Pacific Grove City Council
February 15, 2023

PGCC 2-15-23

AMENDMENT #1 GOLF COURSE LEASE
Pacific Grove Golf Links
Landlord: City of Pacific Grove
Tenant: Pacific Grove Golf, LLC an affiliate of CourseCo, Inc Premises: 77 and 79 ASILOMAR AVENUE, LOCATED IN THE CITY OF PACIFIC GROVE,

CALIFORNIA

Amendment #1
Golf Course Lease
Pacific Grove Golf Links
PGCC 2-15-23

AMENDMENT #1 TO GOLF COURSE LEASE
Landlord: City of Pacific Grove
Tenant: Pacific Grove Golf, LLC an affiliate of CourseCo, Inc 77 and 79 ASILOMAR AVENUE, LOCATED IN THE CITY OF PACIFIC GROVE, CALIFORNIA THIS GOLF COURSE LEASE AMENDMENT ("Amendment #1") shall amend, supersede, and restate that Golf Course Lease entered into between the Parties and dated February 19, 2014 by and between the CITY of Pacific Grove, a Charter City of the State of California ("City" or "Landlord"), and Pacific Grove Golf, LLC, a California limited liability company ("Tenant11).

FACTS
There shall be no change to any Recital set forth in the Golf Course Lease.

Landlord and Tenant desire this Amendment #1 to amend, supersede, and restate the GOLF.

COURSE LEASE, and its exhibits and attachments, dated February 19, 2014 pertaining to the Premises known as Pacific Grove Golf Links or 77 and 79 Asilomar Avenue, located in the City of Pacific Grove, California. This Amendment #1 shall be incorporated into the Golf Course Lease and shall be a part thereof.

Tenant has exercised its first option to renew and extend the Term of the Lease for a period of five (5) years pursuant to Section 4.2(a) of the Golf Course Lease ("First Renewal Term").

Landlord agrees to such extension of this First Renewal Term upon the terms and conditions as set forth in Article 4 of the Golf Course Lease. The Parties agree that the current Expiration Date of the Golf Course Lease as extended by the First Renewal Term shall be September 30, 2029.

Except as modified by this Amendment #1, the Parties intend this Amendment to republish and restate the Golf Couse Lease. Where terms set forth in the Golf Course Lease may be inconsistent with terms of this Amendment #1, this Amendment #1 shall control.

ARTICLES 1-5
There shall be no cha.nges to any provisions in Articles 1- 5, inclusive, of the Golf Course Lease.

ARTICLE 6
Effective on and after October 1, 2016, Paragraph 6.2 (Other Expenditures) of the Golf Course Lease shall be deleted in its entirety, and in its place the following provision shall take effect:

Amendment #1
Golf Course Lease
Pacific Grove Golf Links
PGCC 2-15-23

6.2 Other Expenditures. Tenant shall be responsible for any and all other costs and expenditures for garbage pickup, utilities, cable television, internet services or other services for its use, occupancy, operation or enjoyment of the Premises or any Improvements permitted thereon. Notwithstanding the foregoing,
a} Tenant shall use the most efficient water conservation and management practices available.
b} Tenant shall pay actual costs billed by California American Water Company for potable water supplied to the Golf Course or properties located at 77 or 79 Asilomar Avenue. c} For the first 27.2 million gallons supplied per water year (October 1 - September 30) upon the Golf Course, Tenant shall pay actual costs billed by California American Water Company, or the City of Pacific Grove, or any other purveyor for sub-potable irrigation water to the Golf Course or properties located at 77 or 79 Asilomar Avenue, up to a cap of $443,332 per year for such water. Effective each September 1st this cost cap shall be increased by 2%.

To the extent billed costs for sub-potable irrigation water (up to 27.2 million gallons per water year) supplied to the Golf Course or properties at 77 or 79 Asilomar Avenue exceed the referenced cost cap, Landlord shall reimburse Tenant any excess water costs. d} For water use exceeding 27.2 million gallons supplied per water year (October 1 - September 30), Tenant shall pay actual costs billed by California American Water Company, or the City of Pacific Grove, or any other purveyor for sub-potable irrigation water to properties located ·at 77 or 79 Asilomar Avenue, without any cost cap for such irrigation water. Landlord shall have no obligation to pay any cost for water use exceeding 27.2 million gallons per water year.
e} Should Tenant pay less than $375,000 per water year for water usage pursuant to paragraph c) above, Tenant shall pay to Landlord a "Minimum Annual Water Charge" set at $375,000 less the actual annual water charge paid by Tenant pursuant to paragraph c).

ARTICLES 7 - 24
There shall be no changes to any provisions in Articles 7 - 24, inclusive, of the Golf Course Lease.

Except as modified by this Amendment #1, all of the remaining terms and conditions of the Golf Course Lease shall remain in effect and continue to determine the rights and obligations of Landlord and Tenant.

Ci~ Tenant execute this Golf Course Lease Amendment #1 in triplicate as of this day, b-k- ~ ,2016.

Amendment #1
Golf Course Lease
Pacific Grove Golf Links
PGCC 2-15-23

TENANT:

By:

By:

Amendment #1
Golf Course Lease
Pacific Grove Golf Links
PGCC 2-15-23

FUND ACCT ACCT TITLE VENDOR FROM TO DUE DATE AMT ACCOUNT 741 5222 UTILITIES CAL AM 10/16/19 11/16/19 12/10/19 9,112.18 1015-210019640544 741 5222 UTILITIES CAL AM 11/17/19 12/15/19 1/8/20 600.03 1015-210019640544 741 5222 UTILITIES CAL AM 12/16/19 1/14/20 2/8/20 769.95 1015-210019640544 741 5222 UTILITIES CAL AM 1/15/20 2/12/20 3/9/20 815.00 1015-210019640544 741 5222 UTILITIES CAL AM 2/13/20 3/10/20 4/3/20 3,258.93 1015-210019640544 741 5222 UTILITIES CAL AM 3/11/20 4/12/20 5/6/20 800.41 1015-210019640544 741 5222 UTILITIES CAL AM 4/13/20 5/13/20 6/8/20 1,988.12 1015-210019640544 741 5222 UTILITIES CAL AM 5/14/20 6/12/20 7/7/20 3,004.01 1015-210019640544 741 5222 UTILITIES CAL AM 6/13/20 7/13/20 8/6/20 12,679.17 1015-210019640544 741 5222 UTILITIES CAL AM 7/14/20 9/15/20 10/8/20 20,872.29 1015-210019640544 741 5222 UTILITIES CAL AM 9/16/20 10/14/20 11/9/20 1,474.27 1015-210019640544 741 5222 UTILITIES CAL AM 10/15/20 11/13/20 12/28/20 882.23 1015-210019640544 741 5222 UTILITIES CAL AM 11/14/20 12/13/20 1/6/21 876.44 1015-210019640544 741 5222 UTILITIES CAL AM 12/14/20 1/10/21 2/3/21 929.55 1015-210019640544 741 5222 UTILITIES CAL AM 1/11/21 2/10/21 3/8/21 895.70 1015-210019640544 741 5222 UTILITIES CAL AM 2/11/21 3/12/21 4/6/21 3,847.45 1015-210019640544 741 5222 UTILITIES CAL AM 4/14/21 5/15/21 6/8/21 5,982.42 1015-210019640544 741 5222 UTILITIES CAL AM 5/16/21 6/11/21 7/7/21 12,656.45 1015-210019640544 741 5222 UTILITIES CAL AM 6/12/21 7/14/21 8/9/21 30,245.11 1015-210019640544 741 5222 UTILITIES CAL AM 7/15/21 8/12/21 9/7/21 10,140.32 1015-210019640544 741 5222 UTILITIES CAL AM 8/13/21 9/14/21 10/8/21 11,231.75 1015-210019640544 741 5222 UTILITIES CAL AM 9/15/21 10/13/21 11/8/21 896.39 1015-210019640544 741 5222 UTILITIES CAL AM 10/14/21 11/11/21 12/7/21 779.86 1015-210019640544 741 5222 UTILITIES CAL AM 11/11/21 12/10/21 1/5/22 855.29 1015-210019640544 741 5222 UTILITIES CAL AM 12/14/21 1/12/22 2/7/22 840.74 1015-210019640544 741 5222 UTILITIES CAL AM 1/13/22 3/11/22 4/11/22 27,428.22 1015-210019640544 741 5222 UTILITIES CAL AM 3/12/22 4/13/22 5/16/22 17,504.14 1015-210019640544 741 5222 UTILITIES CAL AM 4/14/22 5/12/22 6/9/22 18,520.66 1015-210019640544 741 5222 UTILITIES CAL AM 5/13/22 6/13/22 7/11/22 18,333.15 1015-210019640544 741 5222 UTILITIES CAL AM 6/14/22 7/14/22 8/19/22 40,555.64 1015-210019640544 741 5222 UTILITIES CAL AM 7/15/22 10/13/22 11/14/22 62,512.91 1015-210019640544 741 5222 UTILITIES CAL AM 10/14/22 11/11/22 12/8/22 939.87 1015-210019640544 PGCC 2-15-23

FUND ACCT ACCOUNT TITLE YEAR DATE REFERENCE VENDOR EXPENDITURES DESCRIPTION 74 - LOCAL WATER PROJECT 5222 UTILITIES 21 08/06/20 97129 2024 PACIFIC GAS & EL 9,849.64 06/30/2020-07/28/2020 74 - LOCAL WATER PROJECT 5222 UTILITIES 21 09/17/20 97515 2024 PACIFIC GAS & EL 10,419.56 07/29/2020-08/27/2020 74 - LOCAL WATER PROJECT 5222 UTILITIES 21 10/14/20 97749 2024 PACIFIC GAS & EL 10,591.61 08/28/2020-09/28/2020 74 - LOCAL WATER PROJECT 5222 UTILITIES 21 11/12/20 98011 2024 PACIFIC GAS & EL 8,869.63 09/29/2020-10/28/2020 74 - LOCAL WATER PROJECT 5222 UTILITIES 21 12/09/20 98260 2024 PACIFIC GAS & EL 6,173.78 10/29/2020-11/30/2020 74 - LOCAL WATER PROJECT 5222 UTILITIES 21 01/07/21 98457 2024 PACIFIC GAS & EL 3,062.75 12/01/2020-12/29/2020 74 - LOCAL WATER PROJECT 5222 UTILITIES 21 02/17/21 98885 2024 PACIFIC GAS & EL 2,515.14 12/30/2020-01/28/2021 74 - LOCAL WATER PROJECT 5222 UTILITIES 21 03/17/21 99134 2024 PACIFIC GAS & EL 5,371.8301/29/2021-03/01/2021 (two mths) 74 - LOCAL WATER PROJECT 5222 UTILITIES 21 04/14/21 99369 2024 PACIFIC GAS & EL 129.46 03/02/2021-03/30/2021 74 - LOCAL WATER PROJECT 5222 UTILITIES 21 05/12/21 99645 2024 PACIFIC GAS & EL 4,769.34 03/31/2021-04/29/2021 74 - LOCAL WATER PROJECT 5222 UTILITIES 21 06/10/21 99890 2024 PACIFIC GAS & EL 7,852.31 04/30/2021-05/31/2021 74 - LOCAL WATER PROJECT 5222 UTILITIES 21 07/21/21 100220 2024 PACIFIC GAS & EL 9,734.85 06/01/2021-06/29/2021 74 - LOCAL WATER PROJECT 5222 UTILITIES 22 09/01/21 100618 2024 PACIFIC GAS & EL 10,564.48 06/30/2021-07/29/2021 74 - LOCAL WATER PROJECT 5222 UTILITIES 22 09/15/21 100724 2024 PACIFIC GAS & EL 11,057.07 07/30/2021-08/30/2021 74 - LOCAL WATER PROJECT 5222 UTILITIES 22 10/14/21 100973 2024 PACIFIC GAS & EL 10,459.41 08/31/2021-09/29/2021 74 - LOCAL WATER PROJECT 5222 UTILITIES 22 11/23/21 101344 2024 PACIFIC GAS & EL 7,021.27 09/30/2021-10/28/2021 74 - LOCAL WATER PROJECT 5222 UTILITIES 22 12/23/21 101568 2024 PACIFIC GAS & EL 3,216.52 10/29/2021-11/30/2021 74 - LOCAL WATER PROJECT 5222 UTILITIES 22 01/21/22 101766 2024 PACIFIC GAS & EL 2,534.85 12/01/2021-12/28/2021 74 - LOCAL WATER PROJECT 5222 UTILITIES 22 03/18/22 102236 2024 PACIFIC GAS & EL 2,474.30 12/29/2021-01/27/2022 74 - LOCAL WATER PROJECT 5222 UTILITIES 22 03/18/22 102236 2024 PACIFIC GAS & EL 3,559.10 01/28/2022-02/28/2022 74 - LOCAL WATER PROJECT 5222 UTILITIES 22 04/15/22 102479 2024 PACIFIC GAS & EL 4,615.48 03/01/2022-03/29/2022 74 - LOCAL WATER PROJECT 5222 UTILITIES 22 05/13/22 102754 2024 PACIFIC GAS & EL 4,505.80 03/30/2022-04/28/2022 74 - LOCAL WATER PROJECT 5222 UTILITIES 22 06/10/22 102983 2024 PACIFIC GAS & EL 7,403.21 04/29/2022-05/30/2022 74 - LOCAL WATER PROJECT 5222 UTILITIES 22 07/08/22 103219 2024 PACIFIC GAS & EL 9,465.77 05/31/2022-06/28/2022 74 - LOCAL WATER PROJECT 5222 UTILITIES 23 08/19/22 103601 2024 PACIFIC GAS & EL 12,665.96 06/29/2022-07/28/2022 74 - LOCAL WATER PROJECT 5222 UTILITIES 23 09/16/22 103845 2024 PACIFIC GAS & EL 11,894.05 07/29/2022-08/29/2022 74 - LOCAL WATER PROJECT 5222 UTILITIES 23 10/14/22 104094 2024 PACIFIC GAS & EL 11,132.95 08/30/2022-09/28/2022 74 - LOCAL WATER PROJECT 5222 UTILITIES 23 11/10/22 104406 2024 PACIFIC GAS & EL 9,202.50 09/29/2022-10/27/2022 74 - LOCAL WATER PROJECT 5222 UTILITIES 23 12/09/22 104651 2024 PACIFIC GAS & EL 0.07 09/29/2022-10/27/20 (true-up) 74 - LOCAL WATER PROJECT 5222 UTILITIES 23 12/09/22 104651 2024 PACIFIC GAS & EL 5,896.03 10/28/2022-11/29/2022 PGCC 2-15-23

FUND ACCT ACCOUNT TITLE YEAR DATE REFERENCE VENDOR EXPENDITURES DESCRIPTION 74 - LOCAL WATER PROJECT 5222 UTILITIES 20 12/31/19 95099 1798 MONTEREY ONE WAT 8,100.69 11/1/19 - 12/31/19 74 - LOCAL WATER PROJECT 5222 UTILITIES 20 2/20/20 95603 1798 MONTEREY ONE WAT 8,100.69 01/01/2020-02/29/2020 74 - LOCAL WATER PROJECT 5222 UTILITIES 20 5/1/20 96356 1798 MONTEREY ONE WAT 7,115.75 3/1/2020-4/30/2020 74 - LOCAL WATER PROJECT 5222 UTILITIES 20 6/18/20 96743 1798 MONTEREY ONE WAT 7,115.75 5/01/20-6/30/2020 74 - LOCAL WATER PROJECT 5222 UTILITIES 21 8/20/20 97285 1798 MONTEREY ONE WAT 7,115.75 7/1/2020-8/31/2020 74 - LOCAL WATER PROJECT 5222 UTILITIES 21 10/14/20 97744 1798 MONTEREY ONE WAT 8,078.89 09/01/20-10/3120 74 - LOCAL WATER PROJECT 5222 UTILITIES 21 1/15/21 98551 1798 MONTEREY ONE WAT 7,353.99 11/1/2020-12/31/2020 74 - LOCAL WATER PROJECT 5222 UTILITIES 21 2/17/21 98880 1798 MONTEREY ONE WAT 6,942.46 01/01/21-02/28/21 74 - LOCAL WATER PROJECT 5222 UTILITIES 21 4/14/21 99365 1798 MONTEREY ONE WAT 7,057.74 3/01/21 - 04/30/21 74 - LOCAL WATER PROJECT 5222 UTILITIES 7050 JE MONTEREY ONE 7,057.74 5/1/2021-6/30/2021 74 - LOCAL WATER PROJECT 5222 UTILITIES 22 8/18/21 100493 1798 MONTEREY ONE WAT 8,315.62 7/1/2021-8/30/2021 74 - LOCAL WATER PROJECT 5222 UTILITIES 22 10/27/21 101088 1798 MONTEREY ONE WAT 9,515.01 09/01/21-10/31/21 74 - LOCAL WATER PROJECT 5222 UTILITIES 22 12/23/21 101559 1798 MONTEREY ONE WAT 9,515.01 11/01/2021-12/31/2021 74 - LOCAL WATER PROJECT 5222 UTILITIES 22 3/4/22 102107 1798 MONTEREY ONE WAT 10,045.70 01/01/2022-02/28/2022 74 - LOCAL WATER PROJECT 5222 UTILITIES 22 4/15/22 102468 1798 MONTEREY ONE WAT 10,068.40 3/1/2022-4/30/2022 74 - LOCAL WATER PROJECT 5222 UTILITIES 22 6/20/22 103034 1798 MONTEREY ONE WAT 14,753.14 05/01/2022-06/30/2022 74 - LOCAL WATER PROJECT 5222 UTILITIES 23 8/19/22 103593 1798 MONTEREY ONE WAT 17,519.37 07/01/2022-08/31/2022 74 - LOCAL WATER PROJECT 5222 UTILITIES 23 10/20/22 104129 1798 MONTEREY ONE WAT 17,991.08 09/30/2022-10/31/2022 74 - LOCAL WATER PROJECT 5222 UTILITIES 23 12/9/22 104647 1798 MONTEREY ONE WAT 17,991.08 11/01-12/31 04-007087 PGCC 2-15-23

Evaluation of Operating Options
Santa Barbara Golf Club
Santa Barbara, California
Prepared for: City of Santa Barbara
Prepared by: Pro Forma Advisors, LLC
November 2014
PFAID: 10-644
Version: 1.0
Pro Forma Advisors, LLC Los Angeles T 310.616.5079 New York Metro T 203.604.9007 F 888.696.9716 www.ProFormaAdvisors.com PGCC 2-15-23

Table of Contents
General Limiting Conditions 4
I. Introduction and Background 5
Background 5
Basic Assignment Objectives 5
II. Summary 7
Background 7
Golf Market Overview 8
Regional Comparative Metrics 9
Golf Course Operating Options 9
Options Economics 13
III. Description of Facilities and Historical Operating Review 15 Facilities 15
Existing Concessionaire Agreements 15
Municipal Water Quality Elements 16
IV. Capital Improvements 23
Completed Capital Improvements 23
Golf Fund Debt Service 23
Maintenance Equipment 24
Golf Course/Support Facility Capital Improvements 24
V: Golf Market Overview 26
Market Area Demographics 26
National Trends 27
Regional Market Trends 28
Tri-County Golf Market 29
VI: Comparative Operating Revenues and Expenses 46
Pro Forma Advisors, LLC Los Angeles T 310.616.5079 New York Metro T 203.604.9007 F 888.696.9716 www.ProFormaAdvisors.com PGCC 2-15-23

Annual Play 46
Operating Revenues 46
Operating Expenses 47
VII: Golf Course Operating Options 53
Current Hybrid Model 55
Golf Facility Lease 56
Management Agreement 59
Modified Hybrid Model 62
Summary of Operating Options Strengths and Weaknesses 63 VIII. Economics of Golf Course Operating Options 73
Summary Economics 73
Baseline Revenues 73
Living Wage Ordinance 74
Operating Expenses 74
Management Agreement 75
Facility Lease 75
Hybrid Agreement 77
Summary of Options Economics 78
Pro Forma Advisors, LLC Los Angeles T 310.616.5079 New York Metro T 203.604.9007 F 888.696.9716 www.ProFormaAdvisors.com PGCC 2-15-23

General Limiting Conditions
Certain information included in this report contains forward-looking estimates, projections and/or statements.

