HomeMy WebLinkAbout0295.0911
I
--------~-----~~-----
~ ~
Hay 30, 1991
; .. ,
o
HONORABLE CITY COl~CIL
Palo Alto, California
,
ClOP COORs, CAPl:fAL PROJECT J'IASIBILlfY 8TOPY
Members of the Council:
This is an in~o~ational report and no council action is necessary.
Report ta. Brief
Staff hired Bartle Wells Associates of San Francisco to stuay the
feasibility of either a renovation or full reconstruction of the
Golf Course. 'I'be attached study conclL.'>des that the renovation
would be salf-supporting throuqh increased fees, but a full
reconstruction woulc3 not be self-supporting. staff plans to
discuss the proposed renovation with the golf constituencies and
will return to Council with a recommendation to proceed with the
project by hiring a consultant to prepare a master plan.
Backgrpun d
The Palo Alto Golf Course is over 35 years old and is in deterio
rating condition. In 1978 the City ot Palo Alto Golf Course
corporation sold $1.8 million of Lease Revenue Bonds to fina;)ce
construction and other cost~ of impr-ovements to the Golf Course.
The ilIIprovements consisted of mooifications to the Course and
construction of a new clubhouse~
The Golt Course complex: is a former marshland area. since its
inception, the Course has been plagued by poor turf and landscape
quality; accumulations of salt and other substances natural to the
area have made the growing of suitable turf grasses virtually
impossible. The problems with inherent soil conditions have led to
substantially increased maintenance costs, poor quality turf and
trees, and the majority of customer complaints~
CHR:295:91
•
o
During the last several years, City staff has been studying the
problem of growing grass for the Golf Course, the need to replace
the old irrigation system, and changes to tt.e clubhouse and parking
lot areas. These changes would accommodate the increased use of
the facility and anhance revenues of tenants and the City. To
datal ~our stUdies have been completed reqardinq the Golf Course
facUity:
o In 1986, the firm of John Brooks SOyd and Associates was
retained to facilitate a conceptual study for improve
ments. This study re.coDUllended increased parking and
seating capacity to enable tenants and the city to
increase sales and revenues, respectively.
o In 1988, Sherman, Johnson Associates completed an
evaluation of the irrigation system with a recommendation
for replacement~
o In 1990, Council requested in.formation regardinq the need
to address the ~qinq facility and the level of ravanues
and green tee rates necessary to ~tfsat all or part of
the Golf Course capital improvements.
Durinq the 1990-92 budget process and again in July 1990,
statf discussed with the Finance and Public Works
COllm!.ittee the upcominq need to address the aging Golf
Course facility (CKR:422:0j.
Staff developed two proposed projects which addressed the
soil problems by providing a sand base to enhance turf
grass growth" providinq adequate drainage and leaching of
salts and other subst~nces from reclaimed water, provid
ing for long-term economical maintenance practices, and
enhancinq the marketing of qol! operations~
o On August 17, 1990, staff issued a Request for proposal
(RFP) for a financial advisor to analyze the two projects
(see Attachment AJ. On November-15, 1.990 (CHR;S5B:O),
staff informed the Council that a financial advisor. had
been hired to prepare a financial feasibility analysis.
On January 11, 1991, staff siqned an agreement with
Bartle wells Associates. In May 199.1, Bartle Wells
Associates completed the Golf Course Capital Project
Feasibility Study# shown as Attachment B.
CKR: 295: 91 2
" .. , ,
_._------..:::::---
-.
r ••• i~ility study
The attached study analyzes the financial feasibility of two
capital projects to improve the Golf Course~ The report describes
the projeeta and their estimated cost., calc\!l~,tes potential
revenues and expenses., and examines financing options~ The two
capital projects are: 1) a full reconstruction and redesign of the
present course and addition of a sports complex at an approximate
total cost estimated by City staff of $11 million to $13 million;
and 2) renovation of the current course, at an approximate cost
estimated by city staff of $S million to $6 million~
The feasibility study shows that the current Palo Alto green fees
are approximately 40 percent below the median for the market area
and can be increased to the median in order to cover the cost ot
iaprovements. The reiU1ar weekday fee would be increased from $13
to $18 and the regular weekend rate would be increased from $17 to
$25. As shown in Table 5 on page 6 of the study, the total revenue
would increase by $.5 million, from $1~3 million to $1~8 million
annually~
The renovation project shown es project 2 could be completely
covered by additional fees. As shown in Table 9 on page 19# the
current operating revenue plus the savings from reclaimed water,
plus the green ~ee increased revenue, will cover by 1994-95 the new
debt cost and cost of closing the Course during construction. The
Golf Course operation would show a profit after that year~ In
fact# the financial advisor estimates the additional revenues would
support up to $8 million in project costs~
The full reconstruction and redesiqn of the present course and
addition of a sports complex, shown as project 1# was estimated at
$11 to $13 million. As shown in Table 8 on page 18, the operations
of the rull reconstruction project cannot cover the debt service
until the year 1998-99# and the project shows a cumulative loss of
$1.3 million by the end of 1999-2000. The financial advisor
concluded that this more expensive project is not salf-supportin9~
Kext 81;.p
The Co_unity Services Oepartment plans to sha.re the financial
advisor'S findings with the Palo Alto Public Improvement Corpora
tion and other qolf constituencies in the near futUre. After a
series of meetinqs, staff plans to return to the City council with
a reco1lllD.endation to proceed with the project by hiring a consultant
to prepare a master plan for the renovation of the Golf Course and
an appropriate financing mechanism for the project.
C!!R:295:91 3
·-~ .... ,.. :1~"
•
,
I o
'., j
~<
-'; ... Jo '-.. -,.-.
~.
o
",
'.
/
ATTACIIIEIITA .-....... -.
CITY OF PALO ALTO
pu~CHASrNG/CONTRACTING
P.O. BOX 10250
PlILO AL'l'O, CA 94303
lJQIflCI tWlTI" 'PI,ip PROPOSALa
Date: August 17$ 1990
IUIOIIDtJIIQIft'8 ,
Tbe City of Palo Alto requests a proposal for:
finAncial Advisor -Improyements to public Parks
The Proposer shall respond to all requirements in accordance with
the tents and conditions( the Project Tasks and requirements., and
schedules in Part I -II Derein~
The biclder shall be required to:
cabl agree with terES and conditions of the contract documents·
( provid! management, reports 1 analysis., pl~n9, and cosfs i .arket~~ a~ presentat10ns n accordance w~tn the proposa
clocuments; (c) be licensed with the state of California, if required, by this
project;
q!ve ~ience and financial qualifications;
.~9n the proppsali
be knowl~eable of state law and local Ordinances;
be able to meet insurance requirements;
and aut other requirements as specified.
Date proposals are due in CITY Purchasing o~fice:
3:00 p •• !! rue.4ay, 8.pt-mber 11. 1'90
The proposal and accompanying documents shall be submitted in a
sealed envelope addressed and marked as follows:
",ipaAoial Advisor -raprov ... nt. tp Euhlie parkBn
MAIL TO:
CITY OF PlILO ALTO Purchasing ~ contract Admin.
250 Haailton Avenue
PO Box 10250
Palo Alto, CA 94303
DELIVER TO:
CITY OF PALO ALTO
(Proposals are received by
Purchasing, 1st Floor, civic Ctr., Palo Alto, CA)
•
\~.r
'< .
=00;;.::..:'.,=..;..;..;.,"-'-__________ .. "--.
o o
CITY OF PALO ALTO
n'x, or COll'l"DJT';
Part I
Part II
Cover Letter
Bid Signature Page
Acknowledguent of Addend"",!_)
Instruction to ProposErs, and
Terms , Conditions
certificatiDn of Non-discrimination
Experience and Financial InfDrmation
Part III -Project Description, proposal
Require.ents, Submittal Information
DEFINITIONS;
1 pages
1 paqe
1 paqe
6 Pages
1 Page
1 paqe
7 Pages
.-Purch~Be Order-is an agreement or contract and is referenced
herei~ as P.O., Agreement, or Contract. The P.O. will include the.
Terms and Conditions of this document and all attachments,
drawings, specificationa, exhibits •
• ·Seller,· ·Consultant,· ·Vendor,-·Contractor,· ·Supplier~·
-Proposer,· -Bidder,-·Underwriter,· are synonymous herein.
*·CITY-.eans City of Palo Alto .
• -SPECIFICATIONS· or -REQUIREMENTS· indicate the
provisions, standards and criteria contained herein.
directions.,
ex" PROJIIC'l' COftACT. Gordo. Jl'or4 Phon.: 415/329-2416
Issued by:
Ken X. Haskins, Manaqer
Purchasing/Contract Administration
City of Palo Alto Civic Center
2
CITY OF PALO ALTO
1m ,xQUDU -DU X
PROPOSER'S SIGNATURE PAGE
The under.igned hereby certifies that, directly or indirectly, they
or their representatives and agents have not been collusive with
other pa.rt.i.. interested. in this request for proposal.. This·
Agreement'toqethar vi tb all Exhibl ts, and Propo sa 1 documents ~ to be
included vltb the ensuing purchase oraer aqree=ent to be issued,
shall conatitute the entire Agreement between the parties ..
Proposer is a:
________ ~califcrnia Corporation, or a
________ ~COrporation under the laws of the State of ______________ ___
with head offices located at. ____________________________________ __
and oftices in California at.-.~~~~r_r.~~~~~~~~~-------(AtEiCh addenau1D If necessary) ________ ,Sole Propri~torship, or 5
=====p,artnership (list nlmes ot partners; state which partner or partners are 2anagIng partner(sJ .. (Attach addendum) ..
________ other (Attach addendum specifyinq details).
Datea' ____________ 19 ___ _ Name of Proposer (Company)
Signature of Officer/OWner
Printed Name of Siqnatory
Title
A~ess of Proposer
Tax 1.0. lfWlber City, State, zip of Bidder
FacsiJaile NUlBber Telephone N~r
3
...------.... ' .. 7tIlo.lif#iIl ... IIIII' ... "" ........ --,,·-..... '-", .... -,,.;,-""'~-----"--
,
'".,-
o
CITY OF PALO ALTO
!RPI!IJ)VX (') -DR! 1
AaNQWLEnGgEN1' or APDENQUM (S)
Durinq the requast for proposal process there may be changes to the
RFP documents which would require an addendu.. To assure tha.t all
bicSders recel va the update or chanqe addendum, the fo llowing
acknowled9'eJ:lent and ooiqn-otf is require4.
NOTE: Failure to execute the following aay be considered as
an irregularity in the bid. Receipt of the
tolloving a~endua(s) issued during the time
of bi~1nq is aclcnowledged, and the
information contained tharein has been
considered in the preparation of this bid.
Addendum No. {lione_l, (1 __ ), (2 __ 1, 13_1, (' __ I, (5 __ 1
(Check appropriate space)
Signature of proposer
--__ r_' ____ -,-
CITY OF PAW ALTO
A. ProposAl Fpgat: As part of the contract documents, proposals
shall be in accordance with the following instructions and project
requlreaents (Part III) to receive consideration:
1.0 unless otherwise called for, tour U) cqpies of the
Proposal Foraat, typewritten or printed. in ink and. completely
filled. out with signature, is required. The co.ple.ted form shall be
without interlineation, alterations, or era&ures,' and shall be in
the CITY'. requested forms/format where the cost of all services
required are covered.
2.0 Proposals sball not contain any modification ot the work
or services to be done. Alternative proposals are accept.able when
called for. Exceptions to requirements must be clearly identified
in writing with full explanations in area provided or on additional
pages.
2.1 When requested, the proposer shall furnish
statement o~ financial responsibility and eKPerience
required proposal.
a
in
2.2 .Before submittinq a proposal, the proposer shall
exa.ine and read the enclosed documents, visit the site of the
service to be provided if applicable, and be informed. as to
all existing conditions and li.itations.
B, Interpretation;
1.C It any person contemplatinq the submittal of a proposal
.for the proposed project and is in doubt as to the proposal
procedures, such PROPOSER should contact the Manager of Purchasinq
~ contract AdDinistration~
2.0 It any person is in doubt as to the true meaning of any
part o~ the plans, specifications, or other proposed contract
docuaents, or finds discrepancies in, or omissions from the
drawinqs or specifications or scope of work, be will request that
the Project Kanager provide a written interpretation or correction
thereof ..
3.0 The proposer submittinq the request will be responsible
~or its prompt delivery. Any interpretation or correction of the
proposed docwae.nts will be .ade only bY' aadendull receiving a set or
docuaent:s. The council will not: be responsible for any other
explanations or interpretations of the proposed documents.
