring services and
increase compensation.
NOW, THEREFORE, in consideration of the covenants, terms, conditions, and provisions of this Amendment, the parties agree: SECTION 1. Section 1, SCOPE OF SERVICES is hereby amended to read as follows:
“CONSULTANT shall perform the Services described in the attached Exhibit “A-3”
as an addition to the Scope of Services described in Exhibits “A”, “A-1”, and “A-2” of the amended
Contract and 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. Section 4, NOT TO EXCEED COMPENSATION is hereby amended
to read as follows:
“The compensation to be paid to CONSULTANT for performance of the Basic
Services described in Exhibit “A-3” in addition to the compensation for performance of the Basic
Services described in Exhibits “A”, “A-1”, and “A-2” of the amended Contract, including payment
for professional services and reimbursable expenses, shall not exceed eight hundred thirty-one
thousand nine hundred ninety-five dollars ($831,995). In the event Additional Services are
authorized, the total compensation for services and additional services and reimbursable expenses
shall not exceed one million one hundred twenty-seven thousand seven hundred fifty-one dollars
($1,127,751). The applicable labor rates are set out in Exhibit “C-1” of the original Contract.
2 Revision April 28, 2014
Additional Services for this Contract Amendment, if any, shall be authorized in
accordance with and subject to the provisions of Exhibits “C”, “C-2”, and “C-3”. 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
Services described in Exhibits “A”, “A-1”, “A-2”, and “A-3”.
SECTION 3. The following exhibit(s) to the Contract is/are hereby amended to read
as set forth in the attachment(s) to this Amendment, which are incorporated in full by this reference:
a. Exhibit “A-3” entitled “SCOPE OF ADDITIONAL CONSTRUCTION
STAGE AND ENVIRONMENTAL MITIGATION MONITORING
SERVICES”.
b. Exhibit “B-2” entitled “AMENDMENT NO. TWO SCHEDULE OF
PERFORMANCE”.
c. Exhibit “C-3” entitled “AMENDMENT NO. TWO COMPENSATION”.
SECTION 4. Except as herein modified, all other provisions of the Contract,
including any exhibits and subsequent amendments thereto, shall remain in full force and effect.
IN WITNESS WHEREOF, the parties have by their duly authorized representatives
executed this Amendment 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:
DocuSign Envelope ID: 4209E41D-9476-4780-8595-5BA9624F8529
Forrest Richardson
Pres.
3 Revision April 28, 2014
EXHIBIT "A-3": SCOPE OF ADDITIONAL CONSTRUCTION STAGE AND
ENVIRONMENTAL MITIGATION MONITORING SERVICES
EXHIBIT "B-2": AMENDMENT NO. TWO SCHEDULE OF PERFORMANCE
EXHIBIT “C-3”: AMENDMENT NO. TWO COMPENSATION
DocuSign Envelope ID: 4209E41D-9476-4780-8595-5BA9624F8529
EXHIBIT “A-3” SCOPE OF ADDITIONAL CONSTRUCTION STAGE AND
ENVIRONMENTAL MITIGATION MONITORING SERVICES
BASIC SERVICES
The CONSULTANT’s Basic Services consist of the services described below:
Task (6) Construction Support Services (Golf Course Architect)
Task (7) Construction Support Services (Project Representative)
Task 6 - Construction Support Services (Golf Course Architect)
(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.
DocuSign Envelope ID: 4209E41D-9476-4780-8595-5BA9624F8529
(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 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.
Task 7 - Construction Support Services (Project Representative)
(a) 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. The Project Representative mutually agreed upon by all parties shall be the firm DL Siemens Inc, who shall be represented by Dale
Siemens, California Contractors License #872425, Class A, 1039 E. Santa Ana
Ave, Fresno, CA.
(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.
DocuSign Envelope ID: 4209E41D-9476-4780-8595-5BA9624F8529
(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.
(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 averaging 3 days per week of the Project
Representative’s time 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) Provide coordination of the site visits of the CONSULTANT
(4) Coordinate required meetings for scheduling, approvals and administration
including:
(a) Leading weekly or bi-weekly on-site progress construction meetings
including minutes and notes thereof.
(b) Processing and tracking of contractor submittals as required by the project documents
(c) Review, comment and updating of Contractor’s project progress
schedule.
(5) Provide contract administration and coordinate timely payment approvals
consistent with that of the CONSULTANT
(6) Impart instructions and interpretations from the Golf Course Architect to the
Contractor
(7) Meet with the CITY in person or via telephone and/or email to convey
pertinent information regarding the project status, discuss issues, make
advisements, and record CITY decisions and directives in matters of the
construction.
(8) The Project Representative shall not be empowered to, nor shall he make
decisions on behalf of the CITY. The Project Representative shall only be
empowered to convey CITY decisions timely to the Contractor and/or Golf
Course Architect.
DocuSign Envelope ID: 4209E41D-9476-4780-8595-5BA9624F8529
(9) Coordinate, document and accept comments, observations, concerns of CITY
provided staff, consultants or maintenance contractors with regard to the
project progress and conformance with the Construction Documents.
(10) Coordinate the projects grow-in acceptance schedule and “punch-list”
between the Golf Course Contractor and the CITY’s Golf Course
Maintenance Contractor.
ADDITIONAL SERVICES
The following services may be provided by the Consultant if approved in advance by the
City’s Project Manager.
Mitigation Measure BIO-2b: Confine Construction Disturbance and Protect Special-Status Plants during Construction (ICF) (As-needed) This mitigation measure is only required if special-status plants are observed during the pre-construction survey. Golfauna staff will consult with CA Department of Fish & Wildlife, identify exclusion areas, and oversee installation of protective fencing. Deliverable: One day to oversee the installation of fencing. Assumptions: 2-3 of hours to consult with agencies is assumed. It is assumed that the City’s Contractor will install the fence per Golfauna biologist’s direction. Schedule/Timing: 2-3 days prior to construction Mitigation Measure BIO-2c: Compensate for Loss of Special-Status Plants (ICF) (As-
needed) This mitigation measure is only required if special-status plants are observed during the pre-construction survey. Golfauna will prepare a compensation plan for loss of special-status plant species. Deliverable: Compensation Plan for loss of special-status plant species. Assumptions: There may be costs from other contractors, primarily associated with preserving a population of the species of interest, or with a nursery collecting seed and creating a new population. These tasks are not included in the scope of work. Schedule/Timing: 2-3 days prior to construction
DocuSign Envelope ID: 4209E41D-9476-4780-8595-5BA9624F8529
Mitigation Measure BIO-2d: Develop and Implement Special-Status Plant Species Monitoring Plan (ICF) (As-needed)* This mitigation measure is only required if special-status plants are observed during the pre-construction survey. Golfauna staff will prepare a monitoring plan. Typically CA Department of Fish & Wildlife requires monitoring for a period of five years. Services are to conduct monitoring for two days a year for five years. Deliverable: Monitoring plan and annual monitoring reports. Assumptions: Five year monitoring period. Schedule/Timing: During blooming period for species observed twice a year. * Services required after September 2017 may be assigned to the City under
separate agreement. Mitigation Measure BIO-2e: Deposit Landscape Waste Exclusively in Developed or Ruderal Areas Absent of Special-Status Plant Species (ICF) (As-needed) If special-status plants are found during pre-construction survey, ICF will prepare a handout and give training to the City’s Golf Course operations and maintenance staff regarding where to deposit landscape waste in order to avoid impacting special-status plants. Deliverable: O&M worker awareness training. Special-status plant species handout and trainee sign-in sheet. Assumptions: One day training for City’s Golf Course operations and maintenance staff. Schedule/Timing: After construction, but before golf course becomes operational (e.g., start of O&M activities).
Mitigation Measure (CUL-2): Stop Work if Cultural Resources, Including Human
Remains, are Encountered during Ground-Disturbing Activities (ICF) (As-needed)
In the unlikely event of finding any human remains, ICF cultural resources
specialist will visit the site and advise the crew regarding recovery of artifacts.
Deliverable: Site visit and guidance. Memo of findings and recommendations for further action.
DocuSign Envelope ID: 4209E41D-9476-4780-8595-5BA9624F8529
Assumptions: Does not assume preparation of a treatment plan or coordination
with Native American tribes. Assumes 16 hours of monitoring.
Schedule/Timing: As needed during construction.
Mitigation Measure CUL-5: Stop Work if Paleontological Resources are Encountered
during Ground-Disturbing Activities (ICF) (As-needed)
In the unlikely event of finding any paleontological resources, ICF cultural
resources specialist will visit the site and advise the crew regarding recovery of
artifacts.
Deliverable: Site visit and guidance. Memo of findings and recommendations for
further action.
Assumptions: Does not assume preparation of a treatment plan. Assumes 16
hours of monitoring.
Schedule/Timing: As needed during construction.
DocuSign Envelope ID: 4209E41D-9476-4780-8595-5BA9624F8529
EXHIBIT “B-2” AMENDMENT NO. TWO 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 No. of Weeks
From NTP
Task 6 - Construction Support Services (Golf Course Architect) 78
Task 7 - Construction Support Services (Project Representative) 78
DocuSign Envelope ID: 4209E41D-9476-4780-8595-5BA9624F8529
EXHIBIT “C-3” AMENDMENT NO. TWO 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 compensation to be paid to CONSULTANT under this Agreement for all services
described in Exhibit “A-3” (“Basic Services”) and reimbursable expenses shall not exceed
$52,395. CONSULTANT agrees to complete all Basic Services, including reimbursable
expenses, within this amount. In the event CITY authorizes any Additional Services, the maximum compensation shall not exceed $125,720. 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, does not exceed
$52,395 and the total compensation for Additional Services does not exceed $73,325.
BUDGET SCHEDULE NOT TO EXCEED
FEES REIMBURSABLES
Task 6 $ 1,968 $ 7,800
(Construction Support Services -
Golf Course Architect)
Task 7 $ 42,627
(Construction Support Services –
Project Representative)
Sub-total Basic Services $ 44,595
Reimbursable Expenses $ 7,800
Total Basic Services and Reimbursable expenses $ 52,395
Additional Services (Not to Exceed) $ 73,325
Maximum Total Additional Compensation $ 125,720
REIMBURSABLE EXPENSES
The administrative, overhead, secretarial time or secretarial overtime, word processing,
photocopying, in-house printing, insurance and other ordinary business expenses are
DocuSign Envelope ID: 4209E41D-9476-4780-8595-5BA9624F8529
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.
All requests for payment of Reimbursable Expenses shall be accompanied by appropriate
backup information. Any expense anticipated to be more than $7,800 shall be approved in advance by the CITY’s project manager.
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-2” of this Agreement.
Estimated Additional Services Expense Breakdown
Mitigation Measure BIO-2b (ICF) $ 2,697
Mitigation Measure BIO-2c (ICF) $ 6,529
Mitigation Measure BIO-2d (ICF) $ 16,738
Mitigation Measure BIO-2e (ICF) $ 2,160
Mitigation Measure CUL-2 (ICF) $ 2,376
Mitigation Measure CUL-5 (ICF) $ 2,376
Contingency for Golf Course Architect Construction Services $ 13,485
DocuSign Envelope ID: 4209E41D-9476-4780-8595-5BA9624F8529
Contingency for Project Representative Construction Services $ 18,354
Contingency for Mitigation Measures $ 8,610
ADDITIONAL SERVICES TOTAL $ 73,325
DocuSign Envelope ID: 4209E41D-9476-4780-8595-5BA9624F8529
NOT YET APPROVED
160609 jb 0131526 1
Resolution No. _______
Resolution of the Council of the City of Palo Alto Declaring Its Intention to
Reimburse Expenditures from the Proceeds of Tax-Exempt Obligations
to be Issued by the City
R E C I T A L S
A. The City proposes to undertake the project referenced below, to issue, execute
and deliver a tax-exempt financing lease, either on a private placement basis or using
certificates of participation (the “Lease”) to finance such project, and use a portion of the
proceeds of the Lease to reimburse expenditures made for the project prior to the issuance of
the Lease.
B. United States Income Tax Regulations section 1.150-2 provides generally that
proceeds of tax-exempt debt are not deemed to be expended when such proceeds are used for
reimbursement of expenditures made prior to the date of issuance of such debt unless certain
procedures are followed, one of which is a requirement that prior to the payment of any such
expenditure, the issuer declares an intention to reimburse such expenditure.
C. It is in the public interest and for the public benefit that the City declares its official
intent to reimburse the expenditures referenced herein.
NOW, THEREFORE, the Council of the City of Palo Alto RESOLVES as follows:
SECTION 1. The City intends to cause the Lease to be executed and delivered for the
purpose of paying the costs of renovating and reconfiguring the Palo Alto Municipal Golf Course
(the "Project").
SECTION 2. The City hereby declares that it reasonably expects (i) to pay certain costs
of the Project prior to the date of execution and delivery of the Lease, and (ii) to use a portion
of the proceeds of the Lease for reimbursement of expenditures for the Project that are paid
before the date of execution and delivery of the Lease.
SECTION 3. The maximum principal amount of the Lease is expected to be Ten Million
Five Hundred Thousand dollars ($10,500,000).
/ /
/ /
/ /
/ /
NOT YET APPROVED
160609 jb 0131526 2
SECTION 4. The Council finds that the adoption of this resolution does not constitute a
project under the California Environmental Quality Act and CEQA Guidelines, and therefore, no
environmental assessment is required.
