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HomeMy WebLinkAboutMINUTES - 06191990 - H.5 H.5 3 p.m. TO: BOARD OF SUPERVISORS Contra r' 't l FROM: Phil Batchelor, County Administrator Costa s County DATE: ,June 19, 1990 `;... .... SUBJECT: Buchanan Fields Golf Course, Inc. Lease SPECIFIC REOUEST(S)OR RECOMMENDATION(S)&BACKGROUND AND JUSTIFICATION RECOMMENDATIONS Approve basic terms and provisions of the proposed lease with Buchanan Fields Golf Course, Inc. authorize County Administrator, County Counsel and Lease Management Division of General Services to prepare a final lease document which includes adequate provisions to protect the County, including any hold harmless, indemnification or other clauses deemed necessary, and authorize Director of Public Works to execute lease. on behalf of the County. BACKGROUND On July 25, 1989, the Board of Supervisors reaffirmed its. previous designation of the existing golf course property to remain a golf course. In addition the Board declared its intent to renegotiate the lease with the current leaseholder, Buchanan Fields Golf Course, Inc. , and requested the County Administrator to obtain comparables of similar golf course leases. The Board also requested staff to meet with the leaseholder and review the proposed structure of revenue to the County and present a lease for the Board's consideration to maximize the revenue to the County from the use of the property as a golf course. Finally, the Board asked that any correspondence from any other parties interested in this parcel be shared with the Board. PROPOSED LEASE WITH BUCHANAN FIELDS GOLF COURSE, INC. Since your action in July, we have been negotiating terms and conditions of an extended lease with the existing leaseholder, Buchanan Fields Golf Course, Inc. which is owned by Tim Sullivan and Roger Kelsey. Since taking over the course and CONTINUED ON ATTACHMENT: _M-YES SIGNATURE: RECOMMENDATION OF COUNTY ADMINISTRATOR RECOMMENDATION OF BOARD COMMITTEE APPROVE OTHER .SIGNATURE(S): ACTION OF BOARD ON .lune 19. 1990 APPROVED AS RECOMMENDED.�_ OTHER Scott Tandy, Assistant County Administrator, reviewed the report before the Board. The Chair opened the public hearing. Sandford M. Skaggs, P. O. Box V, Walnut Creek, attorney for Strickland, Gore, Straface and Associates, outlined the proposal of his client, urged that the lease be put out to bid. , Christine Callahan, 2204 Concord Boulevard, Concord, attorney for Buchanan Fields Golf Course, reviewed the history of the golf course since 1961, explained the proposal her client now has before the Board, and urged that the Board approve it and authorize that it be signed. William Rassett, 2301 N. 6th Street, Concord, the pro manager who originally opened the golf course reviewed the history of the course and spoke in favor of the current operator. The hearing was closed and Supervisor McPeak moved to approve staff recommendations, including proceeding with the signing of the lease. The vote was unanimous. VOTE OF SUPERVISORS I HEREBY CERTIFY THAT THIS IS A TRUE UNANIMOUS(ABSENT r AND CORRECT COPY OF AN ACTION TAKEN AYES: NOES: AND ENTERED ON THE MINUTES OF THE BOARD ABSENT: ABSTAIN: OF SUPERVISORS ON 7DATE SHOWN. CC: C. Callahan ATTESTED 9 T. Sullivan PHIL BATCH OR,CLERK OF THE BOARD OF S. Skaggs SUPERVISORS AND COUNTY ADMINISTRATOR L. Gore M. Walf Ord M382 0,/Jfeiffer BY ,DEPUTY estman JW driving range in 1984, Sullivan and Kelsey revived its condition and transformed the course into a well used and maintained facility. Rounds of play are up substantially, complaints regarding operation are virtually non-existent and the tenant has cooperated fully with the County on matters affecting the operation of the airport. The proposed lease terms provide an immediate large increase in revenue and would maximize County revenue. The terms compare favorably with other public agency lease agreements for golf course operations in other areas of the state. These negotiations have resulted in proposed lease terms that we believe would be very favorable to the County. The terms and conditions are presented below for your consideration with the understanding that the final lease documents would be prepared by County Counsel pursuant to these parameters. Proposed Terms and Conditions Lease Term: 20 