5
........ :"--j-~'.;~,.
:~
•
\ ,
CITY OF PALO ALTO
USTRQCTlQBS m noPOl_ UP TP"' i COJfDX'IXOJiS -PART II
C. IntereAt 9t PROpoSER: At all ti.es the consultant shall be
deemed to be an independent contractor and the consultant is not
authorized to bind the city to any contracts or other obligations.
In accepting ensuing aqreements proposer certifies that no one vho
has or will have any financial interest under the iasued Aqreament,
ia an officer or employee of CITY.
p. proposers tnterested in Bore Than On. BFP: No person" firm or
corporation shall be allowed to make or file or be interested in
more than one RFP for the same work or services unless alternative
proposals are called for.
It Add,endwp.i Any addendUD issued durinq ttle request for
proposal process shall be indicated in the RFP response and shall
be made a part of the Aqreement.
1.. Opening ot ProposAls: All RFP's, regardless of any
irregularities or in~ormalities, will be opened and only the name
of the Proposer publicly read aloud at the time and place set forth
berein.
1. Proposers, or their representatives and other interested
persons may be present at the opening and reading of all RFP'sa
2. If any RFP or security furnishe.d. therewith is observed to
be irregular or informal, the facts will be notec:l and publicly
announced at the time or readinq thereof a
G. Award or Rejection of RfP(§'j
1.0 The Contract will be awarded to the most responsible
proposer. However, any or all UP's may be rejected. The proposal
raquest may· be re-advertised or the services accomplished by the
CITY. The CITY" also reserves the riqht to waive any int"ormality or
irrequ1arity in any RFP and to award agreements on an item
(service) by item basis and, where specified or deemed appropriate.
2.0 Upon failure of the proposer to whom the contract is
awarded to execute the contract and file any re.quired documents,
the awarding authority .ay, in its discretion, award the contract
to the next responsible proposer, or upon failure of such proposer
to execute the contract and return the appropriate documents within
the desiqnated tillie, to the third responsible proposer, if any
there be.
6
\
•
•
\
----.-----
-'
CITY OF PAW ALTO
'".DDc;y:rog IV UOPOIIM 'IP Tun , COlmtTtOllB -rNlt XI
H, pisputes: In case ot discrepancy between words and fiqures
when evaluating these proposals, the words shall prevail;
provided.. however,. that the-CITY reserves the right to construe any
RFF according to ita true intent 'Where it contains a patent
mistake.
x. Wii,bdx,wal of Propp"l: Any proposer may withdraw a proposal,
either persOIUII.lly or by telegraphic or written request, at any time
prior to the scheduled c:losi.nq time :for receipt of RFP' S ~ No con
sultant aay withdraw tor 3 period of sixty (~O) days after the
time and date set tor opening thereof.
J, Indemnity; The suocessf~l PROPOSER hereby agrees to
indemnify, defend and bold harmless CITY, its officers, agents, and
e.ployees fro. any and all deunds, claims or liability of any
nature, including: wronqful death, caused by or arisinq out of
PROPOSER's, its officers', aqents' or employees' neqligent acts,
errors, or oais8ions, or willful .isconduct, or conduct tor which
the law aposes strict liability on the proposer in performance of
or nonperformance of the Agreement.
]( ~ Warr'nty:
1~O PROPOSER selected shall be required to llnCunditionally
warrant that it shall use sound and professional principles and
practices in accordance with the hiqhest degree of skill and care
as those observed by national firms of established good reputation
as well as the current nontally ac.cepted industry standards., in the
performance of services required herein. The perfonaance of its
personnel shall also reflect their best professional knowledge,
skill and judq .... ent.
2~O If any failure to meet the fore-qoing warranty appears
within the agreement period the CIT~ may terminate the aqreement
and require reimbursement of all expenses necessary to replace or
restore such services. The CITY shall be required to documellt all
such expenses and proposer's warranty for defective or negligently
perfor.ed services shall be li_itea to the cost of re-pertorming
such services.
L. Tera of Agreement; The tera of the this Agreement shall be
for -1L. months 'With renewal of the Aqreement each 12 month period
contingent on:
1.0 City of Palo A.lto COuncil approval of each current years'
budqet Which includes funds allowing the Agreement;
7
----------~~~--~~-~~-~~-~~-------~-----
o o
CITY OF PALO ALTO
D'"l'R."Cctl.QJlI J9 nOPQ81R1 pD "P"' • OOMpUlDHS ... 'PMT 11
2.0 The Vendor meetlnq the established Terms ~ Conditions of
the Aqreeaenti
3 ~ 0 The JlUtual agreement of partie.s to continue the aqree.ment
with'
3.1 satisfactory compliance by the Vendor with the
established certificates of insurance, licensinq,
peraits, and other requirements of the Agreement (RFPJ;
3.2 cost of proposal to CITY and maintenance ot price
with the cost per unit fixed over the contract period;
3.3 and mutual neqotiatlons confirming extension of the
agreement for the remaining period.
K. SUbcontract.ing: Should any PROPOSER. contemplate
subcontractinq any part of the work or services covered by the
specifications, they ahall submit with their proposal a description
of the work or service to be done under such subcontracts toqether
with the name of the proposed subcontrac.tors who shall perform any
part ot the work ~
Nt Inspection and Agdit: VENDOR shall furnish CITY with every
reasonable opportunity for CITY to ascertain that the services of
VENDOR are beinq perforaed in accordance with the requirements and
intentions of the Aqreeaent. All records, files, tapes and other
.ateriala in VENDOR's possession ~hich relate in any way to the
VENDOR's perform.ance ot the Agreement shall be available .for
inspection by CITY staff, or CITY's aqent, at any time, upon
reasonable prior notification. VENDOR shall indicate where the
various records, files, or tapes will be held durinq the term of
the Agreement.
Q. Inyoicing and Verification of Costs; The VENOOR shall be
paid out of the proceeds of the bond sale, or the VENDOR shall
submit an invoice one year after the date of the contract.
Invoices with proper documentation, reference-s, and pricinq as
outlined herein sball be aubuitted to the CITY of Palo Alto, P.O.
Box 10250, Palo Alto, CA 94303.
Attention; (Proj~ct Manager see -Coyer Letter-page 2),
8
CITY OF PALO ALTO
rIITBPptIQI' f9 Plopq'l8I lIP TIP"' I OQRpJ!tQNS -PA8T II
P, Chlnqaa; The Agreement shall not be assigned or transferred
without the written ,consent ot the CITY. No chanqes or variations
of any kind are authorized without ell signed 2.:..2.L "change orderlll or
other amendment to the issued Agreement.
0. Termination;
1,0 In the event City elects to suspend Services under this
agreement, CITY shall in vritinq, notify the VENDOR one (1) week in
advance of the suspension date; this notification shall indicate
the antiCipated suspenSion period. Any reillbursement shall be
limited to the vendor's reasonable costs incurred as a direct
result o~ the suspension and shall be subject to Verification. The
VENDOR shall resume performance of Services without delay in
accordance with this Aqrea.ent vhen &0 notified by C~TY in writing.
2.0 Either party shall have the riqht to terminate Agreement
for their convenience, in whole or in part, upon 60 days ~itten
notice. In the event of such termination, Vendor shall promptly
comply with the directions contained in such notice and shall,
subject to direction, take action as may be necessary to terminate
the services and minimize its costs and lIability with respect to
the terminated Services. An equitable adjustment in the price of
this Agreement for additional costa incurred by Vendor as a direct
result of such termination will be negotiated.
R. Taxes; Except where specifically providecJ, the proposal
price{sJ shall include all fedaral, state, and local sales, use,
excise, transportation, privileqe, occupational, and other taxes
applicable to service, materials 0= equipment furnished under the
ensuinq Aqreement or by Vendor's payroll. The Vendor agrees to
indemnify and save the CITY harmless trom and against ~ny liability
for any such taxes, or payroll premiums and contributions.
S. Governing La ... ; The laws of the State of California shall
qovern any agreements entered pursuant to this Notice.
T. Proposal I.ist; Unless receipt of this Request For Proposal
(RYPJ is acknowledged, in the form of a letter or a -no bid,· the
consultant's name may be removed from the applicable mailinq list.
Hailing lists are maintained solely as an accommodation to
PROPOSERs. A -,No Bid-response may be submitted on company
letterhead or via FAX4 Purchasing's FAX~ (415J 3~9-2468.
9
tc
•
·r
o
CITY OF PALO ALTO
QlDVer:ron fO DDPOIIM UP Tn!IA , cmm];IIog -PAB1' :r I
U. Int.lre Agreement: This dOCWtent and. its parts, exhibits,
drawinq8, And other related documents represents the entire
Aqreeaent between the parties ,.,i th respect to tlie purchase of
services, waterials or equipment which may be the subject of any
enauinq contract or agree.ent. Any conflict with thase Terms ,
conditions or any prior agreements, representations, statements,
negotiations and undertaklnqs whether oral or written are
superseded hereby.
10
' ..
,-
CITY OF PALO ALTO
Certification of Non-Discrimination
As propc8er of qooda or services to the city of Palo Alto, the fir1lll
l18ted below certifies that it does not discriminate in its
employaent with reqards to race, rellqion,. creed or national
orlqin; that it i8 In compliance with all Federal, State and local
directives and executive orders reqardinq non-discrillination in
emplopent; and that it agrees to de.onstrate positively and
agqra.Bively the principle of equal opportunity in e.ployment.
The VENDOR agrees specifically:
1.0 To establish or observe employzaent policies which
affirmatively proBate opportunities for minority persons at
all job level".
2.0 To communicate this policy to all persons concerned,
including all company employees,. outside recruiting services,.
especially "those servinq minority cOl'1llW1ities, and to the
.inority co .. unities at larqe.
3.0 To take affirmative steps to hire llIinority employees
within the company.
FirJI __________________________ _
Officer Siqninq ___________________ ~p~a~tse~; _________ _
Siqnature~. ___________________________ __
Please include any addit.ional inforDation available regarding equal
opportunity employ.ent programs now in effect within your company.
Note: Depending upon project, additional forms for Affirmativ!!
Action or related requirements may be requested. Refer to the
Specifications or Requirements (Part III.} of documents.
•
o o
CITY OF PALO ALTO
mpxpg UP "DGtIL :IRQlXUIOX -QB7 II
Experience & Financial Infonnation
The tollowil19 are examples of atateaents ot experience and
financial qualifications of proposer which are required as a part
ot the propollal ~ The intoraation is certified correct by siqnature
berein.
Name of co.pany:
.1 ~ How.any years have you done business under the name above?
2. Bow aany years experience bave you had which is similar in
nature to the work coveTed in the proposal?
3. Provide references of contracts satisfactorily completed in
the last three (3) years:
Locationof/and
IAr __ IYP""' ......... 9 ... f'-'.".Il"=i"e"' .... IL __ -'C"o"p.Ju.\r ..... "'c!Jt ..... Ms!...,llun .... t:"---'CO.,._ID! .... D~YJ.1 .. A"""'!I"llCV<x
(Please provide additional sheets)
12
•
·.
CITY OF PALO ALTO
P-OJBC'I' D1SCUH'IO'. R'OO];RPPT' Nfl) 'DUTTAL 'IDe -PART III
DIPROVEKEllTS TO Pt1BLIC PARKS REVENUE BONDS
The City of Palo Alto is located approximately 35 miles south
of San Francisco in santa clara county, and has a population
of 57.000~ It is a part of the San F~ancisco Bay metropolitan
area, which has a population of five million.
The City provides a full range of municipal services" in
addition to operating its own municipal electric, water, qas,
wastewa.ter and refuse utilities. Its schools, parks and
recreational facilities are outstanding. The City owns 34
parks totallinq more than 4,000 acres, two community centers,
a municipal golr course, CUltural Center, Community Theatre,
Children's Theatre, and Junior ~seum.
The 18 hole qolf course facility is a 184 acre complex located
on Embarcadero Road in the Baylands Nature Preserve area just
east of Highway 101. Tbe facility includes a driving range,
practice green, golf shop, restaurant, and maintenance
facility_ The L"Ulual number of qolf rounds has been in excess
of 105,O~O annually over the past eight yaars, making the Palo
A1to Golf Course one of the most popular and heavily utilized
golf facilities in the Bay Area. The attached stateme.nts
reflect a positive cash flow for the facility, while at the
same time providing very reasonable rates for users.