Pro Forma Advisors LLC has based these projections, estimates and/or statements on expected future events.

These forward-looking items include statements that reflect our existing beliefs and knowledge regarding the operating environment, existing trends, existing plans, objectives, goals, expectations, anticipations, results of operations, future performance and business plans.

Further, statements that include the words "may," "could," "should," "would," "believe," "expect," "anticipate," "estimate," "intend," "plan," “project,” or other words or expressions of similar meaning have been utilized.

These statements reflect our judgment on the date they are made and we undertake no duty to update such statements in the future.

No warranty or representation is made by Pro Forma Advisors that any of the projected values or results contained in this study will actually be achieved.

Although we believe that the expectations in these reports are reasonable, any or all of the estimates or projections in this report may prove to be incorrect. To the extent possible, we have attempted to verify and confirm estimates and assumptions used in this analysis. However, some assumptions inevitably will not materialize as a result of inaccurate assumptions or as a consequence of known or unknown risks and uncertainties and unanticipated events and circumstances, which may occur. Consequently, actual results achieved during the period covered by our analysis will vary from our estimates and the variations may be material. As such, Pro Forma Advisors accepts no liability in relation to the estimates provided herein.

In the production of this report, Pro Forma Advisors has served solely in the capacity of consultant and Pro Forma Advisors has not rendered any “expert” opinions and does not hold itself out as an “expert” (as the term “expert” is defined in Section 11 of the Securities Act of 1933).

This report is not to be used in conjunction with any public or private offering of securities, and may not be relied upon without the express written consent of Pro Forma Advisors.

This study is qualified in its entirety by, and should be considered in light of, these limitations, conditions, and considerations.

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I. Introduction and Background
Background
The City of Santa Barbara municipal golf course, the Santa Barbara Golf Club (SBGC or “Muni”), has served the community of Santa Barbara since 1958 under the leadership of the Parks and Recreation Department.

SBGC provides the Santa Barbara community, residents and visitors alike, with affordable golf in a welldesigned and maintained golf course facility. The 108-acre, 18-hole regulation, par-70 golf course is located in the north side of town and features sweeping views of the Santa Ynez foothills and the Pacific Ocean.

SBGC is managed by the Parks and Recreation Department. The Department also provides the golf course maintenance operation, staffed with City employees. The Department manages two concession contracts associated with the operation of the course, the Director of Golf/Pro Shop concession and the Food and Beverage concession. Although concession rents provide revenue to the golf course, over 80% of City golf revenue derives from greens fees paid by golfers.

Operated as an enterprise fund within the City, SBGC receives no tax revenue support through the City’s General Fund and is funded solely by revenues generated at the course. Since 1987, the course has seen a gradual decline in the number of rounds being played, affecting revenue. Discussed in the report, the decline in play is largely attributed to a national decline in golf participation and an unprecedented increase in the number of golf courses serving golfers, including in the Santa Barbara area. This industry decline has been compounded in recent years as people changed their leisure and spending habits in response to the deep national recession. Concurrently, SBGC experienced a significant decline in play resulting from two major construction projects at the facility. Although the level of play has recovered and stabilized to some degree, it has not returned to pre-2009 levels and the outlook is that play will likely remain relatively flat in the near-term, with slow growth over the longer time frame.

With sluggish growth in play/revenues and increasing expenses, the longer term fiscal health of SBGC became a focus for the Parks and Recreation Department and the City. This study was undertaken to provide the City with information on trends within the golf industry, the comparative performance of SBGC to comparable regional facilities, various operating models used for municipal golf courses, strengths and weaknesses of the various models, and how the various models compare to the current operating model in place for the City of Santa Barbara.

Basic Assignment Objectives
Key objectives of the assignment included:
‣ Prepare a description of SBGC facilities and historical operating review. ‣ Provide an overview of the golf market, including national and regional demographics and trends. ‣ Complete a comparative performance review of regional golf courses, including rounds of play, average revenue per round, revenues, and operational costs including maintenance.

Introduction
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‣ Describe and compare various operating models employed by municipal golf courses in California, including Santa Barbara.
‣ Review the economics of alternative operating models related to SBGC.

Overall Work Process
The overall work process for this assignment has occurred over about a two-year time frame. A significant portion of the analysis was conducted in 2013 and updated in mid-2014. The work tasks completed during this study process included the following:
‣ Discussions and interviews with selected stakeholders, including the concessionaires and Parks and Recreation staff, and industry representatives, including a series of private golf management companies. ‣ A review of historical operating and financial statements for SBGC. ‣ Inspection of the golf course and support facilities. ‣ Analysis of current and anticipated future golf course market conditions. ‣ A review of future capital improvement requirements at the golf facility. ‣ Identification and analysis of the various operating models employed by municipal golf courses. ‣ Projections of near- and mid-term operating performance of SBGC. ‣ Comparative evaluation of prospective operating models with the current SBGC operating structure.

The Parks and Recreation Department contracted with Gene Krekorian, a Principal with Pro Forma Advisors LLC, to provide the majority of the information provided in this report. Mr. Krekorian was well qualified for this effort having prepared various operational analysis reports on the City’s golf course over the years. Additionally, Mr. Krekorian has undertaken similar studies for other golf courses in the Tri-County area so he is familiar with golf operations in the region. Staff worked with Mr. Krekorian to provide assistance and information to complete the report.

The final report, drafted by Pro Forma Advisors, is the product of a collaborative effort of Pro Forma Advisors and Parks and Recreation staff.

Introduction
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II. Summary
The following section presents a summary of principal findings related to future operations at Santa Barbara Golf Club (SBGC). Substantiation and documentation of these summary findings are contained in the subsequent sections of the report.

Background
The Santa Barbara Golf Club (known as SBGC or “Muni”) has served as the City’s municipal golf course since 1958. The course is operated as an enterprise fund, whereby revenue generated at the club sustains maintenance and operations of the golf course. The golf course receives no tax support.

Santa Barbara Golf Club is managed by the City Department of Parks and Recreation, which also maintains the golf course. Golf operations is the responsibility of a golf concessionaire who pays rent to the City based on a percentage of gross revenue. Similarly, the food and beverage operations at SBGC are provided under a concession agreement.

Santa Barbara’s municipal golf course has experienced increasing fiscal challenges due to a continuing decline in the number of rounds played at the course. The sport of golf has seen declines nationally and regionally primarily due to fewer people playing golf or playing less frequently, an over-expansion of the golf course inventory, and more recently the effects of a struggling economy. Additionally, SBGC has yet to see play fully rebound from 2010 losses due to the lingering effects from two major construction projects on the golf course and the national economic recession. The course has seen play decline an average of nearly 3% per year, down from over 100,000 rounds in 1990 to 62,500 in Fiscal Year (FY) 2014.

Presently, over 80 percent of golf course revenue is generated by user fees charged to the golfers (greens fees). Fewer rounds mean less revenue. A number of measures have been taken over recent years to decrease expenses, restructure debt, and increase play. The golf course has limited ability to further reduce expenses without negatively affecting course conditions, which would have a reciprocal effect on play. Similarly, extraordinary fee increases intended to generate additional revenue will have the opposite effect, as the local golf market offers golfers many choices today with competitive pricing.

Despite the actions which have been taken, and given some stability in the golf market, SBGC sustained negative cash flow in FY2014, and the outlook suggests financial performance may deteriorate further. Actual financial results for FY2014 are summarized as follows:

Summary
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SBGC Net Cash Flow-2014 ($000)
City Revenue/Rent
Greens Fees Revenue $1,664.7
Concession/Other Revenues 378.4
Total $2,043.1
Operating Expenses
Course Maintenance 1,369.1
Other Operating Expenses 263.0
Total $1,632.1
Net Operating Income (EBITDA)1/ $411.0
Less: Debt Costs 264.8
Capital Improvement Allowance 214.5
Net Cash Flow (68.2)
1/ Earnings before interest, taxes, debt and amortization, and capital improvements.

Golf Market Overview
Nationwide, golf play increased steadily between the mid-1980s and 2000. Over the period 1990-2010, the national inventory of golf courses increased by 34% while golf demand only increased 12%. Since 2000, first signs of industry problems surfaced and have persisted for the last 10 years. Since 2007, the golf market has been further impacted by the national and regional recession. In response, promotions, discounts and special rate loyalty programs which offer reduced fees have become the norm and increased local competition.

Regionally, similar patterns were seen over the same period. The Tri-County region has 38 public access golf courses, expressed as 18-hole equivalent courses, of which 7.5 are located in Santa Barbara County. Inventory has increased 58 per cent since 1995. While only two new courses were added to the golf inventory in Santa Barbara County since 1995, and none since 1998, the significant expansion in Ventura County has provided many more options for residents of the region. The Tri-County public golf market is highly competitive.

In addition to numerous municipal facilities, there are a number of higher quality public access courses available at relatively affordable greens fees.

Since 2011, the regional golf market has been generally flat, benefitting from favorable weather. Golf industry leaders project limited growth over the next 10- to 20-year term. Most of this growth will result from the aging Summary
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population trend (60 to 74 age cohort) where the propensity to, and frequency of, play increase compared to younger age cohorts. While the regional market appears to have stabilized, there are no indications that portend much, if any, growth in the near- to mid-term.

Regional Comparative Metrics
With the inventory of golf courses increasing by one, the aggregate annual play at 10 selected Ventura and Santa Barbara public courses declined by only 5.3 percent over the 2004-2013 period. However, the survey shows that the average play per course declined 15 per cent over the nine-year period. (By comparison, play at all regulation length public access courses in Los Angeles County declined 14 per cent.) Play at SBGC declined from 86,400 rounds in 2004 to 61,000 in 2013, or nearly 30 per cent. Factors contributing to decline in SBGC rounds included:
• Glen Annie Golf Club has repositioned toward the mid-market, thus becoming more competitive with SBGC.
• Higher end daily fee courses (i.e., Sandpiper Golf Club and Rancho San Marcos) have been targeting Tri-County residents with discounts.
• City of Ventura recently renovated both of their municipal courses (Buenaventura and Olivas Links) resulting in fewer Ventura area players traveling to Santa Barbara, and more Santa Barbara players traveling to the newly renovated courses.
• Promotional programs and greens fees discounting by competitive courses in the region has reduced their effective fee structures relative to SBGC.
• Lost play following 2010 SBGC construction.

When compared to the performance of seven municipal courses and three daily fee courses, revenue per round ranged from $19 to $35.30. SBGC FY 2014 performance was $26.57 per round. For comparison, Buenaventura was $24.80 and Olivas Links was $28.89. SBGC merchandise revenue performs slightly superior to most other courses in the region. Average cart fee is consistent with similar courses in the region. Practice range revenue is relatively low at SBGC compared to others due to facility limitations. Food and beverage (Mulligans Bar & Cafe) performance is strong.

When compared to five municipal courses and four mid-market daily fee courses, the greatest expense variance was the cost of maintenance labor. With staffing levels ranging from 9 to 15 FTE at 18-hole golf courses in the region, the majority of payroll and benefit cost was in the range of $311,000 to $555,000 while SBGC direct labor cost was $929,000 with 12 FTE. Santa Barbara operates SBGC with a City employee workforce which is the primary reason for the higher labor cost.

Golf Course Operating Options
Golf courses have four primary operational areas, including Administration/Management, Course Maintenance, Golf Operations (daily golfer services), and Food and Beverage service. Five basic golf course operating options employed by municipalities are presented, including the current model used by the City of Santa Barbara.

Summary
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‣ Hybrid – current model in Santa Barbara (City maintenance) ‣ Modified Hybrid – alternate model with contract maintenance ‣ Management Agreement
‣ Golf Facility Lease
‣ Full Self-Operation
A brief description of each model is below. The following table provides an overview of the responsibilities for each function in the various models.

Responsibility for Function
Model Course
Maintenance
Golf Operations Food & Beverage Administration/
Management
SBGC Hybrid* City Concession Concession City
Modified Hybrid** City/Private Private/
Concession
Concession City/Private
Management Agreement Private Private Private Private
Golf Facility Lease Private Private Private/
Concession
Private
Full Self-Operation City City City/Concession City
* Represents current SBGC Hybrid model.
** Hybrid model with City course maintenance and golf operations concession represents the current city model, with some modifications of terms/expenses.

In addition to these basic options, there are numerous permutations which would create alternative hybrid models. These alternative hybrid models combine some form of self-operation, concession agreements, and/ or management/contract agreement.

The Hybrid model consists of any combination of concession agreements and service contracts. The City of Santa Barbara currently employs a Hybrid model with City employees providing Administration/Management and golf course maintenance; golf operations and food and beverage services are provided by two concessionaires: Director of Golf - Chris Talerico/Channel Islands Golf Enterprises, Inc., and Mulligans Café LLP – Mario and Lani Medina. The “hybrid model” (golf operations concession, with City maintenance), currently accounts for 6 percent of the 83 municipal golf courses in Southern California.

A Modified Hybrid model respective to the City of Santa Barbara could entail the City retaining the current golf operations and food and beverage concessions, with golf course maintenance shifted to a private landscape maintenance entity on a contract basis. The City would still be responsible for overall golf course management, and overseeing the three contracts. The “modified hybrid model” (golf operations concession, with Summary
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contract/private maintenance), also currently accounts for 6 percent of the 83 municipal golf courses in Southern California.

The Management Agreement model, although observed at only about one-quarter of the Southern California municipal golf courses, is the most common model employed in the municipal golf market today. The City would enter into a fee-for-service agreement with a Director of Golf, General Manager, or an outside management company. Under a typical management agreement, the facility owner (City) receives all revenues and is responsible for funding all capital improvements, operating expenses and capital reserves . In addition, the City pays the operator a fee for management of the facility. In effect, the professional operator serves as the City’s agent in managing, operating and maintaining the golf facility. Management compensation typically consists of a base fee, plus performance incentives. The “management agreement model” currently accounts for 23 percent of the 83 municipal golf courses in Southern California, although in recent years the model has been employed in the majority of the municipal transactions.

Under the Golf Facility Lease model, the City would enter into a long-term facility lease with a private golf course operator who provides course maintenance, golf operations, and overall facility management. The food and beverage operation may be included or provided through a separate lease. Typically, the lease model has been utilized when a private entity will be investing significant capital into the facility. The operator’s lease payments typically are based on a minimum rental payment versus a percentage of gross revenues derived from golf, merchandise, food and beverage, etc. Under a typical facility lease, the lessee receives 100 percent of the revenue and is obligated to fund required front-end capital improvements, operating expenses, and a capital reserve fund. This model is not as common in today’s municipal golf market, although it is the model employed in over one-half of the municipal golf courses in Southern California. The “golf facility lease model” currently accounts for 57 percent of the 83 municipal golf courses in Southern California, although in recent years the model has been employed in a much smaller percentage of the municipal transactions.

The Full Self-Operation model, whereby the facility is operated fully by the City with a City workforce, is very uncommon and movement away from this model continues given higher public employee compensation labor costs. This model is not seen as a viable option for Santa Barbara at this time. Currently, the “full selfoperation model” accounts for 6 percent of the 83 municipal golf courses in Southern California. In addition, there are two recreation districts (two percent) in Southern California which operate municipal golf courses.

There are economic and non-economic advantages and disadvantages of the various types of operating structures, and the most appropriate structure generally is strongly influenced by the the objectives of the owner (City). Most of the advantages and disadvantage of each approach are summarized in the following table.

