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May 16, 2023
ITEM TITLE
Agreements: Approve a Form of Agreement with Touchstone Golf, LLC for Management of the Chula Vista Golf Course and Authorize the City Manager to Enter into an Agreement with Huntington National Bank for the Lease of 80 Golf Carts
Report Number: 23-0046
Location: Chula Vista Golf Course at 4475 Bonita Road
Department: Economic Development
Environmental Notice: The activity is not a “Project” as defined under Section 15378 of the California Environmental Quality Act State Guidelines; therefore, pursuant to State Guidelines Section 15060(c)(3) no environmental review is required.
Recommended Action
Adopt resolutions A) Approving a form of agreement with Touchstone Golf, LLC for professional management services for the Chula Vista Golf Course (form of agreement is attached to the resolution and incorporated in the resolution as Exhibit 1); and B) Authorizing the City Manager to ent er into a lease agreement with Huntington National Bank for the lease of 80 golf carts at a cost of $547,296, which will be funded by Touchstone Golf, LLC, as provided for under the agreement between the City and Touchstone Golf, LLC.
SUMMARY
On November 2, 2016 the City approved an agreement with Touchstone Golf, LLC to manage the Chula Vista Municipal Golf Course. The original agreement was for a one -year period with a provision to extend for an additional year, which was exercised by staff. In 20 18, the City entered into a five -year agreement with Touchstone Golf, LLC to continue to manage the Golf Course. The term of that five -year agreement is due to expire on October 31, 2023. Since Touchstone Golf, LLC has taken on management of the Golf Course in 2016 it has continued to make physical improvements to the facility, improving the quality of the golf experience.
Additionally, Touchstone Golf, LLC has improved the financial position of the City’s asset and has managed to increase patronage and rev enues even through the COVID -19 pandemic. Staff recommends the City Council enter into another five-year agreement with Touchstone Golf, LLC to manage the Golf Course through 2028, with an option to extend the agreement for an additional five -year term through 2033. Additionally, P a g e | 2
the existing lease for 80 golf carts at the Golf Course expires coterminous with the expiration of the existing management agreement with Touchstone Golf, LLC. As a result, staff recommend entering into a five -year lease with Huntington National Bank for the lease of 80 new E-Z-GO golf carts through 2028.
ENVIRONMENTAL REVIEW
The Director of Development Services has reviewed the proposed activity for compliance with the California Environmental Quality Act (CEQA) and has determined that the activity is not a “Project” as defined under Section 15378 of the State CEQA Guidelines because the proposed activity consists of a governmental fiscal/administrative activity which does not result in a physical change in the environment; therefo re, pursuant to Section 15060(c)(3) of the State CEQA Guidelines, the activity is not subject to CEQA. Thus, no environmental review is required.
BOARD/COMMISSION/COMMITTEE RECOMMENDATION
N/A
DISCUSSION
In 1984, the City entered into a lease agreement with American Golf Corporation for the Chula Vista Golf Course that afforded the City a long -term management solution with a steady stream of revenue. It also required very little input or resources from the Ci ty. Conversely, it provided the operator with very little incentive to maintain the facility at a high level and no incentive to perform upgrades. As a result, the facility fell behind standards and had serious problems resulting from deferred maintenance of the facility.
In November 2016 after staff review of the facility and the terms of the lease, staff recommended the transition of the facility from a lease agreement to a management agreement with Touchstone Golf, LLC. The management agreement allowed the City to have more control over the level of investment and management over the operations, which allowed flexibility to adapt to changing market conditions.
The management model has provided the City more control over the operation and management of the Golf Course. Touchstone Golf, LLC’s one -year trial period began in 2016 and was extended by staff by an additional year based on Touchstone Golf, LLC’s successful management of the facility. Touchstone Golf, LLC’s management of the facility has resulted in physical improvements to the facility, an increase in the quality of the golf experience for customers and an improved financial position of the City’s asset. Touchstone Golf, LLC has been very responsive to the City’s direction and has shown creativit y in addressing the various issues that have arisen.
In 2018, the City Council approved a five-year facility management agreement for the Chula Vista Golf Course based on Touchstone Golf, LLC’s successful management of the facility for the previous two ye ars.
Additionally, Touchstone Golf, LLC has improved the financial position of the City’s asset and has managed to increase patronage and revenues even through the COVID-19 pandemic. The term of the current five-year agreement is due to expire on October 31, 2023.