2. DESCRIPTION OF PROJeCT
The City of Palo Alto is considering at least tW"o possible
developments. The most elaborate development "'Would be a
development costing approximately $11 million and the simpler
development would be improvements to the Golf Course costing
approximately $5 million. Other possible developments might
be considered.
The purpose of both of the projects is to enhance community
services availability and to allow fees and revenues for golf
operations to be maximized within the golf marketplace. The
current infrastructure of the golf course is deteriorating,
pushing maintenance ancl repair costs and resulting in the
customer base potentially looking elsewhere to spend their
recreation dollars.
13
t
•
\
•
•
----. .-~.
o
CITY OF PAW ALTO
PROJIC'I' puea1nXQJI, , ,mz:rBpmll NIP 'VBJClftAL ':lao -PART I I I
The site of the golf course complex, located in a .former
marshland area, bas since its inception been plaqued by poor
turf and landscape quality. DUe to the fact that the growing
location is below sea level, accumulations of salt and other
substances natural to the area have made the qrowing of
suitable turf grasses marqinal at best. The continual
problems with inherent soil conditions have continued to cause
substantial increased .aintenance costs, poor quality turf and
trees, and are the primary cause for mos~ customer complaints.
The planned use of effluent water will intensify the problems
in some areas due to the fact that the effluent water in
itself has high sodium and salt levels. Both of the following
proposals address the soil permeability and salinity problem
by providing a sand mediWII to enhance turf qrass qrowth,
provide adequate drainage and leachinq of salts and other
substances from the efflUent water, pr-ovide for long term
economical malntenance practices, and enhance the. marketing of
golf operations~
Pr9P9sal #1 -Improvements to Public par~
The scope of this projact would entail development and
imple.entation of a master plan tor converaion of the current
drivinq ranqe area and portions of the current #~O and 118
fairways (approximately 2S acres) into a liqhted multiple
softball complex. At least three fields are proposed in this
area tor seasonal softball functions with oft season use fo~
soccer, volleyball, or other recreation activities. The
potential of lighted fields would extend operations of both
the qalf shop and the restaurant operations.
The remaining acreaqe would be re-configured into a new
cha.pionship golt course and driving range~ This will entail
complete demolition of the ~urrent golf course and
reconstruction of the site utilizing a 12 inch sand cap to
raise the site above sea level, to provide an aesthetically
pleasing playing area in an area devoid of land contours and
provide a proper medium for high use turf qrass growth to
ensure lonq term quality conditions. As part of this package,
a conceptual study completed in 1986, addressed parking,
restaurant and pro shop expansion, irrigation and effluent
water and associated landscaping~ This plan will be revised
to include additional golt cart storage, increasinq the site
of the equipment maintenance repair facility building, and
potential increases in office space as deemed necessary for
10n9 ter. qrowth options~ All redesign work will take into
consideration future work proposed for raising the levee at
,"
CITY OF PALO ALTO
DDJICT R"CI.:rnrOB. ,IOUBDDT' up '1lIK1 nAL IJaO -PMT XII
San .Prancisquito Creekw The scope of this project may entail
cloaure of the golf course and golf shop operations for a two
year construction period. Restaurant operations could
continue.
Pr0P9,.l 12 -CoIf Course Rgnoyat!on
The acope of this project will entail the development and
impleaentation of a aapter plan for complete renovation of the
golt course and drivlng range complex 4 but will retain the
existinq hole confiquration. All playinq areas viII be
rebuilt utilizinq sand base construction to raise fairway
areas to sea level or above, viII provide adequate drainaqe
and permeability for effluent water use, and will provide a
1Ilediu. to support the demands for gol.! course traffic. The
sand based fairways, tor •• terial purposes, will be retained.
Additional restaurant and qolf shop space" additional <jolf
cart parking, completion o~ qolf cart path system, equipment
aaintenance tacility expansion, replacement irriqation and
effluent water connections" and any other area deemed
necessary .a part of the mas.ter planninq process will be
reviewed.. Althouqb this plan utilizes the existinq
confiquratlon of the qolt complex, consideration viII be qiven
to potential relocation of the drivinq rallge to reduce
liability issues and alSb re-alignmant of four holes as the
future rai.inq of San Francisquito Creek impacts these areas.
This proposal could be 4COO1Lplished in two phases (front
9/baclt 9) thus allowing only partial closure during
construction and allowing 9 holes to remain open for business
operations ..
3 .. CURRENT GOLF CO!JRSE BOtms
The City of Palo Alto Golf Course Corporation is or-qanized
under the General Non-Profit Corporation L~w of the state of
California to finance" construct and improve the public
municipal qolf course of the City of Palo Alto. The
Corporation upgraded and renovated the golf course and leased
the improvements to the City for a 25 year period thr-ouqh
2003.
In 1978 the City of Palo Alto sold $1,800,000 in Golf Course
Corporation Lease Revenue Bonds, series 1978.. Attachment A
contains sections froa the official statement of that issue.
On March 1, 1980 the City paid $75,000 in principal, leavinq
a balance of $1,300,000 outstanding. The bonds have interest
rates between 5 percent and 6 percent.
15
\
"
•
·.
/
o o
CITY OF PALO ALTO
UQJBCl'I DI'l3rrtXOB, 'PI'"",,' UP 'DJKln» nlPO -PM!' 'II
.... PROPOSAL PmrTISQlENTS
a. Prepare cash flow and analysis to detenline the financial
feasibility of the project. Included in the analysis
would be eonsi~eration of:
1) The finaneial loss incurred by partial or full golf
course closure.
:2} :rhe impact on qolf tees of repayment of debt issued
to finance construction.
b. Provide advice on the timinq, structure and method of
financing.
c.. Prepare the cfticial statement and other necessary
financing dOCWDents.. coordinate and direct the printing
of Official statements.
d. Assist the City of Palo Alto in developing the paying
agent/reqistrar contract, and if appropriate, assist in
preparinq a request for proposal for paying agentl
reqistrar services.
e. Develop the mailing list of prospective underwriter{ and
institutional investors, direct the preparation and
p1aceaent ot advertisinq competitively bid issues.
t. Attend the City of P~lo Alto's bond sale to verify and
evaluate the bids and recommend award of bonds.
q. Assist with directing bond
indentures, leases M amendments,
meet the needs of the City.
counsel in proposing
and contracts which best
h. Apply for ratings from rating aqencies. Prepare the
required. submissions and develop supplementary lIIaterials,
as needed. Kanaqe the city of Palo Alto's bond sale
presentatIon to the ratinq agencies if required.
i. Manage bond printing procedures, includinq oversight of
the printinq, execution, signing,. and delivery of tbe
bonds. Maintain close coamunication with bond note
company, paying agent/registrar, and the securities
depositoryM if applicable.
16
•
,
\'
.,
-----------
/
CITY OF PALO ALTO
l&OJmCI pugtJnIOJr. !'9Il1J!1!IJP!2I' UD stllXl!'T" xJ!PO -PAU I I I
1·
It.
Aaai&t the City of P&lo Alto in arranginq for investment
of bond proceeds in compliance with California law
regard.ing inve.taent of pUblic funds, the City's
investment policies, and federal arbitrage regulations.
Arranqe tor contract with a certified public accountant
or other profeaaional for arbitraqe re~te calculation,
if applicable.
1. Make presentationa to the City Council, council
Caaaittees, Bond Counsel, and/or staff as needed.
_. Provi~. other services normally provided to clients which
relate to bond sales.
7. PROPOSAL smpqTTAL INFORMATION
The City expect. all firms sUbmitting proposals
understand. the current laws of their field.
should inclUde the following:
to thoroughly
The proposal
&. Given the information in this RPP, advice on how your
fira could best assist the city.
b. A dislJUssion of the experience and depth of your firm as
it relate. to this project alonq with similar information
regardinq the individuals wb<> would be assigned to this
account, bot..'l account .anaqer a.nd backup personnel ~
c. SpeCific experianee with si.ilar projects in which your
fir. bas partiCipated as financial advisor with an
indication of the succass achieved in arranqinq financing:
prograJOS.
4. A list of. the services which you would propose to provide
as a financial a.dvisor.
e. A standard contract for.m for 8er~ices.
f. A statement ot fees that 'Would be charqed for the
services listed in this request for proposal along 'With
any factors whicb would modify those fees if greater or
lesser services were required. The Cit.y intends to sell
·the new bond on a competitive ba6is.
11
.. \
.. ' .
q.
h.
o o
CITY OF PALO ALTO
Please indicate if your fir. will charge separately for
any travel, lodqing, or other incidentsl expenses or it
the •• will be covered in the overall Frice~
Information on the location ot offices and pers.onnel that
would be assigned to this contract and the availability
of those resources.
It your fira ia interested in providing this service, please submit
a propo.al not later than September 18, 199Q 3:00 p.m. Propo&als
and four copies must be subwitted to the. Purchasinq Division
located on the first floor of the Civic Center at 250 Hamilton
Avenue, Palo Alto, California 94301. Your proposal should be
sealed in. a package. or envelope shovinq your firm's name. and
.address -Financial Advisor -:raprovements to Public Parks" and the
p~oposa~ ~ue date. Late proposals will be rejected.
s. sgr~ON CRITERIA
The selection of the :financial advisor will be subject to
review and appro'Val by the City council and it will be basec:l
on the followinq criteria.
a. Indication of firm's tinancinq experiences with q01f
eour •• revenue bonds and other si.ilar projects.
b. organization, Size, structure, and financial stability of
tirm~
c. AqreeRent to points and compliance with the information
requested within the REP.
d. QUalifications and availability of .taff to be assigned,
noting; persons with priaary and secondary respons.ibility.
e. 'QUality of work previously performed by the firm. for the.
City, if applicahle.
t. The proposed fee relative to the services ti:l be provided.
Please include a fee schedule for this project and a tee
&chedule for services that J!ay be required for other
projects.
18
',. ~,
CITY OF PALO ALTO
DOJI(!'f DllCI"ntOW. I!IMT!DDT' UP 'UJlXlnp,L nrro -.. UT xxx
9. TlNTAXIVI SCHlQULI
Request Cor propo8al iSSUed
Proposals due.
Evaluation of proposals.
selection of fin to reCOlllllend
t.o Counc 11.
council approval ot aelection.
AUgust., 1990
September, 1990
September~ lS90
October .. 1990
october, 1990
The City of Palo Alto reserves the right to reject any and all
proposals and to accept the proposal which. in its opinion.
best serves the public interest. If you bave any questions
regarding this request or need more Intormation~ please
contact GOrdon Ford at 415/329-2415.
GF:ec rev: 8-08-90
-____ ...... , ......... ___ ~.~*~' ,,---------~--------_0'
',.
NEW ISSUE:
r-... 0
" I ',--'
-City of Palo Alto Golf Course Corporation
Me,eIl 13, 1978 $1,800,000 Lease Revenue Bonds, Series 1978
1be bonds arc ge!lel'81 obligatlons of the City of PaTo Alto Golf Course Corporatioc., but DO( 0( the City of PaIo Allo
01' or any eUler political .subdivisloD of the state. The. prlm.a.ry SOUrCC for paymect ot bonds will be rent payable by the:
city fOl' use of the JOlt course (joan«<! through issuance 01 Ixmds by this CaLifornia nocprofil corporation. The tarpa
r«Uon has DO tuing power.
BONDS DATED; March I, 1978
DENOMINATION: $5,000
DUE: Marchi, as shown below:
r~IcI ...
't'ear Mounl Rau Prict =------:=-=-=::----:;c----198O.. .. . $25,<XXl % %
19a1. .. , , 25,<XXl
1982. . . . . 2'5,000
1983, .. ' •. .. 25,<XXl
I~... . 'O:JOO
1985 .....• ,. 50,000 .
1986... .. ",,ooa
1987. . _ 50,000
1988. .. "',000
19..... 7S,000
1990 .. ... 7',<100
1991.. .. .. .. .... 7S,<lOO
YUI' hnount
=:----:-::. 1992. . .... S 75,000
1993. 7S,CXXJ
1994. . ... _ 75,!XlO
1995.. 7S,(O'J
1m ..... _ 100,000
1991.. lOO,CXX)
1m.. lOO,l'lOO
1999. 100,.000
2000 ..... , ..... 125,<XXl
2001. 125,000
1002 125.000
2t'(l3 150,000
RATINGS:
Moody', __
Standard &: Poor~s ___ _
'firfd ~
I'oi",
The bonds are coupon bonds.. regi~bic as to pcincipal oely, or fully registered bond!. with provisions for deregi.str<l
lion and reregistration. PriDcipal is payable aanuaDy beginning March I. 19BO, and interest is payable semiannuaUy
begin.rUng September 1, 1978, at the main oftke of the fisca1 agent, BW of America NT" SA., in San Fr.ancisco,
CaIifomia. and at tile offices of the corporation's p.yin,g agent in New Yorl.
