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Anaheim, CA 92805
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CITY COUNCIL AGENDA REPORT
City of Anaheim
COMMUNITY SERVICES DEPARTMENT
DATE: DECEMBER 12, 2023
FROM: COMMUNITY SERVICES DEPARTMENT
SUBJECT: APPROVE THE THIRD AMENDMENT TO THE AGREEMENT
WITH AGC MANAGEMENT, LLC
ATTACHMENT (Y/N): YES ITEM # 10
GOVERNMENT CODE § 84308 APPLIES: YES
RECOMMENDATION:
That the City Council, by Motion, waive Council Policy 4.0 and approve the Third Amendment to Agreement with AGC Management, LLC, to continue providing golf course operation services and golf course maintenance services at Anaheim Hills Golf Course and Dad Miller Golf Course; amend the Incentive Fee to 15% of net operating income over $4,000,000, eliminate the Food & Beverage Incentive Fee, and increase the Base Management Fee to $300,000; extend the term of the Agreement by five years to expire on June 30, 2029, with an option for two five-year extensions; and authorize the Director of Community Services to exercise the renewal options.
DISCUSSION:
In 2020, the City of Anaheim (City) and AGC Management, LLC (AGC) entered into an agreement for golf course operations, maintenance and food and beverage services at Dad Miller Golf Course, as well as golf course operations and maintenance services at Anaheim Hills Golf Course, with the initial term ending on February 9, 2024. In January 2022, the First Amendment included the addition of food and beverage services at Anaheim Hills Golf Course. In late January 2022, a Second Amendment was approved by the Community Services Director to increase the operating account due to the increase in expenses for the addition of the food and beverage services.
The current agreement is scheduled to end in February 2024 unless the extension for an additional five years is exercised. With the proposed Third Amendment to the AGC Agreement, new terms were negotiated to better reflect the current business environment. The base management fee to AGC will increase from $200,000 annually to $300,000 annually. In response to this, the Incentive Fee will be reduced from 20% of Net Operating Income over $2,000,000 to 15% of Net Operating Income over $4,000,000. Under the new model, the separate incentive fee for Food and Beverage Services of 2.5% of revenues over $70,000 will be eliminated. Lastly, the Third Amendment will extend the term of the agreement by five years and provide an option for two five-year extensions.
Approve the Third Amendment to the Agreement with AGC Management, LLC December 12, 2023
Contract Provision Current Term Proposed New Term
Base Management Fee $200,000 $300,000
Incentive Management Fee 20% 15%
Net Operating Income threshold $2,000,000 $4,000,000
Food & Beverage Incentive Fee percentage 2.5% 0%
AGC is headquartered in Southern California and has over 50 years of experience operating golf courses, including facilities with large food & beverage operations.
Under the current agreement, AGC has been providing excellent service to our golf patrons and has improved golf course conditions under their operation. Revenues in golf and concession services have consistently increased allowing the Golf Division to address many deferred maintenance issues at both facilities. The food & beverage operation at Anaheim Hills Golf Course has improved significantly, achieving the highest revenues since the facility opened in 2003.
Unifying the golf and food and beverage operations between the two golf courses has allowed the city to better facilitate operations at both golf courses and has provided for a more efficient management structure. With a cohesive goal utilizing joint marketing and unified brand management, the golf revenues have increased over the last few years reinforcing the success of the partnership with AGC.
IMPACT ON BUDGET:
There is no budgetary impact. Any fees will be paid by the revenues generated by the Golf Courses Fund.
Respectfully submitted,
Sjany Larson-Cash
Director of Community Services
Attachments:
1. Third Amendment
2. Original Agreement with First and Second Amendments