INTRODUCED AND PASSED:
AYES:
NOES:
ABSENT:
ABSTENTIONS:
ATTEST:
__________________________ ________________________________
City Clerk Mayor
APPROVED AS TO FORM: APPROVED:
__________________________ ______________________________
Senior Asst. City Attorney City Manager
______________________________
Director of Administrative Services
______________________________
Director of Community Services
PALO ALTO MUNICIPAL GOLF COURSE RECONFIGURATION PROJECT - CIP PG-13003
Bid Results - May 24, 2016
12 3
Item Quantity Units Unit Cost Total Wadsworth Duininck Frontier
1 Mobilization/Bond (NTE 1.5% of Total Bid) 1 LS 120000 120,000 179,465 190,000 190,000
2 Staking/Layout 1 LS 60000 60,000 55,500 150,000 100,000
3 Existing Tree & Wetland Protections 1 LS 50000 50,000 88,790 87,000 115,600
4 Construction Mitigation Measures under Special Provisio 1 LS 60000 60,000 20,000 175,000 70,000
Schedule 1 Total 290,000 343,755 602,000 475,600
5 Demo Cart Paths/Bury 1 LS 60000 60,000 48,400 45,000 55,000
6 Demo Existing Features, Bunkers, Greens & Restroom 1 LS 25000 25,000 30,500 38,000 70,000
7 Tree Removal/Bury 650 Ea 100 65,000 110,220 35,000 36,500
Schedule 2 Total 150,000 189,120 118,000 161,500
8 Strip Existing Sod 1 LS 40000 40,000 96,050 92,000 95,000
9 Baylands Areas/Pond Earthwork (cuts) 70000 CY 2.6 182,000 103,500 150,000 264,000
10 Topsoil Management (Harvest /Place Soils) 38000 CY 4.5 171,000 288,890 340,000 152,000
11 Place Import Fill from Stockpile 326000 CY 3.5 1,141,000 1,738,800 1,650,000 1,764,180
12 SWPPP/Erosion Control Scope 1 LS 200000 200,000 316,800 260,000 230,000
13 Golf Feature Shaping 1 LS 200000 200,000 275,250 365,000 360,000
14 Grade/Shape Buffer Mounding 1 LS 17000 17,000 9,750 40,000 22,000
Schedule 3 Total 1,951,000 2,829,040 2,897,000 2,887,180
15 New Subsurface Drainage Piping 4" Perf 17828 LF 8 142,626 178,000 178,000 186,900
16 New Subsurface Drainage Piping 6" Non-Perf 27012 LF 10 270,120 313,345 275,000 402,000
17 New Catchments 235 EA 200 47,000 88,115 90,000 112,875
18 Modify Existing Backbone Drain Inlets 21 Ea 1100 23,100 28,150 10,000 58,00019 12" Drainage Culvert Pipes & FES 1 LS 10000 10,000 12,235 7,500 8,500
Drainage Subtotal 619,845 560,500 768,275
20 Greens Construction Sand Only Method 147300 SF 3.75 552,375 802,560 800,000 1,249,000
21 Tee Construction 118000 SF 1.4 165,200 163,330 225,000 313,000
22 Bunker Construction New 43840 SF 4.5 197,280 321,535 285,000 347,000
Schedule 4 Totals 1,407,701 1,907,270 1,870,500 2,677,275
23 Irrigation - Golf, Youth, Practice Areas 1 LS 1895000 1,895,000 2,231,480 2,450,000 2,418,658
24 Irrigation - Native areas 1 LS 110000 110,000 115,910 170,000 132,730
25 Irrigation - Buffer Mounding 1 LS 30000 30,000 15,460 50,000 30,630
26 Irrigation – Embarcadero Road Area 1 LS 25000 25,000 44,270 35,000 16,336
27 Irrigation - Athletic Field Supply Pipeline 1 LS 23000 23,000 21,880 20,000 26,54628 Irrigation Staking, Programming and Asbuilt Fees 1 LS 45000 45,000 42,270 45,000 42,372
REVISED 2016 PROBABLE COST ESTIMATE
PALO ALTO MUNICIPAL GOLF COURSE RECONFIGURATION PROJECT - CIP PG-13003
Bid Results - May 24, 2016
12 3
Item Quantity Units Unit Cost Total Wadsworth Duininck Frontier
REVISED 2016 PROBABLE COST ESTIMATE
Irrigation Subtotal 2,471,270 2,770,000 2,667,272
29 Replacement of Irrigation Pump Station 1 LS 250000 250,000 161,065 200,000 158,255
30 Add Potable Water Pump Station 1 LS 200000 200,000 91,130 100,000 89,848
Schedule 5 Totals 2,578,000 2,723,465 3,070,000 2,915,375
31 Cart Paths and Foot Paths 208000 SF 3.2 665,600 1,035,760 856,000 920,200
32 Path Roll Curb 3000 LF 2 6,000 13,500 12,000 14,100
33 Cart Path 4" Curbing 3000 LF 8 24,000 15,750 15,000 14,100
34 Maintenance Routes (Gravel) 2000 LF 8.5 17,000 25,560 21,300 20,590
Schedule 6 Totals 712,600 1,090,570 904,300 968,990
35 Finish Shaping 1 LS 140000 140,000 140,880 250,000 125,000
36 Fine Grade Prep & Soil Amend Fairways & Roughs 79 AC 2700 213,300 388,120 550,000 630,000
37 Fine Grade/Soil Prep Native areas 55 AC 850 46,750 163,260 200,000 117,000
38 Native Area "A" Hydro Seeding 42 AC 4200 176,400 138,140 120,000 204,250
39 Baylands Area "B" Hydro Seeding 13 AC 4000 52,000 60,870 600,000 59,110
40 Paspaulum Sod - Platinum 16.0 AC 26000 416,000 470,080 672,000 498,320
41 Sprigged Paspaulum Areas - Platinum 61.5 AC 5200 319,800 410,440 291,400 275,590
42 Bentgrass Seeded Greens with Amendments 148000 SF 0.2 29,600 17,980 36,000 90,000
43 Greens Ryegrass Sod Collars 50000 SF 0.4 20,000 30,415 36,000 26,970
44 Fescue Sod 1 LS 6500 6,500 10,630 8,000 5,600
45 New Trees 300 Ea 285 85,500 101,300 90,000 90,300
46 Landscape Along Embarcadero 1 LS 35000 35,000 72,770 70,000 50,000
47 Youth Golf Area Fence, Bollards 1 LS 42000 42,000 45,590 60,000 56,000
48 Turf Establishment 1 LS 150000 150,000 217,480 325,000 235,000
Schedule 7 totals 1,732,850 2,267,955 3,308,400 2,463,140
49 Driving Range Poles and Netting 1 LS 60000 60,000 45,800 50,000 77,000
50 Barrier Fencing 1 LS 4000 4,000 28,250 55,000 18,000
51 Concrete Range Tee 1 LS 11000 11,000 15,610 19,000 13,900
52 New Synthetic Turf 35000 SF 3.5 122,500 220,320 175,000 367,000
Schedule 8 Totals 197,500 309,980 299,000 475,900
53 Restroom 1 LS 125000 125,000 247,775 200,000 236,000
54 RR Sewer 1 LS 35000 35,000 18,990 40,000 60,000
55 RR Electrical Supply 1 LS 20000 20,000 36,700 35,000 54,000
Schedule 9 Totals 180,000 303,465 275,000 350,000
PALO ALTO MUNICIPAL GOLF COURSE RECONFIGURATION PROJECT - CIP PG-13003
Bid Results - May 24, 2016
12 3
Item Quantity Units Unit Cost Total Wadsworth Duininck Frontier
REVISED 2016 PROBABLE COST ESTIMATE
ADD INFLATION 2% 2.0% 9000000 180,000
ADD FOR PREVAILING WAGE 6% 6.5% 9000000 585,000
Subtotal Construction Hard Costs 9,964,651 11,964,620 13,344,200 13,374,960
Alternate Additional or Deductive Items
A Add Youth Golf Area Greens – 3 Greens Total 1 LS 35000 35,000 59,910 32,000 60,000
B Add Youth Golf Area Green West – 1 Green Total 1 LS 20000 20,000 29,230 19,000 40,000
C Add Class 2 Base Section to Cart Paths 1 LS 150000 150,000 207,580 214,000 214,000
D Add Wire Mesh Reinforcement to Cart Paths 1 LS 50,000 50,000 81,320 85,600 85,600
E Add Bridge & Bulkheads 1 LS 80000 80,000 79,980 130,000 70,200
F Add Upgrade to Pro-Matrix mulch in Hydroseed “A” 1 LS 30000 30,000 64,150 75,000 73,710
G Add Upgrade to Pro-matrix mulch Hydroseed “B” 1 LS 10000 10,000 16,690 20,000 21,333
H
Add Alt Upgrade to Add Peat Moss in Greensmix,
Include Alts A&B 159300 SF 0.5 79,650 136,805 110,000 105,000
I
Add Alt Upgrade to use Profile in Greensmix over Peat
option above Include Alts A&B 159300 LS 1 159,300 187,790 160,000 155,000
J
Alternate Additive Unit Cost to provide Platinum
Paspaulum turf in sodded form in lieu of using
hydrosprig method for Bid Item #41 61.5 AC 19136 1,176,864 1,430,960 496,000 1,647,464
K
Alternate Deduct item - Adjust Turf Establishment costs
for use of all sod if Alternate J above is accepted.
1.0 LS -50000 (50,000) -10,000 -100,000 115,000
L
Alternate add or deduct (strike one) to provide
Hydroseeded Dynasty Paspaulum in seed form in lieu of
Platinum Paspaulum in sprig form for Bid Item #41 61.5 AC -900 (55,350) -70,680 496,000
M
Alternate add or deduct (strike one) to provide Dynasty
Paspaulum turf in sodded form for Bid Item #40
(Sodded Platinum Paspaulum)16.0 AC 0 - 464,640 676,800
N
Alternate add or deduct (strike one) to provide Dynasty
Paspaulum sod in lieu of Platinum Paspaulum sod for
Bid Item #41 61.5 AC 0 - 3,231,440 2,622,600
PALO ALTO MUNICIPAL GOLF COURSE RECONFIGURATION PROJECT - CIP PG-13003
Bid Results - May 24, 2016
12 3
Item Quantity Units Unit Cost Total Wadsworth Duininck Frontier
REVISED 2016 PROBABLE COST ESTIMATE
O
Alternate Deduct item - Adjust Turf Establishment costs
for use of all Dynasty Paspaulum sod if Alternate N
above is accepted.1.0 LS -50000 (50,000) -10,000 -100,000 -115,000
P Deductive Alt - Prefabricated Restroom 1 LS -20000 (20,000) -64,940 -35,000 -92,000
Updated Analysis and Pro Forma
Projections for Reconfiguration Option G
Palo Alto Municipal
Golf Course
Prepared For:
City of Palo Alto
Lam Do, Superintendent Open Space, Parks, and Golf
Community Services Department
3201 East Bayshore Road
Palo Alto, CA 94303
Prepared By:
1150 South U.S. Highway One, Suite 401
Jupiter, FL 33477
(561) 744-6006
May, 2016
Updated Analysis and Pro Forma Projections for
Reconfiguration Option G
Palo Alto Municipal Golf Course
Table of Contents
INTRODUCTION & PURPOSE .................................................................................................. 1
PALO ALTO MUNICIPAL GOLF COURSE RECONFIGURATION OPTION ‘G’ ....................... 2
Option G ............................................................................................................................. 3
Palo Alto GC Performance FY 2012 – FY 2016 .................................................................. 4
EXTERNAL FACTORS ............................................................................................................. 5
Market Overview ................................................................................................................. 5
Demographics ............................................................................................................................... 5
Golf Industry Overview 2015 ......................................................................................................... 6
Bay Area Market ............................................................................................................................ 7
Local and Regional Golf Supply and Demand Indicators.............................................................. 8
Competitive Golf Market ................................................................................................................ 9
Summary of Findings – Key Changes Since 2012 Report .......................................................... 12
CONCLUSIONS & UPDATED FINANCIAL PROJECTIONS ....................................................14
Basis for Rounds And Revenue Projections – 2016 ...........................................................14
Financial Projections – ‘Baylands Golf Links’ (2017-2026) .................................................16
Key Assumptions ......................................................................................................................... 16
Pro Forma Estimate for ‘Option G’ Scenario – FY2017 – FY2026 ............................................. 20
NGF Projection Sensitivity Analysis ...................................................................................23
Sensitivity Analysis - Summary for 2020 ..................................................................................... 23
Financial Projections Summary ..........................................................................................24
SUMMARY STATEMENT .........................................................................................................25
APPENDICES...........................................................................................................................26
Appendix A – Golf & The Millennial Generation ..................................................................27
Appendix B – Sensitivity Analysis Pro Formas ...................................................................28
Sensitivity Analysis - Summary for FY 2020 ............................................................................... 28
Reduced Rounds Sensitivity Spreadsheet .................................................................................. 29
Reduced Fee Sensitivity Spreadsheet ........................................................................................ 31
Reduced Rounds and Fee Sensitivity Spreadsheet .................................................................... 33
Appendix C – PAGC Management Structure ......................................................................35
Appendix D – Consideration Of Other Improvements .........................................................36
Expanded Meeting Space ........................................................................................................... 36
Range Performance Center ........................................................................................................ 36
National Golf Foundation Consulting, Inc. – City of Palo Alto Final Report – 1
Introduction & Purpose
National Golf Foundation Consulting, Inc. was retained by the City of Palo Alto in furtherance of
the City’s due diligence relative to the planned renovation of the Palo Alto Golf Course, which
would be rebranded as Baylands Golf Links. The original impetus for the renovation was the
San Francisquito Creek Flood Control Project, which would involve the reconfiguration of at
least six holes at the golf course. NGF was originally retained in early 2012 to help the City
identify the expected financial impact from the improvements related to the reconfiguration work
under Plan Options A, D, F, and G, submitted by golf course architect Forrest Richardson,
ASGCA.
The primary goal of this spring 2016 due diligence, which was prompted by the lengthy delay in
construction, is to reassess the validity of the key assumptions – especially those related to golf
market conditions - that drove the financial projections for ‘Reconfiguration Option G’ as the
recommended plan. As of early May 2016, construction permits have not been granted and the
latest tentative dates have golf course renovations beginning in July 2016 and continuing
through June 2017. Turf grow-in would follow in July 2017 through October 2017, with the
facility re-opening in November 2017. City staff hopes to seek construction bids and Council
approval based on these dates. The total estimated amount to be bonded by the City for this
project is $8.29 million, including associated fees.
Key components of this study include:
Reviewing current construction plans and timing.
Collecting and reviewing the relevant facility data and performance history since our
last study, including activity levels, revenues, and expenses.
Updating external factors, such as demographic trends, that have the potential to
affect performance at Baylands Golf Links.
Identifying substantive changes to the competitive market since our initial report,
including any golf course closings, openings, or major renovations.
Reassessing the proposed Baylands Golf Links fee structure, recommended market
positioning, and other key assumptions for ‘Option G’ in the context of the current
and expected competitive golf market (assuming October/November 2017 re-
opening date).
Revising Option G 10-year pro forma as market conditions and other assumptions
warrant, including sensitivity analysis of key variables.
The study effort was managed by NGF Director of Consulting Services Ed Getherall and Senior
Director of Consulting Services, Richard B. Singer. Activities conducted in completion of this
report included: desktop market analysis and research, including interviews with area golf
operators; analysis of recent financial performance; phone meetings with key City staff from the
Recreation & Golf Services, Administration, Community Services, and Finance Departments;
and a phone interview with the Head Golf Professional.
Following is the consultants’ report summarizing key findings. Throughout this report, we may
refer to shortened names for: the City of Palo Alto (“City”), the Palo Alto Municipal Golf Course
(“Palo Alto Golf Course”, “Palo Alto GC”, “PAGC”, or “Baylands Golf Links”), and National Golf
Foundation Consulting, Inc. (“NGF Consulting” or “NGF”).
National Golf Foundation Consulting, Inc. – City of Palo Alto Final Report – 2
Palo Alto Municipal Golf Course
Reconfiguration Option ‘G’
In early 2012, NGF Consulting was provided four course reconfiguration options prepared by
Forrest Richardson, ASGCA. These options were identified by the titles “Option A,” Option D,”
“Option F” and “Option G,” and each had unique characteristics. The options represented four
possible scenarios for adjusting the course to accommodate the SFCJPA flood mitigation
project. The process for developing options was thorough, with extensive input from golfers,
staff, concessionaires and the public at large. NGF Consulting reviewed notes and summaries
from those meetings to better understand the goals and objectives desired by those who will
use and operate the facility following reconfiguration.
Among the goals and objectives set forth to guide the design process for reconfiguration
options, in addition to the fundamental goal to accommodate the flood project, were:
Establish a more natural, aesthetic landscape that incorporates a “Baylands” theme
Improve tree care and variety via a theme to use appropriate tree selection
Find ways to eliminate geese and burrowing animals from ruining the course
Improve bunkers (condition, strategy and aesthetics)
Improve overall course conditioning (drainage, irrigation, turf, etc.)