Bonds maturing on or before Mardi I, 1988 (bonds numbered 1-70) are nct callable prior to matutlty. Bonds matur
ing on or after Mard! I, 1989 (bonds numbered 7! -360) are caI1able pursuant to the I.e rms sta:ed in the rr:solution,
including payment 01 a premium. Ie the e ... ent or casualty or proceedings. In eminent domain, as de5Cnbed in the reso
lution., ~ or any maturity d&t.e are subject to can Or !edemptioc without payment of. premium.
The bonds are offeted fOl delivery when, as, and :if i:s5ucd, sub~ct to the legal opinioc of Wilson, Jones, Morto[] &
Lynch, bond counsel, Sac Mateo, Caliromia, approving the varl<f!.lY of tl'1e bonds and .stating that interl";S.t on the bon&.
is CJl:empt from present federal income taxes and from California personal inc-orne tu.es under existing statutes, rtgu
tions, and court decisions.
Terms and conditioas of <he offering are furry set forth in the Official Notice (Jf SJle, daled February 14, 1979. Bids will
be rece.i. ... ed oc Monday, Marek 13, 1978 at Bartle Wens ,-\ssociales, 100 BlJsh Street, 28th F~r. San Francisco.
California, up to 1 [:OO.a.m., Pacific Stalldard Time. Bjd~ wi!lnot be acc-e-pled fM less tbal1 98.5 percent of par. Fonow_
ing acceptance of ... bid, inrormation 0.0 the bond coupons., reoffering prices, and bond ratings win be imprinted in the
spaces provided oc this pa~e,
Th.is pa.se supplements the accompanyins Official ~atemen! dated February 14. U78.
A TTACHMENT A
P9, 1 of 3
· ",,~ .
/
BASIC DOCUMENTS
T.'le following wsic docum~"ls u/ale to the City of Palo Alto Golf Couru Corporation Qffd Series
1978 bonds:
LEASE: The existing golf course is leased by the
city to the curporatio~. The C01'p<JntiO[l:5 usc of
tbe property is funited to construction of the project
and leaseback of the lmpro'ffi:S. faolity. Title to the
golf oourse vests iD the city throughout the term of
the lease. Tbe city 1101£ recelved competitive bids
and will execute construction conU'act5 for s~cifi~
improvemei\ts .and complete the project with the
COS!: thereof paid by the corporatioD from bond pro
ceeds. Rental of $200,000 is prepaid by !be .,;:vr·
poration from bond proceeds.
The leaseback leases tbe site and improvements
back from the corporation 10 the city. Base rent
wiD be sufficic.nllo ~y an bond service. when due.
AddruonaI rental. oC.O'w'tts an admlnisUati ..... e co&ts
and fees. Cdy also pays for maintenance., utmties.
taxes, asscssmen~, and required Uuurance preOJi
UMS. Lt:a:s.e coven the status of the property in thr
event of damage, condemnation, or defauh, ane:
stipulates iruuranct requirements.
Term of the lease begin~ .. ilh -d'elivery o( tbe
Senei' 1978 bonds and ends ten days .aller bonds
.arc fuDy paid, but may not exlend beyond March
1.2008.
1tESOLUTJON: The wlpOfatioll ~tabti~hes a
trust for the beoeJlf of the bondholders. The resolu
tiOD is: dated February 14, 1978, and 5Cts fortl! the
fonn of the bonds, the rigllts and duties of the fiscaJ
agent, and the co~'enants of the corporation. Bond
provisions cover the: malurity schedute, registra.
llon, deti'Yery, and redemptinn ot Series 1978
bonds, and !be ruuance 0( addition al bond,. Other
del~ils. of tbe r-=solutiOD relale to Lhe we of bond
proc:etds, application of revenves, flow and lnvcs.l.
me". of funds, other covenants ol the corporation,
and the remedies available t!l bondholders and
~aTagent
OffiCIAl. NOTICE OF SALE: Notice adopted
by roolutiOrl of the corporation on February 14,
1978, sets forth the maturity schedule and tt.trn5 o(
sale and delivery of tlle Series ]978 bonds. 80Tld
l.enIU and limitations on interest rates, ute dif
ferences, and nu mbers of COupcns are summarized.
LEGAL OPINION ~ The: bauds. ace offered subject
to tM unqualified approvir1g opinion of \viIs"Jn,
Jones, Monon &: lynch. bond counsel, San Mareo,
CaIifomi a, as to the "aridity of the bonds. Sec
"Legal OpiniOfl" in Bond sec:tiOIl .
The a/xJ",e sumrruuit:$ are offered wbjed 10 pro
liirions of the camp/de doc:umnl/S. COpi6 of the
docwmentr Me Qvailable from Bartl~ WeUs Ana
date.J upon rtqu~H priOf 10 dtdj~,t,.y ol.ht bond.f.
ATTACHMENT A
Pg. 2 of 3
!
J
<,
P.le AHo"$ city halT. compl~ In I 97(), ho~
mostcit}' departmc:nl5. Daft £ Bo)'tf' phQro.
THE CORPORATION
The City oC PaIo Aho Golf Course Corporation was
organized under die General Nonprofu Corporation Law
of the Slate of Californla. Artic1es of Incorporation were
tiled with the California Secretary of State on Seple!nber
8, 1977. The corporation was. fonned to:
• Render financial a$5istance to the City of Palo Alto by
financing, IIcquiriC.i, con.structing, and improving oil
pubfic Irlunicip.aJ golf course and reQ"e3tion facility in the
city.
• AcquiJ:e real estate in the aly; to construct improve
mcn.ts to be us.ed for pubflC go[f COUC5e and recreation
purpos.es; ,:md to make sue}] properties available to the
city.
• Promote the common 1000 and general welfare of the
city by providiag golf course facilities.
• Borrow necessary hmds. 10 pay eosts of financing,
acquiring, (:(JlUl1ucling, improving. malntaining. and
ope::ating sucb properties and facilities, IDd to issue evi
dences of indeblcdncss.
• Conduct its business and aft"airs so tnat all right., title,
and interest in the facilities shan vest in the cily when an
corporation indebtednC5S shaD have b£en furfy paid.
• Conduct its buslnc:$s so that no profit will inure or [10
cfuuibutioo {Io( assets ..... 11 be made to any member of the
corporation..
/'
The corporatio[l is prohibited from engaging in any
business or activiti~ othei" than those incidental to its
primary purpo:lOCS. The corporation was formed specitic
any for these purposes. It has no operating or firlanoa!
hi!,tory.
An directors of the corporation are residents of the
City of PaTo Allo:
ROBU:T O. D.o,VI.s, Preside1ll-r~rired civil cngin.eer,
member of Palo Alto Senior Meo's Golf C1uh; mlMtthu
of origi~aI 6ti.zemi advisory committee for gotf cou~
improlt'emcnts.
HENlI.IErTA. FEltRy -Homt-maker and resident of PaJo
Aho for 23 years; membc: of Palo Alto Womeo"s Gulf
QtJb.
G!.OflG!: HA.R.TLEY-Retired special agent, Federal Bu
reau of lnvestigation; 1977 president, Pale Abo Golf
Qub; Ptesident, San Francisco Ligf:uhoU${": fe. the Blind.
J ... N£ HAUGSF.-Rt:sid'ent of Palo Alto for 33 ye.al"S, em
ployed in teal esIate investments; member of Pato AJeo
Wem~n', Golf Oub.
Do .... N ... JossE.-Heusewife; former member of golf course
advisory committee; member of lIo'Omen's 9-hole and 18-
hole golf clubs.
The Palo Alto city treasurer is treasurer of the corpora
tiOll.
ATTACfttENT A
Pg.?"'1f3
•... '
.' .
7
"
\
L
AfTACHMENT B
OlYOF PALO ALTO
GOLF COURSE CAPITAL PROJECf
FEASmIlJlY STIlDY
May 1991
• \
o
CI'IY OF PALO ALTO
GOLF COURSE CAPITAL PROJECT
FEASlBIUTY STUDY
May 1991
BAJln..E WElLS ASSOCIATES
Independent Public Fmance Advisors
1636 Bush Street
San Francisco CA 94109
TeL 415InS-3113
,~
•
,--'
\ ,
Bartl". Wells A:sa.ociatft
May 1,1991
Independent Publk Fman(~ J\dvi<;()r5
10.\e> Bush 5tTerl
City 0( Palo Alto
2SO Hamilton Avenue
Palo .000to CA 94303
Attn: Emily Harrison
Director 0( Finance
Re: Golf Course Capital Project
F ..... "bility Study
San F rJ.nn5CQ 94 rD9
41 ",'775·_~113 f. ... X 415/77';-4123
We are pleased to present our report ana.lyzing the financial feasibility of
two capital projects to improve the Palo A!to municipal golf COUIOe.
Our report descnbes the projects and their estimated cost, calculates poten·
tial revenues and expenses, and examines financing options. Conclusions
and rerommendations are summarized at the end 0( the report. Our pri.
mazy conclusions are:
• Project 1-. full reoonsttu<:tion and redesign 0( the present course
and addition of a sports eomplex at a cost of $11 to $13 million-
is not self·su~. Termination 0( the El Camlno Park lease
would not assist project fellSlbility. While savings in lease costs
could be used as an additional soun:e for project debt service pay.
ments, termination would incur one-time buyout COSts 0( over $9
million that W<><lld ex=dlease cost ~ This conclusion should
be reevaluated if current lease terminatIOn negotiations result in
significant buyout cost reductions or if the city elects to fund such
capital costs from sources OIlIer than the golf course revenue sources.
• Project 2---«>urse renovation at a cost 0( $S to $6 million-is self
suppotting. In addition, revenue and cost savings would,support
an increase in project scope up to $8 million. .
We have very much enjoyed wodcing for the city on tills important project
and are con!iden! our report will assist in decisions necessary to proceed
with golf <ourse improvements. W. look forward to the opportunity to as·
sist the city with a bond sale to ~ improvements. We have appreci·
ated the help and cooperation of the ely staff, particularly:
• Emily Harrison, Director of Finance
• Kevin Riper, Assistant Director 0( Finance
• Gordon Ford, Manager, Treasury Division
• Paul Dias, Director, Parks and Golf Division
Very truly youn,
HARnE WELLS ASSOClATI'.S
Lora J. Stovall
US/KS:mt
~u
Kent South
" ".
.:.,:
CONTENTS
.............................................................. 1
The Project ••••.•••••••• • . • • • • . . . • • • • • • • • .• 2
Oesaiptian ....................................... 2
Project Com •...•..••..••..•.••.•...•...••..••.•.• 3
Revenue and Expenses ........................ 4
Golf Course Pin"""'ng Polky ........................... 4
CurreIII Net ReY'enue •••••••••••••••••••••••••••••••• 4
I!stinIIrM Pee !.ocreaae ~ ......................... 6
Cost S8YIDgs ••••••••••••••••••••••••••••••••••••.• 10
Course Closure Com ••..••..•..•..•..••.•••......•.• 12
Golf Course F"JJ!lUJCing Optioos . • • • • • . • • • • • .. • • • .• 14
Pederal/State Grant or LoaD Funding ., • • . • • . . • • . . . • • . • . .• 14
Borrowing MetbocIs .••••••.•••••••••••••••••..••.••• 14
BoaowiDg Com _ • • • . • • . . • • . • • . . • . . • . . • • • . . • • . . . . . •. 15
Pea5lDility AIIaIysis • Project 1 ••..•..•. '. • . • • • . . . • . . . . . .. 16
FasibiIity AtlIII)"ls • Project 2 .••..•.••.....•.•...•..... 17
E1 Camino Park Lease Option • .. .. . .. • .. .. • • .. .. . • • • . • .• 20
Conclosioo:I aDd R" ... mn!e!!darioos • • • • • • • • • • • • • • •• 22
usr OF TABlES
1. Project Cost Estimate • • • • • • • • • • • • • • • • • • • • • • • • • • • •• 3
2. lleYenue and Expense HistOl)' and Projection .••••••.•••• 5
3. Area Green Pee Comparison . Public Courses .. .. .. • • .. • .. 8
4. Comparison 01 Pees to Rounds Played • Public Courses •• • • •• 9
S. Estimated Fee Increase Revenue .••••••••••.••.••..•• 10
6. Estimated Course CIooure Com . . . • . . . . . . . . . . • • . . • . •• 13
7. Estimate 01 Debt Issue Size and Debt Service Costs ........ 17
8. Capital Proje<t Feasibility Analysis • Project 1 •••.•••••••. 18
9. Capital Project Feaso'billty Analysis • Project 2 •••••••••••• 19
10. Estimate 01 Possible E1 Camino Park Lease Payment Savings ., 21
The City of Palo Alto is located approximately 35 miles south of San Pra;1Cisco
in Santa Oara County, and has a population of 57,000. Palo Alto Municipal
Golf Comse is an 1 S.hole facilily located on Embarcadero Road in the Bay
lands Nat\l%e p,tkl'" IImI, just east of U.S. Highway 101-The facilily in
cludes a driving nmge. ~ gteen, golf shop, restaurant, and mainr.ns"",
fadIity_ The site COY'/lB appromnately 180 acres. The annual number of golf
rounds has a1Iel1Iged 105,000 over the past eight years, making it one of the
most beaviIy utilised golf fac:iljties in the Bay Area.