Summary
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Strengths and Weaknesses of Golf Course Operating Options Hybrid (Current Model) Facility Lease Management Agreement Modified Hybrid

STRENGTHS
• Provides high level of City
control over rates, policies,
practices, and overall golf
experience
• Availability of City overhead
support functions
• Strong participation in upside financial performance • Provides opportunity to
retain specialists in golf
operations and food and
beverage
• Preserves option to convert
to alternative operating
option
• Provides reasonably strong
financial return to City
• Produces guarantee minimum rent payment to City
• Minimizes financial risk
• Minimizes political influence
with less direct involvement
of City with setting fees,
policies, and practices
• Offers potential benefits in
golf management expertise
and specialized
maintenance support services
• May provide private capital
investment in facilities
• Provides strong financial
return to City.
• Provides high level of City
control
• Greater potential quality
assurance
• Opportunity to provide
shorter term contracts
• Potentially more compatible
with multiple operator options
• Provides opportunity to
retain specialists in professional golf management
• Captures benefits of private
sector wage and benefit
structure
• Provides high level of City
control over rates, policies,
practices, and overall golf
experience
• Availability of City overhead
support functions
• Strong participation in upside financial performance • Potential benefits from
lower private sector
maintenance payroll/
benefits
• Provides opportunity to
retain specialists in golf
operations and food and
beverage
• Preserves option to convert
to alternative operating
option

WEAKNESSES
• Constrains ability of management to adapt and respond to dynamic market conditions
• Entails high level of financial
risk
• Involves higher public sector wage and benefit structure for maintenance • Reduces opportunity to
attract private capital due
to reduced lessee control
• Potential conflicts of multiple concessionaires
• Relatively high City monitoring requirements
• Minimum operational and
quality control
• May involve long-term contractual commitment
• Minimizes financial upside,
particular in current market
• Current weak market for
facility leases
• Potential conflicts over
capital reinvestment responsibilities of contracting
parties
• Requires more City involvement than facility lease
option
• Minimizes private capital
investment in facilities.
• Entails greatest level of City
financial risk
• May constrain ability of
management to adapt and
respond to dynamic market
conditions
• Entails high level of financial
risk
• May involve higher public
sector wage and benefit
structure
• Reduces opportunity to
attract private capital due
to reduced lessee control
• Potential conflicts of multiple concessionaires
• Relatively high City monitoring requirements
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In general, there are three factors which influence the preferred structure:
‣ Level of control desired by public entity in terms of fee structure, operating policies, and other procedures.
‣ Ability or willingness to fund significant capital improvements required. ‣ Degree of financial risk tolerance related to market and other events.

Options Economics
The report provides detailed economics of how each model might compare if implemented in Santa Barbara.

In general, the primary difference in net operating income and cash flow derives from whether golf course maintenance is provided by a City employee workforce or a private entity.

A comparative summary of the economics associated with the various operating models is presented in the following table. The comparative analysis is predicated on the assumption that revenue is constant among the various models. General experience suggests that revenue (play levels) are likely to be greater under the management agreement model and the facility lease model. To the extent that revenues are higher, the differential between the management agreement (and facility lease) model and the hybrid model would likely be substantially greater.

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Comparative Baseline Operating Options Economics
(thousands of constant 2014 dollars)
City Hybrid
Actual
FY2014
Hybrid Management Agreement Facility
Lease1/
Department
City Hybrid
Actual
FY2014 City
Maint*
Contract
Maint with
Living Wage
No Living
Wage
With Living
Wage
Facility
Lease1/
City Revenue/Rent
Greens Fees Revenue $1,664.7 $1664.7 $1664.7 $1,664.7 $1,664.7 --- Golf Operations Revenue --- --- --- 793.4 793.4 ---
Facility/Golf Ops Concession Rent 189.6 161.5 161.5 --- --- $449.9 Food & Beverage Rent 139.1 137.8 137.8 206.7 206.7 137.8 Other Revenue 49.7 49.7 49.7 49.7 49.7 10.0
Total $2,043.1 $2,013.7 $2,013.7 $2,714.5 $2,714.5 $597.7 Less: Cost of Sales --- --- --- 142.7 142.7 ---
Gross Profit $2,043.1 $2,013.7 $2,013.7 $2,571.8 $2,571.8 $597.7 Operating Expenses
Course Maintenance $1,369.1 $1,370.0 $1,140.72/ $880.0 $1,037.0 --- Golf Operations --- --- --- 313.0 378.0 ---
G & A/Clubhouse 71.4 71.4 71.4 420.0 420.0 ---
City Contract Administration 118.1 118.1 150.0 80.0 80.0 80.0 Citywide Overhead Allocation 73.5 73.5 73.5 73.5 73.5 73.5 Total $1,632.1 $1,633.0 $1,435.6 $1,766.5 $1,988.5 $153.5 Net Operating Income (EBITDA)3/ $411.0 $380.7 $578.1 $805.3 $583.3 $445.2 Less: CIP Replacement Reserve 214.5 225.0 225.0 225.0 225.0 108.1 Debt Service 264.8 264.8 264.8 264.8 264.8 264.8
Net Cash Flow ($68.3) ($109.1) $88.3 $315.5 $93.5 $71.3 Variance From Current Hybrid
Model, With City Maintenance
$40.8 --- $197.4 $424.6 $202.6 $180.4
* Represents current City Hybrid model with current terms. 1/ Assumes no Living Wage ordinance; 2/ Assumes Living Wage ordinance; 3/ Earnings before interest, taxes, depreciation, debt service and amortization. * Represents current City Hybrid model with current terms. 1/ Assumes no Living Wage ordinance; 2/ Assumes Living Wage ordinance; 3/ Earnings before interest, taxes, depreciation, debt service and amortization. * Represents current City Hybrid model with current terms. 1/ Assumes no Living Wage ordinance; 2/ Assumes Living Wage ordinance; 3/ Earnings before interest, taxes, depreciation, debt service and amortization. * Represents current City Hybrid model with current terms. 1/ Assumes no Living Wage ordinance; 2/ Assumes Living Wage ordinance; 3/ Earnings before interest, taxes, depreciation, debt service and amortization. * Represents current City Hybrid model with current terms. 1/ Assumes no Living Wage ordinance; 2/ Assumes Living Wage ordinance; 3/ Earnings before interest, taxes, depreciation, debt service and amortization. * Represents current City Hybrid model with current terms. 1/ Assumes no Living Wage ordinance; 2/ Assumes Living Wage ordinance; 3/ Earnings before interest, taxes, depreciation, debt service and amortization. * Represents current City Hybrid model with current terms. 1/ Assumes no Living Wage ordinance; 2/ Assumes Living Wage ordinance; 3/ Earnings before interest, taxes, depreciation, debt service and amortization.

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III. Description of Facilities and Historical Operating Review The following section contains a brief description of Santa Barbara Golf Course (SBGC) and a review of historical operating performance.

Facilities
The Golf Course was designed and built in 1957 by Lawrence Hughes, and opened for play on January 12, 1958. The 18-hole golf course envelope is approximately 108 acres, of which 85 acres is irrigated turf. The regulation, par-70 golf course features sweeping views of the Santa Ynez foothills and the Pacific Ocean. Located in the north side of town, the course is surrounded by homes, Earl Warren Showgrounds, Las Positas Road, McCaw Road, Club House parking lot, and Adams Elementary School.

The amenities of the course include a practice putting green, electric golf cart storage facility, pro shop/office, restrooms, an unlighted driving range with fence which has 12 stalls for irons and woods, 6 stalls for irons only, and for the exclusive use of providing lessons only, an 1,800 square foot teaching area with easy access for 4- 5 simultaneous lessons, a putting/chipping green, and a small sand bunker. The Santa Barbara Golf Club has a 210-space paved parking area.

The clubhouse, originally built with the golf course as a small food and beverage operation, was significantly expanded and remodeled in 1989 into the current configuration. The clubhouse includes a full-service restaurant, bar and banquet room as well as exterior patio dining areas on two sides of the facility overlooking the golf course, and a takeout counter serving golfers.

Existing Concessionaire Agreements
The pro shop concession, which provides the daily operation of the course and golfer services, is with Chris Talerico, Channel Islands Golf Enterprises, Inc. Golfer services include the tee reservations and starter function, carts, driving range operation, retail sales of golf supplies and equipment, lessons, tournaments, leagues, and the marshaling operation which oversees the pace of play on the course. The three-year agreement term ends June 30, 2016. The current pro shop concession terms include a base rent minimum of $125,000, plus percentage rents as follows: 30% on carts, 25% on the driving range, 4% on merchandise, and 4% on lessons and equipment rental sales. In FY 2014 annual income to the City from the pro shop concession was $189,600.

The food and beverage concession is with Mario and Lani Medina, Mulligan’s Café LLP. Mulligans Café has served the SBGC since 1993. The restaurant serves breakfast, lunch and dinner seven days a week and draws a substantial business from the general community in addition to serving golfers. The current concession agreement term will conclude June 30, 2016. The Mulligans food and beverage concession terms include a base rent minimum of $116,774 plus 10% percentage rent on gross receipts above the base rent amount. In FY 2014 annual income to the City from the Food and Beverage concession was $139,060.

SBGC Description/Historical
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Municipal Water Quality Elements
The Santa Barbara Golf Club, located at the top of the Las Positas Creek watershed, receives storm water and urban runoff from surrounding streets and properties. The Creek Restoration and Water Quality Program constructed the Upper Las Positas Creek Restoration and Storm Water Management Project on the course in 2010. The project was designed to detain and treat storm water and incidental runoff and improve water quality downstream in Las Positas Creek, the Arroyo Burro Estuary, and Arroyo Burro Beach. This project added several new aesthetic elements to the course, including several large retention basins, as well as natural area creek and native landscape elements.

Staffing Levels
SBGC is supported with City employee resources in management, marketing and maintenance. After many years of consistent staffing levels, reductions were made in 2010 (-.20 FTE) and again in 2012 (-2.50 FTE) to reduce expense in response to decreased revenues, both at a management level and golf maintenance staffing.

Current Golf Fund staffing totals 12.75 full time equivalent employees. Management and marketing total .75 FTE (.20 FTE Parks and Recreation Director, .5 Business Analyst, .05 FTE Marketing Coordinator). Golf Maintenance is 12.0 FTE, comprised of the following:
• 1.0 FTE – Golf Superintendent
• 1.0 FTE – Maintenance Coordinator
• 1.0 FTE – Irrigation Tech
• 1.0 FTE - Automotive/Equipment Tech
• 1.0 FTE – Sr. Grounds Maintenance Worker
• 4.0 FTE – Grounds Maintenance Worker II
• 1.3 FTE – Grounds Maintenance Worker I
• 1.7 FTE – Grounds Maintenance Worker I (hourly)
Golf Fund Revenues and Expenses
Greens fees are the largest component of Golf Fund revenue, comprising over 80% of annual revenue. Any change in the number of rounds played has a corresponding effect on Golf Fund revenue. Since 1987, the number of rounds at SBGC has continued on a gradual decline. A number of factors for this are related to national trends and regional golf operations and discussed in more detail in the Golf Market Overview. In 2010, SBGC rounds hit their lowest point of 59,091, reflecting the impacts of two major golf course construction projects compounded by changes golfers made in their leisure and spending habits in response to the national recession. Although the level of play has partially recovered and stabilized to some degree, it has not returned to pre-2009 levels (see Table III-1).

As shown, in FY2014 SBGC accommodated approximately 62,500 total rounds of play. The majority of these rounds were played by about 6,000 individual golfers.

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The distribution of 2014 play, by type of round, is presented in Table III-2. The following observations are offered:
‣ Residents of Santa Barbara County account for 93 percent of total play, with non-residents about 7 percent. The percentage of resident play on weekdays is slightly lower at 92.5 percent of total play, and slightly higher at 93.4 percent on weekends.
‣ Weekday play represents approximately 65 percent of total play, and weekend play about 35 percent.

This pattern of play, which is slightly disproportional on weekends, is consistent with most municipal golf courses in Southern California.
‣ Seniors account for approximately 60 percent of total weekday 18-hole play. Senior play at most Southern California municipal golf courses, where discount rates are offered, typically accounts for 50 to 60 percent of total 18-hole weekday play.
‣ Tournament play at SBGC represents 3.1 percent of total play, slightly below the percentage observed at most Southern California municipal golf courses. Generally, tournament play accounts for about 5 percent of total play.
‣ Complimentary play represented 4.0 percent of total play in FY2014, consistent with the percentage seen at comparable municipal golf courses.

Golf fees have increased by an average of $1 per year, with occasionally larger increases ($2-3), to keep up with increasing operational expenses and decreases in play. Greens fee increases can affect play since the municipal course attracts many low to average income players and seniors who live on fixed incomes. The current greens fees structure at SBGC is as follows (residents are defined as golfers residing in Santa Barbara County):

SBGC Greens Fees
Resident/Non-Resident
Weekday Weekend
Regular $35/$50 $39/$60
Senior 28/50 37/60
Twilight 25/37 27/40
Super-Twilight 17/17 17/17
Junior 13/13 13/13
The cart fee is $15.00 per rider.

In response to the national recession, most golf operators, including SBGC, reduced rates and instituted discounts and special promotions to retain and attract golfers. As the economy has improved, SBGC has gradually and strategically been reducing the quantity and value of discounts put into place over the past several SBGC Description/Historical
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years which will help to improve revenue. However, as the local golf market is particularly competitive, many golfers continue to be resistant to any increased fees or reduced discounts.

Gross revenue for 2014 at SBGC is presented in Table III-3. The City receives 100 percent of greens fees revenue and a share of the golf concession (carts, range, merchandise, and instruction) and food and beverage concession revenue.

Maintenance is the primary expense of the Golf Fund, and historically that budget has been relatively consistent from one year to the next except for the staffing changes discussed above, water costs based on varying weather patterns, and mandated increases to employee salary and benefits and costs allocated by the City for overhead, insurance, IS services, and other indirect support services.

Net operating income at SBGC for 2014, before capital expenditures, interest on debt, and other nonoperating expenses, is shown in Table III-4. As indicated, net operating income totaled approximately $400,000 in 2014. Most of this net income was used for debt service obligations and capital expenditures (see Capital Improvements Section).

SBGC Description/Historical
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Table III-1: SBGC Historical Annual Play
Fiscal
Year
Annual
Rounds
Fiscal
Year
Annual
Rounds
1982 97,742 1999 95,359
1983 103,147 2000 93,612
1984 113,710 2001 85,275
1985 114,174 2002 90,435
1986 109,562 2003 86,892
1987 112,032 2004 86,404
1988 111,354 2005 78,1914/
1989 105,1701/ 2006 76,6004/
1990 108,216 2007 78,5324/
1991 79,1942/ 2008 74,484
1992 99,145 2009 70,546
1993 96,634 2010 59,0915/
1994 99,274 2011 62,800
1995 95,221 2012 63,620
1996 98,320 2013 61,030
1997 98,796 2014 62,512
1998 93,0523/
1/ Clubhouse remodeled. 2/ Drought conditions. 3/ Glen Annie and Rancho San Marcos opened. 4/ Construction. 5/ Major construction/national recession.1/ Clubhouse remodeled. 2/ Drought conditions. 3/ Glen Annie and Rancho San Marcos opened. 4/ Construction. 5/ Major construction/national recession.1/ Clubhouse remodeled. 2/ Drought conditions. 3/ Glen Annie and Rancho San Marcos opened. 4/ Construction. 5/ Major construction/national recession.1/ Clubhouse remodeled. 2/ Drought conditions. 3/ Glen Annie and Rancho San Marcos opened. 4/ Construction. 5/ Major construction/national recession.1/ Clubhouse remodeled. 2/ Drought conditions. 3/ Glen Annie and Rancho San Marcos opened. 4/ Construction. 5/ Major construction/national recession.

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Table III-2: SBGC Distribution of Rounds Played--2014
Resident Non-Resident Total
Weekday
18-Hole Standard 7,537 1,786 9,323
18-Hole Senior 14,224 2 14,226
Twilight/9-Hole 11,818 989 12,807
Super-Twilight 770 --- 770
Subtotal 34,349 2,777 37,126
Weekend
18-Hole Standard 8,069 899 8,968
18-Hole Senior 2,737 --- 2,737
Twilight/9-Hole 5,314 445 5,759
Super Twilight 2,879 2,879
Subtotal 18,999 1,344 20,343
Juniors 420 --- 420
Tournament 1,853 --- 1,853
Total Paid 55,621 4,121 59,742
Complimentary --- --- 2,489
Total --- --- 62,231
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Table III-3: SBGC Gross Revenue--2014
Amount ($000)
Department Total City Share
Greens Fees $1,664.7 $1,664.7
Cart Rental Fees 422.4 138.4
Range 95.5 28.7
Merchandise 190.3 9.2
Instruction/Other Pro Shop 85.2 13.3
Food & Beverage 1,377.9 139.1
Other Revenue 49.7 49.7
Total $3,882.2 $2,043.1
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Table III-4: SBGC Net Operating Income-2014
Department Amount
($000)
City Revenue/Rent
Greens Fees Revenue $1,664.7
Golf Operations Revenue ---
Facility/Golf Ops Concession Rent 189.6
Food & Beverage Rent 139.1
Other Revenue 49.7
Total $2,043.1
Less: Cost of Sales ---
Gross Profit $2,043.1
Operating Expenses
Course Maintenance 1,369.1
Golf Operations ---
G & A/Clubhouse 118.1
City Admin/Overhead 144.92/
Total $1,632.1
Net Operating Income (EBITDA)1/ $411.0
Less: Debt Costs 264.8
CIP Allowance 214.5
Net Cash Flow (68.2)
1/ Earnings before interest, taxes, debt and amortization, and capital improvements.
2/ Includes vehicle replacement and maintenance, insurance, Citywide overhead allocation ($73,500) and other miscellaneous expenses.
1/ Earnings before interest, taxes, debt and amortization, and capital improvements.
2/ Includes vehicle replacement and maintenance, insurance, Citywide overhead allocation ($73,500) and other miscellaneous expenses.

