Title
Adopt a Resolution to Approve and Authorize the City Manager to Execute Amendment No.1 to the Management Agreement with American Golf Corporation (AGC) for the Monarch Bay Golf Course
Staffreport
COUNCIL PRIORITY
• Improve Infrastructure
• Support Quality of Life
SUMMARY
On June 1, 2020, the San Leandro City Council adopted Resolution No. 20-175 authorizing the City Manager to execute a Management Agreement with American Golf Corporation (AGC) that runs through November 14, 2024. Amendment No. 1 extends the agreement for an additional 5-year term. The extension includes the specific contributions and conditions outlined in the agreement. It will enable AGC to continue managing Monarch Bay Golf Course while the City conducts further analysis and planning for future capital improvements and potential alternative operating models. The continuation of this agreement is considered beneficial to the City, ensuring a consistent level of service and financial returns.
RECOMMENDATION
Staff recommends the approval of Amendment No. 1 to the Management Agreement with American Golf Corporation (AGC) to extend the term for an additional five-year term.
BACKGROUND
The Monarch Bay Golf Course has been managed by AGC under various agreements since 1997. The Shoreline Development purchase and sale agreement in early 2020 included a portion of the land where the 9-hole Marina Golf Course is located. The sale of the land reopened the lease agreement between the City and AGC. As a result, both parties agreed to terminate the lease agreement and enter into a management agreement with an initial term ending November 14, 2024. Per the new agreement, AGC is paid a base management fee of $150,000 annually and an incentive management fee of 20% of all net revenues over $750,000.
The management agreement provides the City with greater control over operations and capital improvements by ensuring that all revenues are deposited directly into the City’s Golf Enterprise Fund, and all AGC expenditures are reviewed and reconciled annually. Revenues that exceed AGC and City administrative expenditures are available and allocated to golf course capital improvement projects.
Analysis
City staff completed a series of evaluations and due diligence reviews to ensure that AGC is fully in compliance with the terms of the Management Agreement including: a financial audit of onsite cash handling, payroll, expenditures and inventory; an audit of maintenance management practices against the maintenance standards set forth in the Agreement; and a customer satisfaction survey.
The extension of the Management Agreement with AGC is in the best interest of the City for several reasons:
• Experienced Partnership: AGC has over 27 years of experience managing Monarch Bay Golf Course, providing continuity and expertise.
• Financial Stability: AGC's management has consistently yielded positive financial returns, with projected net revenues for FY 2024 at approximately $1.2 million.
• Operational Control: The City retains oversight of major capital decisions and budget approvals, ensuring alignment with City goals and community needs.
• Flexibility: The five-year term allows the City time to explore and evaluate future operating models and potential partnerships.
Previous Actions
Resolution No. 20-175 authorized the City Manager to execute a Management Agreement with American Golf Corporation (AGC)
Committee Review and Actions
Staff presented and recommended to the City Council Facilities and Transportation Committee on April 1, 2024, to forward a recommendation to the City Council to renew the agreement for one (1) additional five-year term. At the meeting, the Committee requested further information from staff. Subsequently, the item was returned to the Committee on June 5, 2024, at the Monarch Bay Golf Course.
Summary of Public Outreach Efforts
A survey conducted in January 2024 received 500 responses from golfers, indicating an overall high satisfaction with the course conditions and staff.
Fiscal Impacts
There is no fiscal impact on the City's General Fund. Based on AGC's FY 2024 projected net income of $1.2 million, total net income for the proposed five-year term is estimated at approximately $6 million. Net income remains in the Golf Fund for golf course administration and capital improvement projects.
ATTACHMENTS
Attachment A: Resolution for Amendment No. 1 to Management Agreement with American Golf Corp.
Attachment B: Management Agreement with American Golf Corp.
Attachment C: Fiscal Year 2021-2023 Financial Statements
Attachment D: Customer Survey - January 2024
PREPARED BY: Vicente Zuniga, Recreation and Parks Department Director