In 1978 the citY sold lease reY'I!IllIe bonds to fund improwments including two
fairways and five greens, relocation of the driving range, consttuction of a new
clubhouse, and other improvements. These improvemmts were based on exist
Ing _ patterns. Facilily use panerns began to chaDge in 1981 due to new
course =gemeut and oorII:eSSion VO!IIdors.
In 1986 a clubhouse upgtade study was completed and in 1988 an irrigation
system reDOVatlan study was completed The staff has also comp~ a study
of using rec:IaImed water to irrigate the course. The c:iIy already provides
water I<> the City of Mountaln VIew foe use on its ~ golf cwrse.
Since the last major course improvements funded from the 1978 bond issue,
the citY staff has prepared capital project requests in response to identified
additimal c:ow:se ~ Fo< cample, in jUepazing the 1990-1995 capi
tal improYemeat ptopam, ~ totaIiJlg appm.jmoteJy $2 million were
c:onsidered but not teeOlft!tlet!de pending further study_
CitY staff has now Plepated alternative im~ plans for the golf coune
renovation and a po.sible sports facilitY_ Bartle Wells Associates was selected
to:
• Review the city's current golf course finances, policies, and objectives
• Re-liew chaDges in golf and vendor operntions
• Review and analyze the economic feast'bilitY of the capital improvement
ahematives
• Survey <omp<uable green fees in tbe market aru
• Determine future financing capacitY to fund capital improvement projects
from golf course revenues
1
\
1-
o
THE PROJECT
Description
:rhe city provides • wide range of community services including a golf coU'se
to serve • gJOwing golf marl<et. The site of the golf cOW'Se campI"" is located
in • former marshland area, however, and bas been plagued by poor tmf and
IaruIscape quality. The site is below sea level. ""cumulations of salt and other
substances natural to the area !law rl!SU!ted in course deterioration as well as
an In<rease in maintenance and repair costs. At the same time, new or ren0-
vated counes located nearby are competing foe the same recreational revenue.
These conditions reduce the revenue potential of the course os well as the pro
shop and _ WDdars. Golf """"'" operations are genenUl'j self-supportiI.g.
The public is willing to pay h facilities with good playing conditions and ameni
tie. such as adequate perking, dnVing range, restaurant, and other facilities.
Potential fee increases and vendor rent inaeases are dependent upon facility
impIO~.
Two projeclll have been proposed to address m...e~:
Project 1 -i'IIIl Realamac:ticu of Coane and Spans CompIer The concept of
this project would '!:I1tIIil development and implementation of a master plan for
conYerS1an of approlimately 2S acres into a lighted multiple sports complex.
This complex will include fields for softball activities plus off-season use foe
soccer, vol!eybaD. or other recreation activities. The potential of lighted fields
would eneod operations of both the golf shop and the restaurant operations.
The remaining acreage would be reconfigured into a new championsbip golf
course and driving range to cotnpIete the package. This would eotail complete
renovation of the current golf course and lecotlStluction of the site utilizing •
12 inch sand cap to provide penneahle soil, raise the site aOOve sea Ieve1, and
improve golf playing &reaS-A conceptual study completed in 1986 addIessed
parldng, restaurant and pro shop ezpansion, irrigation and reclaimed water and
associated landscaping. This plan would he revised to include additional golf
cart storage, increasing the size of the equipmenl mainlenance repair facility
and potential iDcreases in office spa... All redesign work would take into con
sideration future work proposed for raising the levee al Franc:isqulto Creek
The seope of this project would entail closure of the golf course and golf shop
operations for a 2 year construction period. Restaurant operations could con
tinue for non.goJf customers. For economic feasibility purposes, capital costs
of the sportS campI"" portion of this project are separalely identified and ex
cluded from costs 10 he funded from golf course revenues.
Project 2 -Course !let&>oation Only: This project would entail the develop
ment and implementation of a master plan for complete renovation of the golf
course and driving range complex, bur would retain the existing hole configu
ration. All playing areas would he rebuilt utilizing sand hose construction to
raise fairway areas to sea level or above would provide adequate drainage and
permeability for reclaimed water use. Fairways #10 and #lB, and Greens #3,
#10, #17 and #18 were rebuilt in 1976 to current sand technology standards
and would he utilized in their present configuration. The sand hosed fairways,
2
,
\
•
l
t ,
I
I
t
•
. .' ~
. " --
,
o
for material putp<>SeS, would be retained. The 1986 conceptual study would
be revised to lDclude additional restaurant and golf shop space, additional golf
cart parking, completion of golf cart path system, equipment maintenance facil
ity expanso." repI""""""t i1'rlga%ion and reclai"""ll water connection. Although
this plan utilizes the eDsting configuration of the golf romplex, consideration
would be given to potential relocation of the driving range and also realign
ment of Holes #12, #13, #14, and #15 as the future caising of Prancisquito
Creek lmpects these artas.
This proposal could be aa:omplished in phases (e.g., front 9/back 9) thus al·
lowing paniaI operation during construction. Both the pro shop and the res
taurant would remain open.
Project Costs
Table 1 shows estimated costs foe both prop as foDows:
• Proje<:r 1 •••• _ • " • • • . • . • • . • • • • • . • • . . • .. $11,000,000
• Project 2 ••.•.•••••••••••.. _ • • • • • • • . • • • 5,000,000
These costs include the golf course portioJI. of the capital costs !IeceSSaI)' to de
IiYer reclajmec! WIll£[ ftom the city's treatment ~ to the golf coune. AD costs
attribuIlIbIe to use of !be sports eompla in l'ro]ect 1 (estimated at $1,515,000)
would be an expense of the paries department rather than the golf coW'Se, and
would be paid from genera1 funds of the city.
Project eost data has heeD. estimated by city SIal!' from discuosioos with quaIilied
golf cour.Je ",dlitects regarding current coostruction <om. Upon determination of
project feasibility, " logical next step would be deY"eIopment of • master plan.
TABU: 1 • CITr OF PALO AI. TO IiOU COURSE
PROJECT COST ESTIMATE
COUrie renoy&tfon. frrigattDn
Sand cap
Design
Clubhouse reIOdelfng. pertlng 10t
Cart path. repair facflity a~dftign
.Reclaf.ed watn pfpel Ine cost
Contingency
Est"futed total
less sports c~le. port1on (lS acres):
Margi'nol construction costs
Lights
81tachers • backstops
. Ccmtfngency
Total sparts cOlPlex costs
ftet golf course cost estiaatt
S 1,100,000
150.000
120,000
dU:RSS s 9,485,000
Project z2
11,800,000
1,000,000
5lI,OOO
1.21JO.OOO
200,000
200,000
$sJ~:gg8
1 -Rec:onfl9"'rt entire course. add .sports ctap1ex {requires. f~l1 COUMe c1oswre>.
2 -Retail exist;ng configuration. renovate course {requires only partfef
c1 oS4Ire).
3 -IncludH sports ca.plex.
Source: City RFP ona' capiUl i_pr"Oyetlent progrlll proposal llelloronda.
3
•
\
---_ .
.. --..; ...• _-_._-.. _----------
o
REVENUE AND EXPENSES
Golf Course FiMndng Policy
Wbile golf course operatioDs have been accounted for as part of the city's gen
eral I\md, the city's financing policy bas been that operation and capital ex
penses sbould be paid from revenue generated by the course. Although the
city aDocates certain overhead costs to the operation, these are not used in cal
culating net income for the golf course, due to prior council dlreotion that the
golf course should recover only direct operating: expenses and capital costs.
The approach taken by the parlcs and golf division staff is to vi2W the golf
course operation as a business entexprise. They strive to upgrade the course,
increase play, and build a reputation that will attract and retain golfers. At
the same time, the objective of these efforts is to make the course profitable.
In 1978 the City of Palo Alto Golf Coune Corporation was organized te> fund
improvements to the course and issued $1.8 million of lease """",ue bonds.
Deb!: service payments on eorporation lease revenue bonds are paid from the
general fund, but UDder city policy net course revenues must be sufficient to
support debt serW:e payments. In addition, the city bas indicated its continu
ing interest in ensming that golf course operations are self-supporting_
The city's cw:renJ: golf course finances. polides. and objectives were reviewed,
as were similar policies in nearby comparable municipal golf courses. Golf
assodations and golf participants concur that existing courses are experl=cing
growing demaDd which e=eds avai1abIe supply_ Wbile participation in the
sport is apparently inaeasiDg. golf COUISeS oem! only a limited portion of city
residems Perhaps more significantly, the golfing" population tends to be char
acterized by those able, willing, and accustomed to paying fees whicb facilitate
a self-supporting operation. Continuation of the c:urrent self-supporting polley
is the basis lor the feas1"bility analysis whicb furrows.
Cmrent Net Revenue
Golf course operations are accounted for as part of the g=er.ol fund of the city
but revenue and expense data are available from the budget and other finance
department records. Table 2 shows operating results for the three-year period
from 1981/88 tbrough 1989190, as well as budget projections for 1990/91-
Golf course revenues [Le.. green fees, pro shop, and coffee shop rent) have
been sufficient to fund aD expenses including debt service on the 1978 lease
revenue bonds.
Water costs have increased significantly. from $94,671 in 1987/88 to a bud
geted amount of $242,568 in 1990/91. Water costs are increasing as a result
of drought conditions and increases in wbolesale water rates over whicb the
golf course has no control Water costs now constitute 22 perc:ent of operat
ing costs. Further cost increases are projected due to continued drought
conditions.
For the three-year period ending 1989190, actual net revenues averaged
$206,000 per year and were approximately $160,000 in the latest year. This
feas11>ility analysis assumes that up to $150,000 of net revenue per year from
4
•
'\ , .
·' .'
./
TAiLE 2 • CI~ or PALO ALTO GOlF COURSE
REVENUE AND EXPENSE HISTORY NID PROJECTION
Actua! Adopted
Budget
1981/88 1988/89 1989/90 1990/91
IIie¥enae
6reen fees $ 923,916 $1,039,266 $1,088,250 $1.246,050
Pro shop I"l!I1t 75.000 82,000 86.000 90,300
Coffee $hop I"l!I1t 30,300 33,000 35,000 37,000
Other l,ll!!!! . l,!l!l!I l,!l!l!I
T ota 1 reYeI1ue $1,030,216 $1. 154,21i6 $1.210,250 $1,374,350
~ng Expenses r...> 1 O)'ee services S 396,515 S _ 344,980 $ 428,598 $ 449,406
Contract se",lces 48,452 411,548 4B,m 126,600
s..wHes I .. terlals 92,553 80,546 96.133 136,!IDO'
General expenses . 1,479 24,410 28,681 40,204
Facilities I equt~ 46,331 28,743 29,986 45,500
Al located dla.rges:
Wilter 94,671 132,701 186,888 242,568
Other rellbursed to city 6,575 35,826 41,182 38,533
Other.lI~ -2J.m lMli ;l§,5911 ZZ,22!
_ Total operations S 710,104 $ 726,273 $ M6,643 $1,101,935
liater cost as percent of
toto I operating costs 13.3% 18.3% 20.8% 22.0%
!let I"I'YeIIIIO before
debt se",ice $ 320,112 $ 427, !l93 $ 313,507 $ 272,415
Debt se",ice l.Y.:wZ m,2§Z ~ 1!a,11l!!