Adjust yardage so the course is shorter for beginners, women and seniors
Create a “wow factor” to remain competitive with other regional facilities
Add interest to the course strategy (dog-legs, differentiation of holes, etc.)
Find ways to offer player development opportunities (short game area, range, etc.)
Additionally, there was a strong desire to address long range issues that face the aging facility
beyond those on the golf course itself. The City commissioned its own scope of work to address
these issues concurrently with the course reconfiguration planning. These long range areas
included the following:
Clubhouse planning
Entry, parking and signage
Practice areas
Cart storage and staging
On-course restrooms
Branding and image
Trail connections from the Baylands and existing trails
The objective of the additional long-range planning was to look beyond the golf course to ensure
that reconfiguration options would not preclude improvements to the areas on the above list.
Specific goals and objectives included the following:
Find ways to bring non-golfers to the facilities (group events, restaurant, etc.)
Expand the clubhouse to seat 200 so larger groups can be accommodated
Develop areas to hold multiple outings/events simultaneously
National Golf Foundation Consulting, Inc. – City of Palo Alto Final Report – 3
Improve the arrival experience, entry aesthetics, trail connections and security
Develop a cart storage area/facility
Make overall improvements to the clubhouse and grounds (exterior and interior)
Improve and expand the practice range
Create new player development and practice opportunities
Plan for upgrading the on-course restroom facility
Develop a new brand and image consistent with the reconfiguration goals and design
A common thread among the long range planning components was a strong desire to return the
facilities, with golf course approaching its 60th year and the clubhouse its 30th, to a “Point of
Pride” status within the community. Along with this primary objective come the benefits of
leveraging the facility for economic development, tourism and as a home to annual and special
events. Secondarily, the community had a strong desire to see the golf course be more
compatible with the Baylands environment. This goal was echoed by Mr. Richardson in his
reconfiguration options, each of which adds more naturalized areas to the golf course. In
addition, long range design concepts associated with the clubhouse, entry and image go hand-
in-hand with this goal.
OPTION G
Option G represents a plan to remove more land from golf course use, setting aside this land for
potential future use as multiple athletic fields and non-golf recreation purpose. This land is
shown conceptually as athletic field use. This option was added to the reconfiguration scope of
the golf course architect based on the direction of the City to investigate whether the viability of
the golf course could be preserved while opening more area (than with Option F) for non-golf
recreation. The constraint placed on the planning work was to retain a regulation layout with a
par of 70 or 71. Safety from the new trail system and within adjoining holes was to be
maintained with no compromise to standard guidelines.
Option G also facilitates the San Francisquito Creek realignment as required by the SFCJPA.
The option involves the removal of approximately 10.5 acres from the golf course parcel. This
land area is shown as athletic field use (three full sized NCAA soccer fields or combination of
fields and field types of the same proportion and area), and additionally shows areas for a small
playground, wetlands park and picnic space, and trails connecting to the San Francisquito
Creek levee trails, Baylands and neighborhood. The reconfiguration departs from the common
parallel routing of the existing course. Golf holes are moved away from the levee to form new
views and variation. Bunker work and naturalization enhancements are made throughout the
course in order to provide a more consistent golf experience and landscape. Virtually all areas
of the existing course would be reconstructed, enhanced and improved.
The NGF projection model for “Option G” represented a significant change from other options
presented, as it involved a complete renovation of the golf course (to be re-branded as
“Baylands Golf Links). The project would involve a full closure of the golf course (now slated for
12 months construction and an additional 4 months grow-in) and re-opening as a brand new golf
course with high quality features that will stand out in this public golf market. The full golf course
irrigation system would be replaced and three new soccer fields would be added to the site.
Subsequent to the initial draft report, the City Finance Committee recommended that this option
include rebuilding of all 18 greens, re-grassing of all fairways, construction of an on-course
restroom, and rebuilding the practice green area. These changes should further enhance the
product’s marketability and the golfer experience.
National Golf Foundation Consulting, Inc. – City of Palo Alto Final Report – 4
PALO ALTO GC PERFORMANCE FY 2012 – FY 2016
The most recent five-year performance history of Palo Alto GC is shown in the table below.
Palo Alto Municipal Golf Course
Historical Revenue and Expense Performance (2012-2016*)
REVENUES FY2012 FY2013 FY2014 FY2015 FY2016*
Tournament Fees $1,878 $1,670 $4,037 $37,517 $152
Green Fees (+Cards) 1,940,725 1,781,405 1,103,410 922,800 625,894
Driving Range 355,594 343,883 313,633 296,933 190,528
Cart Fee 301,225 279,795 225,310 216,541 152,117
Pro Shop Lease 29,966 27,248 25,051 24,818 18,473
Restaurant Lease 43,827 48,880 53,487 39,191 33,318
Restaurant Utilities 21,600 21,600 16,260 16,980 13,500
Other Fee 25,325 24,319 20,075 22,239 11,768
TOTAL REVENUE $2,720,140 $2,528,800 $1,761,263 $1,577,019 $1,045,750
Operating Expenses
Salaries & Benefits $129,586 $134,948 $122,634 $85,683 $50,531
Advertising & Publishing 13,781 11,307 7,916 5,599 4,216
Supplies and Materials 12,238 3,292 6,986 1,106 (595)
General Expense 754 1,014 1,038 74 49
Facilities Repairs & Maint. 4,538 7,259 9,706
Water Expense 241,630 381,966 319,204 253,314 216,049
Other Direct Charges 44,061 48,448 46,126 44,173 30,255
Indirect Charges 28,961 93,702 35,858 31,017 14,210
Subtotal $475,549 $681,936 $539,762 $430,673 $314,715
Contract Services
Golf Maintenance $772,539 $808,801 $780,755 $831,130 $623,682
Miscellaneous 546 940
Range Fees 135,310 130,676 119,181 112,835 72,401
Cart Rentals 114,621 112,083 86,034 81,767 57,107
Club Rentals 6,061 5,951 4,666 4,880 3,133
Fixed Management Fees 343,544 339,045 338,292 319,057 288,762
GF to Golf Professional (5%) 0 0 0 0 0
Credit Card Fees 41,474 38,000 30,000
Subtotal $1,413,549 $1,434,555 $1,359,474 $1,350,608 $1,045,084
Total Operating Expenses $1,889,099 $2,116,491 $1,899,236 $1,781,281 $1,359,800
Net Income Operations $831,041 $412,309 ($137,973) ($204,262) ($314,050)
Debt and Other Charges
1998 Debt Service $559,539 $428,180 $429,020 $428,194 $429,020
Cost Plan Charges 24,837 23,871 27,349 20,459 25,000
Capital Reserve 0 0 0 0 0
Subtotal - Debt + Other $584,376 $452,051 $456,369 $448,653 $454,020
Net Income (Loss) $246,665 ($39,742) ($594,342) ($652,915) ($768,070)
Golf Rounds 62,971 58,026 46,527 42,048 30,289
Source: City of Palo Alto *FY2016 Actual Through March.
Rounds played at Palo Alto GC decreased steadily from FY2012 to FY2016, a result
of changes to the golf course (e.g., temporary greens, reduced par) caused by
storage of imported soil. During the same time, golf revenues declined by over $1.2
million and net income from operations declined by almost $1.03 million.
The recent decline has led the Palo Alto GC to fall below break-even on operations,
meaning that when debt service and cost plan charges are included, the course is
losing well in excess of $650,000 in FY2015, the last full year.
National Golf Foundation Consulting, Inc. – City of Palo Alto Final Report – 5
External Factors
Below, NGF Consulting provides a summary update of key “external” factors that characterize
the trade area in which the Palo Alto Golf Course operates. We include basic demographic
variables that have the potential to affect the economic performance of the golf facility, as well
as an analysis of supply and demand indicators in the public golf market.
MARKET OVERVIEW
Below we provide an overview of recent and emerging trends with respect to golf participation
and municipal golf, as well as a summary of golf demand and supply indicators in the Bay Area
region and local Palo Alto market. NGF Consulting utilizes predictive models as benchmarks for
estimating potential market strength.
Demographics
In the table below, NGF provides the population, median age, and median household income
trends for San Mateo and Santa Clara counties, the U.S., and the 3-, 10-, and 15- mile market
rings surrounding the PAGC. Source: Applied Geographic Solutions, Inc.
Palo Alto Golf Course 3 miles 10 miles 15 miles
San
Mateo
County
Santa
Clara
County
U.S.
Summary Demographics
Population 1990 Census 94,005 696,969 1,480,582 649,627 1,496,700 248,584,652
Population 2000 Census 99,863 769,033 1,663,189 707,165 1,682,590 281,399,034
CAGR 1990-2000 0.61% 0.99% 1.17% 0.85% 1.18% 1.25%
Population 2010 Census 103,357 807,540 1,750,575 718,451 1,781,642 308,745,538
CAGR 2000-2010 0.34% 0.49% 0.51% 0.16% 0.57% 0.93%
Population Estimate 2015 112,010 855,326 1,862,466 756,286 1,903,592 319,998,423
Population 2020 Projected 121,210 923,070 2,009,226 808,754 2,076,498 332,811,226
CAGR 2015-2020 0.99% 0.96% 0.95% 0.84% 1.09% 0.49%
CAGR 2010-2020 2.01% 1.69% 1.74% 1.49% 1.93% 0.94%
Median HH Income (2014 Estimate) $93,513 $99,371 $93,371 $89,279 $91,521 $52,747
Median Age (2014 Estimate) 36.6 37.5 37.7 40.1 37.3 37.8
CAGR = Compound Annual Growth Rate
NGF Consulting has made the following observations regarding the demographics of Palo Alto
and surrounding areas:
The 10-mile and 15-mile markets around Palo Alto GC are dense, with 2015
estimates of about 855,000 and 1.862 million residents, respectively. The 10-mile
market has added nearly 48,000 net new residents since 2010, while the 15-mile
market grew by nearly 112,000 people. Population growth is projected to be even
more robust through 2020, at more than twice the national rate of growth. The 10-
mile market is expected to add about 68,000 net new residents during that time.
The Median Ages in the subject market areas are generally similar to the national
median of 37.8 years, though San Mateo County is significantly higher at 40.1 years.
In general, the propensity to play golf with greater frequency increases with age,
making older markets more attractive to golf facility operators, all factors being equal.
National Golf Foundation Consulting, Inc. – City of Palo Alto Final Report – 6
Median Household Incomes in the area are much higher than the national median.
For instance, the 10-mile market median income is 77% higher than the national
median income of $52,747. In general, higher income residents are more likely to
participate in golf, and they play more frequently than lower income residents.
Locally, these high figures are mitigated by the high cost of living in the Bay Area.
Golf Industry Overview 2015
While socio-demographic, financial and cultural headwinds certainly persist for golf, the industry
continued its macro trend toward stabilization in 2014-2015. Golf’s pay-for-play green fee
revenues and other spending on the sport will always be vulnerable to outside forces such as
weather and the economy, but the game remains popular and is fortunate to have a deep well of
interested prospects. Still, some socioeconomic and demographic trends continue to present
challenges for golf operators. For instance, golf is having trouble attracting and retaining young
adults (i.e., Millennials – see Appendix A); though this segment continues to account for a large
percentage of annual play and spending, factors such as debt and competing recreational
activities have suppressed golf demand from this segment. The smartest, best-managed and
most innovative golf facilities will win market share and have the best opportunity for growth.
Key Trends
Participation - The national golfer number (participation) appears to be continuing a
stabilization trend, though there has been continued net attrition, primarily among
occasional/less committed golfers. Overall, NGF survey research indicates that in
2015 there were 24.1 million people in the U.S. that played at least one round of golf
in the prior year, about ±1 million fewer than in 2012. However, the vast majority of
“core” golfers remain in the game.
Rounds Played / Looking Ahead – Despite poor weather that suppressed first-
quarter play in 2015, rounds played nationally finished the year 1.8% ahead of 2014,
according to Golf Datatech. The overall Pacific region was up 2.7%, while the San
Francisco/Oakland submarket was up 1%. The next couple of years should provide a
stronger indication of whether playable day- adjusted rounds have stabilized.
Golf Course Supply - The correction in golf course supply continued in 2015 at a
level comparable with the previous three years. According to NGF data, since the
market correction in golf course supply began in 2006, there has been a cumulative
net reduction of 679.5 golf courses (18HEQ), which represents a drop of about 5%
off the peak supply year of 2005. For perspective, golf supply grew by 40% in the
previous 20 years (1985-2005). We note that not all golf courses are closing due to
competitive dynamics; rather, some golf courses – especially in geographies where
developable land is at a premium – are closing because residential or commercial is
a much “higher and better use”. Whatever the reasons, this much-needed move
toward supply/demand equilibrium is expected to continue for the next several years.
Baby Boomer Effect – As Baby Boomers age and retire over the next 15 years, we
expect to see a measurable increase in total rounds played in the U.S. Boomers -
born between 1946 and 1964 - are currently 51 to 69 years old. About 6 million of
them are golfers; that’s about 1/4 of all golfers, and they currently play about 1/3 of
all rounds. Boomers started turning 65 in 2011, and already about 1 million golfing
Boomers have reached retirement age (though not all have retired). Both the Social
Security Administration and Pew Research Center report that 10,000 or more
Boomers retire every day. And 300,000 Boomer golfers will turn 65 each year for the
next 15 years. Retired Boomers (age 65+) play about twice as much as younger,
non-retired Boomers (40 rounds vs 21 rounds).
National Golf Foundation Consulting, Inc. – City of Palo Alto Final Report – 7
Other Measures of Health
Other perhaps equally important metrics to consider when measuring the health of, and
prospects for, golf include: Engagement, Beginners, and Latent Demand.
Engagement: Several years ago NGF developed a scale to gauge participant engagement/
passion for golf. NGF annual golfer survey research indicates that the number of engaged
golfers has remained steady at 20 to 21 million for the past four years. But the proportion of
engaged golfers has increased from 78% to 83% over this period. These engaged golfers are
responsible for over 94% of rounds played, and 97% of equipment spend. Those who are more
engaged are significantly more likely to continue playing.
Beginners: The number of beginners – about 2 million in 2015 - looks to be on the upswing
again, more evidence of the participation bubble that began to build in 1997.
Latent Demand: It is also encouraging to know that overall interest in playing golf remains very
high. NGF survey research indicates there is more than one prospect golfer for every existing
golfer, or about 25 million strong.
Summary
Positive economic indicators, an increase in weather-adjusted rounds played, and the return of
private equity funding to the industry are just a few of the under-reported developments in golf
that tell the current story of the industry. The continued supply correction, though painful for
some operators, will result in more favorable competitive situations in some markets. Finally,
participation has historically tracked closely with Real Adjusted Household Income, suggesting
that if income increases, there’s a likelihood that the golfer trajectory would increase with it.
Bay Area Market
As was the case with nearly every golf market NGF examined nationally, average annual
rounds played at many Bay Area golf courses dropped by 25% or more between the late 1990s
/ 2000 and the middle part of the 2000s. Based on rounds reported to NGF as part of our study
effort back in 2011-12, rounds played among the direct competitive continued to decline through
the Great Recession and into the 2010-11 period, though decreases in some of those years
were at least partly attributable to weather variations.
