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File Number: 22-687 Conversion to a management agreement structure is consistent with the direction of many municipal golf courses upon the expiration of lease agreements. The conversion from a lease agreement to a management agreement means the City: ·Directs operations at Monarch Bay Golf Club; ·Assumes greater risk; ·Controls the operating budget; and ·Funds capital improvement projects. The Management Agreement stipulates the City shall pay the following to AGC: ·Base Management Fee. $150,000 per year, payable in twelve (12) monthly installments of $12,500. The City shall pay AGC the Base Management Fee in advance, no later than 10 days following the first day of each month during the term of the Agreement. ·Incentive Management Fee. Equal to twenty percent (20%) of the amount by which net operating income for a given operating year exceeds $750,000. For purposes of this provision, net operating income is gross revenues minus operating expenses. The City shall pay the Incentive Management Fee, if any, to AGC within 45 days following the final calculation of financial results for the facility for the preceding operating year (based on a fiscal year). Analysis According to the National Golf Foundation, the golf industry, during the pandemic, saw a boom for most courses around the country. Most courses saw record revenues and Monarch Bay Golf Course was no exception. For the past operating year, Monarch Bay Golf’s net revenues were $2,001,999, which is the second highest in its history (FY 2020-2021 being the highest). The year prior to the pandemic, Monarch Bay Golf Club’s net revenues were $1,018,676. AGC’s Incentive Management Fee calculation: $ 2,001,999 Net Revenue $ 750,000 Target Net Revenue $ 1,251,999 Net Revenue (NR) in excess of Target Net Revenue (TNR) $250,399.82 Incentive Management Fee (20% of NR in excess of TNR) The City’s net revenues are $1,751.599.18 after payment of AGC’s Incentive Management Fee. It should be noted that the City’s annual net revenues for Monarch Bay Golf during the lease with AGC for the last five fiscal years averaged under $900,000. Previous Actions ·Resolution No. 2020-052 Authorizing the City Manager to Enter into a Management Agreement with American Golf Corporation and to Terminate the Lease Agreement Page 2 City of San Leandro Printed on 12/14/2022