Net re ........ S 186,575 S 272,006 $ -161,507' $ 124,315
..... r of rounds 107.585 105.371 103,265 100,000
lleYenue per roIIld $9.58 $10.95 $11:72 $13.74
Cost per TWIIfI 7.84 8.37 10.1S 12.50
Cost per acre" $4,585 $4,795 $5,699 $6,793
1 -Increa •• partially due to drought recovery.
2 -Includes debt service.
Source: City of Palo Alto finance depart.ent records.
5
•
current operations could be sustained and utilized to support project debt ser·
vice. Additional operation and mainlenance (O&M) expenses would require
higher green fees.
EsIimate:I Fee lncrease Revenue
The Palo Allo golf course market area is graphically displayed on the next
page. The legend identifies public (fee) courses in the market area.
A surYeY of green fees of public roUISeS in Palo Alto's market area was com·
pleted in Pebrwuy 1991. Tabl. 3 shows the results of !hat survey. Courses
are grouped as either municipal courses 0< privalely owned courses allowing
public play. A comparisoo with a simiIa:r survey ronducted by the city in Jan·
uary 1990 shows that most ~ increased fees by aver 10 percent over thaI
period of time, with many of those increases effective in January 1991. The
city bas bistorlcaIly iDaeased green fees in August of applicable years. Table 3
also shows • c:ompari."'" of CUIreDl: city fees wi1h the median range of the mada:t
area. It clemo. KUales that the cunent fees are apptoximatdy 40 percent beIaw
the mecUm
Table " ,unpa"" ttnmds played to fees r.hatgelin 1990. Rates shown are tbloe
in efI"ect clurlng 1990 to maintain "''''1,"",biIity wi1h round!< played in the same
period, aDd are not the same as those shown OIl the most recent survey due to
sul1sequem fee increases (Table 3). CouIses are listed in descending on:er of
rounds played. SitI<:e demand is influenced DOt only by tBtes but also by course
con4ition, the table shows recent known course improvemenrs. While rID clear-cut
c:orttiation is shown, it appears that municipal courses which are either new or
recently implOYed could successfully charge up to $25 and sti1l achieve anum·
ber of rounds dose to capacity. By cxmttast, Shoreline (aty of Moun!ain View's
municipal """"") has • policy of high fees frx nonresidents. While rounds
p!ayed are significantly below course capacity, the city in<tirates that !OW green
fee In<:ome is apptoximately $1.6 million per year compared to $1.25 million
in palo Alto. The City of Mountain View estimates that only about 27 percent
of play is by residents, even with a SO percent resident discount.
Marlret demand is affected DOt only by fees and comse <ondition, but also by
the number of golfen and IMIilabIe COUJSeS. National Golf Foundation research
indicates that the nwnber of golfers in the United States grew from 14 tniIlion
in 1978 to 23.4 million in 1988, and is projected to grow to 30 million by 2000.
In Palo Alto's marl<et area, while population had inoreased, public golf course
supply bas """ kept pace. A 1981 marl<et SUIVey of public COUISeS in the San
.1<loe marl<et area indicated a course demand of 25 in 1990 but 8 supply of only
18 courses. Development pressures have resulted in closing of some public
courses in this market area (e.g~ Oakridge and Hillview in San Jose an<! Fair·
way Glen in Santa Oara). New public course development has not met the de
lII8Dd. ThIs cIemaod is verified by the number of courses shown in Table 4 with
rounds played at or near capacity (approximately 90,000 to 100,000 pet year).
6
•
, ,
~ .
i
,
,
.; ~ , ,
I
•
.-
...... -------........ _----------
8outtI"'~
0..:."': I r=
.. "'" . •••• 1 .,
• • •• 1 tQ,I
I •• Ie •
..... 1 •
....... 1 ID
....... , 4C
• • '" •• 1 eel ........ 1 lei · "'",. . ••••• '" 4A ........ a •
... 1 ... Ita •
1 ••••• 14 10
........ 11 4C
• ..... 11 ID ""~ ".,. ....... tr 10 ••••• \1 Ie .. , ..... t. .
I ~.... •
7
.......• 11 .......... ......... I.
I ... .
"" .. . ...... -
I ....•• 17
.... I ..... .. I I.
I I ••• ....... at
•• I. I •
I ....... _
I • I ••• .1& ......•
I ••••• _
I ••• I •••• S7
!t
i
7D
I
ID • •
8
'=-...... ~----------.. ---
,
..•...
TAlILE 4 • CHY Of PALO ALTO GOLf COURSE
COIU'AAISON OF fEES TO ROUNDS PlAYED· PUBLIC COURSES'
Course
Santa Claro Golf Cl"b
San Jose lUIiclpal
ralo Alto Municipal
San Mateo
Santa Teresa
$ijnnyvale Municipal
Crystal SpM ngs
~rlng •• 11.y
R,verside
Shoreline
s..-it Point Club
1 -1990 diU.
Location
Santa Claro
San Jon
P.l. Alt.
San Matoo
San Jose
Sunnyvale
Burling_
Milpitas
San Jose
IIouI1tain View
Hi Ipitas
2 -fall (nonresident) rate.
3 -OngoIng.
New 1985
1989
197&
nla
1988
1989'
1987
1989'
n/a
1988
1990'
4 -_ 1101" under construction in 1990.
Roonds ~ WeeIa!nd
Played Rate' Rate'
110,000
107.017
101.018
100,000
98,000
88,SOO<
85.000
82,000
80,000
65,000
63,859
$14.00
16.00
13.00
9.00
17.00
13.00
33.00
15.00
15.00
29.00
18.00
$20.00
22.00
17.00
11.00
25.00
17.00
38.00
20.00
20.00
38.00
25.00
Source: tallfonia State ~t_bl1e AssocIatIon, 6<dd. tD Northern C.I
fforDl. Golf Courses; City of Pal. Alto survey of 9reen fees,
January 1990.
In light al matIcet demand conditions, a fee increase up to the median should
DOt reduce rounds played if facility renovation results in an anrattive and com
petitiYe course compared 10 similar courses in the market area. The dty
course already has a high degree al difficulty, due in some measure to the
Iengtb aDd configuration of the course. The total land area is approximately
180 aaes. Mally comparable marl<et area public courses are built on sites of
ocly US to ISO aaes.
Survey statistics and rounds played at Palo Alto and compara"le cour.;es indi
cate that __ marl<et demand is high. Either proposed improvement project
wiD resaIt in a course that should command at least a marI<et median fee.
I'roject 1 would, in addition, provide a more attractive course in that the entire
course s:mtge would be improved. "'" just the playing areas [Le., fai:ways and
greens). ~,the COUISe resulting from Project 1 would probably no! com
maDd sjgniIirantIy higher fees than the renovated COW'Se resulting from Project 2.
This feasihility analysis 8SSUIIleS that the dty can raise fees to the median rate
upon rompletion of either project. Table S shows the detail of the proposed
fee im:rease by category for an increase in green fee revenue of $508,000, or
41 pen:ent allove the rewnue that would be generated by 1990/91 fees. The
feasibility analysis projects increased revenue of $558,000 at course opening in
9
•
·.: .
o
TABLE 5 • CITY Of PALO ALTO GOLF COORS E
ESTIMATED fEE INCREASE REVENUE
Cur,..,nt Estillirted
Rate Categ"ry Rounds Rate Revenue
IIeetda1s
9 holes 3,000 S 8.00 S 24,000
18 holes 38,000 13.00 494,000
Junlor!senior 9,000 10.00 90,000
Twilight 15,500 8.50 132.000 .... _.
9 holes _ 3,000 9.00 27,000
IS hole. 23,SOC 17.00 400,000
Twilight 5,000 1J.00 55,000
Pl~
Sen! or (275) 3,600 50,00 17,000
Junior (175) --1..!ll2 40.00 Z,!lllQ
Total 102,000 $1.245,000
Increa~ rnenue at course openins"
1 -To -.dian rate shown in Tabl. 3.
o
Future COl.lrse
Increased Esti .. ted Increased
Rate-1 Revenue Re\lenue
$11.00 S 33,000 S 9,000
18.00 684,000 190,000
14.00 125,000 35,000
11.50 178,000 45,000
13.00 39,000 12.000
25.00 587,000 187,000
15.00 75,000 20,000
80.00 22,000 5,000
55.00 la,!l!lll M!!!!
$1,754,000 $508,000
$558,000
2 • AsSUieS I 10% imflationary increase after two-year constructio"
ProgTu.
1993/94. assuming • 10 pe=nt infIatio:wy adjustment for W11lpi1able <0=
during • two-year construction perlOO. In addition, the city should be able to
increase revenue from pro shop and calfee shop rentals through contract neg0-
tiations that recognize greater income potential.
Cost Savings
ReclajrnryI WIIII!r Use: Tallie 2 previously showed that water costs for the golf
coune have increased signifiamtly. In 1990/91 such costs are estimated at
$243,000, 0< about 22 percent of total operating c:osts. Potable water rate
increases adopted by the San Francisco Water Department for sale to wholesale
clients tike Palo Alto in 1990/91, and further increases under consideration,
could signftkantly increase the price of po'.able water. Perhaps more impor
tantly, if the current drought continues, inigation water from existing sources
may be UII3YlIiIabl. or higbly restricted.
10
-------
, "
The city needs 10 find areas to dispose of its swplus effluent water from its
wastewater lleatlllt!U! plant. The effiuent meets state standards for an reo
claimed _ ilrigatian uses. The city cutrentIy delivers reclaimed water to
the City 01 MOUDtain View for its Shorelin<! golf c:ourse and will S<lOIl begin to
use reclaimed water on Greer Park. Approximately 15 years ago, during the
previous clrougItt, reclaimed wakr was used at thl! Palo Alto golf course fa< a
short period. DeIM!ry was stopped due to inadequat~ supply llnes and salinity
problems with the turf.
I!.eceDt oonsu1tsnt tests 01 soil and water at the course indicated that a blend~
IDg process would make the reclv""", water satisfactory fa< use at thl! golf
coune. PurdIer, th< PaRs and Golf Division Dinctor bas indicated that the
ptoposed roune reaovatians, wbiclIlDclude • 12-inch sand cap, will reduce the
rloks invoMd 10 ~ quality through use of =laimtod water. Careful
moaitorlug ollldU8l use will be required to avoid tuIf m.intensn.::e problems.
• Capital Oem: A water quality control plant analysis io 1990 indicated
that a pclaimed water pipeline project would cost approzimateIy $300,000.
The timefi'ame Iix such • project is estimated at 12 months from design to
compIetian, wI!idI is less than the timdrame '" complete eilher golf course
proj<ct. '!'be fadlitleo De ... ary to .... ble the golf cowse to use reclaimed
water consist 01 • pipeIioe from the adjacmt wast~ter treatment plant
to the golf course, and • blending well or tank and booater pump on the
golf ~ The city bas induded this ptOject io its p"'posed 1991/92 alp
ltaI impto'dI>eiIl program. Savings will bqin jmmedjately upon completion.
• Clp'.a'; .. Oem: R ... lajmed water use savings are diffkuIt to estimate.
Saviop are laIgeIy dependent on the following policy dOOsions:
• lllend 01 poIBble and reclaimed water (! 00% reclaimed YS. blend)
• Price 01 reclaimed water to golf rourse (if any)
Assuming c:ur=t policy direction [Le., 100 ~t reclaimed water use,
%eft) cost \0 course), annual savings io water oosts 01 up to $250,000 from
" the 1990/91 budget c:ouId be achieved through use 01 reclaimed water.
Potential savings in future years could be ...", greater due to projected
drought-related potable water rate increases. The total cost savings would
be reducm dt!e \0 some increase in th< COS! of eIectric:i!y Iix pumping (esti
mated at $16,000 per year by thl! utilities department).
1llq .... Ii'iiie Ccm!rI:lI: Table 2 ref!~ actual :lata through 1989190 and
adopted budget data Iix 1990/91. Budgeted expenses for emp~ seMces
plus supplies and materials are significantly bigher than .... -rua! ezpenses due to
expenditure control measures adOpted by thl! gclf course to JIll!S"r"" profitable
operations. Similar cost reductions are DOW anticipated for 1990/91. Expen
diture reductions are estimated at $70,000 compared to budgeted. expenses.
11
o
Savings Prom All Soun:es: Maldmum BllIlWII savings from all sourtes above
are:
R.eclaimed water .•••.•••••...•..••.•.••••••• $250,000
Expenditure oonuol .......................... 70,000
Pumping cOOlS .. .. .. • .. .. .. .. .. .. .. .. .. .. ... () fi 000)
Total .................................... $304,000
This Ceasibility analysis assumes $300,000 net annual cost savings as a reason·
able estimate pending reclaimed water blending/pricing decisions.