The decrease in activity levels was due to the number of golfers falling from its peak in the early
2000’s that resulted from a number of factors, including the “Tiger Effect” and the increased
exposure of professional golf on network television. Another factor contributing significantly to
the decline in average rounds played from its peak, both nationally and regionally, was the
furious run-up in golf course supply during that time, especially in the public segment. Though
the population growth of the Bay Area somewhat mitigated the increase in the number of golf
courses, operators still felt the pain. For the nine-county Bay Area region, 27 total golf facilities
were added between 1997 and 2006. This included 6 private (comprising 90 holes) and 21
public (360 holes) facilities. Still, even with the sharp decline off of peak activity levels, rounds
played per 18 holes among the subset of municipal golf courses that Palo Alto GC competes
with remain among the highest in the U.S.
As we will note below in the ‘Competitive Golf Market’ section below, NGF’s tracking of activity
trends (operator interviews) in PAGC’s primary trade area indicate that rounds played have
stabilized over the last several years on a playable-day adjusted basis. (Subject
notwithstanding, whose decline since 2012 can mostly be attributed to the disruption of the golf
course in advance of construction). According to Golf DataTech, in 2015 the Pacific region saw
rounds increase by 2.7%, while the San Francisco/Oakland submarket was up 1%.
National Golf Foundation Consulting, Inc. – City of Palo Alto Final Report – 8
Rounds Played
Annual % Change Year Over Year
Census Divisions 2008 2009 2010 2011 2012 2013 2014 2015
San Francisco/Oakland -3.1% 0.4% -9.4% 2.1% 2.7% 10.0% -5.3% 1.0%
United States -1.8% -0.6% -2.3% -2.5% 5.7% -4.9% -1.7% 1.8%
The table above shows the longer-term trend in year-over-year rounds played, from both a
national and Bay Area perspective. Though the Bay Area saw a larger rounds decrease in 2014
than the nation overall, NGF believes that the next few years will provide a stronger indication of
whether playable day- adjusted rounds have stabilized, and whether the increasing population,
coupled with the standstill in new course development, may result in activity levels rebounding
somewhat.
Local and Regional Golf Supply and Demand Indicators
Below is a summary of key findings regarding the public golf supply/demand dynamic in Palo
Alto GC’s primary trade area. This information is derived from the NGF Demand Model (based
on ongoing NGF golf participation research), NGF U.S. Golf Facilities Database, and NGF Golf
Market Analysis Platform (GolfMAP).
There are thirteen total, including eight public, golf facilities (including Palo Alto GC) in
the 10-mile market area, and 25 total facilities, including 21 public, within 15 miles of
Palo Alto GC. The NGF database reveals no new golf course projects currently in
planning or under construction within 15 miles of Palo Alto GC.
Golf participation rates in the subject markets around Palo Alto GC are very similar to
the national benchmark. However, due to the density of the population, the area has
significantly more golfing households per 18 holes of golf than the nation overall. For
example, in the 10-mile market area surrounding Palo Alto GC, there are 3.4 times
as many golfing households per total 18 holes of golf than in the overall U.S.
Supplementing golf demand from permanent residents are: (1) The area’s large
number of major corporate and public employers, including many high-tech
companies. These large employers are prime targets for soliciting tournament/outing
play, which are generally strong revenue generators and expose a number of golfers
to a facility for the first time; (2) Visitors to the Palo Alto area - though visitation
numbers were not available for Palo Alto specifically, about 17 million people visit
San Francisco alone each year, and the overall Bay Area has considerably more
visitors than that. NGF research shows that roughly one-third of all golfers participate
in the activity while traveling. With Baylands Golf Links should get its fair share of
visitor demand, as it is designed to have “destination” appeal.
People who express an interest in playing golf but have not yet started include
former golfers and those who have never tried. The demographic profile of latent
demand tends to be more female and younger than the population as a whole.
Surveys show these golf-interested non-golfers cite several barriers to entry in golf,
including the cost and social aspects (no one to play with). NGF research estimates
that about 120,000 interested non-golfers live in PAGC’s 10-mile market. This
represents a rich well of “prospects”, some of whom can be activated with creative
programming aimed at inviting and “onboarding” them into the game.
National Golf Foundation Consulting, Inc. – City of Palo Alto Final Report – 9
Competitive Golf Market
NGF reviewed the public access golf market in which the current Palo Alto GC operates, with a
focus on changes that may have occurred among the key competitors identified in the 2012
NGF study, plus Golf Club Moffett Field, which went public since the previous study. This group
of potential competitors was chosen based on NGF market experience, with input from Palo Alto
GC Golf Professional Brad Lozares and other area operators. The list is intended to be a
representative subset, and is not totally exhaustive. For example, the city of San Jose’s “Muni”
golf course is considered a key competitor, while the city’s other 18-hole offering – the shorter-
length and much less popular Los Lagos – is not.
The map below shows the location of these facilities in relation to Palo Alto Golf Course.
Following the map are summary operational tables for these key competitors to PAGC and,
potentially, to the reimagined Baylands Golf Links.
Competitive Facility Location Map
National Golf Foundation Consulting, Inc. – City of Palo Alto Final Report – 10
Summary Information – Primary Competitors
The table below provides summary information regarding the golf courses we have identified as
Palo Alto GC’s primary competitors.
Palo Alto Municipal Golf Course Key Competitors – Summary Information
Golf Facility Location Type
Year
Open Par / Slope
Front Tee /
Back Tee
Location Relative
to PAGC*
Palo Alto Municipal Golf Course Palo Alto MU 18H 1956 67 / 104 4,482 / 5,558 --
Crystal Springs Golf Course Burlingame MU 18H 1924 72 / 125 5,530 / 6,628 16 mi NW
Golf Club of Moffett Field Mountain View DF 18H 1956 72 / 117 5,386 / 6,572 4.5 mi
Poplar Creek Golf Course San Mateo MU 18H 1933 70 / 115 4,768 / 6,042 14.5 mi NW
San Jose Municipal Golf Course San Jose MU 18H 1968 72 / 118 4,200 / 6,700 13 mi SE
Santa Clara Golf & Tennis Club Santa Clara MU 18H 1987 72 / 118 5,459 / 6,722 8.5 mi SE
Santa Teresa Golf Club San Jose DF 27H 1963 71 / 126 5,460 / 6,737 24.5 mi SE
Shoreline Golf Links Mountain View MU 18H 1983 72 / 127 5,437 / 6,608 2.5 mi SE
Spring Valley Golf Course Milpitas DF 18H 1956 70 / 113 5,453 / 6,139 15 mi E
Sunnyvale Golf Course Sunnyvale MU 18H 1969 70 / 118 5,173 / 6,255 5.5 mi SE
*Air miles from subject site, rounded to half-mile; actual driving distances will likely be greater.
Type: DF – Daily Fee; MU – Municipal
National Golf Foundation Consulting, Inc. – City of Palo Alto Final Report – 11
The table below shows summary rounds played and green fee information regarding Palo Alto Municipal Golf Course and its primary
competitors.
Summary Operating Data – Palo Alto Municipal Golf Course and Primary Competitors
Golf Facility
2011
Rounds
2015
Rounds
Average 2015
Green + Cart
Fee per
Round
18-Hole
Resident
Green Fee
(WD/WE)
18-Hole
Non-
Resident
Green Fee
(WD/WE)
Per Person
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 66,740 42,048 $27 DNA $29/$39 $15 single rider
$13 pp $25/$30 $25/DNA $16/$17
Crystal Springs Golf Course 63,000* 69,577 $32 DNA $47/$69 $17 $39/$46 $32/DNA $28/$38
Golf Club of Moffett Field N/A 39,985 N/A Google emp.
$22 / $27 guest $35 / $49 $15 $14/$17 g/e
$22/$30 guest DNA $12/$12 g/e
$16/$22 guest
Poplar Creek Golf Course 70,709 63,903 $36* $33/$45 $38/$53 $19 single rider
$14 pp $27/$33 $27/DNA1 $19/$25
San Jose Municipal GC 78,000* 80,000 $38 DNA $38/$52 $15 $26/$33 $24/DNA $20/$24
Santa Clara Golf & Tennis 81,000 60,000 $31 $28/$38 $37/$53 $16 single rider
$14 pp
$17/$24 res
$26/$30 n/r DNA $12/$14 res
$16/$18 n/r
Santa Teresa GC3 (18H) 72,000* 80,000 $39* DNA $42/$47/$63 $20 single rider
$14 pp $25/$29/$34 $26/$26/DNA $17/$19/$25
Shoreline Golf Links 50,000 82,000 $27* $31/$47 $38/$54 $18 single rider
$14 pp
$18/$21 res
$25/$28 n/r $21/DNA1 $10/$10 res
$16/$18 n/r
Spring Valley Golf Course N/A 61,000 N/A DNA $41/$60 $15 $30/$34 $30 M-F $19/$22
Sunnyvale Golf Course 72,535 73,000 $32* DNA/$45 $37/$50 $14 DNA/$27 res
$27/$32 n/r DNA2 $17/$22
KEY
*NGF Consulting estimate N/A – Information not available DNA – Does not apply / Not offered
Note: For San Jose, Santa Teresa, “afternoon” rates used for twilight and “twilight” for super twilight; for Spring Valley, “afternoon” and evening used for twi / super-twi; Palo
Alto late afternoon used for super-twi.
1 Non-resident seniors: $28 at Shoreline; senior discounts at Poplar Creek are for residents only;
2 Sunnyvale offers senior discount card.
3 Rounds listed are for regulation 18-hole course only.
Source: Area golf operators; City CAFRs; City of San Jose golf audit.
National Golf Foundation Consulting, Inc. – City of Palo Alto Final Report – 12
Summary of Findings – Key Changes Since 2012 Report
Posted green fees, and average daily green + cart rates, have been flat for most of
the competitive set for the last several years, with a few exceptions. The subject Palo
Alto GC has reduced rates due to the course reconfiguration necessitated by the
stockpiling of soil, while Santa Clara GC has reduced fees when course conditions
warrant (fairways are now used for event parking, such as 49er games and
concerts). Also, Mountain View’s Shoreline Golf Links, which hired a management
company in 2012, has been aggressively discounting fees (e.g., through very
affordable unlimited play monthly passes) to drive volume.
Even considering the 25% or so decline in activity off of peak rounds achieved in the
late 1990s, more than half of this competitive set hosts between 70,000 and 80,000
rounds each year, or more than twice the national average. There are few
submarkets in the nation that produce these kinds of activity levels, which are largely
attributable to the high number of golfers per 18 holes in the area.
NGF interviews indicate that there have been no major facility improvements at Palo
Alto GC’s key competitors since the time of our previous study, with the exception
that a driving range was added at the City of San Mateo’s Poplar Creek.
San Mateo is looking for ways to address the financial deficit at Poplar Creek, and
has just issued an RFP for a feasibility study to explore alternative recreational uses
for the property. Though the golf course generated an operational profit of ±$200,000
in FY 14, it was close to break-even operationally in FY 15, on just under 64,000
rounds. Annual $675,000 payments on $7.465 MM in golf course debt (for golf
course renovation in 2000) brings the overall Golf Fund significantly into the red each
year. Also, the General Fund charges the Golf Fund ~$140,000 annually for
allocated overhead charges, and another ~$200,000 for Payment in Lieu of Taxes.
NGF believes that, even with the addition of a driving range, Poplar Creek offers a
significantly inferior product to what is proposed for Baylands. The course averages
three out of five stars on both Yelp and GolfAdvisor, with most negative reviews
centering on pace of play, poor drainage and overall course conditions.
Golf Club Moffett Field, which is now owned by Google, has gone fully public since
the time of the previous study, and hosted just under 40,000 rounds in 2015. Google
recently finished improvements to the clubhouse, and is now improving the driving
range, with a new grass tee line, target greens, and improved irrigation and drainage.
There is also a tree program being implemented aimed at removing dead trees and
trimming others throughout the golf course.
As noted, PAGC’s chief competitor, the city of Mountain View’s Shoreline Golf Links,
has reduced fees to drive volume. The strategy has worked, with the facility doing
about 30,000 more rounds than it did back in 2011. Of course, Shoreline has also
been the biggest beneficiary of Palo Alto GC’s disrupted operation.
NGF noted macro Bay Area golf participation trends earlier. In terms of the direct
competitive set, all but the subject Palo Alto GC and Santa Clara Golf & Tennis
(SCG&T) have maintained, or even grown, their activity levels since our previous
study. Santa Clara has lost about 25% of its play over the last four years, due to the
aforementioned event parking. In 2015, the course lost 38 days to event parking (25
events, 47,000 cars), plus another 10 days for the Super Bowl. Sunnyvale GC has
also reportedly lost some play recently after restaurant and bar closed due to the
vendor leaving.
National Golf Foundation Consulting, Inc. – City of Palo Alto Final Report – 13
Also contributing to the drop in activity levels at SCG&T is the uncertainty over the
course’s future, as Related Santa Clara, a proposed mixed use city center concept,
is likely to displace the golf course in the next year or two. This has resulted in the
golf facility losing many large tournaments. Santa Clara’s closure should positively
impact Baylands’ market share, as would the potential repurposing of Poplar Creek.
Another potential closure would likely have less impact if it happened; San Jose’s
Los Lagos GC, which the city has reportedly discussed repurposing in the face of
operating deficits and an $18MM debt load, is a shorter length Los Lagos that NGF
does not consider to be a key competitor of PAGC (will be even less so for Baylands
Golf Links).
Although not a direct competitor to Palo Alto Golf Course, 36-hole Sunol Valley GC
and its ~80,000 rounds were removed from the market in late 2015. Though most of
its customers will likely play elsewhere in the East Bay, some will likely find
themselves occasionally coming across the Dumbarton Bridge to play at the new
Baylands Golf Links. Also set to close is Pin High Golf Center in north San Jose, a
popular stand-alone driving range.
National Golf Foundation Consulting, Inc. – City of Palo Alto Final Report – 14
Conclusions & Updated Financial
Projections
NGF Consulting has prepared an analysis to show the potential economic performance of the
newly branded Baylands Golf Links under Option G, taking into account our update of the
external market place and the macro environment for golf participation in 2016. Our projections
represent a “fair estimate of performance” for this facility based on our analysis of external
factors, and our anticipation of the high quality golf experience that Baylands will bring to
market, including excellent customer service.
The Baylands Golf Links performance has been projected under the assumption that the
operation is continued ‘as-is’ with three separate contracts for maintenance, pro shop and
food/beverage. The basic contract terms provided to NGF by the City in 2016 are assumed to
continue through FY2027. The NGF has also assumed a “standard” set of external assumptions
for regional economic performance, consumer discretionary income, and weather, with neither
severe declines nor increases in any of these measures through 2027.
BASIS FOR ROUNDS AND REVENUE PROJECTIONS – 2016
For this 2016 updated assessment of Reconfiguration Option G, NGF has lowered its base
scenario stabilized play projection from 75,700 rounds (NGF 2012 projection) to 71,000 rounds,
based on the following factors:
Though activity levels remain robust among PAGC’s competitive set, with several
approaching or exceeding 80,000 annual rounds, NGF feels that it is prudent to take
into account PAGC’s steady pattern of declining rounds from the FY 07 through FY
11 period (and continuing through the FY 15 season, though due to mitigating
circumstances). Though the Baylands Golf Links is proposed to far exceed Palo Alto
GC in quality, a conservative posture necessitates taking PAGC’s slide into account
when making future projections for Baylands.