Touchstone Golf, LLC has continued to make improvements to the facility by working with staff to fund improvements that enhance the golfing experience, as well as the experience for community members wanting to use the facility as a meeting/gathering space. Improvements have been made to the 19th hole food and beverage operations. In the coming five years, the City and Touchstone Golf, LLC aspire to continue P a g e | 3
improving the food and beverage amenities of the facility. Since taking over management of the Golf Course in 2016, Touchstone Golf, LLC has made $700,000 in capital improvements, including investing: $200,000 in new and used equipment; $75,000 in tee box repairs; and $100,000 in irrigation repairs. Since 2016, Touchstone Golf, LLC has hosted ov er 500 events or golf tournaments for local schools, non -profits and charities. Between July 1, 2020 and June 30, 2022 Touchstone Golf, LLC has generated approximately $1.1 million in net revenue from the Golf Course. Last year alone, Touchstone Golf, LLC generated $3.3 million in total revenue from the facility.
As a result of Touchstone Golf LLC’s successful professional management of the Chula Vista Golf Course since 2016, staff recommends the City Council enter into another five -year agreement with Touchstone Golf, LLC to manage the Golf Course through 2028, with an option to extend the agreement for an additional five-year term through 203 3. The proposed agreement includes an increase in the base management fee paid to Touchstone Golf, LLC. Whereas, the 2018 agreement established a $7,500 monthly base management fee paid to Touchstone Golf, LLC, the proposed base management fee for the next five years is $8,000 per month or $96,000 annually.
In addition to the base management fee, Touchstone Golf, LLC is incentivized to continue to increase revenue generated from the golf course. The agreement also contains an Incentive Management Fee. In addition to the Base Management Fee, the incentive fee is based on the sustaining current revenue generated by operating the golf course. Specifically, if the Earnings Before Interest, Taxes and Amortization (EBITDA) is greater than or equal to $500,000, but less than $650,000, Touchstone Golf, LLC would receive an incentive fee of $15,000. If the EBITDA is equal to or gr eater than $650,000, Touchstone Golf, LLC would receive an incentive fee of $25,000.
Finally, the existing lease for 80 golf carts that are currently located at the Golf Course expires coterminous with the expiration of the existing management agreement the City has with Touchstone Golf, LLC.
Touchstone Golf, LLC maintains a close relationship with E -Z-GO and receives a corporate discount for the lease of E -Z-GO golf carts at a rate of 47%. The City identified a cooperative agreement through Omnia Partners Agreement (R210201) and in review of the options it was found that the pricing provided would be
2.5% higher than the discount offered by Huntington National Bank. Based on these unique reasons, staff is recommending that the City Council waive the normally applicable procurement selection process and enter into a lease agreement with Huntington National Bank on a “single source” basis as permitted under Sections
2.56.070B(3) and 2.56.070B(4) of the Chula Vista Municipal Code.
As a result, staff recommends entering into a five -year lease with Huntington National Bank for 80 brand new electric E-Z-GO golf carts through 2028 at a cost of $547,296 . In addition, the agreement between the City and Touchstone Golf, LLC requires that all obligations for maintenance and cost, including but not limited to return of the golf carts, repair, and stipulated loss of value, be borne by Touchstone Golf, LLC.
Recommendation
Staff recommends the City Council approve the form of agreement attached hereto as Attachment 1 for the City to enter into another five-year agreement with Touchstone Golf, LLC to manage the Golf Course through 2028, with an option to extend the agreement for an additional five-year term through 2033, by adopting the resolution provided therefor.
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DECISION-MAKER CONFLICT
Staff has reviewed the property holdings of the City Council members and has found no property holdings within 1,000 feet of the boundaries of the property which is the subject of this action. Consequently, this item does not present a disqualifying real property -related financial conflict of interest under Californ ia Code of Regulations Title 2, section 18702.2(a)(7) or (8), for purposes of the Political Reform Act (Cal. Gov’t Code §87100, et seq.).
Staff is not independently aware, and has not been informed by any City Council member, of any other fact that may constitute a basis for a decision-maker conflict of interest in this matter.
CURRENT-YEAR FISCAL IMPACT
Given that the terms of the agreement with Touchstone Golf, LLC is proposed to begin in FY 2023/24, there is no current fiscal impact by adoption of these resolutions. Additionally, the lease with Huntington National Bank for 80 brand new electric E-Z-GO golf carts through 2028 at a cost of $547,296 will be funded through operating income generated by the golf course, as provided for under the agreement between the City and Touchstone Golf, LLC.
ONGOING FISCAL IMPACT
The management agreement with Touchstone Golf, LLC at a cost of $96,000 per year (plus any Incentive Fee), and the lease for the golf carts from Huntington National Bank at a cost of $547,296, are covered within the Golf Course’s operating budget for FY 2023/24 through FY 2028/29. The management agreement cost and lease cost will be funded through operating income generated by the golf course as provided for under the agreement between the City and Touchstone Golf, LLC.
ATTACHMENTS
1. Agreement with Touchstone Golf, LLC for Professional Management Services for the Chula Vista Golf Course (Exhibit 1 to Resolution A)
2. Agreement with Huntington National Bank for the Lease of 80 Golf Carts Staff Contact: Kevin Pointer, Principal Economic Development Specialist Eric Crockett, Deputy City Manager