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IV. Capital Improvements
The following section presents a summary of the capital improvements program for Santa Barbara Golf Club.

Capital improvements are separated into golf course maintenance equipment and golf course/support facility improvements.

Completed Capital Improvements
The current condition of the SBGC facility is very good. The course itself is maintained well, and routinely receives frequent compliments from golfers on the above average condition of the greens and course, especially for a municipal course. A number of improvements to the course have been completed since 2004, including a continuous concrete cart path around the course, updated irrigation system, two new greens, and several modifications to hole designs to improve play and safety. Within the past year, the clubhouse roof has been replaced and the clubhouse has been repainted. There are several components to the complex--primarily support facilities--where there is some deferred maintenance.

The golf course completed an analysis and developed the Golf Course Safety Improvement Master Plan in 2004. This plan addressed safety concerns at the course due to its design, constraint limitations due to size and the fact that it is surrounded by immediately adjacent streets, residences, an elementary school and businesses. The number of errant golf balls leaving the course exposed the City to increased liabilities. The plan included a number of projects to relocate holes, tee boxes, bunker and greens in order to redirect balls into the course, away from golfers and improve play. Since 2004 the course has seen a substantial number of the recommended improvements constructed, and a decrease in incidents and claims related to errant golf balls.

Several of the recommended improvements have yet to be completed.

Golf Fund Debt Service
The Golf Fund debt service includes repayment of three loans for the clubhouse renovation (2022), 2008 Golf Course Safety Improvement Project (2018), and turf equipment replacement (2018). To help ease Golf Fund fiscal challenges, the City Council approved debt restructures in FY 2012 and again in FY 2013, reducing the annual payments and increasing the repayment period.

Debt service payments scheduled over the remaining amortization period are projected as follows:

FY2016 FY2017 FY2018 FY2019 FY2020 FY2021 FY2022
Principal $213,052 $213,201 $233,399 $158,826 $165,182 $171,790 $174,732 Interest 49,070 40,689 31,838 26,821 20,469 13,861 10,919 Total $262,122 $253,890 $265,237 $185,647 $185,651 $185,651 $185,651 SBGC Capital Improvements
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Maintenance Equipment
The golf course maintains a full complement of golf course maintenance equipment, most of which was acquired through a City of Santa Barbara fleet fund loan purchase in April 2013. The equipment is in good condition. Going forward, a maintenance equipment replacement schedule is in place which provides for routine replacement of equipment. Commencing in FY2019, maintenance equipment replacement expenditures averaging about $80,000 annually are scheduled.

Golf Course/Support Facility Capital Improvements
SBGC has benefited from periodic improvements to the golf course infrastructure and support facilities such that most of the facilities generally are in relatively good condition. However, golf courses require continual capital reinvestment to maintain the quality of the golf experience and preserve asset value. In particular, there has been some recent deferred maintenance to support facilities, and some facilities such as golf course maintenance structures will have to be addressed at some point.

A 7-year capital improvement plan is presented in Table IV-1. Over the 2015-2021 period, capital improvement requirements at SBGC are projected at $1,794,900, or just over $250,000 per year. While there are no major capital needs required during this period, there are numerous capital items related to smaller projects which total nearly $1.18 million over the 7-year term. To the extent that the Players’ Improvement Fund (PIF) contributions are used for slated capital improvements, the total amount of capital expenditures would be reduced accordingly.

SB Muni Capital Improvements
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Table IV-1: SBGC Projected Capital Improvement Plan
Component 2015 2016 2017 2018 2019 2020 2021 Total
Maintenance Shop Addition $5,000 $65,000 $70,000
Parking Lot & Other Asphalt 32,000 45,000 77,000
Club House Painting $30,000 30,000
Irrigation Controller Upgrades 100,000 100,000
Driving Range Improvements 45,000 100,000 145,000
irrigation Mapping and Software 33,000 33,000
Club House Upgrades 15,000 30,000 45,000
Irrigation System Replacements 50,000 25,000 100,000 175,000 Rebuild Greens 75,000 75,000 150,000 30,000 330,000
Rebuild Tee Boxes 35,000 40,000 75,000
Other Course Improvements 32,000 7,500 3,000 14,500 57,000 Maintenance Equipment 80,000 80,000 80,000 240,000
Player Improvement Fund Imps 59,700 59,700 59,700 59,700 59,700 59,700 59,700 417,900 ANNUAL TOTAL $146,700 $316,700 $255,200 $239,700 $299,700 $282,700 $254,200 $1,794,900 SB Muni Capital Improvements
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V: Golf Market Overview
The following section presents an overview of the demographic makeup of the Santa Barbara market area and an analysis of national, regional and local golf market conditions.

Market Area Demographics
The primary market area for a golf course is influenced by a number of factors including course quality, rate structure, transportation network and access, location and characteristics of competitive facilities, resident demographic attributes, and other such factors. The primary market area for SBGC, from which 80 to 90 percent of total play is expected to derive, is defined as the Tri-County region (Santa Barbara, San Luis Obispo and Ventura Counties), recognizing that the vast majority of support derives from Santa Barbara County. Most residents of Santa Barbara County are within about a 20- to 30- minute drive time (10-15 miles) of the golf complex, while residents of Ventura and San Luis Obispo Counties have a drive time of 30-60 minutes, or longer. Additional support derives primarily from overnight visitors to the area.

Comparative demographics of the Santa Barbara market area are presented in Table V-1. As noted, Santa Barbara County population has increased at a very modest rate over the past 20 years, and is projected to continue to increase marginally over the next 10 years, reaching just under 450,000 by 2020 (note that the projected population is based on applying projected California Department of Finance growth rates to actual 2010 population). The Tri-County area population has increased at a faster rate than Santa Barbara County, and is expected to continue to grow at a slightly faster rate, with the majority of the growth occurring in Ventura County. Residents of Santa Barbara County are somewhat older than the statewide benchmark, and of comparable overall affluence.

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While Santa Barbara County population growth is projected to be very modest, the aging of the population will be a significant factor which is expected to positively impact golf demand as the propensity to play and frequency of play increase with age, particularly in the 60-74 age cohort.

Santa Barbara County Population Growth
Population Average Annual Growth
Year 60-74 Age
Cohort
Total Percent
of Total
60-74 Age
Cohort
Total Population
2000 39,500 399,300 9.9% --- ---
2010 48,900 423,900 11.5% 2.16% 0.60%
2020 (projected) 71,600 448,200 16.0% 3.88% 0.56%
2030 (projected) 82,300 472,700 17.4% 1.40% 0.53%
Note: Population projections are adjusted based on actual 2010 Census count.

Source: U.S. Department of Commerce, Bureau of the Census; State of California, Department of Finance, Demographic Unit;
As shown in Table V-2, Santa Barbara County’s 60-74 age cohort, as a percentage of the total population, is slightly larger than the statewide average (11.5% versus 11.1%), but somewhat less than that of neighboring counties. Over the next 10 years, this age cohort in Santa Barbara County is forecast to increase at a significantly faster rate (3.88%) compared with the general County population (.56%). This rate of increase parallels that of the State as a whole and neighboring counties.

The south portion of Santa Barbara County, which accounts for approximately one-half of the total population, is demographically different from the north portion. In general, the South County population tends to be older and more affluent than North County, positive factors favoring golf demand in South County. However, North County population is expected to increase at a faster pace than South County over the next 10-20 years.

Santa Barbara (City) has extremely mild Mediterranean climate, as indicated in Table V-3, which compares favorably with many other areas of Southern California. Moderate year-round temperatures, and rainfall of about 16 inches annually, provide for year-round golf.

National Trends
Nationwide, golf play increased steadily between the mid-1980s and 2000. As shown in Table V-4, during this period, the total number of annual rounds played nationally increased at an average rate of 2.4 percent per year. Golf balls sold, perhaps the best indicator of play, increased at a similar rate (2.5 percent per year). This unprecedented growth in golf play was due to a number of factors including:
‣ An increase in the number of golfers,
‣ The increasing importance of golf-oriented real estate, SBGC Market Overview
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‣ Expansion of the golf tourism industry, and
‣ One of the longest economic expansions in the nation’s history.

The increase in golf demand and the popularity of golf-related housing development during the 1990s stimulated extraordinary expansion of the national golf course inventory, primarily between 1995 and 2002, as summarized in Table V-5. Over the full 1990-2010 period, the inventory of golf courses in the United States increased by 34 percent, while the U.S. population registered only a 24 percent gain, and golf demand (play) increased only 12 percent over this same period.

Right after the new century started, the first signs of industry problems surfaced, and have persisted for the past 10 years. While total golfers and rounds played are down industrywide, individual golf courses have experienced steeper declines in utilization, along with revenue contraction and falling net operating income, as the market totals are spread over an increased supply of facilities. Further, golf course transaction prices have declined precipitously, bankruptcies and foreclosures have become routine, and new golf course construction has virtually ceased while the number of courses closing now well exceeds new openings. The impact of market softness has been widespread and affected all segments of the market and all geographic areas.

The National Golf Foundation (NGF) reports that over the 2001-2011 period, annual golf play in the United States declined from 518 million to 463 million rounds, or over 11 percent, rebounding somewhat in 2012 to 490 million rounds before declining again in 2013 to 465 million rounds. Golf ball sales, perhaps a better indicator of demand, declined by about 20-25 percent over this time period. The golf participation rate, after rising steadily through 2003, has fallen precipitously from 12.4 percent in 2004 to a current level estimated at just under 9.0 percent. (It should be noted that the golfer participation rate is based on the number of golfers relative to the population over the age of 6 years old). Since 2007, the golf market has been significantly impacted by the national economic recession. Annual rounds in the U.S., according to industry reports, have declined by nearly 5 percent since 2007. Other independent sources indicate a much more severe contraction, which is borne out by golf ball sales and other market indicators.

Since 2002, the construction of new courses has declined sharply, and the rate at which courses have closed has accelerated. Between 2006 and 2013, for example, the number of courses closed exceeded new course openings. New courses have been added to the inventory since 2006 at an annual rate of 50-60 courses per year, while course closings have averaged about 120 per year over this period. Despite the slowing expansion of new supply over the past eight years, golf market conditions in most markets continued to deteriorate, although most markets experienced some stability over the past three years.

Regional Market Trends
Golf demand in Southern California also increased steadily through the early-2000 period, with strong growth occurring since the mid- to late-1980s time period. Through the mid-1990s, there was relatively limited expansion of the inventory of public golf facilities. Note that the public golf course inventory is comprised of municipal golf courses and daily fee golf courses, defined as public access golf courses owned by a private sector entity. In the early 1990s, the municipal golf courses and limited number of daily fee golf courses in SouthSBGC Market Overview Pro Forma Advisors, LLC Page 28 PFAID: 10-644
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ern California were performing exceptionally well, with municipal golf course play exceeding 100,000 rounds at many Southern California courses and play on daily fee courses in the range of 60,000-80,000 annual rounds.

In response to increasing demand and a static supply situation, a number of golf courses were developed.

The total number of public regulation length golf courses that have opened in Southern California since 1995 is summarized in Table V-6. As shown, these 56 course additions represent a 33 percent increase in the Southern California public golf course inventory. At the same time, ten regulation length public golf courses have been closed in Southern California over the past 6-7 years, reducing the net increase to 46 courses (27%).

The Tri-County area, with a current inventory of 38 regulation length public courses, represents 18% of the total Southern California inventory, while the Tri-County area has accounted for 25% of the additions to the inventory since 1995. Although there have been only two new courses added to the golf course inventory in Santa Barbara County since 1995, and none since 1998, the significant expansion in Ventura County has provided many more options for residents of the region. No new golf courses have entered the Southern California golf market in the past five years, and none are expected to be added in the foreseeable term.

While the regional golf market largely mirrors the national golf market, there are year-to-year variations influenced by weather. The regional market, in terms of rounds played, improved somewhat in 2011, showing about a 3.0 percent increase over 2010. Much of this increase was related to favorable weather. Since 2011, regional golf market demand has been generally flat, benefitting from favorable weather. While the regional golf market appears to have stabilized over the 2011-2013 period, there are no indications that portend much, if any, growth in the near- to mid-term. Prospects for SBGC appear to be consistent with these expectations such that growth in play levels will likely be nominal over the foreseeable term.

Tri-County Golf Market
The Tri-County region (Ventura, Santa Barbara, San Luis Obispo) has a current inventory of 38 public access golf courses, expressed as 18-hole equivalent courses, of which 7.5 are located in Santa Barbara County.

Table V-7 summarizes the number of new public golf courses that have opened in the Tri-County area since 1995, and Table V-8 presents a list of the new courses opened in the region.

As shown, these additions since 1995 represent a 58 percent increase in the Tri-County public regulation length golf course inventory, led by San Luis Obispo County with a near doubling of their golf course inventory.

As noted above, since 1995, 14 regulation length daily fee golf courses have entered the market, with half of these opening in Ventura County.

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Based on historical golf data for the Tri-County region, the following illustrates the approximate aggregate and average per golf course play levels for regulation length golf courses:

Year Number of Golf Courses
(18-Hole Equivalent)
Total Annual
Play
Average Play
Per Golf Course
1996 24.0 1,560,000 65,000
2004 36.0 1,950,000 54,200
2010 38.0 1,860,000 48,950
2013 38.0 1,840,000 48,420
The Santa Barbara County public regulation length golf course inventory consists of the following facilities:
‣ Santa Barbara Golf Club (Muni), Santa Barbara
‣ Glen Annie Golf Club, Goleta
‣ Rancho San Marcos, Lake Cachuma
‣ Sandpiper Golf Course, Goleta
‣ La Purisima, Lompoc
‣ River Course, Solvang
‣ Alisal, Solvang
‣ Twin Lakes (9 holes), Goleta
It also should be noted that the 9-hole regulation length (par-36) Ocean Meadows Golf Course in Goleta closed in March 2013 due in large part to poor operating performance. Reportedly, Ocean Meadows was generating approximately 30,000 rounds (starts) annually, although less than one-half of the rounds were paid.

Most of the unpaid rounds were in exchange for goods/services provided by the golfers. The closure of Ocean Meadows has not significantly benefitted regional golf courses.

Golf Course Survey
A survey of selected public golf courses in the primary market area is presented in Table V-9. Play and greens fees at courses in the region for 2013 are summarized in Table V-10. Based on a review of area golf courses, the following observations regarding the overall local golf market are offered:
‣ The Tri-County public golf market is highly competitive. In addition to numerous municipal facilities, there are a number of higher quality public access golf courses available at relatively affordable greens fees.
‣ The Tri-County golf market, like virtually all other areas of Southern and Central California, has softened considerably over the past 5-10 years, and remains relatively soft at this time. Performance over the past three years, however, suggests that the golf market has stabilized. This recent improvement stems SBGC Market Overview
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from an improving economy, no expansion of the golf course inventory, and the aging population, where propensity to, and frequency of, play are positively correlated with age. ‣ The typical pattern of play at the higher quality public golf courses in Ventura and Santa Barbara Counties historically has been primarily local play on weekdays with more non-local play − primarily north Los Angeles County golfers − on weekends.
‣ Tri-County residents generally play at lower greens fees levels on municipal and daily fee golf courses while non-locals support higher fees. The greens fees discount offered Tri-County residents and loyalty club members varies widely from no discount to 45%, averaging approximately 20% on weekdays and slightly more on weekends.
‣ Over the past five years, posted greens fees have generally increased modestly, at or slightly below the Consumer Price Index (CPI) rate.
‣ Numerous specials and other discounts have increased in importance in recent years, primarily related to weekday play. Increasingly, player clubs and other loyalty programs have been offered which feature discounted greens fees.
‣ As a result, the average greens/cart fee has remained about the same, or declined slightly, at most courses between 2005 and 2013.
‣ There is strong competition for golf play during weekdays, while weekend play is slightly less competitive.
‣ Use of golf carts at most courses is optional, with utilization ranging from about 50% to 90% depending on the terrain, course distance, and profile of golfer. Cart fees per player for 18 holes generally are in the $14-$16 range.
‣ Senior rates are offered at many, but not all, courses. In particular, courses which offer loyalty programs or resident discounts often do not have senior rates.
‣ Annual play at courses in the Tri-County also ranges widely depending on the quality of the golf experience, rate structure, strength of market, and other such factors. Rounds at surveyed courses range from 30,000 to about 70,000 rounds per year, with most mid-market courses generating in the range of 60,000 rounds per year.

Table V-11 shows annual play at selected Ventura and Santa Barbara public golf courses over the 2004 through 2013 period. In 2004, the 9.0 golf courses (18-hole equivalents) open accommodated about 598,600 rounds, or an average of 66,500 rounds per course. In 2013, the 10 courses combined generated 566,900 rounds, or an average of 56,690 rounds per 18-hole course. Thus, the average play per course declined 15% over this 9-year period.

As noted, the total play at the selected market area courses declined from 598,600 in 2004 to 566,900 in 2013, or nearly 6%. By comparison, play at all of the regulation length public access courses in Los Angeles County declined from approximately 4.2 million to 3.6 million rounds, or about 14% over this same 9-year period. Play at SBGC declined from 86,400 rounds in 2004 to 61,000 in 2013, or nearly 30 percent. Over the more recent 2008-2013 period, play at SBGC has declined 18.1 percent.