Though NGF Consulting, based on its experience, is of the belief that “all golf is
local”, we have taken into account the national attrition in the number of golfers over
the last five years, as golf has faced some participation headwinds from occasional
golfers and from golfer segments such as young adults.
Having said that, NGF is confident that the current 2016 projections - based on market demand
factors and the assumption that Baylands Golf Links will stand out as Silicon Valley’s best public
golf course - are justifiable and achievable. The stabilized activity we have projected is 71,000
rounds, a number only moderately higher than PAGC achieved in FY 2010 with a product that
was inferior to what a reconfigured and re-branded golf course will bring to market. Also, we feel
we have been conservative in terms of green fees, with the highest riding rate of $69 (weekend
mornings) very comparable to what the club’s current competitors are charging.
Pro formas are, by their nature, models based on a set of assumptions that may or may not
become reality and which are subject to a number of uncontrollable factors (e.g., weather
variations, the economy, quality/quantity of the competition), but NGF believes that our
projections represent a “reasonable” estimate of performance for the “Baylands” facility based
on the factors discussed in this report. The overriding assumption is that Baylands, when
completed, will stand out as the premier public golf experience in the south Peninsula / South
National Golf Foundation Consulting, Inc. – City of Palo Alto Final Report – 15
Bay market. (‘Experience’ encompasses many things, including a challenging layout, appeal to
multiple segments of golfers, excellent customer service, pleasing aesthetics, and good pace of
play). Among the factors considered when crafting our projections for each model are:
Expected high quality of the Baylands Golf Links at Palo Alto, which should stand out
as the public golf gem of the Silicon Valley. Results of ERA’s 2008 survey for the City
revealed that the number one reason Palo Alto GC was not the primary course of
respondents was “course quality/play experience”.
As noted, NGF believes there is a lack of truly outstanding direct competitors to
Baylands Golf Links. None of the primary competitors have made major facility
improvements since our last study, though Poplar Creek has added a driving range
and the now fully public Golf Club Moffett Field is in the midst of clubhouse and
driving range improvements.
Re-branding and effective marketing of the new club, along with more proactive
direct selling of outings and tournaments.
Maintenance conditions that will position the facility in the upper tier of municipal golf
courses in this market. Superior level of customer service.
With initial green fees similar to what its current competitors are charging now,
“Baylands” will offer a strong price/value proposition that will ensure that the
improved golf course remains very competitive in the area market.
This regional submarket (south Peninsula/South Bay) remains one of the most active
markets for municipal golf in the nation. At the peak of the market, Palo Alto and
several of its chief competitors realized annual activity levels approaching, or even
exceeding, 100,000 rounds. Though play levels may never approach these
extraordinary numbers again, several facilities are holding steady at ±80,000 rounds,
despite offering only average golf experiences.
The Bay Area and Silicon Valley economies are very strong, with the tech industry
helping to shield the area from severe economic downturns. The area has some
specific economic attributes that act as natural demand drivers for quality golf
courses, including high incomes, an extremely robust corporate presence, high
visitation (both leisure and business travelers), and low unemployment. The Milken
Institute's Best-Performing Cities Index ranked the Santa Clara County metro area
as No. 1 and the San Francisco-San Mateo region No. 2 for 2015.
The area has significantly more golfing households per 18 holes of golf than the
nation overall. For example, in the 10-mile market area surrounding Palo Alto GC,
there are 3.4 times as many golfing households per total 18 holes of golf than in the
overall U.S. Despite Moffett Field going fully public in 2014 (was semi-private at time
of previous NGF study), there are plenty of golfers available to support public golf in
this market. It is likely that no new golf course inventory will be added to this market
for the foreseeable future, and the potential of further closures – most likely Santa
Clara Golf & Tennis – will only help the supply/demand balance for public golf.
NGF believes that the significant rounds played decreases at PAGC since the time of
our last study are largely attributable to the course disruption and temporary
reconfiguration of the golf course due to soil stockpiling, as well as uncertainty over
when, or if, construction would begin on the new golf course. Baylands should be
able to quickly win back many of the lost customers.
National Golf Foundation Consulting, Inc. – City of Palo Alto Final Report – 16
FINANCIAL PROJECTIONS – ‘BAYLANDS GOLF LINKS’ (2017-2026)
The NGF projection model assumes continued operation of the facility under the improvement
scenario previously identified as “Option G.” This option would involve a complete renovation of
the Palo Alto Municipal Golf Course (to be re-branded as “Baylands Golf Links”). The project will
necessitate a full closure of the golf course from July 2016 through October 2017, with the
facility re-opening as a brand new golf course with high quality golf features and higher fees
than were in place prior to 2012. The full golf course irrigation system would be replaced and
three new soccer fields would be added to the site. The improvement program includes
rebuilding of all 18 greens, re-turfing of all fairways, construction of an on-course restroom, and
rebuilding the practice green area. These changes should further enhance the product’s
marketability and the golfer experience.
The NGF revenue estimates have been crafted in consideration of the current operating
structure at PAGC, and provide projections of Baylands Golf Links performance for the next 10
years. Projections for rounds and revenues assume successful completion of the proposed
upgrades. The NGF has projected growth to approximately $3.27 million in total gross revenues
(from all sources) to the City by 2020.
Key Assumptions
The Base assumptions in preparing the projected financial performance estimates cover several
categories, including rounds activity, green fees, average revenues (carts, range, concessions,
etc.), total revenue, expenses, capital and debt. The NGF has assumed use of more
complimentary and discount rounds in the initial years after reopening for the purposes of
gaining back lost customers, stimulating trial, and general promotions.
Rounds Performance
The rounds activity performance assumptions include:
Baylands Golf Links will be closed for the entire 12 months of FY2017, and the first
four months of FY2018, with no activity on the golf course. We assume the driving
range will remain open during this period.
Baylands Golf Links is projected to re-open in November 2017, and host a total of
48,000 rounds in the final eight months of FY2018. In 2019, we project growth to
62,700 rounds and then 71,000 rounds in FY2020. This FY2020 level of rounds
activity is projected to remain stable through FY2026.
Rounds projections assume the general mix of play by category remains constant
through FY 2026, with modest increases in tournament and junior rounds.
The 71,000 total ‘stabilized’ rounds activity represents a 5.4% increase over actual
rounds activity in FY 2011 (last full year before changes), but is about 11% lower
than the recent peak of just over 79,900 rounds hosted in FY2007. The NGF expects
our stabilized estimate of 71,000 rounds is representative of market observations in
2016, and reflective of operating the golf course at a higher price point than previous
years. In public golf, higher green fees typically lead to reduced rounds, but
increased revenue overall.
The overall distribution of rounds by category is shown in the table below:
National Golf Foundation Consulting, Inc. – City of Palo Alto Final Report – 17
Palo Alto Municipal Golf Course (Baylands Golf Links)
Projected Activity (2017-2026)
Closed 12 mos.
For full renov.
Closed Jul-Oct
Open Nov-June
(4 mos. Closed)
Operating on 18 holes
for full year
FY2017 FY2018 FY2019
FY2020
-2026
Weekday
18-Hole 0 4,000 5,000 6,000
Senior Non-Resident 0 4,700 5,500 6,200
9-Hole 0 1,100 1,300 1,500
Senior 0 600 800 1,000
Junior 0 1,000 1,300 1,500
Early Bird 0 500 700 900
Twilight 0 8,400 11,000 11,600
Specials 0 5,600 7,600 8,500
Junior Card 0 800 1,000 1,200
Senior Card 0 600 800 1,000
Non-Resident Senior Card 0 3,000 4,200 4,700
Sub-Total Weekday 0 30,300 39,200 44,100
Weekend
18-Hole 0 7,600 10,500 11,600
9 Hole 0 1,400 1,800 2,200
Junior 0 600 800 1,200
Twilight 0 4,600 5,500 5,900
Sub-Total Weekend 0 14,200 18,600 20,900
Complimentary Play 0 2,200 2,500 2,500
Tournaments 0 1,300 2,400 3,500
TOTAL ROUNDS 0 48,000 62,700 71,000
Average Fees / Revenue
The average green fees per round by category are shown in the table that follows. Key
assumptions driving this estimate include:
Upon re-opening on 18 holes (assumed November 1, 2017), average fees in each
category are increased approximately 15% over FY2012 (rounded). This equates to
a highest 18-hole weekend green fee of $54 (max at $69 with cart) and a highest
weekday fee of $42.50 ($57.50 with cart). Other green fees are adjusted accordingly,
with the lowest fees for Juniors ($17/$18) and various other specials at $22.00. All
green fees are assumed to increase at 1.0% per year through 2020, 1.5% from
2021-2022, 2.0% in 2023-2024 and 2.5% in 2025-2026.
Average Cart fee and driving range revenue per round in FY2017 is based on the
actuals in FY2012, and then increased by 2% per year through 2026.
Average merchandise sales per round in FY2017 is based on the actuals in FY2012,
and then increased by 2% per year through 2026.
National Golf Foundation Consulting, Inc. – City of Palo Alto Final Report – 18
Average food and bar sales in FY2017 are based on the actual in FY2012, and then
increased by 2% per year through 2026.
The NGF estimates for average green fees by category and ancillary revenue per round:
Palo Alto Municipal Golf Course (Baylands Golf Links)
Projected Average Green Fees and Ancillary Revenue per Round (2018-2026)
FY2018 FY2019 FY2020 FY2021 FY2022 FY2023 FY2024 FY2025 FY2026
Weekday
18-Hole $42.50 $42.93 $43.35 $44.00 $44.66 $45.56 $46.70 $47.86 $49.06
Senior Non-Resident $37.00 $37.37 $37.74 $38.31 $38.88 $39.66 $40.65 $41.67 $42.71
9-Hole $24.00 $24.24 $24.48 $24.85 $25.22 $25.73 $26.37 $27.03 $27.70
Senior $32.00 $32.32 $32.64 $33.13 $33.63 $34.30 $35.16 $36.04 $36.94
Junior $17.00 $17.17 $17.34 $17.60 $17.87 $18.22 $18.68 $19.15 $19.62
Early Bird $26.50 $26.77 $27.03 $27.44 $27.85 $28.41 $29.12 $29.84 $30.59
Twilight $34.50 $34.85 $35.19 $35.72 $36.26 $36.98 $37.91 $38.85 $39.83
Specials $22.00 $22.22 $22.44 $22.78 $23.12 $23.58 $24.17 $24.78 $25.40
Junior Card $22.50 $22.73 $22.95 $23.30 $23.65 $24.12 $24.72 $25.34 $25.97
Senior Card $27.00 $27.27 $27.54 $27.96 $28.38 $28.94 $29.67 $30.41 $31.17
Non-Res. Senior Card $31.50 $31.82 $32.13 $32.62 $33.10 $33.77 $34.61 $35.48 $36.36
Weekend
18-Hole $54.00 $54.54 $55.09 $55.91 $56.75 $57.89 $59.33 $60.82 $62.34
9 Hole $28.50 $28.79 $29.07 $29.51 $29.95 $30.55 $31.31 $32.10 $32.90
Junior $18.00 $18.18 $18.36 $18.64 $18.92 $19.30 $19.78 $20.27 $20.78
Twilight $39.00 $39.39 $39.78 $40.38 $40.99 $41.81 $42.85 $43.92 $45.02
Tournaments $40.00 $40.40 $40.80 $41.42 $42.04 $42.88 $43.95 $45.05 $46.17
Additional Revenue Center (per Round)
Avg. Cart Fee / Round $4.60 $4.69 $4.79 $4.88 $4.98 $5.08 $5.18 $5.28 $5.39
Avg. Range / Round $5.25 $5.36 $5.46 $5.57 $5.68 $5.80 $5.91 $6.03 $6.15
Merchandise / Round $9.94 $10.14 $10.34 $10.55 $10.76 $10.97 $11.19 $11.42 $11.65
Food per Round $9.56 $9.75 $9.95 $10.15 $10.35 $10.56 $10.77 $10.98 $11.20
Bar per Round $2.23 $2.27 $2.32 $2.37 $2.41 $2.46 $2.51 $2.56 $2.61
Other Revenue Assumptions
Total green fee revenue includes all discount (10-play) cards and monthly passes.
Ancillary revenue per round (carts, merchandise, range, food, bar, other) is derived
from total rounds, including complimentary rounds.
Concession revenue to the City of Palo Alto assumes the same current contract
basics through FY2026. The City is assumed to collect: (1) 7% of all F & B revenue;
and (2) 5% of merchandise sales.
Utility payment is estimated by NGF as fixed at $18,000 during construction
(FY2017) and $26,000 beginning in FY2018 with 2% annual inflation.
Expense Assumptions
Labor expenses are for City oversight only. These include allocations for contract
oversight, Parks and Recreation Director, Division manager, etc. The estimate is
intended to include both salary and benefits allocation and is increased by 4.8% in
2019, 4.1% in 2020, 3.9% in 2021-2022 and 3.8% for 2023 – 2026.
National Golf Foundation Consulting, Inc. – City of Palo Alto Final Report – 19
Commissions paid to the pro shop vendor include 20% of gross driving range and
cart revenue, plus 5% of green fee revenue after re-opening in FY2018.
The pro shop management fee is fixed at $30,500 for FY2017 (during construction),
increasing to $300,000 per year after full reopening (2018-2026). Increases for
inflation are assumed at 2.6% per year through FY2026.
Reimbursements for merchant fees (mostly credit card fees) are assumed to be
$4,500 for FY2017, and then set at 1.4% of total facility revenue.
Contract maintenance expense to the City of Palo Alto assumes:
$18,158 per month for the full FY2017 (course closed).
$415,000 lump sum for the first four months of FY2018 (manage grow-in),
then $64,105 per months for the last 8 months of FY2018.
$66,800 per month in FY2019, growing at 2.6% annually through 2026.
Other expenses such as repairs, maintenance, supplies, club fees, materials and
other indirect expenses are all based on City estimates for FY2017, and then based
on previous years’ actual expenses for 2018-2026, with variable increases between
1.7% and 3.9% as per City schedule.
Advertising and publishing expense is increased to $30,000 in FY2018 to account for
enhanced marketing of the upgraded facility and re-theme as “Baylands Golf Links.”
Advertising and publishing expense is then reduced in subsequent years to a
“standard” of around $17,000 per year (increasing between 1.7% and 3.9% through
FY2026 as per City schedule).
Water expense has been highly variable and NGF projections are based on previous
years’ average with adjustment for the new golf course design. The NGF has used
the average of 2012-2014 water expense ($313,600), with a 9.5% reduction factor
from the new design. NGF also applied a 5% inflation factor to water expense to
provide some conservatism to the expense estimate with the greatest unknown in
the operation.
Other direct charges (including electric) are derived from the City estimate for
FY2017, increasing between 1.7% and 3.9% through FY2026 as per City schedule.
Debt Service and Other Non-Operating Expense Assumptions
The NGF has assumed that the $8,288,700 in cost needed to complete the Baylands
upgrade project will be funded via the issuance of a new debt program (revenue or
General Obligation Bond). A debt service payment schedule to retire the new
$8,288,700 loan was provided by the City, and assumes a 25-year payback.
