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File Number: 21-684 <br />previous three years, whichever is greater; and <br />·Escalating percentage rent from years 1-10, with the highest rate of 30% on golf revenues <br />and 6% on clubhouse revenues. <br />Subsequent lease agreement addendums included: <br />·2006 - Agreement for AGC to purchase the City’s reclaimed water; <br />·2010 - Addition of cell sites at the driving range, with agreement that all cell site revenues <br />would be deposited into the Golf CIP account; and <br />·2019 - Temporary waiver of payment for reclaimed water. <br />From 1997-2020, the City received more than $17M in golf revenues from the AGC lease. <br />With the City’s intention to sell a portion of the 9-hole golf course to Cal Coast as part of the <br />proposed Shoreline Development Project, this action opened the Lease Agreement between the <br />City and AGC. Subsequently, on June 1, 2020 the City approved a Management Agreement with <br />AGC. The Management Agreement replaced the Lease Agreement. <br />Conversion to a management agreement structure is consistent with the recent direction of many <br />municipal golf courses upon the expiration of lease agreements. The conversion from a lease <br />agreement to a management agreement means the City will: <br />·Direct operations at Monarch Bay Golf Club; <br />·Assume greater risk; <br />·Control the operational budget; and <br />·Fund capital improvement projects. <br />The Management Agreement stipulates the City shall pay the following to AGC: <br /> <br />·Base Management Fee. $150,000 per year, payable in twelve (12) monthly installments <br />of $12,500. <br />·Incentive Management Fee. Equal to twenty percent (20%) of the amount by which net <br />operating income for a given operating year exceeds $750,000. For purposes of this <br />provision, net operating income is gross revenues minus operating expenses for the <br />preceding operating year (based on a fiscal year). <br />Analysis <br />The first operating year (June 2020 - June 2021) of the Management Agreement was during the <br />year of the COVID-19 pandemic. Because there were so many unknowns on how the pandemic <br />would impact golf, the budget was conservative with a forecast of $715,000 in net revenues. <br />According to the National Golf Foundation, the golf industry and most golf courses around the <br />country flourished during the pandemic. Most courses saw record revenues and Monarch Bay <br />Golf was no exception. For the past operating year (13 months), Monarch Bay Golf’s net revenues <br />Page 2 City of San Leandro Printed on 12/2/2021 <br />65