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Golf Market Outlook
The public golf market appears to have stabilized over the past three years, and some courses have experienced a slight improvement in rounds and revenues over this period, although part of this improvement is weather related. Nonetheless, the regional public golf market is likely to remain sluggish in the near-term as the market works to absorb the new supply. However, as development opportunities become limited due to lack of available land suitable for golf course development and as the population continues to grow and mature, it is anticipated that market area demand will eventually catch up with supply, such that the long-term outlook remains reasonably favorable. The consensus among recognized golf authorities is that golf demand, in real terms, will increase very modestly at about a 1.0 percent average annual growth rate over the next 10- to 20-year term. Most of this growth will result from the aging population trends shown above (60-74 age cohort), where the propensity to, and frequency of, play increase compared to younger age cohorts.

The same factors which influence future golf demand for the national and regional golf markets also apply to the local golf market and SBGC specifically. Very modest growth of perhaps 1.0 percent annually is expected, although virtually no growth may be realized over the near-term, and the long-term forecasts remain highly uncertain given the current state of the industry.

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Table V-1: Regional Demographic Characteristics
Santa
Barbara
County
Tri-County
Area
California
Population (000)
1990 369.6 1,255.8 29,760.0
2000 399.3 1,399.2 33,871.7
2010 423.9 1,515.3 37,223.9
2020 (projected) 448.2 1,662.3 42,015.2
Average Annual
Growth Rate
1990-2000 0.78% 1.09% 1.30%
2000-2010 0.60% 0.81% 0.96%
2010-2020 0.56% 0.92% 1.21%
Median Age (2010) 33.8 36.0 34.9
Population 65+ 12.8% 12.2% 11.4%
Median HH Income $59,350 $67,100 $60,390
Note: Population projections are adjusted based on actual 2010 Census count.

Source: U.S. Department of Commerce, Bureau of the Census; State of California, Department of Finance, Demographic Unit; SBGC Market Overview
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Table V-2: Santa Barbara County 60-74 Age Cohort
2010 2020 2030
Population (60-74)
Santa Barbara 48,900 71,600 82,300
San Luis Obispo 39,100 52,600 56,700
Ventura 100,300 144,400 150,000
Tri-County 188,300 268,600 289,000
State of California 4,131,800 6,078,200 7,123,100
Percent of Total Population
Santa Barbara 11.5% 16.0% 17.4%
San Luis Obispo 14.55% 18.3% 18.2%
Ventura 12.2% 15.7% 14.5%
Tri-County 12.4% 16.1% 16.0%
State of California 11.1% 14.5% 15.2%
Average Annual Increase
Santa Barbara 2.16% 3.88% 1.40%
San Luis Obispo 3.36% 3.01% 0.75%
Ventura 4.13% 3.71% 0.38%
Tri-County 3.42% 3.62% 0.73%
State of California 3.06% 3.94% 1.60%
Source: U.S. Department of Commerce, Bureau of the Census; State of California, Department of Finance, Demographic Unit; and Pro Forma Advisors, LLC.

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Table V-3: Santa Barbara Historical Climate Summary
Average Historical Monthly
Month High
Temperature
Low
Temperature
Precipitation
(inches)
January 63 40 3.5
February 65 43 3.4
March 65 45 2.8
April 68 47 1.2
May 69 50 0.2
June 71 53 --
July 74 57 --
August 75 58 0.1
September 75 56 0.3
October 73 51 0.4
November 69 44 1.8
December 65 40 2.4
Total --- --- 16.1
Source: Station #723925, KSBA, Santa Barbara, CA
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Table V-4: Indicators of U.S. Golf Demand (1985-2013)
Year
Rounds
(millions)
Number of
Golfers1
(millions)
Participation
Rate2
Golf Ball Sales3 (millions
of dozens)
1985 365 17.5 10.2 36.0
1990 400 27.8 13.5 42.0
1995 420 25.0 11.6 46.0
2000 518 28.8 11.7 52.2
2001 518 29.5 11.9 50.0
2002 502 29.5 12.0 46.7
2003 495 30.4 12.4 43.4
2004 499 29.5 11.5 43.4
2005 489 29.3 11.2 43.6
2006 493 29.4 11.2 44.0
2007 490 29.5 11.1 43.5
2008 481 28.6 10.7 42.2
2009 477 27.1 10.0 40.1
2010 475 26.1 9.6 --5/
2011 463 25.7 9.2 --5/
2012 490 25.3 9.0 --5/
2013 465 24.7 8.9 --5/
Average Annual Growth
1985-1990 1.8% 9.7% --- 3.1%
1990-1995 1.0% (2.1)% --- 1.8%
1995-2000 4.3% 2.9% --- 2.6%
Subtotal 2.4% 3.4% --- 2.5%
2000-2005 (1.1%) 0.3% --- (3.5%)
2005-2010 (1.0%) (2.3%) --- (2.1%)4/
2010-2013 (0.7%) (1.8%) --- --5/
1/ Represents golfers over 12 years of age. 2/ Estimated by PFA. 3/ Estimated by PFA based on “soft goods” sales recorded by Data Tech and golf ball manufacture sales. 4/ For period 2005-2009. 5/ Data for 2010-2013 not available in comparable format.

Source: National Golf Foundation and Pro Forma Advisors LLC.

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Table V-5: Number of Golf Courses1 - U.S.

Year
Average Annual
Courses Added
Average Annual
Courses Closed
Total Golf
Courses2
Average Annual
Percent Change
1990 --- --- 11,105 ---
2002 315 15 14,725 2.96%
2006 120 60 14,968 0.80%
2007 115 95 14,988 0.13%
2008 70 105 14,953 (0.23%)
2009 50 100 14,903 (0.33%)
2010 45 110 14,838 (0.44%)
2011 35 140 14,733 (0.71%)
2012 14 155 14,592 (0.96%)
2013 14 157 14,449 (0.98%)
1/ 18-hole equivalents.
2/ Includes courses added, less courses closed., 2006-2013 Source: National Golf Foundation; and Pro Forma Advisors.

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Table V-6: Number of Regulation Length Public Golf Courses Opened by Year Year
Santa
Barbara Ventura
San Luis
Obispo
Los
Angeles Orange
Inland
Empire1 Kern
San
Diego Total
Up to 1995 6.5 12.5 5.0 40.5 21.0 44.5 7.0 33.0 170.0
1996 0.0 0.0 1.5 0.0 2.0 1.0 0.0 0.0 4.5
1997 0.0 0.0 1.0 0.0 1.0 1.0 0.0 0.0 3.0
1998 2.0 0.0 0.0 0.0 0.0 1.0 0.0 1.0 4.0
1999 0.0 2.0 1.0 1.0 2.5 2.0 1.0 2.0 13.5
2000 0.0 1.0 0.0 4.0 0.0 5.0 0.0 1.0 12.0
2001 0.0 1.0 0.0 0.0 3.0 1.0 0.0 1.0 7.0
2002 0.0 2.0 0.0 0.0 0.0 1.0 0.0 0.0 5.0
2003 0.0 0.0 0.0 1.0 0.0 1.0 0.0 0.5 2.5
2004 0.0 0.5 0.0 1.0 1.0 0.0 0.0 0.0 3.0
2005 0.0 0.5 1.0 0.0 0.0 0.0 0.0 1.0 3.0
2006 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
2007 0.0 0.0 0.0 0.0 0.0 1.0 0.0 1.0 2.0
2008 0.0 0.5 0.0 0.0 0.0 2.0 0.0 0.0 3.0
2009 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
2010 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
2011 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
2012 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
2013 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Total 8.5 20.0 9.5 47.5 30.5 60.5 8.0 40.5 225.0
Change
1996-2013)
Number 2.0 7.5 4.5 7.0 9.5 16.0 1.0 7.5 56.0
Percent 31% 60% 90% 17% 45% 36% 14% 23% 33%
1Excludes Coachella Valley.

Source: Pro Forma Advisors, LLC
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Table V-7 Tri-County Public Access Golf Courses
Number of Public Access Golf Courses Opened by Year
Ventura
Santa
Barbara
San Luis
Obispo
Total
Central
Up to 1995 12.5 6.5 5.0 24.0
1996 0.0 0.0 1.5 1.5
1997 0.0 0.0 1.0 1.0
1998 0.0 2.0 0.0 2.0
1999 2.0 0.0 1.0 3.0
2000 1.0 0.0 0.0 1.0
2001 1.0 0.0 0.0 1.0
2002 2.0 0.0 0.0 2.0
2003 0.0 0.0 0.0 0.0
2004 1.0 0.0 0.0 0.5
2005 0.0 0.0 1.0 1.0
2006 0.0 0.0 0.0 0.0
2007 0.0 0.0 0.0 0.0
2008 0.5 0.0 0.0 0.5
2009 0.0 0.0 0.0 0.0
2010 0.0 0.0 0.0 0.0
2011 0.0 0.0 0.0 0.0
2012 0.0 0.0 0.0 0.0
2013 0.0 0.0 0.0 0.0
Total 20.0 8.5 9.5 38.0
Change in Inventory
(1995-2013)
Number 7.5 2.0 4.5 14.0
Percent 60% 31% 90% 58%
Source: Pro Forma Advisors, LLC.

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Table V-8: New Public Regulation Length Golf Courses Added to Tri-County Market--1996-2013 Course Location/County
Year
Opened Course Designer
Vista del Ombre Paso Robles/SLO 1996 Duran
Blacklake (9) Nipomo/SLO 1996 Robinson
Dairy Creek San Luis Obispo/SLO 1997 Harbottle
Glen Annie Santa Barbara/SB 1998 Pascuzzo-Graves
Rancho San Marcos Lake Cachuma/SB 1998 R.T. Jones, Jr.

Cypress Ridge Arroyo Grande/SLO 1999 Jacobsen-Hardy
Sterling Hills Camarillo/VTA 1999 Pascuzzo-Graves
Tierra Rejada Moorpark/VTA 1999 Cupp
Lost Canyons-Sky Simi Valley/VTA 2000 Pete Dye
Lost Canyons-Shadow Simi Valley/VTA 2001 Pete Dye
Moorpark CC (18) Moorpark/VTA 2002 Jacobsen/Hardy
Rustic Canyon Moorpark/VTA 2002 Hanse
Moorpark (9) Moorpark/VTA 2004 Jacobsen/Hardy
Victoria Lakes (9) Oxnard/VTA 2004 Millhouse
Monarch Dunes Nipomo/SLO 2005 Pascuzzo-Graves
Victoria Lakes (9) Oxnard VTA 2008 Millhouse
Source: Pro Forma Advisors, LLC.

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Table V-9: Selected Characteristics of Tri-County Public Golf Courses Course SBGC Glen Annie Sandpiper Rancho SM La Purisima
Location Santa Barbara Goleta Goleta Lake Cachuma Lompoc Course Type Municipal Daily Fee Resort/Daily Fee Daily Fee Daily Fee Architect L. Hughes Graves/Pascuzzo William Bell R.T. Jones II R. M. Graves Owner City Capital Crossings Ty Warner Prop Ty Warner Prop Pro Tec Investment Operator City Touchstone Golf Ty Warner Prop Ty Warner Prop In-House Year Opened 1958 1997 1972 1998 1986
Number of Holes/Par 18/70 18/71 18/72 18/71 18/72
Course Length (back/middle) 6037/5785 6417/5945 7068/6597 6817/6243 7105/6670 Rating (back/middle) 69.3/68.1 71.3/68.9 74.5/72.2 72.9/70.8 75.6/73.1 Slope (back/middle) 126/123 130/125 134/131 137/131 143/136 Greens Fees
Standard (18 holes)
Weekday $30/35/501/ $42/622/ $70/1402/ $50/802/ $29/553/ Weekend 34/39/601/ 52/762/ 90/1602/ 60/1102/ 42/693/
Twilight (9 holes)
Weekday $22/25/371/ $26/362/ 75/752/ $50/802/ $24/303/
Weekend $24/27/401/ 32/422/ 90/902/ 70 35/403/
Super Twilight
Weekday $17 --- --- --- $15/193/
Weekend $17 --- --- --- 15/193/
Senior (18 holes)
Weekday $23/28/501/ $46 --- --- ---/553/
Weekend $32/37/601/ --- --- --- ---
Cart Fees (18/9 holes) $15/9 $13/8 $20/12 $20/12 $14/153/ Mandatory No no no no no
Percent Using Carts 51% 85% 70% 70% 65%
Inventory 60 80 80 80 80
Facilities
Clubhouse Size (sq.ft.)* 3,500 6,000 4,000 2,500 8,000
Banquet Seating Capacity 110 125 --- --- 150
Snack Bar Yes yes yes yes yes
Driving Range Yes yes yes yes yes
Number of Tees 15 16 40 25 30
Annual Number of Rounds 62,500 50,000 38,000 32,000 30,000 Percent Twilight/9-Hole 35% 20% 15% 10% 10%
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Table V-9 (continued): Selected Characteristics of Tri-County Public Golf Courses Course Buenaventura Olivas Links River Ridge River Course Rustic Canyon Location Ventura Ventura Oxnard Solvang Moorpark
Course Type Municipal Municipal Municipal Daily Fee Daily Fee Architect Bill Bell, Jr. Forrest-Richardson Bill Bell, Jr. Hallsey/Daray Gil Hanse Owner Ventura Ventura Oxnard Alisal Ranch Ventura Co.

Operator Kemper Golf Kemper Golf High Tide & GG Alisal Ranch Highlands Golf Year Opened 1932 1960s/20077/ 1986/20085/ 1992 April 2002 Number of Holes/Par 18/70 18/72 36/72 18/72 18/72
Course Length (back/middle) 6054/5737 6818/6530 6543/6111 6830/6451 6906/6585 Rating (back/middle) 69.2/67.7 73.7/72.4 70.7/68.7 72.7/70.9 73.1/71.3 Slope (back/middle) 118/115 135/132 114/109 125/121 130/125 Greens Fees
Standard (18 holes)
Weekday $29/33/404/ $33/41/504/ $32/383/ $60 $43/466/
Weekend $37/43/504/ $42/50/604/ 45/503/ 72 $66
Twilight (9 holes)
Weekday $25 $29/33/404/ $24/263/ $45 $28/306/
Weekend 28 34 26/313/ 45 44
Super Twilight
Weekday $17 $21 $16/183/ --- $18/206/
Weekend $17 $21 $15/173/ --- 25
Senior (18 holes)
Weekday $26 $29/33/404/ $23/283/ $45 $28/306/
Weekend --- No discount No discount No discount No discount Cart Fees (18/9 holes) $15/10 $15/10 $15 $16/8 $15/10
Mandatory No No No no No
Percent Using Carts 50% 60% 55% 60% 55%
Inventory 75 80 80 80 80
Facilities
Clubhouse Size (sq.ft.)* 2,000 2,000 (mod) 13,000 10,000 5,000 Banquet Seating Capacity 200 --- 200 200 50
Snack Bar Yes Yes Yes yes Yes
Driving Range No Yes Yes yes Yes
Number of Tees --- 25 25 12 25
Annual Number of Rounds 65,900 59,800 82,000 35,000 55,000 SBGC Market Overview
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Table V-9 (concluded): Selected Characteristics of Tri-County Public Golf Courses Course Soule Park Camarillo Sprgs Los Robles Simi Hills Sterling Hills Location Ojai Camarillo Thousand Oaks Simi Valley Camarillo Course Type Municipal Daily Fee Municipal Municipal Daily Fee Architect Bill Bell, Jr. Ted Robinson Baldock Ted Robinson Graves, Pascuzzo Owner Ventura County Oak Creek Ranch Thousand Oaks RSH Rec. District Oak Creek Ranch Operator Highlands Golf Oak Creek Ranch Eagle Golf American Golf Oak Creek Ranch Year Opened 1962 1971 1964 1981 1999
Number of Holes/Par 18/72 18/72 18/70 18/71 18/71
Course Length (back/middle) 6730/6465 6375/5931 6274/5693 6411/6062 6813/6395 Rating (back/middle) 72.3/71.1 70.8/68.9 70.1/68.7 70.6/69.1 72.7/71.1 Slope (back/middle) 126/124 128/121 125/119 125/121 131/125 Greens Fees
Standard (18 holes)
Weekday $28 $30 $32/419/ $32 $41
Weekend 40 $558/ $40/509/ $42 $59
Twilight (9 holes)
Weekday $19 $24 $23/289/ $23 $27
Weekend 27 $34 $28/339/ $28 $39
Super Twilight
Weekday $12 $15 $15/189/ $17 $17
Weekend 12 $22 $18/229/ 20 $24
Senior (18 holes)
Weekday $25 $20 $22/289/ $20 $27
Weekend 458/ No discount No discount No discount $39
Cart Fees (18/9 holes) $15/10 $13/10 $15/11 $13/10 $15/10 Mandatory No Weekend mornings No No Weekends
Percent Using Carts 75% 80% 65% 65% 70%
Inventory 75 80 84 80 85
Facilities
Clubhouse Size (sq.ft.)* 10,000 7,000 22,000 2,000 ---
Banquet Seating Capacity 250 150 250 40 ---
Snack Bar Yes Yes Yes Yes Yes
Driving Range Yes Yes Yes Yes Yes
Number of Tees 12 26 20 20 20
Annual Number of Rounds 42,000 55,000 78,200 73,000 45,000 Percent Twilight/9-Hole 15% 25% 30% 30% 20%
1/

Resident
loyalty
program/standard
resident/standard
non-­‐resident.

2/
Tri-­‐County
resident/non-­‐resident.

3/

Loyalty
club
member/
standard.

4/

City/county/non-­‐resident.

5/

Vineyard
Course/Victoria
Lakes
Course.

6Monday-­‐Thursday/Friday.

7Originally
opened/
full
redesign.

8/

Includes
required
cart.

9City
resident/non-­‐resident.

1/

Resident
loyalty
program/standard
resident/standard
non-­‐resident.

2/
Tri-­‐County
resident/non-­‐resident.

3/

Loyalty
club
member/
standard.

4/

City/county/non-­‐resident.

5/

Vineyard
Course/Victoria
Lakes
Course.