Non-operating revenue attributed to the existing debt service is assumed to continue
at 6% of debt service payment as long as payments continue (through FY2018).
The Cost Plan Charges are based on actual FY2017 charge of $25,000 with
historical 5% growth through the end of FY2026.
The NGF has added a new “Operating & Capital Reserve” line to the pro forma
beginning in FY2018, set at 10% of green fee revenue.
National Golf Foundation Consulting, Inc. – City of Palo Alto Final Report – 20
Pro Forma Estimate for ‘Option G’ Scenario – FY2017 – FY2026
Utilizing the above assumptions and activity/revenue estimates, NGF Consulting has prepared a
pro forma for the next 10 years of operation. The table shows that the renovated Baylands Golf
Links could produce net income to the City in the range of $1.17 to $1.18 million (stable) before
debt, cost plan and reserves. After all existing and future debt service obligations are
considered, the facility is expected to produce net income to the City, after all expenses and
charges, in the range of ±$290,000 (stable). As this is a projection, all operating revenue and
expense figures have been rounded to the nearest $100 for simplicity.
National Golf Foundation Consulting, Inc. – City of Palo Alto Final Report – 21
Palo Alto Municipal Golf Course (Baylands Golf Links)
Projected Total Revenue and Expense (FY 2017 – FY 2026)
Closed –
only range
open
Open 8
months +
Closed 4
months
Full 18
holes open
Full 18
holes open
Full 18
holes open
Full 18
holes open
Full 18
holes open
Full 18
holes open
Full 18
holes open
Full 18
holes open
Revenues
FY2017
Projected
FY2018
Projected
FY2019
Projected
FY2020
Projected
FY2021
Projected
FY2022
Projected
FY2023
Projected
FY2024
Projected
FY2025
Projected
FY2026
Projected
Golf Course Revenues
Green Fees (Incl. Cards) $0 $1,571,252 $2,091,470 $2,395,409 $2,431,340 $2,467,810 $2,517,166 $2,580,096 $2,644,598 $2,710,713
Cart Fees 0 220,800 294,200 339,800 346,600 353,500 360,600 367,800 375,200 382,700
Driving Range 155,000 252,000 335,800 387,800 395,600 403,500 411,500 419,800 428,200 436,700
Tournament / League Fees 0 1,400 1,900 2,100 2,100 2,100 2,100 2,100 2,100 2,100
Other 24,000 8,600 11,300 12,800 12,800 12,800 12,800 12,800 12,800 12,800
Total Golf Course Revenues $179,000 $2,054,052 $2,734,670 $3,137,909 $3,188,440 $3,239,710 $3,304,166 $3,382,596 $3,462,898 $3,545,013
Concession Payments
Food and Beverage Concession
Minimum Lease $18,000 $0 $0 $0 $0 $0 $0 $0 $0 $0
Variable Portion $0 $39,600 $52,800 $61,000 $62,200 $63,400 $64,700 $66,000 $67,300 $68,700
Utility Payment $18,000 $26,000 $26,500 $27,000 $27,500 $28,100 $28,700 $29,300 $29,900 $30,500
Total from F & B Concession $36,000 $65,600 $79,300 $88,000 $89,700 $91,500 $93,400 $95,300 $97,200 $99,200
Pro Shop Lease
Minimum Lease $18,000 $0 $0 $0 $0 $0 $0 $0 $0 $0
Merchandise (4%) $0 $23,900 $31,800 $36,700 $37,400 $38,200 $39,000 $39,700 $40,500 $41,300
Total From Pro Shop Concession $18,000 $23,900 $31,800 $36,700 $37,400 $38,200 $39,000 $39,700 $40,500 $41,300
Total Gross to City $233,000 $2,143,552 $2,845,770 $3,262,609 $3,315,540 $3,369,410 $3,436,566 $3,517,596 $3,600,598 $3,685,513
National Golf Foundation Consulting, Inc. – City of Palo Alto Final Report – 22
Operating Expenses
FY2017
Projected
FY2018
Projected
FY2019
Projected
FY2020
Projected
FY2021
Projected
FY2022
Projected
FY2023
Projected
FY2024
Projected
FY2025
Projected
FY2026
Projected
Salaries & Benefits $129,900 $163,800 $171,700 $178,700 $185,700 $192,900 $200,200 $207,800 $215,700 $223,900
Range Fees 31,700 50,400 67,200 77,600 79,100 80,700 82,300 84,000 85,600 87,300
Cart Fees 0 44,200 58,800 68,000 69,300 70,700 72,100 73,600 75,000 76,500
Club Fees 4,200 4,300 4,500 4,700 4,900 5,100 5,300 5,500 5,700 5,900
Fixed Management Fee 30,500 300,000 307,800 315,800 324,000 332,400 341,000 349,900 359,000 368,300
Merchant Fees Reimbursement 4,500 28,800 38,300 43,900 44,600 45,400 46,300 47,400 48,500 49,600
Contract Maintenance 218,000 927,800 801,600 812,300 833,400 855,100 877,300 900,100 923,500 947,500
Repairs & maintenance 6,700 43,700 45,400 46,600 47,800 49,000 50,300 51,600 52,900 54,300
Advertising & Publish 15,000 30,000 17,000 17,400 17,900 18,400 18,900 19,400 19,900 20,400
Supplies and Materials 13,500 45,000 46,800 48,000 49,200 50,500 51,800 53,100 54,500 55,900
Water Expense 60,000 295,000 308,300 323,700 339,900 356,900 374,700 393,400 413,100 433,800
Other Direct Charges (Incl. Electric) 41,500 43,100 44,800 46,000 47,200 48,400 49,700 51,000 52,300 53,700
Indirect Charges 65,900 103,500 107,500 110,300 113,200 116,100 119,100 122,200 125,400 128,700
Total City Operating Expenses $621,400 $2,079,600 $2,019,700 $2,093,000 $2,156,200 $2,221,600 $2,289,000 $2,359,000 $2,431,100 $2,505,800
Net Income From Operations (Loss) ($388,400) $63,952 $826,070 $1,169,609 $1,159,340 $1,147,810 $1,147,566 $1,158,596 $1,169,498 $1,179,713
Non-operating
Capitalized Interest $369,350 $184,675 $0 $0 $0 $0 $0 $0 $0 $0
Total Non-operating $369,350 $184,675 $0 $0 $0 $0 $0 $0 $0 $0
Total Income (Incl. Non-operating) ($19,050) $248,627 $826,070 $1,169,609 $1,159,340 $1,147,810 $1,147,566 $1,158,596 $1,169,498 $1,179,713
Debt Service $429,020 $429,020 $0 $0 $0 $0 $0 $0 $0 $0
New Debt Service $369,350 $369,350 $569,350 $573,350 $572,050 $573,450 $574,450 $575,050 $570,250 $570,250
Operating & Capital Reserve $0 $157,125 $209,147 $239,541 $243,134 $246,781 $251,717 $258,010 $264,460 $271,071
Cost Plan Charges $25,000 $26,300 $27,600 $29,000 $30,500 $32,000 $33,600 $35,300 $37,100 $39,000
Total Debt / Other Charges $823,370 $981,795 $806,097 $841,891 $845,684 $852,231 $859,767 $868,360 $871,810 $880,321
Net Income or (Loss) ($842,420) ($733,168) $19,973 $327,718 $313,656 $295,579 $287,800 $290,236 $297,688 $299,392
National Golf Foundation Consulting, Inc. – City of Palo Alto Final Report – 23
NGF PROJECTION SENSITIVITY ANALYSIS
As noted, pro forma projections have been made under a set of assumptions that may or may not
come to fruition. Also, projections are subject to several uncontrollable factors such as yearly
weather variations, economic conditions, and the nature of the competition. Therefore, in the interest
of conservatism we have prepared a sensitivity analysis for Baylands Golf Links projections of two
key variables related to revenues – rounds played and average green fee. Specifically, we have run
three scenarios that present deviations from the “base” model presented above: (1) Rounds reduced
to moderately lower than projected FY2020 performance, continuing downward trend; (2) Average
green fee increasing over current by just less than half the 15% projected increase in base model;
and (3) Rounds and average green fees both lower, in combination. Because of the virtually limitless
number of combinations, other variables, such as fixed operating expenses, remain the same as in
the base scenario.
The sensitivity scenarios reveal that the lower than projected (base) green fee growth would result in
a reduction in net income of approximately 48% from the base case. Reduced rounds result in a
±$405,600 reduction in net income, while the “worst case” – both rounds and green fee increases
below the projected base model – produces about $541,400 lower net income. (See Appendix B for
full pro formas).
Sensitivity Analysis - Summary for 2020
Summary in FY2020 (Stabilized Year)
Expected Case
(Base Scenario)
Reduced
Rounds
Scenario
Reduced Fees
Scenario
Reduced
Rounds + Fees
Scenario
FY2020
Projected
FY2020
Projected
FY2020
Projected
FY2020
Projected
TOTAL ROUNDS 71,000 61,100 71,000 61,100
ANNUAL ROUNDS REVENUE $2,395,409 $2,052,277 $2,219,315 $1,901,376
AVERAGE GREEN FEE PER ROUND $33.74 $33.59 $31.26 $31.12
Total Golf Course Revenues $3,137,909 $2,691,177 $2,961,815 $2,540,276
Concessions
Total from F & B Concession $88,000 $79,500 $88,000 $79,500
Total From Pro Shop Concession $36,700 $31,600 $36,700 $31,600
Total Gross to City $3,262,609 $2,802,277 $3,086,515 $2,651,376
Expenses
Total City Operating Expenses $2,093,000 $2,072,600 $2,093,000 $2,072,600
Net Income From Operations (Loss) $1,169,609 $729,677 $993,515 $578,776
Total Debt/Other Charges $841,891 $807,578 $824,281 $792,488
Net Income or (Loss) $327,718 ($77,901) $169,233 ($213,712)
National Golf Foundation Consulting, Inc. – City of Palo Alto Final Report – 24
FINANCIAL PROJECTIONS SUMMARY
The results of the NGF Consulting financial projections for the proposed-to-be upgraded
“Baylands Golf Links,” based on the analysis and assumptions presented in this report, show
that the facility will generate improved revenue performance compared to the existing facility
before recent changes. We have assumed that the construction to renovate the facility will take
a full year to complete, plus an additional four months of “grow-in,” meaning the golf course will
be closed for a full 16 months (July 2016 – October 2017). The key observations regarding
NGF-projected “Baylands Golf Links at Palo Alto” financial performance:
NGF has projected significant economic loss during the two fiscal years during which
the course will be renovated. In FY2017, NGF projects a loss on operations of
($842,400), which includes the $369,350 debt payment noted on the schedule
provided by the City, as well as the existing debt service of $429,020 through FY 18.
In FY2018, the course would be open for eight months, but still suffer a projected
($733,200) loss on operations (including debt service).
After re-opening and recovery to a stabilized 71,000 rounds of golf, NGF is projecting
total City revenue in excess of $3.14 million, equal to the $3.14 million the City
generated in a recent peak year in FY2008. The FY2008 revenue was generated
from 77,989 total rounds, or an average of $40.24 per round of golf. In FY2020, the
NGF is projecting total average City revenue per round to be $45.95, showing
improved average revenue per round on slightly fewer total rounds hosted.
Based on the schedule of debt payments provided by the City, the NGF is projecting
that the newly upgraded “Baylands Golf Links at Palo Alto” will fully cover all
obligations beginning in FY2019, the first full (12 months) year of operation after re-
opening. The NGF expects net income after debt and other charges to stabilize
between $290,000 and $320,000 each year from FY2020 through FY2026.
In reviewing sensitivity, NGF projections show that a 15% decline in estimated
rounds would lead to reduced net income that may not be sufficient to fully cover the
debt service needed to retire the project cost. However, this total of 61,000 stabilized
rounds is much lower than several of the area’s public golf competitors, many of
which have much lower quality than is expected of the new Baylands Golf Links.
Also, the sensitivity estimate of 61,000 rounds is also lower than the 62,900+/-
hosted in 2012 when the City began its stockpile of soil and temporary
reconfiguration of the golf course, resulting in reduced rounds.
If Palo Alto is not able to increase(or sustain increases) in golf fees, the NGF projects
the new Baylands Golf Links will still remain profitable after debt costs with rounds at
71,000. This estimate shows that rounds activity is the key driving force in the golf
course’s profitability. The NGF estimate is for total net income after debt to be
around $100,000 (stabilized), even if golf fees come in 7.5% lower than expected in
the base case.
When combined with smaller fee increases, the reduced rounds activity could lead to
revenues falling as low as $2.5 million +/-, and the City being as much as ($310,000)
short of covering total debt service in a stable year after re-opening.
National Golf Foundation Consulting, Inc. – City of Palo Alto Final Report – 25
Summary Statement
After reassessing the basic assumptions driving activity level and economic projections for
PAGC’s reconfiguration Option G, NGF has concluded that our fundamental premise in
assessing the likely market impact of the newly branded Baylands Golf Links – that the club, as
planned, will stand out as the highest quality public golf experience in the Silicon Valley -
remains very sound. However, in consideration of the attrition in rounds played at the subject
facility over the last decade, as well as some participation headwinds that golf has been facing
with less engaged golfers, we have lowered our stabilized rounds projections for Baylands
facility by about 6.5%.
This regional submarket (south Peninsula/South Bay) remains one of the most active markets
for municipal golf in the nation. Several direct competitors to Palo Alto GC continue to achieve
±80,000 annual rounds played, despite offering only average golf experiences. The fundamental
golf demand profile of the market remains very solid. The local economy is strong, and the area
has economic attributes that act as natural demand drivers for quality golf courses, including
high incomes, a strong corporate presence, high visitation, and low unemployment. Also, the
10-mile market has added nearly 48,000 net new residents since 2010, and latent demand
(interested non-golfers) is very robust in the area, providing an opportunity for savvy operators
to “activate” these prospects.
We believe that proper implementation (adequate budgets, quality control, effective branding
and marketing, and customer service commensurate with the golf experience) of the program
will have a dramatic effect on driving new business to the “new” golf facility. Though
replacement or major of the clubhouse is not planned at this time, NGF recommends that, at the
least, cosmetic improvements (e.g., fresh paint, landscaping) be done to the buildings, grounds
and entryway. Also, as noted in our previous study, a commitment on the City’s part to
becoming certified with Audubon International as a “Sanctuary Golf Facility” is an integral part of
the ability to market the course as a “green” aware golf facility.
NGF is confident that the current projections, based on market factors and the assumption that
Baylands Golf Links will stand out as Silicon Valley’s best public golf course, are justifiable and
achievable. The stabilized activity we have projected is 71,000 rounds, a number only
moderately higher than PAGC achieved in FY 2010 with a product that was inferior to what a
reconfigured and re-branded golf course will bring to market. Based on the schedule of debt
payments provided by the City, NGF projects that the newly upgraded “Baylands Golf Links at
Palo Alto” will fully cover all obligations beginning in FY2019, the first full (12 months) year of
operation after re-opening. The NGF expects net income after debt and other charges to
stabilize between $290,000 and $320,000 each year from FY2020 through FY2026.
Other considerations that were not part of the scope of this study include whether the
management structure of the facility – multiple concessions – will be the best fit for Baylands
Golf Links going forward, and whether other major improvements, including addition of meeting
space, should be undertaken concurrently with the golf course improvements to maximize
market impact. NGF has included our initial high-level opinions on these issues, initially
presented in the 2012 study, in Appendices C and D.
