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File Number: 20-174 <br />·The City will assume responsibility for all operating expenditures; and, <br />·The City will be responsible for funding major capital improvements. <br />While there are other experienced municipal golf operators throughout the country, staff believes <br />remaining in partnership with AGC is beneficial to the City because of the following: <br />·The 23-year partnership between AGC and the City resulted in an experienced operator <br />familiar with Monarch Bay, which staff believes is advantageous to the City; <br />·Will provide for a seamless transition (from lease to management) for the golfing <br />community; <br />·AGC is regarded as one of the most successful golf operating companies in the country <br />with 40+ years’ experience operating 500+ courses; and <br />·AGC is an industry leader in controlling expenses and producing EBITDAR. <br />AGC will continue to operate Monarch Bay Golf Club, with no change in the day-to-day operations <br />of the facility. AGC will continue to commit its resources to all facets of the business from its El <br />Segundo, California corporate headquarters. AGC’s core economies of scale will also continue <br />to accrue to the benefit of the City’s bottom-line. <br />Legal Analysis <br />The City Attorney’s Office assisted with the negotiations of the management agreement. The City <br />Council should note that the City is retaking the risks associated with operating a golf course. The <br />lease agreement transferred all risks to AGC, but also allowed AGC to receive the majority of <br />revenues. Under a management agreement, the City will retake all revenues, but also all of the <br />risks to operate the facility. As part of the management agreement, AGC will procure the proper <br />types and amounts of insurance coverage, the costs of which will be paid by the City as an <br />expense of the facility. Therefore, although entering into a management agreement carries <br />increased risk, such risks are offset by insurance that covers the City, indemnity for AGC’s sole <br />negligence or willful misconduct, and the flexibility to allow the Shoreline Development to proceed <br />as quickly as possible. <br />Fiscal Impacts <br />Under the current lease agreement, all golf revenues go directly to AGC, who then pays the City <br />monthly rent plus annual contributions towards the Golf CIP fund. Under a management <br />agreement, all golf revenues received by AGC would be deposited into a City account. A <br />separate joint banking account would be established and be funded by the City from the revenue <br />deposits, with draws to the joint account made to cover AGC’s monthly operating expenses as <br />well as monthly installment payments for the management fee. <br />The existing and separate Golf CIP fund would remain, although AGC would no longer be <br />required to contribute to it under the management agreement. Prior to the onset of the Shelter in <br />Place (SIP) order and temporary closure of both golf courses, the Golf CIP fund had a balance of <br />just under $500,000. The City and AGC agreed to waive rent payments and cover the minimal <br />staffing/maintenance of the course during the SIP from the Golf CIP fund, at an estimated cost of <br />Page 4 City of San Leandro Printed on 5/28/2020 <br />137