6Monday-­‐Thursday/Friday.

7Originally
opened/
full
redesign.

8/

Includes
required
cart.

9City
resident/non-­‐resident.

1/

Resident
loyalty
program/standard
resident/standard
non-­‐resident.

2/
Tri-­‐County
resident/non-­‐resident.

3/

Loyalty
club
member/
standard.

4/

City/county/non-­‐resident.

5/

Vineyard
Course/Victoria
Lakes
Course.

6Monday-­‐Thursday/Friday.

7Originally
opened/
full
redesign.

8/

Includes
required
cart.

9City
resident/non-­‐resident.

1/

Resident
loyalty
program/standard
resident/standard
non-­‐resident.

2/
Tri-­‐County
resident/non-­‐resident.

3/

Loyalty
club
member/
standard.

4/

City/county/non-­‐resident.

5/

Vineyard
Course/Victoria
Lakes
Course.

6Monday-­‐Thursday/Friday.

7Originally
opened/
full
redesign.

8/

Includes
required
cart.

9City
resident/non-­‐resident.

1/

Resident
loyalty
program/standard
resident/standard
non-­‐resident.

2/
Tri-­‐County
resident/non-­‐resident.

3/

Loyalty
club
member/
standard.

4/

City/county/non-­‐resident.

5/

Vineyard
Course/Victoria
Lakes
Course.

6Monday-­‐Thursday/Friday.

7Originally
opened/
full
redesign.

8/

Includes
required
cart.

9City
resident/non-­‐resident.

1/

Resident
loyalty
program/standard
resident/standard
non-­‐resident.

2/
Tri-­‐County
resident/non-­‐resident.

3/

Loyalty
club
member/
standard.

4/

City/county/non-­‐resident.

5/

Vineyard
Course/Victoria
Lakes
Course.

6Monday-­‐Thursday/Friday.

7Originally
opened/
full
redesign.

8/

Includes
required
cart.

9City
resident/non-­‐resident.

SBGC Market Overview
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Table V-10 Summary of Rounds and Rates at Selected Tri-County Public Golf Courses Annual 18-hole Greens Fees (excluding cart)
Rounds Standard/Non-Resident Resident/Player Club
Golf Course 2013 Weekdays Weekends Weekdays Weekends
SBGC 61,0002/ $50 $60 $35/301/ $39/341/
Glen Annie 50,000 62 76 42 52
Sandpiper GC 37,000 140 160 70 90
Rancho San Marcos 30,000 80 110 50 60
Olivas Links 59,800 50 60 33/412/ 42/502/
Buenaventura 65,900 40 50 29/332/ 37/432/
River Ridge-Vineyard 37,000 38 50 32 45
River Ridge-Victoria
Lakes
45,000 38 50 32 45
Rustic Canyon 55,000 43/463/ 66 43/463/ 66
Soule Park 42,000 28 40 28 40
Sterling Hills 45,000 41 59 41 59
Tierra Rejada 42,000 654/ 954/ 494/ 854/
Alisal (River Course) 35,000 60 72 45 45
Camarillo Springs 55,000 30 554/ 25 30
Los Robles 78,200 41 50 32 40
Simi Hills 73,000 32 42 32 42
La Purisima 30,000 55 69 29 42
Blacklake (27 holes) 70,000 42 52 42 52
Monarch Dunes 39,000 67 87 50 60
Cypress Ridge 35,000 65 1004/ 38 48
1/ Tri-County Residents/Loyalty Club Members. 2 / Represents play for FY2013. Note that FY2014 play totaled 62,500 rounds 3 Monday-Thursday/Friday. 4/ Includes Cart. 5/ City Residents/County Residents.
1/ Tri-County Residents/Loyalty Club Members. 2 / Represents play for FY2013. Note that FY2014 play totaled 62,500 rounds 3 Monday-Thursday/Friday. 4/ Includes Cart. 5/ City Residents/County Residents.
1/ Tri-County Residents/Loyalty Club Members. 2 / Represents play for FY2013. Note that FY2014 play totaled 62,500 rounds 3 Monday-Thursday/Friday. 4/ Includes Cart. 5/ City Residents/County Residents.
1/ Tri-County Residents/Loyalty Club Members. 2 / Represents play for FY2013. Note that FY2014 play totaled 62,500 rounds 3 Monday-Thursday/Friday. 4/ Includes Cart. 5/ City Residents/County Residents.
1/ Tri-County Residents/Loyalty Club Members. 2 / Represents play for FY2013. Note that FY2014 play totaled 62,500 rounds 3 Monday-Thursday/Friday. 4/ Includes Cart. 5/ City Residents/County Residents.
1/ Tri-County Residents/Loyalty Club Members. 2 / Represents play for FY2013. Note that FY2014 play totaled 62,500 rounds 3 Monday-Thursday/Friday. 4/ Includes Cart. 5/ City Residents/County Residents.
1/ Tri-County Residents/Loyalty Club Members. 2 / Represents play for FY2013. Note that FY2014 play totaled 62,500 rounds 3 Monday-Thursday/Friday. 4/ Includes Cart. 5/ City Residents/County Residents.

SBGC Market Overview
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Table V-11: Annual Rounds By Course (000)1/
Fiscal Year 2008-
2013
Course 04 05 06 07 08 09 10 11 12 13 Growth
2008-
2013
Growth
SBGC 86.4 78.2 76.6 78.5 74.5 70.5 59.1 62.8 63.6 61.0 (18.1%) Glen Annie 49.2 41.9 43.8 46.4 46.1 43.1 48.3 51.5 52.0 50.0 8.5% Olivas Links 88.9 57.7 --- 11.7 54.1 61.4 65.4 60.7 59.1 59.8 10.5% Buenaventura 23.1 65.9 77.7 77.5 67.9 65.3 68.5 66.6 64.7 65.9 (2.8%) River RidgeVineyard 71.4 68.7 68.6 67.3 61.6 42.0 42.0 37.0 38.0 37.0 (6.6%) River RidgeVictoria Lakes --- 12.7 23.2 25.6 26.2 37.0 37.0 37.0 39.0 45.0 (6.6%) Rustic Canyon 50.0 39.0 50.3 54.1 50.8 55.2 54.1 56.6 56.0 55.0 8.3% Soule Park 61.7 45.1 31.2 44.7 42.2 38.0 35.0 43.2 43.0 42.0 (0.5%) Simi Hills 84.8 74.8 74.9 76.9 78.7 79.4 75.1 74.1 75.0 73.0 (7.2%) Los Robles 83.1 80.1 79.8 79.0 85.4 83.0 82.5 78.9 77.8 78.2 (8.4%) Total 598.6 564.1 526.1 561.7 587.5 574.9 567.0 568.4 568.2 566.9 (3.5%) 1/ Includes complimentary rounds.

SBGC Market Overview
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VI: Comparative Operating Revenues and Expenses
Current operating revenues and expenses at Santa Barbara Golf Club (SBGC) are compared with the performance at other courses in the region. The performance at any course is influenced by a number of factors including golf course characteristics, market positioning, operating structure, management objectives, and the like.

Annual Play
Annual play at selected Tri-County regional regulation length public golf courses over the 2004-2013 period is presented in Table VI-1. Note that annual play for SBGC in Fiscal Year 2010 was affected by the extensive construction during the year.

Aggregate annual play at the 10 courses shown has declined from 598,600 rounds in 2004 to 566,900 rounds in 2013, or approximately 5.3 percent over the 9-year period. One golf course was added (Victoria Lakes at River Ridge) in 2005, and the play trend was affected by the major re-construction of Olivas Links in 2006/ 2007. By contrast, play at SBGC has declined from 86,400 rounds in 2004 to 61,000 in 2013, or nearly 30 percent over the period. Since 2008, play at SBGC has declined approximately 18.1 percent. Play in FY2014 rebounded somewhat to 62,500 rounds.

SBGC’s market share relative to the courses shown has declined sharply over the 2004-2013 period. Between 2004 and 2008, the golf course consistently captured 13%-14% of the regional play, with this market share declining to 10%-11% over the 2010-2013 period, as shown in Table VI-2. There appear to be several reasons which have contributed to this decline:
‣ In recent years, Glen Annie Golf Club in Goleta has been repositioned more toward the mid-market, and has thus become more competitive with Santa Barbara in terms of price point. ‣ The other higher end daily fee courses in the market--Sandpiper Golf Club and Rancho San Marcos Golf Club--have targeted Tri-County residents through greens fees discount and loyalty club programs. ‣ The City of Ventura recently fully renovated both of their golf courses--Buenaventura and Olivas Links-- resulting in less “leakage” of golf rounds generated in Ventura County captured by Santa Barbara County courses.
‣ Competitive courses in the region have intensified promotional programs and greens fees discounting which has reduced their effective fee structure relative to Santa Barbara Muni. ‣ Construction at SBGC in 2010 resulted in many golfers electing to play at competitive courses.

Recapturing lost play generally requires substantial time. ‣ As a result of historically high play levels, there remain perceptions in the golfing community that tee times are difficult to secure at SBGC.

Operating Revenues
The average revenue per round by department for selected public golf courses in Ventura and Santa Barbara Counties is shown in Table VI-3. The municipal golf courses are identified by name, while a sample of daily fee SBGC Comparative Metrics
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courses operating in the region are designated as “Daily Fee-A”, Daily Fee-B”, and “Daily Fee-C” so as not to disclose proprietary information.

In terms of play levels, SBGC is affected by the design and market positioning of the golf course. In particular, the design of SBGC offers a playable golf course which caters to a broad range of golfer abilities, and is attractive to senior golfers, a group which generates substantial levels of play on weekdays.

Given the moderate topography and level of senior play at SBGC, the average cart fee is consistent with similar courses in the region.

Practice range revenue is relatively low at SBGC as the range serves primarily same day golfers. There is limited commercial practice range revenue due to the location, design and condition of the range (limited range depth). As well, the range is not lighted for night use.

Merchandise revenues at Santa Barbara have declined by about 50% over the past 5-6 years, and are currently about $3.04 per round. The decline in merchandise sales is consistent with all other courses where the competition from off-course discount golf merchandisers is intense. Even with the decline, SBGC’s current performance is slightly superior to most other courses in the region.

Food and beverage activities (Mulligan’s Cafe) at SBGC are very strong. The strong performance is due to the outstanding location and ambiance of the clubhouse site. Mulligan’s has successfully marketed the restaurant to non-golfers, and generated substantial special event business, despite having limited capacity for accommodating indoor non-golf special events/banquet business.

Operating Expenses
Annual operating expenses by department are shown in Table VI-4 for SBGC and a series of other mid-market oriented golf courses in the region. As noted, some of the courses are municipal, while four are upper-midmarket daily fee courses (designated as mid-market Daily Fee Courses “A”, “B”, “C” and “D”) which are considered reasonably comparable to SBGC. It should be noted that Santa Barbara Golf Club’s maintenance is provided by City Parks and Recreation employees, while maintenance at Olivas Links, Buenaventura, Los Robles, and all of the daily fee courses is provided by a private sector contractor. Thus, SBGC is the only golf course in the region where course maintenance is provided by City staff.

The table includes only “on-site” operating expenses. Contract administration and overhead support services provided off-site are not included. As well, for SBGC, since golf operations are provided by an independent concessionaire, there are no expenses shown in the table.

Comparative maintenance expenses, staffing and general golf course characteristics for SBGC and a series of other course is presented in Table VI-5.

SBGC Comparative Metrics
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Table VI-1: Annual Rounds By Course (000)1/
Fiscal Year
Course 04 05 06 07 08 09 10 11 12 13
SBGC 86.4 78.2 76.6 78.5 74.5 70.5 59.1 62.8 63.6 61.0
Glen Annie 49.2 41.9 43.8 46.4 46.1 43.1 48.3 51.5 52.0 50.0 Olivas Links 88.9 57.7 --- 11.7 54.1 61.4 65.4 60.7 59.1 59.8 Buenaventura 23.1 65.9 77.7 77.5 67.9 65.3 68.5 66.6 64.7 65.9 River Ridge-Vineyard 71.4 68.7 68.6 67.3 61.6 42.0 42.0 37.0 38.0 37.0 River Ridge-Victoria
Lakes --- 12.7 23.2 25.6 26.2 37.0 37.0 37.0 39.0 45.0
Rustic Canyon 50.0 39.0 50.3 54.1 50.8 55.2 54.1 56.6 56.0 55.0 Soule Park 61.7 45.1 31.2 44.7 42.2 38.0 35.0 43.2 43.0 42.0 Simi Hills 84.8 74.8 74.9 76.9 78.7 79.4 75.1 74.1 75.0 73.0 Los Robles 83.1 80.1 79.8 79.0 85.4 83.0 82.5 78.9 77.8 78.2 Total 598.6 564.1 526.1 561.7 587.5 574.9 567.0 568.4 568.2 566.9 1/ Includes complimentary rounds.

SBGC Comparative Metrics
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Table VI-2: Santa Barbara Golf Club Market Share
Number of
Courses
in Market
Annual Rounds Market
Share
Year
Number of
Courses
in Market SBGC Market
Market
Share
2004 9.0 86,400 598,600 14.4%
2005 8.51/ 78,200 564,100 13.9%
2006 8.51/ 76,600 526,100 14.6%
2007 8.51/ 78,500 561,700 14.0%
2008 9.5 74,500 587,500 12.7%
2009 10.0 70,500 574,900 12.3%
2010 10.0 59,100 567,000 10.4%
2011 10.0 62,800 568,400 11.0%
2012 10.0 63,600 568,200 11.2%
2013 10.0 61,000 566,900 10.8%
1/ Ventura courses (Olivas Links and Buenaventura) under construction.

SBGC Comparative Metrics
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Table VI-3: Average Revenue per Round at Selected Public Access Golf Courses (FY2013-14) Average Revenue Per Round Annual
Course Annual Total
Rounds
Greens
Fees1/
Cart Fees Range Merch F&B
golfers
F& B
Banquet
SBGC 62,500 $26.57 $6.76 $1.53 $3.04 $5.00 $1,065,000
Olivas Links 59,800 28.89 5.65 4.32 1.38 2.40 ---
Buenaventura 65,900 24.80 5.29 --- 1.13 4.00 ---
River Ridge2/ 82,000 26.85 10.01 2.21 2.81 5.16 235,000 Los Robles 78,200 24.44 8.47 2.60 1.75 3.75 1,200,000
Soule Park 42,000 21.55 7.15 2.20 2.90 5.60 250,000
Simi Valley 73,000 26.10 7.76 2.74 2.27 4.37 ---
Daily Fee-A --- 19.00 7.10 2.20 1.45 5.20 300,000
Daily Fee-B --- 35.30 7.60 2.20 2.90 4.55 175,000
Daily Fee-C --- 33.30 3.00 1.40 2.25 5.00 850,000
1/ Includes passholders and/or annual membership play. 2/ 36 holes (revenues are expressed per paid round). 1/ Includes passholders and/or annual membership play. 2/ 36 holes (revenues are expressed per paid round). 1/ Includes passholders and/or annual membership play. 2/ 36 holes (revenues are expressed per paid round). 1/ Includes passholders and/or annual membership play. 2/ 36 holes (revenues are expressed per paid round). 1/ Includes passholders and/or annual membership play. 2/ 36 holes (revenues are expressed per paid round). 1/ Includes passholders and/or annual membership play. 2/ 36 holes (revenues are expressed per paid round). 1/ Includes passholders and/or annual membership play. 2/ 36 holes (revenues are expressed per paid round). 1/ Includes passholders and/or annual membership play. 2/ 36 holes (revenues are expressed per paid round).

SBGC Comparative Metrics
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Table VI-4: Comparative On-Site Operating Expenses--FY 2013/FY2014 ($000) Municipal Golf Courses Mid-Mkt Daily Fee
SBGC Olivas
Links
Buena Los
Robles
Simi
Hills
A C D
Course Maintenance
Payroll and Benefits $945 $412 $311 $415 $450 $555 $376 $477 Services and Supplies 198 265 237 175 225 142 182 165
Utilities 226 106 93 60 490 392 341 354
Maintenance Equipment --- --- --- --- --- --- --- ---
Subtotal $1,369 $783 $641 $650 $1,165 1,089 $899 $996
Golf Operations
Payroll and Benefits --- $206 $196 $300 $175 183 $130 $105 Cart Leasing --- --- --- 70 70 21 74 79
Cart Operation --- 207 72 140 75 70 119 65
Range --- 19 --- 25 --- --- 10 6
Services and Supplies --- 14 10 100 15 39 5 13
Subtotal --- $446 $277 $635 $335 $312 $338 $268
Undistributed/Clubhouse --- $19 $49 $500 $60 100 $14 $86 General and Admin
Payroll and Benefits --- $64 $141 $150 $120 $209 $48 $167 Insurance --- --- --- 40 --- 36 33 49
Property Taxes --- --- --- 5 --- 4 93 106
Marketing/Promotion --- 90 12 60 5 9 5 72
Services and Supplies --- 174 115 145 145 130 183 60
Management Fee --- 109 64 200 --- 115 1203 96
Subtotal --- $437 $331 $600 $270 503 $478 $550
Total $1,369 $1,742 $1,298 $2,385 $1,830 $2,004 $1,733 $1,900 1 Excludes food and beverage.

Source: PFA.