CouDe Closure CosIs
In addition to project costs, economic feasibility of the projects is impacted by
dlsruption of operatiODS for a period of up to two years under either proposal.
lbe fist=s below summarize the estimated net cost to the ciry due to such
closure based OD budgeted 1990/91 expenses:
• Project 1 ................................ $962,000
• Pro',J«t 2 .••••••.•.••.••..••.......•..•.. 704,000
Detailed closure costs are shown in Table 6 and discussed below.
I!wj:1k>jte Servic= Under either pl<>ject assumption, the ciry shouId attempt
to keep employee expenses to a mWmum during the construction period and
reduce staffing by attrition.
Assuming either pl<>ject proceed5 within one year, projected attrition rates and
existing Vl!I:JIDI:ies suggest a maximum reduction of three positions (out of
eight) for full cmm;e closure. PartiaJ operation will require more personnel;
• reduction of two positions is assumed.
O!her Operaring EzpePses: All other operating OOOlS except allocated costs
would be e1imin.ated during the two-year full-closure proposal and it is esti·
mated would be red~ 50 percent during partial closure. Continuing allo
cated COOlS of $30,000 per year are assumed as wclI as 50 pm:ent of current
water costs for partial closure.
Business Imm uption; The city bas existing contracts for both the pro shop
and restaunmr/ooffee shop. The pro shop lease is Iong·term (with silt years
remaining), while the restaurant lease bas been on a month·ro-month basis
pendiDg a master plan and • decision to proceed. Further, the pi<> shop would
suffer a greater degree of business interruption under either project proposal,
while the testaurant would still attract some non·goIfer·associated business.
Both operatOOi are aware of potential faciliry improvement plans and have
indicated their willingness to support the plan fiDandany to create a better
operatioD in the future. Table 6 assumes a cost to the golf course of $25,000
to $50,000 paid to the golf professional foc setVices during project construe·
tion. ActoaI business intemJPtion costs will depend on negotiations with the
open!tors.
12
•
F
TABLE 5 • cm Of PALO ALTO GOLF COURSE
ESTlMT£I) COURSE ClOSURE COSTS
full Partial
Sud 9·ud Cl o~ure ~,..tlon
1990/91 (Project I) (Project 2)
ExpeDses
$ 449,000 $275,000' $325,000> Ellployee servfcH
Contract ,"rvices 127,000 64,000"
Supplies , .. t~ri.1s 131,000 69,000>
General exptn,. 40,000 20,000"
Facilities' equipoent 46,000 000"
Allocated costs (including water) m,~
Total OIH costs 1,102,000
Debt servi co 146,000
Suslness Interruption:
Pro shop
Coff .. shop
SO,OOO 25,000
Toul exponses 1,2SO,OOO 499,000 822,000
Rev .. ue
Green feH 1 .. 246.000
Pro shop , restaurant rent IZII,ggQ
Toul 1,374,000
£Sti .. ted net loss due to closure 481,000 352,000
)
rotal for 2-year construction period $962,000 $704,000
1 -Reduced by three positions ti1rough attrition by start of construction.
2 -Reduced by two positions through attrition,
3 -50% of f.ll cost.
4 -SO% of full water cost plus allocated costs of $30,000.
5 -30,000 rounds at ayerago reYenue of S14.
l.-RnoeaIIe: Estimated revenue !osseo shown in TobIe 6 are b8sed on cur·
rem: green fees and 1990191 budget data. FOI' partial ~ the padts and
golf division director estimates 30,000 equivalent full-time rounds per year.
The estimated revenue loss Is based on the c=t average rev=ue per round.
Continuing revenue includes an estimate of restaurant and pro shop rent.
Even during full course closure, some rental income is apected, on the as
sumption that the restaUrant will remain open for DCn-golfer business such as
lunches for nearby cammerciallocatiODS and for dinner.
13
,
H ~ , , GOLI' COURSE fiNANCING OPTIONS
. Federal/State Grant Dr" Loan Funding
The Federal Bumou of Outd:>or R«reatioc bas been making matching-gnmts to
states and through tI=n to municipalities for the planning, acquisition, and
cIeveJopment of public recreation areas which include golf courses. In Cali
!omia, this progLam is administered by the state parks and recreation depart.
ment. DiscussioDs with the department indicate that grant funding for the golf
course project is DOl: probable due to limited funding and project priority cate
gories. Po< example, in the fiscal year ending September 30, 1991, grant fund
ing for the state is as follows:
• Statewide _ .•• _-." -., _,._. _, _,,_ -. • __ .. _
• State proj~ . '. __ , , • ___ ' _ : : •. _ . __ , • , , . __ . , •
• Nonbern CsIifomja IDUD1Clpalities '.,.,.,',. __ •.
$3,OOOJ OOO
l,200J OOO
642,000
There are 38 funding categories, and golf courses are low on the priority list
due largely te> the limited public setvec! and their fee generating capability.
I'urtber, the awrage grant project is only $50,000. Such gnmts also include
st:ringettt conditions that land remain in recreatioDaJ use in perpetuity. For
example. expansion of • r<'!taurant into a previously designated recreation area
would require substitution of an equivalent amount of land for reaeationaI
pw:poses.
NJ part of its r<dajrned water project, the city has asked its engineering con
sultant to pursue state loan funding, ItJ. this point, the ranking of the city'.
project on the state loan priority list 0< the waiting period for such loan, if
any, is not mown.
The feasibility analysis assumes that no federal 0< state gnmts or loans are
available to assist in financing these golf course projects.
Borrowing MedJods
Either golf course improvement project will result in operating losses during
partial 0< full course closure. In ac!c!ition the city will need to borrow to cover
the cost of construction, and will incur significant new debt service costs.
While the city has a variety of techniques available for ~wing for capital
projects, the appropriate method in a given situation depends on the type of
project being financed. the staMOty powers of the city, the beneliclaries of the
project, and the c:redit pledged for repayment. Some of the basic borrowing
methods available include:
GeueraI ObIigmion IIoDds: Traditionally, general obligation (GO) bonds have
been a major SOUIt:l! of capital furnIs for public agencies. GO bonds are se
cured by the issuer's power and obligation to levy property taxes, without limi
tation as to rate or amount, for the payment of bond service. Because of this
unlimited taxing power as security, GO bonds have tnIditionaily been the least
costly form of public borrowing,
14
•
" J;:
----------'"'---
_.'
'I'M city could issue 00 bonds for this project, with app.l'OVll! by two·thirds 0(
the voteD at an ele..-don. They ~ goneralIy required to be sold at par by
c~bid.
WbiIe 00 bonds are straiglufo<ward 10 issue and administer, and bear the low
est rate of inten'St, • two-thirds voter approval requires • publicly popular
project with grassroots suppon, or an optional project which the city will pur
sue only with voter approvaL WbiIe the golf course project might receive the nee:, Illy voter approval for general obIiptioD bonds, the feas:ibility study
assumes that an alternate borrowIng method will be used.
a--JIoDds: A revenue Ixmd is secured by the power to generate DOn·_
revenues. Palo Alto can issue revenue bonds under its ciry charter by adoption
of • procedural or-dinanu. This approadl has been used for revenue bonds
secured by utility tew:nUes. Revenue bouds should be distinguished from lease
reYelUe bonds, s:uch as those issued by the city in 1978 for golf course im
proVi!XlM!ilt£. Lease revenue bouds are a funu of lease filWldng, discussed
below.
'I'M source 0( payment for debt servke on revenue bonds is revenues from the
enterprise being /jlll"'C,"" 1bese revmues must be predictable and depend
able. The city must be able to demoosttate not only that the revenues are cur
rently sv/Iicient 10 meet an of the obIiptions of the enterprise, but also that
the city can generate additioDaI m'I!IIlH! as needed. In other words, if the city
inc:reaseo the applicable nttes, its reYemIes will ~ coaespondiDgly. This
Is true of s:ueb nnmicipaI utilities as water and sewer, and gas and electric: in
Palo Alto's c:ase. [t is DOt true 0( revenues from recreational facilities. If Palo
A110 inaeases its green fees, golfen; may go elsewhere or may reduce their
play so that additioDaI revenue is DOt in filet produced.
The net result is that" while golf course revenues may appropriately be applied
to the payment of golf course apenses, including debt service, these reveaues
do not have the revenue characteristks needed for revenue bond /jnAncing.
TraditioDaI ~ bonds would be limited to instances in which the projected
revenues so greatly exceed debt service payments that the risks posed by un
enfon:eabIe revenues are very smaIL
Lease pj'W''' jllg. 'I'M traditional method in Ca1ifomia for financing projects
wbic:h produce revenue but do not have the revenue c:haracteristks necessazy
to support revenue bonds is lease financing in one of its forms. Lease financ
ing includes """profit corpotatioD bonds, s:uch as the golf cou= corporation
financing In 1978, and certificates 0( participation.
In a lease financing for • project s:uch as this, It is expected that payment
would be made from golf course revenues, but in the event golf course reve
nues are not sufficient to cover an of the expenses of operations and debt ser
vice, the city would agree to make payments from other city revenues. Tbis
approach provides the ne<eSSaIy security for the financing.
15
•
\.
'-'
-
"
::':;;;~;.i!o;.. ____ ,;;... ___ ._, ___ .. \.. --
o
In • lease financing, the city enters into • lease for specified facilities and
agrees to make • stream 0( lease payments necessary to IinaDct! the facilities.
With a nonprofit torjlOI'ilIion financing, the nonprofit c:o<j>OAtion sells bonds
secured by the city's lease payments. In. certificate financing, the city,
through • trustee baDk, sells shares [Le., participations) in its obligation. The
city makes debt servi<e payments to the tnlStee baDk, which in turn pays inter
est and principal to the awnen 0( the bonds or c:ettificates.
Lease financing., particularly using certificates, is a very popular finandng
~ in california fo< • number of reasons. They a'e easy to issue and ad
minister. They tan be payable from a variety of revenue so=:es and can be
3ttuetured to c:onfoan to the city's revenue soun:es. They can be paid from
facility revenues, property bill", interest, contract paymenG-Wbatover rev'I!
nue sources are awilable. California has • strong' legal basis for 1ease financ
ing of various types, including COP's.
s.. Ulry: The golf comse serves only • limited portion 01 city residents and
may DOt secure a rwo-tbirds vote necessary for • general obligation bond.
Also, golf = """"""'" are not enforoeable as is generally required for a
revmue bond. The most appropriate borrowing method is some form of lease
financing secured by the geDOI3l fund, but ell" h.l to be paid from golf course
MI'en1J<:S. The precise fcnn of borrowing may be certificares of partldpation
(COP'.) or lease revenue bonds issued by the existing golf COUIR nonprofit
cmporalion. The strUCtUn! and security pledge would be comparable to that of
the 1978 Golf Course Corporation lease reYenUe bonds.
Borrowing CosIs
Table 7 shows the estimated cl<!bt issue size and annual debt service payments
fa< both projects, based on curteIlt market interest rat... It assumes a net
interest rost of 7.5 percent. Interest payments during a two-year construction
period would be paid from issue proceeds. Annual debt service totals for years
3 through 20 are estimated at $1,331,000 for Project 1 and $605,000 for Proj
ect 2. The reserve fund balance would be applied to the final debt service
payments.
Actual costs will depend on interest rates and terms and conditions of the debt
instrument when the city is ready to proceed with the project.
Feasibility Analysis -Project 1
Table 8 shows an analysis of Project 1 feasibility for a nine-year period. The
analysis includes the fonowing revenue soun:es and costs discussed above:
• Net revenu~ curr:ent operations
• Operating expense $8vings
• Revenues from increase in green rees
• Genera! fund rontn"bution (or sports complex portion 01 costs
16
•
\
•
" " ,
,
TABLE 7 • CITY Of PALO ALTO GOLf COURSE
ESTINATE Of DEBT ISSUE SIZE AND DEBT SERVICE COSTS
CGnstructlon fund
Reserve fund (10%)
rssuanc. costS/discount .llo •• nce (3.75%)
Net constructloD 'nt~rEst cost
rnterest •• ralng. (1.0%)
Estl .. ted debt Issue size
Annual debt service (20 years, 1.5%):
Construction period (first 2 years)'
Years 3-20"
1 -Paid fro. issue proceeds.