……..
National Golf Foundation Consulting, Inc. – City of Palo Alto Final Report – 26
Appendices
APPENDIX A – GOLF & THE MILLENNIAL GENERATION
APPENDIX B – SENSITIVITY ANALYSIS PRO FORMAS
APPENDIX C – PALO ALTO GOLF COURSE MANAGEMENT STRUCTURE
APPENDIX D – CONSIDERATION OF OTHER IMPROVEMENTS
National Golf Foundation Consulting, Inc. – City of Palo Alto Final Report – 27
APPENDIX A – GOLF & THE MILLENNIAL GENERATION
In 2015, the NGF completed a comprehensive review of golf participation among the 18-34
year-old group known collectively as the “Millennial” generation. The NGF’s study of Millennials
was in response to a drop in participation among this age group and a part of an industry effort
to better understand golfing habits of young adults. What we discovered was that while this
important segment of the population is more closely tethered to the sport than most think, the
commitment isn’t what it was compared to previous generations when they were the same age.
The NGF study of Millennials confirmed that one out of every four golfers is a Millennial, and
that there are 12 million non-golfers among the generation that are “very or somewhat
interested” in playing golf now. This contradicts media coverage of golf and Millennials that
suggests progressive lifestyles, preferences and stressed finances are misaligned with golf’s
old-fashioned sensibilities and pay-for-play nature. The fact is there are six million Millennials
playing about 90 million rounds and spending $5 billion on golf annually.
However, millennial golfers are not all created equal when it comes to their connection to the
sport, as significant differences exist among this generation. The NGF divided the generation
into three distinct segments based on key attitudinal and perceptual traits. Understanding each
of these is crucial to better adapting to and serving needs and expectations. The good news for
golf is that more than half of millennial golfers are committed to the game and are unlikely to
leave the sport barring any significant health or life-changing situations. It’s the second half of
the population where golf has challenges. The segments include:
“Throwbackers” (3.3 million golfers, 51% of millennial golfers) – Akin to golf
purists or traditionalists, ‘Throwbackers’ tend to behave just as avid golfers did
generations before them and therefore share perceptions of the game that mirror the
Boomer (parents’) generation. This group enjoys the challenge and is motivated by
competition and staying fit. They work on their game, keep score and respect the
rules. While they do have concerns about the game and shouldn’t be taken for
granted, we expect this group is “very likely” to continue playing in the future.
“Breakfast Ballers” (1.4 million golfers, 22% of millennial golfers) - This
segment is drawn to the game for vastly different reasons. They play less frequently
and are more motivated by excitement, adrenaline and the opportunity to socialize.
Golf for them is not a lifestyle but a conduit for their social lives. Golf is appealing, but
it’s not enough – they want Golf-Plus. They’re likely to enhance the experience with
music, alcohol, gambling and social media. Although competitive, roughly half of
Breakfast Ballers don’t keep score, and many pay little attention to the rules. Though
generally committed to the game, most think golf is too serious, stuffy and in need of
reform. It’s this segment that presents the best opportunity for participation growth.
“Dabblers” (1.7 million golfers, 27% of millennial golfers) - While we count these
participants as “golfers” because they played golf during the past year, most of them
don’t really consider themselves golfers. Dabblers tend to be more female, and play
infrequently, typically at the urging of someone else. They don’t keep score and only
one-third say they enjoy golf “a lot.” These customers are just “dabbling” at golf, and
without some intervention are unlikely to develop into better customers.
The last group notwithstanding, golf has a far more active and committed base of younger
participants than it’s been given credit for. Still, the sport is not as attractive to this age group
when compared to previous generations, and a better understanding of motivations for
engaging in golf will help the sport golf attract even more young people.
National Golf Foundation Consulting, Inc. – City of Palo Alto Final Report – 28
APPENDIX B – SENSITIVITY ANALYSIS PRO FORMAS
The tables below illustrate the three sensitivity analysis pro formas that present deviations from
the “base” model: (1) Rounds reduced to moderately lower than projected FY2020 performance;
(2) Average green fee increasing over current by just less than half the 15% projected increase
in base model; and (3) Rounds and average green fees both lower, in combination.
Sensitivity Analysis - Summary for FY 2020
Summary in FY2020 (Stabilized Year)
Expected Case
(Base Scenario)
Reduced
Rounds
Scenario
Reduced Fees
Scenario
Reduced
Rounds + Fees
Scenario
FY2020
Projected
FY2020
Projected
FY2020
Projected
FY2020
Projected
TOTAL ROUNDS 71,000 61,100 71,000 61,100
ANNUAL ROUNDS REVENUE $2,395,409 $2,052,277 $2,219,315 $1,901,376
AVERAGE GREEN FEE PER ROUND $33.74 $33.59 $31.26 $31.12
Total Golf Course Revenues $3,137,909 $2,691,177 $2,961,815 $2,540,276
Concessions
Total from F & B Concession $88,000 $79,500 $88,000 $79,500
Total From Pro Shop Concession $36,700 $31,600 $36,700 $31,600
Total Gross to City $3,262,609 $2,802,277 $3,086,515 $2,651,376
Expenses
Total City Operating Expenses $2,093,000 $2,072,600 $2,093,000 $2,072,600
Net Income From Operations (Loss) $1,169,609 $729,677 $993,515 $578,776
Total Debt/Other Charges $841,891 $807,578 $824,281 $792,488
Net Income or (Loss) $327,718 ($77,901) $169,233 ($213,712)
National Golf Foundation Consulting, Inc. – City of Palo Alto Final Report – 29
Reduced Rounds Sensitivity Spreadsheet
Palo Alto Municipal Golf Course (Baylands Golf Links)
Projected Total Revenue and Expense - Reduced Rounds Sensitivity (FY 2017 – FY 2026)
Closed –
only range
open
Open 8 months +
Closed 4
months
Full 18
holes open
Full 18
holes open
Full 18
holes open
Full 18
holes open
Full 18
holes open
Full 18
holes open
Full 18
holes open
Full 18
holes open
FY2017
Projected
FY2018
Projected
FY2019
Projected
FY2020
Projected
FY2021
Projected
FY2022
Projected
FY2023
Projected
FY2024
Projected
FY2025
Projected
FY2026
Projected
Rounds -0- 41,100 54,000 61,100 61,100 61,100 61,100 61,100 61,100 61,100
Golf Course Revenues
Green Fees (Incl. Cards) $0 $1,334,132 $1,789,587 $2,052,277 $2,083,061 $2,114,307 $2,156,593 $2,210,508 $2,265,770 $2,322,415
Cart Fees 0 189,100 253,400 292,400 298,300 304,200 310,300 316,500 322,800 329,300
Driving Range 155,000 215,800 289,200 333,700 340,400 347,200 354,200 361,200 368,500 375,800
Tournament / League Fees 0 1,200 1,600 1,800 1,800 1,800 1,800 1,800 1,800 1,800
Other 24,000 7,400 9,700 11,000 11,000 11,000 11,000 11,000 11,000 11,000
Total Golf Course Revenues $179,000 $1,747,632 $2,343,487 $2,691,177 $2,734,561 $2,778,507 $2,833,893 $2,901,008 $2,969,870 $3,040,315
Concession Payments
Food and Beverage Concession
Minimum Lease $18,000 $0 $0 $0 $0 $0 $0 $0 $0 $0
Variable Portion $0 $33,900 $45,500 $52,500 $53,500 $54,600 $55,700 $56,800 $57,900 $59,100
Utility Payment $18,000 $26,000 $26,500 $27,000 $27,500 $28,100 $28,700 $29,300 $29,900 $30,500
Total from F & B Concession $36,000 $59,900 $72,000 $79,500 $81,000 $82,700 $84,400 $86,100 $87,800 $89,600
Pro Shop Lease
Minimum Lease $18,000 $0 $0 $0 $0 $0 $0 $0 $0 $0
Merchandise (4%) $0 $20,400 $27,400 $31,600 $32,200 $32,900 $33,500 $34,200 $34,900 $35,600
Total From Pro Shop Concession $18,000 $20,400 $27,400 $31,600 $32,200 $32,900 $33,500 $34,200 $34,900 $35,600
Total Gross to City $233,000 $1,827,932 $2,442,887 $2,802,277 $2,847,761 $2,894,107 $2,951,793 $3,021,308 $3,092,570 $3,165,515
National Golf Foundation Consulting, Inc. – City of Palo Alto Final Report – 30
Operating Expenses
FY2017
Projected
FY2018
Projected
FY2019
Projected
FY2020
Projected
FY2021
Projected
FY2022
Projected
FY2023
Projected
FY2024
Projected
FY2025
Projected
FY2026
Projected
Salaries & Benefits $129,900 $163,800 $171,700 $178,700 $185,700 $192,900 $200,200 $207,800 $215,700 $223,900
Range Fees 31,700 43,200 57,800 66,700 68,100 69,400 70,800 72,200 73,700 75,200
Cart Fees 0 37,800 50,700 58,500 59,700 60,800 62,100 63,300 64,600 65,900
Club Fees 4,200 4,300 4,500 4,700 4,900 5,100 5,300 5,500 5,700 5,900
Fixed Management Fee 30,500 300,000 307,800 315,800 324,000 332,400 341,000 349,900 359,000 368,300
Merchant Fees Reimbursement 4,500 28,800 38,300 43,900 44,600 45,400 46,300 47,400 48,500 49,600
Contract Maintenance 218,000 927,800 801,600 812,300 833,400 855,100 877,300 900,100 923,500 947,500
Repairs & maintenance 6,700 43,700 45,400 46,600 47,800 49,000 50,300 51,600 52,900 54,300
Advertising & Publish 15,000 30,000 17,000 17,400 17,900 18,400 18,900 19,400 19,900 20,400
Supplies and Materials 13,500 45,000 46,800 48,000 49,200 50,500 51,800 53,100 54,500 55,900
Water Expense 60,000 295,000 308,300 323,700 339,900 356,900 374,700 393,400 413,100 433,800
Other Direct Charges (Incl. Electric) 41,500 43,100 44,800 46,000 47,200 48,400 49,700 51,000 52,300 53,700
Indirect Charges 65,900 103,500 107,500 110,300 113,200 116,100 119,100 122,200 125,400 128,700
Total City Operating Expenses $621,400 $2,066,000 $2,002,200 $2,072,600 $2,135,600 $2,200,400 $2,267,500 $2,336,900 $2,408,800 $2,483,100
Net Income From Operations (Loss) ($388,400) ($238,068) $440,687 $729,677 $712,161 $693,707 $684,293 $684,408 $683,770 $682,415
Non-operating
Capitalized Interest $369,350 $184,675 $0 $0 $0 $0 $0 $0 $0 $0
Total Non-operating $369,350 $184,675 $0 $0 $0 $0 $0 $0 $0 $0
Total Income (Incl. Non-operating) ($19,050) ($53,393) $440,687 $729,677 $712,161 $693,707 $684,293 $684,408 $683,770 $682,415
Debt Service $429,020 $429,020 $0 $0 $0 $0 $0 $0 $0 $0
New Debt Service $369,350 $369,350 $569,350 $573,350 $572,050 $573,450 $574,450 $575,050 $570,250 $570,250
Operating & Capital Reserve $0 $133,413 $178,959 $205,228 $208,306 $211,431 $215,659 $221,051 $226,577 $232,241
Cost Plan Charges $25,000 $26,300 $27,600 $29,000 $30,500 $32,000 $33,600 $35,300 $37,100 $39,000
Total Debt / Other Charges $823,370 $958,083 $775,909 $807,578 $810,856 $816,881 $823,709 $831,401 $833,927 $841,491
Net Income or (Loss) ($842,420) ($1,011,476) ($335,221) ($77,901) ($98,695) ($123,174) ($139,416) ($146,993) ($150,157) ($159,077)
National Golf Foundation Consulting, Inc. – City of Palo Alto Final Report – 31
Reduced Fee Sensitivity Spreadsheet
Palo Alto Municipal Golf Course (Baylands Golf Links)
Projected Total Revenue and Expense – Reduced Fee Sensitivity (FY 2017 – FY 2026)
Closed –
only range
open
Open 8
months +
Closed 4
months
Full 18
holes open
Full 18
holes open
Full 18
holes open
Full 18
holes open
Full 18
holes open
Full 18
holes open
Full 18
holes open
Full 18
holes open
FY2017
Projected
FY2018
Projected
FY2019
Projected
FY2020
Projected
FY2021
Projected
FY2022
Projected
FY2023
Projected
FY2024
Projected
FY2025
Projected
FY2026
Projected
Rounds -0- 48,000 62,700 71,000 71,000 71,000 71,000 71,000 71,000 71,000
Golf Course Revenues
Green Fees (Incl. Cards) $0 $1,455,808 $1,937,771 $2,219,315 $2,252,604 $2,286,394 $2,332,121 $2,379,423 $2,438,909 $2,499,882
Cart Fees 0 220,800 294,200 339,800 346,600 353,500 360,600 367,800 375,200 382,700
Driving Range 155,000 252,000 335,800 387,800 395,600 403,500 411,500 419,800 428,200 436,700
Tournament / League Fees 0 1,400 1,900 2,100 2,100 2,100 2,100 2,100 2,100 2,100
Other 24,000 8,600 11,300 12,800 12,800 12,800 12,800 12,800 12,800 12,800
Total Golf Course Revenues $179,000 $1,938,608 $2,580,971 $2,961,815 $3,009,704 $3,058,294 $3,119,121 $3,181,923 $3,257,209 $3,334,182
Concession Payments
Food and Beverage Concession
Minimum Lease $18,000 $0 $0 $0 $0 $0 $0 $0 $0 $0
Variable Portion $0 $39,600 $52,800 $61,000 $62,200 $63,400 $64,700 $66,000 $67,300 $68,700
Utility Payment $18,000 $26,000 $26,500 $27,000 $27,500 $28,100 $28,700 $29,300 $29,900 $30,500
Total from F & B Concession $36,000 $65,600 $79,300 $88,000 $89,700 $91,500 $93,400 $95,300 $97,200 $99,200
Pro Shop Lease
Minimum Lease $18,000 $0 $0 $0 $0 $0 $0 $0 $0 $0
Merchandise (4%) $0 $23,900 $31,800 $36,700 $37,400 $38,200 $39,000 $39,700 $40,500 $41,300
Total From Pro Shop Concession $18,000 $23,900 $31,800 $36,700 $37,400 $38,200 $39,000 $39,700 $40,500 $41,300
Total Gross to City $233,000 $2,028,108 $2,692,071 $3,086,515 $3,136,804 $3,187,994 $3,251,521 $3,316,923 $3,394,909 $3,474,682
National Golf Foundation Consulting, Inc. – City of Palo Alto Final Report – 32
Operating Expenses
FY2017
Projected
FY2018
Projected
FY2019
Projected
FY2020
Projected
FY2021
Projected
FY2022
Projected
FY2023
Projected
FY2024
Projected
FY2025
Projected
FY2026
Projected
Salaries & Benefits $129,900 $163,800 $171,700 $178,700 $185,700 $192,900 $200,200 $207,800 $215,700 $223,900
Range Fees 31,700 50,400 67,200 77,600 79,100 80,700 82,300 84,000 85,600 87,300
Cart Fees 0 44,200 58,800 68,000 69,300 70,700 72,100 73,600 75,000 76,500
Club Fees 4,200 4,300 4,500 4,700 4,900 5,100 5,300 5,500 5,700 5,900
Fixed Management Fee 30,500 300,000 307,800 315,800 324,000 332,400 341,000 349,900 359,000 368,300
Merchant Fees Reimbursement 4,500 28,800 38,300 43,900 44,600 45,400 46,300 47,400 48,500 49,600
Contract Maintenance 218,000 927,800 801,600 812,300 833,400 855,100 877,300 900,100 923,500 947,500
Repairs & maintenance 6,700 43,700 45,400 46,600 47,800 49,000 50,300 51,600 52,900 54,300
Advertising & Publish 15,000 30,000 17,000 17,400 17,900 18,400 18,900 19,400 19,900 20,400