SBGC Comparative Metrics
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Table VI-5: Comparative Maintenance Expenses ($000)
Municipal Golf Courses Mid-Mkt Daily Fee
SBGC Buena
ventura
River
Ridge
Los RoblesSimi Hills Olivas
Links

A B C D
Number of Holes 18 18 36 18 18 18 18 18 18 18
Characteristics
Age (orig/rennov) 54 80 (6) 26/8 48 33 43 (5) 35 50 (5) 10 15 Turf Area (acres) 100 90 220 120 100 90 90 110 80 90
Turf Type
Greens bent/poa bent/poa bent/poa bent/poa bent/poa bent/poa bent/poa bent/poa bent/poa bent/poa Tees berm hyb rye/kiku berm hyb berm berm pas pal berm hyb berm hyb berm hyb berm Fairways berm hyb rye/kiku berm hyb berm berm pas pal berm hyb berm hyb berm hyb berm Over-seed no no no no no no no no no no
# Bunkers 30 35 100 32 53 40 30 50 50 55
Water Source reclaim/
potable
reclaim ground potable potable reclaim potable ground potable reclaim Annual Cost
($000)
Water $223 $93 $110 --- $460 $106 $392 $16 $341 $330
Power 3 --- 105 60 30 --- --- 58 --- 25
Total $226 $93 $215 $60 $490 $106 $392 $74 $341 $355
Staffing (FTE)
Superintendent 1.0 1.0 2.0 1.0 1.0 1.0 1.0 1.0 1.0 1.0
Mechanic 1.0 1.0 2.0 1.0 2.0 1.0 1.0 1.0 1.0 1.0
Irrigation Tech 1.0 0.0 1.0 0.0 1.0 0.0 1.0 1.0 1.0 1.0 Landscape 9.0 7.0 23.0 11.0 11.0 11.0 11.0 8.0 9.0 11.0 Total 12.0 9.0 28.0 13.0 15.0 13.0 14.0 11.0 12.0 14.0
Course Maint-000
Payroll and Benefits $945 $311 $910 $415 $500 $399 $555 $377 $376 $477 Services & Supplies 198 237 556 175 225 245 142 187 182 165 Utilities 226 93 215 60 510 73 392 74 341 354
Maintenance Equip --- --- --- --- --- --- --- --- --- --- Total $1,369 $641 $1,681 $650 $1,235 $716 $1,089 $638 $899 $996 Average Cost/Acre
Payroll and Benefits $9,450 $3,455 $4,130 $3,460 $5,000 $4,430 $6,170 $3,425 $4,700 $5,300 Services & Supplies 1,980 2,630 2,530 1,460 2,250 2,720 1,580 1,700 2,275 1,830 SB Muni Comparative Metrics
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VII: Golf Course Operating Options
The following section presents a description and information regarding various forms of golf course operation and management available to the City of Santa Barbara. Presently, SBGC is operated under a hybrid structure whereby the City is responsible for golf course maintenance and overall management, with the golf course operations and the food and beverage functions provided under concessionaire agreements with two independent entities.

There are five basic golf course operating options that are available to the City of Santa Barbara:
‣ Full Self-Operation/Recreation District
‣ Current Hybrid Model (golf operations concession with City maintenance) ‣ Modified Hybrid Model (golf operations concession with contract/private maintenance) ‣ Management Agreement
‣ Golf Facility Lease
The distribution of the 83 municipal golf courses located in Southern California by type of operating model is indicated as follows (based on golf facilities, regardless of number of holes):

Number of Southern California Municipal Facilities
Region SelfOperationRecreation
District
Concession
w/City Maint
Concession
w/Cont Maint
Management
Agreement
Facility
Lease
Total
San Diego County --- --- 3 --- 3 5 11
Orange County --- --- 1 2 2 8 13
Ventura/Santa Barbara --- 1 1 --- 4 3 9
Los Angeles County 5 --- --- 3 3 25 36
Kern County --- --- --- --- --- 3 3
Western Inland Empire --- 1 --- --- 2 3 6
Coachella Valley --- --- --- --- 5 --- 5
Total 5 2 5 5 19 47 83
Percentage Distribution 6% 2% 6% 6% 23% 57% 100%
SBGC is shown under the model labeled “concession with City maintenance” which is the current hybrid model (golf operations concessionaire with City maintenance).

The above distribution presents a snap shot of the current situation. The “leased facility” numbers are skewed somewhat by Los Angeles County where 13 golf facilities are the County of Los Angeles’ municipal golf courses and four are the City of Long Beach golf courses, all of which are leased. In terms of City selfoperation, all of the five facilities shown are Los Angeles City Department of Recreation and Parks properties.

SBGC Operating Options
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There are two facilities--the Simi Hills Golf Course in Simi Valley and Hesperia Country Club in Hesperia--which are operated by public recreation districts.

In addition to the City of Los Angeles five golf facilities which are self-operated, there are five other facilities, including the City of Santa Barbara, which feature concessionaires for golf operations and City Parks and Recreation staff for golf course maintenance. In addition to Santa Barbara, these include two golf facilities owned by the City of San Diego (Torrey Pines and Balboa Park), Coronado Golf Course on Coronado Island, and the San Clemente municipal golf course in San Clemente.

The distribution does not present a clear picture of the trends established over the past 10-20 years. Nearly all of the management agreements at golf courses have been put in place within the past 20 years. Over this time span, there have been several golf courses which have converted from City maintenance to either facility leases or management agreements.

Responsibility for the basic maintenance, operation and management functions for each of these operating models is summarized as follows:

Responsibility for Function
Model Course
Maintenance
Golf Operations Food & Beverage Administration/
Management
Full Self-Operation City City City/Concession City
Current Hybrid City Concession Concession City
Modified Hybrid City/Private Private/Concession Concession City/Private Management Agreement Private Private Private Private
Golf Facility Lease Private Private Private/Concession Private City determined that the full self-operation model is not a viable option at this time. There are very few municipal golf courses in California which are self-operated, and movement away from this form of operation continues. Sunnyvale Golf Course in Sunnyvale is one of the few remaining full self-operations in the State. In mid2014, Pacific Grove Golf LInks in Pacific Grove converted from full self-operation to a fully privatized form of maintenance and golf operation (golf facility lease).

In addition to the basic options outlined above, there are numerous other permutations which would create alternative hybrid models. These alternative hybrid models, discussed later in this section, combine some form of self-operation, concession agreements, and/or management/contract private party agreements. All of the operating options require City oversight responsibilities including contract monitoring, budget preparation and review, management oversight, and the like. The degree of City participation varies by operating model.

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Current Hybrid Model
Presently, SBGC’s operating structure is described as a hybrid between full self-operation and a facility lease, combining elements of self operation (course maintenance and overall facility management) with elements of a facility lease (golf operations and food and beverage concession agreements). Under the current model, the City is responsible for maintaining the course and overall golf facility management, relying on concessionaires for the golf operations and food and beverage functions. The City sets pricing and policies, and administers the overall program. Under the current model, the City receives 100 percent of the greens fees, and a percentage of the concession (golf carts, driving range, pro shop merchandise, lessons, and food and beverage) gross revenue.

The current SBGC hybrid model, where a golf operations concessionaire is retained and the City provides golf course maintenance, is the most common type of hybrid structure. Historically, there have been many public agencies which have elected to maintain the golf course through their parks and recreation department, while retaining concessionaires for golf and food and beverage operations. In most of these instances, the reservations, starting, marshaling, and greens fees collection function is the responsibility of the concessionaire, although in some instances (e.g. City of Los Angeles and City of San Diego) the municipality fills this role, creating some level of redundancy in staffing. In addition to Santa Barbara Golf Club, the other examples of this hybrid model in California include Torrey Pines and Balboa Park in San Diego, Manteca Park in Manteca, Harding Park and Lincoln Park in San Francisco, San Clemente Golf Course in San Clemente, Poplar Creek Golf Course in San Mateo, DeLaveaga in Santa Cruz, Sharp Park Golf Course in Pacifca, and a few other municipal operations. Under all of these agreements, all of the maintenance is provided by City Parks and Recreation staff, and golf operations – pro shop merchandise, cart rentals, driving range, instruction – are provided by a concessionaire. Food and beverage operations may be provided by the golf operations concessionaire, but more often are the responsibility of a separate concessionaire.

Concessionaires normally pay rent to the City based on a percentage of gross revenue (percentage varies by revenue category). Sometimes the percentage rental rates are adjusted downward to reflect the concessionaire responsibility for reservation, greens fees collections, and starting, but in other cases a separate fee is paid to the concessionaire by the City for these services. In these cases, the City receives rent from the concessionaire, and also pays the concessionaire a fee for services. A summary of representative golf operations concession agreements is provided in Table VII-1).

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The primary advantage of the current model is the level of control retained by the City in terms of setting policies, prices and standards. A case can also be made that under the current structure, the City has substantial overhead support functions at its disposal from other City departments. It also is often argued that a portion of the entrepreneurial compensation (profit for services rendered) is retained by the public agency under this model, and most of the financial upside related to better than anticipated performance accrues to the City.

The validity and value of these advantages is subjective.

The principal potential disadvantages of the current model include higher wage and benefit packages related to public sector employment for the golf course maintenance function, more restrictive labor policies, the potential absence of “best practices” in revenue generation, and bureaucratic constraints which inhibit management’s ability to adapt and respond quickly to changing market practices and conditions. In addition, the current model involves multiple providers of service other than the City which potentially may create conflicts and inconsistent service levels. Most golf analysts strongly believe that there are significant advantages to controlling the entire golfer experience through providing all of the functions at the golf course under one management entity. Under the current operation, most of the financial risk is borne by the City.

The number of California municipal golf courses where golf course maintenance is provided by municipal employees continues to dwindle, particularly during periods when Cities and Counties are fiscally challenged.

Over recent years, the maintenance function has been privatized at Pacific Grove Golf Links in Pacific Grove, Palo Alto Muni in Palo Alto, Shoreline in Mountain View, Chuck Corica in Alameda, Indio municipal golf course in Indio, and Anaheim Hills and Dad Miller in Anaheim. Other than the larger Cities of San Diego, Los Angeles, and San Francisco, there are only a few municipalities which utilize municipal employees in maintaining their golf course.

Golf Facility Lease
Under this option, the golf course is leased to a private golf course operator who provides course maintenance, golf operations, and overall facility management services. The food and beverage operation may be included under the golf course facility lease or provided under a separate lease to a dedicated food and beverage operator. The operator's lease payments typically are based on a minimum rental payment versus a percentage of golf, merchandise, lessons, and food and beverage departmental gross revenue. Under a typical facility lease, the lessee receives 100 percent of the revenue and is obligated to fund required front-end capital improvements (if any), operating expenses, and a reserve for ongoing capital improvements. As such, the financial risk is largely borne by the lessee. The term of the lease is negotiable, although the length generally is related to operator capital improvement levels and rental payment terms.

There are many examples of the facility lease model, although most of these leases were negotiated 15-30 years ago. All of the Los Angeles County courses, the City of Long Beach courses, and the City of Pasadena’s Brookside Golf Course are operated under a facility lease, as are numerous other courses in Southern California. The Simi Valley Recreation District, by contrast, recently elected to self-operate (through the District) the Simi Hills Golf Course after years of operation under a lease agreement with American Golf Corporation.

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Tables VII-2 and VII-3 contain a summary of golf course “turnkey” lease terms — facilities where all operations are leased to a contract operator – for selected Southern and Northern California public properties, respectively.

There has been limited activity in recent years, with Pacific Grove Golf Links in Pacific Grove, Oceanside Golf Course in Oceanside, Los Amigos Golf Course in Downey, the City of Pasadena Brookside Golf Course in Pasadena, and Chuck Corica Golf Course in Alameda among the few agreements negotiated since 2005.

Soule Park in Ojai was leased in 2007 following significant improvements funded by Ventura County to repair flood damage. In general, the facilities are leased to a management company with a minimum lease payment versus percentage rents. The contract specifies performance standards, required capital improvements and a range of contractual terms. It is important to note the agreement date, as the improving economics of the golf market and competitiveness in the golf management industry during the 1990-2000 period are reflected in more favorable lease terms to the lessor, with the most recent agreements somewhat adversely influenced by soft golf market conditions since 2001.

The various terms of the leases are interrelated and the lease payments must be considered in the context of all the terms of the lease.
‣ Lease Term. The term of the facility leases shown generally ranges from 15-30 years. When front-end lessee capital improvements are required, which generally is the case, the term of the lease must be long enough to amortize these capital expenditures. The length of the term normally is a function of the level of capital improvements. Occasionally a short-term agreement (less than five years) is negotiated, but these are generally related to the continuation of an agreement with an operator where minimum capital improvements are required or where an option is exercised to extend the lease term. ‣ Minimum Rent. The minimum rent typically is established at about 75 to 80 percent of the expected “percentage rent” amount. The minimum often is adjusted annually to reflect about 80 percent of the average of percentage rents paid during the prior three to four years operation, but never less than the preceding minimum rent level.
‣ Percentage Rents. Percentage rents vary by golf department, although often a composite rate is applied to greens fees, cart revenue, and driving range revenue. Merchandise, food and beverage, and other minor departments generally have lower individual percentage rents primarily due to the relatively small operating profit margins on these goods and services. The percentage rents are a function of the length of term, required capital improvements, utility sharing agreements, and the replacement reserve requirements. The rent percentage may increase over the term of the lease. The higher the capital expenditure requirement, replacement reserve, and costs associated with utilities and other course operations, the lower the percentage rent structure. Also, the market strength and potential profitability of the course strongly influence percentage rents. For Los Angeles County, the rent payments shown include contributions from the golf course revenues to the capital improvements reserve fund, consisting of 10% of gross greens fees plus $1.50 per 18-hole and $.75 per 9-hole round of golf. These capital improvement contributions represent between 20 and 25 percent of the total gross rent paid. For El Dorado Park in Long Beach, the rent does not include food and beverage which is operated under a SBGC Operating Options
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separate concession agreement until AGC assumed responsibility for this function as well as golf operations.
‣ Fees and Operating Policies. Under most municipal facility leases, the lessor (City) retains substantial control over setting fees and establishing operating policies. As well, specific guidelines such as maintenance standards are in-place or negotiated as an integral part of the lease terms. While changes in fees and policies normally require City approval, in practice, the lessee has greater influence in modifying fees and terms which financially benefit the lessee. Moreover, regardless of the rigor of the lease agreement, a number of “gray” areas, such as level of course conditioning, generally remain which may be exploited by the lessee.
‣ Capital Improvements. Most facility leases call for capital improvements to be funded by the lessee. A list of improvements is specified and a time frame for their implementation is established. The capital improvements requirement varies widely for the facilities shown, from less than $1 million to over $8 million.
‣ Capital Improvement Replacement Reserve. Generally, some provision for establishing a reserve for ongoing future capital improvements is stipulated. The replacement reserve is normally a percentage of greens fee revenue, with the percentage depending on anticipated future capital requirements, the age of the course, and the front-end capital expenditure requirement. Usually, the replacement reserve is in addition to percentage rents, but sometimes the reserve funds are credited against rent payments. ‣ Utilities. Typically, the lessee is responsible for utility costs. However, due to the high cost of water in California, there may be some cost sharing of utilities, or some protection provided the lessee in terms of ceilings or caps on utility rate increases.

For facility lease agreements, the market potentials, specific course maintenance requirements, areas of lessor/lessee responsibility, and other contract terms must all be considered in establishing an equitable lease structure. Thus, while the experience of other courses can serve as a general guideline, specific consideration should be given to the unique characteristics of a city’s golf course, such as the location and market strength.

Further, the overall objectives of the City will influence the structure of contract terms.

The market for golf leases with municipalities has been substantially affected by the soft golf market conditions experienced over recent years. The number of qualified investor/operator groups which have an interest in such agreements has declined sharply, and the rent structure has generally been modified downward. In many instances, municipalities desiring leases are faced with the option of having to select groups with limited experience in exchange for the lessee’s willingness to invest private capital and commit to reasonable rent payments.

It also should be noted that with the softening of golf markets in California, there have been a number of initiatives on the part of lessees to renegotiate lease terms, particularly relating to courses which negotiated new leases in the 1995-2000 period. Specifically, since 2001 a number of lessees have requested rent adjustments to compensate for declining golf play levels and associated revenues, and to assume continued lessee funding for capital improvement obligations. Eaton Canyon and Altadena Golf Course in Los Angeles County, Crystal Springs in Burlingame, Metropolitan Golf Links in Oakland, and Foxtail in Rohnert Park are examples SBGC Operating Options
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where leases have been renegotiated. In the cases where rent concessions have been granted by the lessor, rent terms have been modified by reducing base and percentage rent levels, often with significant increases in potential participation by the lessor in revenue above the current threshold.

The primary advantages of the facility lease option include a guaranteed minimum rent payment to the City, potential benefits of professional golf management, limited required participation by the lessor (City), minimum financial risk to the City, and private capital improvement funding availability. The primary disadvantages of the facility lease option include waiving some control over operating policies and procedures, commitment to longer term agreements, and limited participation in upside financial performance.

Management Agreement
This option relates to a fee-for-service agreement with a Director of Golf, General Manager or an outside management company. Golf and food and beverage functions may be combined or separated, but the structure is the same. All functions would be under the authority of the contract golf director, General Manager or management firm. Under a typical management agreement, the facility owner (City) receives all revenues and is responsible for funding all capital improvements, operating expenses, and reserves for ongoing capital reinvestment. In addition, the owner (City) pays the operator a fee for management of the facility. In effect, the professional operator serves as the City’s agent in managing, operating, and maintaining the golf facility. Management compensation typically consists of a base fee, plus performance incentives.

Increasingly, public agencies are moving to a management contract approach to operations and maintenance.

The City of Ventura retained Kemper Sports Management under a management agreement for operation of their two golf courses. Other examples of this structure include Los Robles in Thousand Oaks which is managed by EAGLE Golf Management, Green River Golf Club near Corona managed by CourseCo, Encinitas Ranch in Encinitas by JC Resorts, and Carlsbad Crossings in Carlsbad and Black Gold in Yorba Linda, both by Kemper Sports. In 2012, a municipal golf course management agreement was negotiated between the City of Mountain View and Touchstone Golf for the Shoreline Golf Course operation. A summary of selected management agreement terms and conditions relating to moderate and high quality municipal golf course operations in California is contained in Table VII-4.