years with two 10-year options Rents: Minimum rent of $50,000 per year or 8% of gross income is guaranteed for the first five years. Based on current volumes of business, the proposed lease should yield approximately $74,000 annually during first five years excluding the one year reconstruction period. Minimum rent thereafter is determined by taking the previous five years gross income and eliminating the highest and lowest annual income and then averaging the three remaining years. The new minimum rent will be calculated by applying the escalating percentage for that period. Percentage of Years of. Lease Gross Income* 1-5 8% 6-10 10% 11-20 12% 21-25 15% 26-30 16% 31-35 17% 36-40 18% *Gross income is defined as income from driving range, green fees, rentals and all other income except lessons, which are exempt from rent and pro-shop and snack bar, which are subject to a percentage rent of 3%. Minimum Capital Improvement Investment by Leaseholder: $1,600,000 Projected Rent to County Over 40 Years: Over $8 million plus tax revenue. Other Benefits to County: The County will immediately recover the land necessary for the Diamond Boulevard Extension and airport security fence. In addition, the County will incorporate a 30-acre flood control detention basin that will provide significant reduction in the cost of drainage . .facilities required by the Diamond Boulevard Extension Project,. Restaurant Development: Provision is made to accommodate the future development of a restaurant which would further increase County revenue. Income from the restaurant will be negotiated under a separate agreement. The estimated income will be a minimum rent of $10,000 to $50,000 depending on the specific development and the negotiated percentage of gross operating restaurant income. In addition there will be an income stream of sales and property tax that will accrue to the County. Comparable Golf Course Operations: We have obtained and evaluated the terms of eight golf course operations leased by public agencies which can be used for comparables. Four smaller courses, Arroyo Seco (South Pasadena), Monterey Park, Van Nuys and David Baker Memorial (Orange County) range from 26 acres to 62 acres and contain rent provisions from 3% to 15% on green fees and driving ranges. Four larger courses, Sky West (Hayward), Tilden Park, Willow Park (EBMUD) and Mile Square (Orange County) range from 125 acres to 142 acres and contain rent provisions ranging from 9% to 14%. We found that the rent minimum and escalating percentage of gross annual income contained in the proposed Buchanan Fields Golf Course, Inc. , lease meet or exceed the provisions found in these comparable public agency leases. The $50,000 minimum and 89 to 189 of gross income over the term of the lease compare most favorably with the eight golf course lease terms we examined. Strickland, Gore, Straface and Associates Correspondence and Proposal On May 30, 1990, we received a written proposal from Strickland, Gore, Straface and Associates entitled "Buchanan Links Golf Course Complex." On June 6, 1990 the proponents presented the proposal to County staff members and responded to questions. The proposal contains a plan to renovate the existing golf course and to develop 'clubhouse facilities, driving range, regional retail golf center and restaurant. The proposed terms for the golf facilities and restaurant are as follows: Golf Facililities: Annual lease payment of $70,000 (escalating at 29 per year) plus 29 of gross receipts in excess of $1.5 million. Restaurant: Annual lease payment of $10,000 for first and second year and $25,000 annually thereafter plus 39 of gross receipts in excess of $2 million. The written proposal and meeting with the proponents on June 6, 1990, was helpful in understanding the full extent of their proposal which had only been outlined in verbal discussion and letters previously. It would be the preference of the proponents to complete the golf facilities project with the restaurant although they indicated it could be accomplished separately. While the Gore, Strickland, Straface proposal provides good lease revenue to the County over the initial five years, it will not produce the higher long-term income streams in the proposed lease with Buchanan Fields Golf Course, Inc.