Supplies and Materials 13,500 45,000 46,800 48,000 49,200 50,500 51,800 53,100 54,500 55,900
Water Expense 60,000 295,000 308,300 323,700 339,900 356,900 374,700 393,400 413,100 433,800
Other Direct Charges (Incl. Electric) 41,500 43,100 44,800 46,000 47,200 48,400 49,700 51,000 52,300 53,700
Indirect Charges 65,900 103,500 107,500 110,300 113,200 116,100 119,100 122,200 125,400 128,700
Total City Operating Expenses $621,400 $2,079,600 $2,019,700 $2,093,000 $2,156,200 $2,221,600 $2,289,000 $2,359,000 $2,431,100 $2,505,800
Net Income From Operations (Loss) ($388,400) ($51,492) $672,371 $993,515 $980,604 $966,394 $962,521 $957,923 $963,809 $968,882
Non-operating
Capitalized Interest $369,350 $184,675 $0 $0 $0 $0 $0 $0 $0 $0
Total Non-operating $369,350 $184,675 $0 $0 $0 $0 $0 $0 $0 $0
Total Income (Incl. Non-operating) ($19,050) $133,183 $672,371 $993,515 $980,604 $966,394 $962,521 $957,923 $963,809 $968,882
Debt Service $429,020 $429,020 $0 $0 $0 $0 $0 $0 $0 $0
New Debt Service $369,350 $369,350 $569,350 $573,350 $572,050 $573,450 $574,450 $575,050 $570,250 $570,250
Operating & Capital Reserve $0 $145,581 $193,777 $221,931 $225,260 $228,639 $233,212 $237,942 $243,891 $249,988
Cost Plan Charges $25,000 $26,300 $27,600 $29,000 $30,500 $32,000 $33,600 $35,300 $37,100 $39,000
Total Debt / Other Charges $823,370 $970,251 $790,727 $824,281 $827,810 $834,089 $841,262 $848,292 $851,241 $859,238
Net Income or (Loss) ($842,420) ($837,067) ($118,356) $169,233 $152,794 $132,304 $121,259 $109,631 $112,568 $109,643
National Golf Foundation Consulting, Inc. – City of Palo Alto Final Report – 33
Reduced Rounds and Fee Sensitivity Spreadsheet
Palo Alto Municipal Golf Course (Baylands Golf Links)
Projected Total Revenue and Expense – Reduced Rounds and Fee Sensitivity (FY 2017 – FY 2026)
Closed –
only range
open
Open 8
months +
Closed 4
months
Full 18
holes open
Full 18
holes open
Full 18
holes open
Full 18
holes open
Full 18
holes open
Full 18
holes open
Full 18
holes open
Full 18
holes open
FY2017
Projected
FY2018
Projected
FY2019
Projected
FY2020
Projected
FY2021
Projected
FY2022
Projected
FY2023
Projected
FY2024
Projected
FY2025
Projected
FY2026
Projected
Rounds -0- 41,100 54,000 61,100 61,100 61,100 61,100 61,100 61,100 61,100
Golf Course Revenues
Green Fees (Incl. Cards) $0 $1,236,115 $1,658,054 $1,901,376 $1,929,896 $1,958,845 $1,998,022 $2,047,972 $2,099,172 $2,151,651
Cart Fees 0 189,100 253,400 292,400 298,300 304,200 310,300 316,500 322,800 329,300
Driving Range 155,000 215,800 289,200 333,700 340,400 347,200 354,200 361,200 368,500 375,800
Tournament / League Fees 0 1,200 1,600 1,800 1,800 1,800 1,800 1,800 1,800 1,800
Other 24,000 7,400 9,700 11,000 11,000 11,000 11,000 11,000 11,000 11,000
Total Golf Course Revenues $179,000 $1,649,615 $2,211,954 $2,540,276 $2,581,396 $2,623,045 $2,675,322 $2,738,472 $2,803,272 $2,869,551
Concession Payments
Food and Beverage Concession
Minimum Lease $18,000 $0 $0 $0 $0 $0 $0 $0 $0 $0
Variable Portion $0 $33,900 $45,500 $52,500 $53,500 $54,600 $55,700 $56,800 $57,900 $59,100
Utility Payment $18,000 $26,000 $26,500 $27,000 $27,500 $28,100 $28,700 $29,300 $29,900 $30,500
Total from F & B Concession $36,000 $59,900 $72,000 $79,500 $81,000 $82,700 $84,400 $86,100 $87,800 $89,600
Pro Shop Lease
Minimum Lease $18,000 $0 $0 $0 $0 $0 $0 $0 $0 $0
Merchandise (4%) $0 $20,400 $27,400 $31,600 $32,200 $32,900 $33,500 $34,200 $34,900 $35,600
Total From Pro Shop Concession $18,000 $20,400 $27,400 $31,600 $32,200 $32,900 $33,500 $34,200 $34,900 $35,600
Total Gross to City $233,000 $1,729,915 $2,311,354 $2,651,376 $2,694,596 $2,738,645 $2,793,222 $2,858,772 $2,925,972 $2,994,751
National Golf Foundation Consulting, Inc. – City of Palo Alto Final Report – 34
Operating Expenses
FY2017
Projected
FY2018
Projected
FY2019
Projected
FY2020
Projected
FY2021
Projected
FY2022
Projected
FY2023
Projected
FY2024
Projected
FY2025
Projected
FY2026
Projected
Salaries & Benefits $129,900 $163,800 $171,700 $178,700 $185,700 $192,900 $200,200 $207,800 $215,700 $223,900
Range Fees 31,700 43,200 57,800 66,700 68,100 69,400 70,800 72,200 73,700 75,200
Cart Fees 0 37,800 50,700 58,500 59,700 60,800 62,100 63,300 64,600 65,900
Club Fees 4,200 4,300 4,500 4,700 4,900 5,100 5,300 5,500 5,700 5,900
Fixed Management Fee 30,500 300,000 307,800 315,800 324,000 332,400 341,000 349,900 359,000 368,300
Merchant Fees Reimbursement 4,500 28,800 38,300 43,900 44,600 45,400 46,300 47,400 48,500 49,600
Contract Maintenance 218,000 927,800 801,600 812,300 833,400 855,100 877,300 900,100 923,500 947,500
Repairs & maintenance 6,700 43,700 45,400 46,600 47,800 49,000 50,300 51,600 52,900 54,300
Advertising & Publish 15,000 30,000 17,000 17,400 17,900 18,400 18,900 19,400 19,900 20,400
Supplies and Materials 13,500 45,000 46,800 48,000 49,200 50,500 51,800 53,100 54,500 55,900
Water Expense 60,000 295,000 308,300 323,700 339,900 356,900 374,700 393,400 413,100 433,800
Other Direct Charges (Incl. Electric) 41,500 43,100 44,800 46,000 47,200 48,400 49,700 51,000 52,300 53,700
Indirect Charges 65,900 103,500 107,500 110,300 113,200 116,100 119,100 122,200 125,400 128,700
Total City Operating Expenses $621,400 $2,066,000 $2,002,200 $2,072,600 $2,135,600 $2,200,400 $2,267,500 $2,336,900 $2,408,800 $2,483,100
Net Income From Operations (Loss) ($388,400) ($336,085) $309,154 $578,776 $558,996 $538,245 $525,722 $521,872 $517,172 $511,651
Non-operating
Capitalized Interest $369,350 $184,675 $0 $0 $0 $0 $0 $0 $0 $0
Total Non-operating $369,350 $184,675 $0 $0 $0 $0 $0 $0 $0 $0
Total Income (Incl. Non-operating) ($19,050) ($151,410) $309,154 $578,776 $558,996 $538,245 $525,722 $521,872 $517,172 $511,651
Debt Service $429,020 $429,020 $0 $0 $0 $0 $0 $0 $0 $0
New Debt Service $369,350 $369,350 $569,350 $573,350 $572,050 $573,450 $574,450 $575,050 $570,250 $570,250
Operating & Capital Reserve $0 $123,611 $165,805 $190,138 $192,990 $195,884 $199,802 $204,797 $209,917 $215,165
Cost Plan Charges $25,000 $26,300 $27,600 $29,000 $30,500 $32,000 $33,600 $35,300 $37,100 $39,000
Total Debt / Other Charges $823,370 $948,281 $762,755 $792,488 $795,540 $801,334 $807,852 $815,147 $817,267 $824,415
Net Income or (Loss) ($842,420) ($1,099,692) ($453,602) ($213,712) ($236,543) ($263,090) ($282,130) ($293,275) ($300,096) ($312,764)
National Golf Foundation Consulting, Inc. – City of Palo Alto Final Report – 35
APPENDIX C – PAGC MANAGEMENT STRUCTURE
With all three vendor contracts set to expire in April 2018, the City would like to explore the
implications of changing the operating structure at Palo Alto Golf Course to a management
contract. NGF has been asked to offer our opinion as to whether this type of structure would be
more effective, or produce higher net operating income to the City, than the current “hybrid”
structure that involves both a management fee and a concession on the golf operations side,
privatized maintenance, and a separate food & beverage concession.
As Economic Research Associates (ERA) noted in their 2008 Operations Review of the Palo
Alto Municipal Golf Course, the current agreement for golf operations evolved due to IRS
regulations related to the tax-exempt financing utilized for the late 1990s renovation of the golf
course. Specifically, at least 50% of the compensation within a management agreement must
be fixed fee in such a case. ERA, after doing the full operations analysis, concluded that the
current pro shop deal was “slightly favorable” to the concessionaire.
After running cash flow models under various operating scenarios, ERA concluded that City Net
Income was maximized with private maintenance (subsequently put in place) and “market rate”
concession terms. However, they also noted that “market rate”, which involved lower
concession rents to the City and an elimination of the management fee, was not permissible by
the IRS without a restructuring of the current debt. ERA concluded that, among the operating
models that were permissible within the current debt framework, the structure that is now in
place at Palo Alto Golf Course – no change in contract terms, but with private maintenance –
produced the highest City Net Income. A full-service Management Agreement produced the
second highest City Net Income.
Without doing a full operations review, NGF does not have sufficient information to critically
evaluate ERA’s analysis or to identify the operating structure that would be the best fit for Palo
Alto GC. While there are a number of advantages to the full service management contract
structure, it is also true that “no one size fits all”. There are many factors and variables to
consider when evaluating options, and it would be unfair to both the City and the current
vendors for a consultant to make a recommendation regarding the optimal structure without
being retained to do a full facility analysis. Carefully evaluating the value proposition that each of
the current vendors brings to the table would be just one component of such an analysis. For
instance, the golfer survey that ERA implemented as part of their 2008 study showed that Brad
Lozares was rated quite high by golfers, indicating considerable goodwill and “equity” built up in
the golf shop. Similarly, NGF has been told of improved maintenance conditions (as well as
considerable cost savings) since ValleyCrest was brought on.
Significant unknowns include how the newly improved facility will cash flow after being brought
back to market and “re-branded”, and how the pro shop concession agreement may need to be
altered again if the City uses tax-exempt debt to fund the construction of the golf course. NGF
recommends that the City wait until after renovation is completed and the improved facility has
been up and running for a year or more before considering a substantive change in structure.
This strategy will provide additional information that will put the City in a better position to make
an informed decision regarding operating structure (for instance, the City may find that the
improved “Baylands Golf Links” has significant upside revenue potential, thus making it
relatively more attractive to control all revenues under the management contract structure).
National Golf Foundation Consulting, Inc. – City of Palo Alto Final Report – 36
APPENDIX D – CONSIDERATION OF OTHER IMPROVEMENTS
Expanded Meeting Space
Palo Alto GC has limited meeting space that has significantly constrained meeting and banquet
business at the facility. Not being able to accommodate larger events of ±250 people precludes
the facility from competing for the most lucrative, high margin food & beverage business. Based
on the estimated cost provided of $1.7 million in 2012, and assuming the City incurs all of the
cost of the improvement, the annual debt service on a 20-year note at 3.5% would be $120,000
(rounded). In 2012, NGF has calculated that the incremental annual gross food & beverage
revenue necessary to generate $120,000 in additional rents to the City to meet the annual debt
service was more than $1.71 million, based on the rent of 7%.
In its 2008 study, ERA noted: “Based on the experience of similar golf course oriented banquet
facilities and the demographics of the area, expanding the clubhouse to accommodate special
events with up to 250 attendees would add $600,000 to $700,000 in annual special event
revenue. This rental income would justify about one-half of the cost of the improvements.” NGF
concurs that generating this level of incremental gross revenue would likely be an achievable
goal, but with updated cost estimates, this level of revenue would justify only about 40% of the
investment cost. Therefore, the balance of the City investment in the expanded facility would
have to be justified through the incremental rounds and associated revenues attributable directly
to the expanded meeting facilities. Based on current and projected average green + cart (City
share) fee revenue per round, it would take 2,000 to 3,000 of these rounds to help fund the
expanded facilities. Of course, the equation would change markedly if gross revenues accrued
to the City under an alternate operating structure.
Range Performance Center
In the table below, we provide the break-even analysis for the range performance center from
the 2012 NGF report, using Mr. Richardson’s 2012 cost estimate of $600,000 that included the
additional 6-bay range expansion. In the table below, we illustrate the number of years it would
take for the City to break even on this investment, assuming different levels of incremental gross
driving range revenue per round (gross per round was $5.15 in FY 11), the rent percentage of
62%, and stabilized rounds activity of 71,000 rounds. Of course, it cannot be determined what
percentage of range activity is a function of number of bays as opposed to rounds played, so we
chose to do a sensitivity analysis by increasing average revenue per round rather than per tee
station. Another factor driving this methodology is that the performance center bays will be used
for teaching, and will likely have less utilization than the already existing bays.
We also assume that all incremental expenses associated with the expanded range remain the
responsibility of the concessionaire, and that there will be no incremental City operating costs
associated with the new building. Finally, we assume that the City receives no lesson revenue.
Palo Alto Golf Course – B/E Analysis for Range Performance Center + 6-Bay Expansion
Average Gross Range Revenue Per Round Increase
$0.50 $0.75 $1.00 $1.25 $1.50
Incremental Gross Revenue* $35,500 $53,250 $71,000 $88,750 $106,500
Incremental Revenue to City* $22,010 $33,015 $44,020 $55,025 $66,030
Years to B/E* 27.3 18.2 13.6 10.9 9.1
*Assumes $600,000 estimated cost and stabilized rounds played of 71,000.