Project 1
$11,000,000
1.391.000
525.000
1.970.000
f9?2.0QQ)
!l.970.000
$ 1.331.000
Project 2
$ 605.000
2 -After reserve fund Interest earnings (1.5%). Final year's debt
serY~ce paid fro. reserve fund.
This 8D8lysis furtber assumes tha! median green fees will continue to Increase
in respouse to intlarionmy and ma.tl<l.t pressures. Table 8 reflects a fee in
crease 015 pet<ent every year.
Project 1 costs <aDIlOt be fully funded from identified """"os. The project
wou1d ~ a net cost 01 appro:mnately $139,000 in the first year of opera.
tion IS well as 0 loss during the two-year full-closure period of $962,000. The
cumuls1ive loss in !be year 1999/00 is estimated at $1,300,000.
Feasibility ADaIysis -Project 2
Table 9 demonsttates the feasJ.'bility 01 Project 2. Net annual revenue 01 over
$400,000 woe!<! pay debt service far an additional $3 million 01 project costs.
In summaIY, revenue and cost savings identified in this analysis could suppon
up to $8 million in project costs. This net reV"llue margin anows for consider
able variation 01 actual results from assumptions.
Since Project :I does 110[ include a sports complex, the analy>is does not in
clude a genera1 fund transfer foe the $183,000 01 debt service costs associated
with the spocts complex capital costs ($1,515,000). All 0Ihet assumptions
listed in the Project 1 analysis apply as well to Project 2, namely, revenue
sources and costs as fi>llows:
• Net revenue, current operations
• Operating ~ savinp • ~ues !rein mcrease m green fees
• Annual inftationary green fees increases at 5 percent
The project wouJd result in Del operational revenues in the first full year 01
operation otapprozimately $404,000. Cumulative net revenues (after closure
period 10sses 01 $704,0(0) wouJd begin 10 acaue in the second year of operation.
17
•
'-
/
/ • I •
I
TABLE 8 • CITY or PALO ALTO GOLf COURSE
CAPITAL PROJECT FEASIBILITY ANALYSIS
PROJECT 1 • FULL COURSE RECONSTRUCTION, $11.0 MILLION
19'1l/92(l) 1"Zi"](1) 1993/94
5alrcI! of _/mot "y\ncjs
""t _. <'IIlTI!Ot """r.tim (Z) 110.000
OperatilYi __ savinoa ()} 300.000
Gn!aI feo Increooo (4) 558.100
Si>Ot18 <DIP!"" IX>rtiCII of _ oelVi"" (5) 183.000 ---
'lbtal avai lable 0 0 1.191.100
1I0oI debt .. moe mots (6) 1.311.000
Q:Jurse clOSllre' l'CfItB 481.000 481.000 ---
(481.0II0) (4Bl.0II0) (IJ9.D)}
1994/95 --
110.000
D).OOO
586.'lIlO
18].000 ---
1,219.100
I.Jll.OOO
---
(111.:m)
., ... ,.,._.',,,;o,~."o~"_·;j-:;:"",.', .:... ___ _ -,;.~T,~''-~' --;. '\19' ~ ';'''.~ i
1'l'l5/96 1996191 19'11/?11 1998/99 1999/00 ---------
150.000 150.000 110.000 110.000 150.000
D).OOO 300.000 :m.000 :m.000 :::00 616.000 646.100 6'/9.100 71J.lOO
183.000 18.1.000 183.000 183.000 183.000 ------
1,249,000 1,219,800 1.1IZ.11IO 1.346,100 1,381,800 ,"-1<
1.3)1.000 l.lll.OIIO l,311.COO
;._ r.
1,1l1,exn 1.JJ1,fXO "
------
(IZ.OIIO) (51.200) (I8.900) 15,1('0 50.800 I : ""t avai!./(mot} • Nrl'ent yoar
; Not ayail./C,,",!} -ruIIIlativo (al.OIIO) (!JI;2.0II0) n.1O!.D)} (1.212.500) (l.294.500) (l.J45,'lIlO) (1.164.600) (l,J49.500) (l.298,'lIlO)
II) (bJroe cloool
(2) After mati1l9 debt get\'i~ Pftl'll!llt
(]) Uae of recl~ wter '" eq:m:ti ture o:fItrola
(4) IncreUod to ..... lII!dian rat .. initially mI ~ ""'I)' \'MI' thoreotter
(51 Tr.1nsfOf f"" 'l"ftI!I1ll flllJ!
(6) \bits poid Ira. IsmIe (capitallZl!ll int ..... t) .... \ncj cmotn>cti ...
o
"
,I
,
I
I ,
/
/
.'
"
l
•
TABLE 9 • CITY OF PALO ALTO GOLF COURSE
CAPITAL PROJECT FEASIBILITY ANALYSIS -PROJECT 2
PROJECT 2.-COURSE RENOVATION, $5.0 MILLION
1991192!11 l~l(l) 1991/94
IbIrce of _/aJllt HViIl'j8
Met _, .......... t qJeratim (2) 150,000
q.er.tlng _ sav1JIgs (l) 300,000
Cmoh r.., u.c....... (4) S58,800
Total .v.llab~ 0 0 1.008.800
""" debt """,I", ""Is (S) 605,000
Q::ane clQllllh! ('(IJU lS2,OOO E,OOO -Net avail./(etat) -aarrent ~r (]S2,OOO) (J52.000) 400.Il00
Met ... 11./("""t) -t'IIIllati"" (J52,OOO) ("104,000) (300.200)
!II O>lroe cl<O'd
(2) Aftpr mcistihq dE!bt service pa~t
(l) \Joe 01 roclaHRI .. ter , • .....,.u.ture <'mtrola
(4) _ to ..... oodian rat .. initially MIl ~ ... ry year _tor
(5) OBt. poid I.,., i ..... (capitalimd int ..... t) during (XIIBtnaim
L .'.",
19'14/')'; ---
150,000
300,000
Wi,1OO
1,036.'100
605,000
---
411,100
lJI,lOO
;--:-0,' n""_"'","'-""'<;""-'...~'~
1995/96 1'196/91 1997/98 1~ 1999/00 ---
150,000 150,000 150,00(\ 1!1O,ooo 110,0
300,000 300,000 300,000 300,000 300,000
616,000 646,800 6'19,100 'I1l,IOO 148.(100 ----
1.066,000 1.096,800 1,129,100 1,163,100 1,198,100 1'" 605,000 605,000 605,000 605,000 60'>,000 . . .
1, __ ~l
------------• "
461,000 491,800 S24.IOO So;a.IOO 59J,WJO m,sco 1_084,300 1.601!!1,400 2,166,500 2.16(),300
'\~ •
()
.. ) :, '
.'
•
,
o
HI Camino Park Lease Opdon
Separale and .part from golf c:ourse capilal budge! discussions, the city real
estate division is pmsuing alternatives to Its EI Camino Park Ie8Sf! with Stan
ford University (lessor) In an effort to stem rapidly ~ lease payments
which are based on increasbg appraised values. The city is contractually com
mitted to an qreement In which the lease paymenb exceed the benefit gained
from use of !he pari< si[e-Total lease paymentS of approximately $500,000
per Y"'" are currendy included In !he parks division budge!. Approximately
$313,000 of tbat payment is applicable to the portion of !he lease devoted to
parl<s and open space purpose$-Since the sports complex Included In Proj-
ect 1 could be used as an alternative [or current recreational uses at EI Camino
Parle, applicable lease savings and costs were reviewed and evaluated as a
SOUl1:e of additional funding for Project 1 costs.
Table 10 demonstrates projected lease paymentS applicable to !he parcels dedi
cated as parIdand by a 1965 vote of city ....uJe!lIS_ Discontin\l8flee of !he
recreation portion of !he lease would reduce the parks budget by !he estimated
lease paymentS of $381,000 by the time • reconstnlCted course could open in
1993/94_ Lease savings could be used to offset cet Project 1 costs shown In
Table 8 ($139,000 In the fust Y"'" of operation).
Lease savings from !he purchase of !he property and conversion to other uses,
however, are subject to sucoessful negotiations and one-time costs of up to
$10 million.
• City staff has advised that purthase of the property through an eminent
domain proceeding would require an offC1' to Stanford based on a market va."'" estimated at $9 milliOll.
• Withdrawal of !he land from !he Williamson AI:! Preserve [0 allow an
alternale use would require a withdrawal penalty of approximately $1 mil
lion to obtain use of !he property In less !han Jive years. This cost could
be paid from lease savings priac 10 !he opening of " rec:onstructed course.
• Con1iC1'sion of !he.1and from park use would require • ballot measure for
removal of the park dedication of EI CamIno Park.
In summaIY, if lease alternative negotiations are successful, 'pplicable cosl sav
ings woiIId offilP.! Project 1 net costs. Non.golf~ revenue funding, how
ever, would be required for one-time buyout costs estimated at $9 million. Ii
lease tennlnation negotiations result In significant buyout cost reductions or if
!he city elects to fund these capital costs from sources other !ban golf course
revenue sources, Project 1 feasibility could be reevaluated.
20
my
~--~.---------
----
---
o
.--;;2
~-
== --~5
/'
______ ~ _____ c
CONCWSIONS AND RECOMMENDAllONS
Course deterioration and increased maintenance costs will req!lire capital proj
ect cootS te correct these problems and provide a course that competes In the
market area. Golf course demand ;, strong and growing, particularly in the
dty'. comparable marl<et area. An improved city facility will benefit from this
demHnd and retlIt in inaeased revenues that can be used to offset capital im·
provemmt <OSI3. City sta1f bas explored various golf course capital improve·
ment optiom. Further ac:tian on two recommended options has been defeJnd
pending resuIu of this feasibility analysis. The conclusions of the feasibility
anaiy5is are as follows:
• Existing golf course finance policies and objec:tives stress a self-supporting
opemion. Continued application of this policy is r=>mmende<i. It is
CODSistent with other municipal courses In the market area. Further, golf
"course demand is high and should support such 8 policy.
• Cum:nt course green fees are well below Ihe median for the ~t area
but still provide a net revenue of .bout $150,000 pet year after payment
of current debt service.
• Water costs have increased dramatkally In recent years. Drought condi·
tioDS bave necasitated repeated nlte increases for pocable water. The city
has • permit from the state to US<! reclaimed water for wrious irrigation
uses, iD.cIuding golf c:ourses. II provides II1'l alternative soun:e !bar DOt
only achieves water conservation but should also result In cost savings to
the city of about $243,000 per year. A<tua1 savings will depend. on the
blend [If any) with parable water.
• Either Project 1 0< Project 2 will result in an improved facility that would
permit a fee inaease to the median level without • reduction m rouDds played.
Ptoje<t 1 will probably not support fees significantly higher than those for
ProjB:t 2. !nl:reased reYmUe from a fee increase to the median is estimated
at $508,000 per year in 1990/91 and $558,800 at 1993/94 levels.
• Grant 0< Joan funding is not currently £VlIiIable 10 assist with golf course
renovation projects.
• Annual debt financing costs are estimated as follows based an current
bond market conditions including • net interest cost of 7.5 pereent:
Ptojea 1 •••••••••.•..•..••.•••••••.. $1,331,000
Ptojec:t2 •..••.•••••.••••.•.•••.•.•.. 605,000
• While • combined sports complex/ golf course renovation project [t.e.,
Project 1) would provide an alternative to sports uses at EI Camino Parle,
the city's ability to terminate its lease of EI Camino Park and &Dow alter·
nate uses of the property requires voter approval as wen as successful ne·
gotiations with Stanford Univenity (lessO<) or eminent domain proceedings.
No savings In kase expenses can be realized without expenditure of over
$10 million foe property purc:hase and removal from the Williamson N:t.
22
"\
,i
•
• f .
,.."."..----_ .. _------._------
•
I "
• Project 1 is no! self-supporting, It would require an annual gener:a! fund
cootnbution of approximately $139,000 initially, as well as course closure
coots of $962,000. If tho city proceeds with the termination of the EI
CamIno Park lease, tho resultant savings could be used to offset net Proj.
ect 1 coots b1:t other general fund contnbutions would be require! {or
one-time buyout costs estimated at $9 million.
• Project 2 is seIf-suppotting. In addition, estimated revenues would SIIJ>'
port up to $8 million In project cOStS.
Tbls feasibility analysis will assist the city in its 1991/92 golf course capital
budget formuIation. Upon approval of a specilk project and funding alterna
tive, it is recommended that the city:
• Include the project in the city's wo:k plan and in its budget
• Develop • master plan
• Secun! debt financing
23