As previously indicated, under this structure, the City receives all revenue and is obligated to fund all maintenance, operating and administrative expenses, including a management fee. The management fee is in addition to all on-site salaries and expenses. The basic terms and conditions of the agreements are discussed below.

Term
Generally, management terms are five years in length, long enough to allow a firm to amortize its initial efforts to establish policies, procedures, and systems, and to ensure sufficient job security for key employees. Longer terms offer little advantage to the owner. The renewal of an agreement typically is for a period of three to five years. The terms may be influenced by conditions dictated by the financing instrument used such as taxexempt bond IRS regulations. For example, the IRS has a number of stipulations imposed to ensure a manSBGC Operating Options Pro Forma Advisors, LLC Page 59 PFAID: 10-644
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agement contract does not result in private business use of a bond-financed facility. Among other things, the IRS restricts contracts which give the service provider an ownership or leasehold interest or provide compensation for services rendered based in whole, or in part, on a share of net profits from operations of the facility.

Specifically, the IRS will allow agreement terms up to 15 years, but the structure of compensation is specific to the term. With 15-year agreements, at least 95 percent of the total compensation must be fixed/guaranteed.

At 10 years, at least 80 percent; and at 5 years, at least 50 percent must be fixed/guaranteed. As well, in accordance with IRS regulations, incentive compensation cannot be based, in whole or in part, on a share of net profits, and thus must be based on gross revenue or expense thresholds.

The IRS also requires the management agreement to have an agreement cancellation option for the owner, typically at the end of three years. In cases where a cancellation provision is required by the financing authority, management companies have not objected.

Compensation Structure
For moderate volume courses ($2.0-$2.5 million in annual golf/greens, carts, range) revenue, the base fee generally ranges from $100,000 to $140,000 per year. Compensation typically consists of a base, or guaranteed fee, plus an incentive fee. Incentive fees are structured such that expected performance would result in additional compensation of $20,000 to $30,000. Total compensation, assuming budgets are met or slightly exceeded, for moderate volume 18-hole public courses, generally ranges from $130,000 to $160,000 per year.

For high volume courses ($3+ million in golf revenue), the base fee generally ranges from $150,000 to $180,000 per year for 18-hole courses. Incentive fees are structured such that expected performance would result in additional compensation of $30,000 to $50,000. Total compensation, assuming budgets are met or slightly exceeded, for high volume 18-hole public courses, generally ranges from $150,000 to $200,000 per year.

While there are many ways of structuring incentive agreements, it is generally more effective to key them off of net operating income, or gross revenue above established threshold levels, with incentive payments equaling anywhere from 25 to 100 percent of the base fee.

The compensation noted above relates to agreements where all management staff, including day-to-day accounting, are onsite, and there are no reimbursements for corporate support functions, marketing, or other normal offsite management services, including routine travel. The cost of some extraordinary services (e.g., legal, specialty agronomical consulting, etc.) may be borne by the golf course owner.

Incentive compensation normally is triggered by performance which exceeds predetermined levels of net operating income (defined as “earnings before interest, taxes, depreciation, and amortization,” or EBITDA) or gross revenue. Since expenses are reasonably predictable, incentive payments based on gross revenue exceeding specified threshold levels often are workable.

It should be noted that golf revenue (greens, carts, and range) has little associated variable cost, whereas merchandise and food and beverage have very high variable costs. Given this, each revenue category should be SBGC Operating Options
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treated independently, and incentive clauses should more greatly reward extraordinary golf revenue compared with merchandise, food and beverage, lessons, and other miscellaneous sources.

Overall, total compensation should represent about 4 percent of total gross revenue. The 4 percent allowance is an industry standard which most professional golf management firms utilize when allocating home office services for courses they own and operate.

It is generally desirable for at least one-quarter to one-third of total compensation to be incentive-based.

Again, the type of financing may influence the structure of the compensation and limit the portion which is incentive-based.

Base Fee Adjustments
In many agreements, the base fee is inflation-adjusted. This is a negotiable point, and typically relates to the structure of incentive compensation, which often serves as an inflation hedge.

Management Services
Offsite management services covered under the management fee include, although are not necessarily limited to, the following functions:
‣ Personnel/Human Resources
‣ Training
‣ Payroll and Benefit Administration
‣ Management Reporting and Accounting Systems
‣ Internal Audits
‣ Budgeting Support
‣ Marketing Support
‣ Agronomical Support
Typically, all of these services are included under the management fee. If not, an accordingly lower management fee would be expected.

While the management company provides these services, they do so, in effect, as the agent for the City. The City determines the fee structure, establishes policies, and has the right to approve compensation, employment practices, and other similar items. Clearly, the management firms provide input and recommendations, but ultimately the City retains near-full control over all operating decisions.

Other Provisions
Daily accounting and management system reports are an integral part of the golf course operation. This daily function can be provided on-site by golf course administrative staff, or at the home office of the management company. When provided by on-site staff, the expense is borne by the course like any other operating expense. When provided off-site by the management company, there often is a separate charge to the City, in addition to the basic management fee.

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There may be other services provided by the management company which are reimbursed by the City separately from the management fee. Examples include travel expenses by home-office management staff, outside agronomical evaluations, and the like. All of these elements of the management agreement are negotiable, and clearly, the overall compensation consists of the sum of the base fee, incentive fee, and reimbursements.

The primary advantages of the management agreement structure include the benefits related to professional golf course management, lower wage and benefit structure related to private sector employment, shorter term contractual commitments, full control over the overall golfer experience and operations, and full participation in upside financial performance. The major disadvantages of this form of operation include greater participation required on the part of the contractor (City), financial risk, and inability to attract private capital.

Modified Hybrid Model
There are numerous alternative hybrids which consist of some combination of concession agreements and service contracts, and often such hybrids involve City-provided golf course maintenance. A “Modified Hybrid Model” would involve one or more changes in the responsibilities for the various functions. One alternative hybrid would retain the current golf operations and food and beverage concessionaires, with golf course maintenance responsibility shifted to a private landscape maintenance entity on a contract basis. The City would still be responsible for overall golf course management.

An alternative model would involve retaining a golf operations professional (individual or firm) on a fee-forservice basis, who would also be responsible for overall golf facility management as well as the golf operations functions (reservations, starting, pro shop, range, carts). Under this alternative, golf course maintenance could continue to be provided by the City, or contracted to a private landscape maintenance provider. The City would receive all of the golf course revenues (greens, carts, range, merchandise) and bear most or all of the operating expenses, paying a fee to the contractor for their service. Examples of this form include Modesto’s golf courses and the Anaheim courses. Generally, the agreement with the golf operations contractor has performance incentives structured in the compensation. Most of the benefits and constraints discussed under the full management agreement would transfer to this option, with a lower base fee.

There are several firms which provide contract golf course maintenance on a fee-for-service basis. The contractors employ private sector employees, paying private sector prevailing wages and benefits, which generally are well below the corresponding public sector wage/benefit scale. Maintenance is provided by a private landscape provider, such as Valley Crest or International Golf Management (IGM), on a fixed fee basis subject to standards and practices established by the public agency. Examples include DeBell in Burbank, Anaheim Hills and Dad Miller in Anaheim, and Alhambra Municipal in Alhambra. The responsibilities of the concessionaire and the structure of the golf operations concession agreement vary considerably. Under private contract maintenance, the annual cost of maintaining a mid-market 18-hole regulation length golf course is in the range of $650,000 ($35,000 per hole), including an allowance for maintenance equipment replacement/lease, but excluding utilities (water and power).

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Concessionaires normally pay rent to the City based on a percentage of gross revenue (percentage varies by revenue category). Sometimes, the rent categories are adjusted downward to reflect the concessionaire responsibility for reservation, greens fees collections, and starting, but in other cases a separate fee is paid to the concessionaire by the City for these services. In these cases, the City receives rent from the concessionaire, and also pays the concessionaire a fee for services (refer to Table VII-1 for a summary of representative golf operations concession agreements).

Summary of Operating Options Strengths and Weaknesses
The strengths and weaknesses of the four basic options are outlined in Table VII-5. Each option offers advantages and disadvantages relative to economic performance, the cost of payroll and employee benefits, city control, maintenance, influence on policy-making, operator responsiveness, efficiencies relating to one operating entity, required city involvement, and other factors. As stated above the Modified Hybrid model would have the same strengths and weaknesses as the full management services.

The current hybrid model, while having some benefits in terms of quality control, support from other City departments, and upside financial participation, has many deficiencies. There are higher costs associated with public sector employment, financial risk, and absence of professional golf management “best practices.” The most significant disadvantage, at least in the current structure, is the City’s inability to operate in a businessoriented, entrepreneurial manner which allows management to adapt and respond to dynamic market conditions. As well, the absence of an on-site manager with the authority to manage and coordinate the various functions provided by multiple providers is problematic, potentially resulting in lower revenues, less efficient operations and a diminished golfer experience.

The strengths and weaknesses of a modified hybrid model would depend on the specific model. Contracting the maintenance function offers clear cost savings, but must be considered in the context of the City’s policies with respect to outsourcing jobs. Retaining a fee-for-service golf operations management entity/individual offers similar advantages and disadvantage associated with the “management model”--principally offering greater City control and participation in upside revenues, while increasing operating and financial risk to the City.

The turnkey facility lease often yields a reasonable financial return to the City and requires the least City involvement, but maintenance and golf operations service levels may be below those desired by the City. As well, the City typically relinquishes at least some control over golf practices and policies, much of which may be due to contract “gray” areas. A major advantage of the turnkey operation is that normally substantial capital funds can be attracted from the private sector for course improvements, with the amount directly related to the length of the lease term.

A fee-for-service management agreement offers many advantages such as maintaining greater authority managing the facility. Since the City would receive all revenues and expenses under this option, the financial return to the City may exceed that of a turnkey facility lease, but carries with it additional financial exposure. At present, service contracts are more prevalent in the private sector (management of daily fee golf courses). HowSBGC Operating Options Pro Forma Advisors, LLC Page 63 PFAID: 10-644
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ever, there is an emerging trend toward this option primarily as a result of cities seeking to maintain greater control without giving up the benefits of private sector management and operation.

A full self-operation model, which is an extension of the current City hybrid model to include additional golf operations functions (merchandise, carts, and driving range), offers some advantages over the current model.

The principal advantage is the ability to coordinate the various functions to a greater degree and potentially to achieve some operating expense efficiencies in golf operations. There are potentially additional disadvantages of moving from the existing hybrid to a full self-contained model, primarily higher payroll and benefits related to public employees in the golf operations department. As stated earlier, cities who self- operate are beginning to make certain that they are staffed appropriately with experienced “golf operators” in order to react to changing market conditions, driving both rounds and revenue to the facilities while maintaining the required golfer experience.

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Table VII-1: Golf Operations Concession Agreements, Selected California Courses Course Santa Barbara GC San Clemente Alhambra
Location Santa Barbara San Clemente Alhambra
Lessor City of Santa Barbara City of San Clemente City of Alhambra Lessee Chris Talerico Golf Dave Cook Jerry Wisz
Agreement Date 2013 2005 1995
Lease Term (years)
Initial 3 10 5
Options None None 3 / 5-year
Discretion --- --- Lessee
Concession Services
Reservation X X X
Starter X X X
Green Fee Collect X X X
Marshals X X X
Range X X X
Carts X X X
Pro Shop X X X
Lessons X X X
Food and Beverage O X O
Minimum Rent $125,000 n.a. n.a.

CPI Adjusted Yes --- ---
Percentage Rent
Carts 30% 20-30%1/ 10/30/40%2/
Range 25% 25% 20/25/35/45%3/
Merchandise 4% 5% 4%
Lessons 4% 10% ---
Food and Beverage --- 13% ---
Liquor --- 13% ---
Other 4% --- ---
Investment Requirements None None $500,000
Utilities Lessor Lessee City
Incentive / Lessor Pymts --- None $50,000/yr. for marshal services Reinvestment/Reserve None None None
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Table VII-1 (continued): Golf Operations Concession Agreements, Selected California Courses Palo Alto Muni Diablo Creek
Griffith Park
(36 holes)
Location Palo Alto Concord Los Feliz
Lessor City of Palo Alto City of Concord City of L. A.

Lessee Brad Lozares J. Fernandez Tom Barber
Agreement Date 2003 1998 5/1993
Lease Term (years)
Initial 5 5 10
Options 1-year 2 / 5-year None
Discretion City Lessee Mo.-Mo.

Concession Services
Reservation X X O
Starter X X O
Green Fee Collect X X O
Marshals X X O
Range X X X
Carts X X X
Pro Shop X X X
Lessons X X X
Food and Beverage O O O
Minimum Rent None None $250,000
CPI Adjusted --- No
Percentage Rent
Carts 60% 35% (0-450K) ---
Range 60% 25% (450K+) 30%
Merchandise 4% 30% (0-400K) 5%
Lessons 0% 25% (6-500K) 10%
Food and Beverage --- 5% (0-500K) ---
Liquor --- --- ---
Other --- --- ---
Investment Requirements $100,000 None ---
Utilities Lessor Lessor Lessee
Incentive / Lessor Pymts $322,000 Base Fee4 Per Round5 None Reinvestment/Reserve None $10,000/year None
1 Years 1-5 at 20%; increases 2% points annually beginning in year 6. 2/ 0-$100K; $100-200K; $200K+; 3/ 0-$100K; $100-200K; $200-300K; $300K+ 4City pays operator base fee, CPI adjusted. Incentives include $3/rounds above 87,000 rounds, 20% cart revenue above $250,000, and range revenue above $440,000. 5$1/round 93,000-98,000; $2/round 98,000-103,000; $3/round 103,000-108,000; $4/round (108,000+).

Source: Pro Forma Advisors
1 Years 1-5 at 20%; increases 2% points annually beginning in year 6. 2/ 0-$100K; $100-200K; $200K+; 3/ 0-$100K; $100-200K; $200-300K; $300K+ 4City pays operator base fee, CPI adjusted. Incentives include $3/rounds above 87,000 rounds, 20% cart revenue above $250,000, and range revenue above $440,000. 5$1/round 93,000-98,000; $2/round 98,000-103,000; $3/round 103,000-108,000; $4/round (108,000+).

Source: Pro Forma Advisors
1 Years 1-5 at 20%; increases 2% points annually beginning in year 6. 2/ 0-$100K; $100-200K; $200K+; 3/ 0-$100K; $100-200K; $200-300K; $300K+ 4City pays operator base fee, CPI adjusted. Incentives include $3/rounds above 87,000 rounds, 20% cart revenue above $250,000, and range revenue above $440,000. 5$1/round 93,000-98,000; $2/round 98,000-103,000; $3/round 103,000-108,000; $4/round (108,000+).

Source: Pro Forma Advisors
1 Years 1-5 at 20%; increases 2% points annually beginning in year 6. 2/ 0-$100K; $100-200K; $200K+; 3/ 0-$100K; $100-200K; $200-300K; $300K+ 4City pays operator base fee, CPI adjusted. Incentives include $3/rounds above 87,000 rounds, 20% cart revenue above $250,000, and range revenue above $440,000. 5$1/round 93,000-98,000; $2/round 98,000-103,000; $3/round 103,000-108,000; $4/round (108,000+).

Source: Pro Forma Advisors
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Table VII-2: Regulation Length Public Golf Course Facility Lease Terms--Southern California Course Soule Park Brookside Oceanside Los Lagos Mountain Meadows
Mission Trails
Location Ojai Pasadena Oceanside Costa Mesa Pomona San Diego Number of Holes 18 36 18 36 18 18
Lessor Ventura County Pasadena Oceanside Costa Mesa L.A. County San Diego Lessee Highlands Golf American Golf Jim Bellows/
Landscapes
Mesa Verde
Partners
American Golf American Golf
Agreement Date 2007 2011 2007 1992 1991 1986
Lease Term (years)
Initial 10 5 30 18 10 35
Option Extension 1-5 --- 10 2-5 --- ---
Minimum Rent $180,000 $1,825,000 None $630K/720K $890,000 $125,000 CPI Adjusted No No --- No No No
Percentage Rents
Greens 11.5%/50%1/ 28.5% 20% 30 / 35% 2/ 35% 11.5%
Carts 11.5%/50%1/ 28.5% 20% 30 / 35% 35% 10.5%
Range 11.5%/50%1/ 28.5% 20% 30 / 35% 33% 10.5%
Merchandise 5% --- 20% 6% 5% 6.0%
Lessons --- --- --- 5% 10% 10.0%
Food and Beverage 5% 13.0% 20% 11% 10% 10.5%
Liquor 5% 13.0% 20% 11% 12% 10.5%
Banquet Room Rental 5% 20.0% 20% 25% 25% ---
Required Capital Imps None $100K/year --- $1.938M $500,000 $104,000 Repl Reserve Require $1/round 9.5% of total
gross
--- 5% of greens --- 3/ ---
Cost of Water Lessee Lessee Lessee Lessee County Lessee SBGC Operating Options
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Table VII-2 (continued): Regulation Length Public Golf Course Facility Lease Terms--Southern California Course La Mirada DeBell Los Verdes Meadowlark Los Amigos Chula Vista Location La Mirada Burbank Palos Verdes Huntington
Beach
Downey Chula Vista
Number of Holes 18 18 18 18 18 18
Lessor L.A. County City of Burbank L.A. County Huntington Bch L.A. County Chula Vista Lessee American Golf S. Scozzola American Golf Fore Golf Los Amigos GP American Golf Agreement Date 1995 4/ 2014 1994 4 1993 2012 1986
Lease Term (years)
Initial 15 5.5 15 25 20 20
Option Extension --- 3 5-year --- 15 (city) 5 (county) 10 Minimum Rent $805,000 $300,000 $970,000 $175K/300K/
500K 6/
---5/ $124,000
CPI Adjusted No No No No No No
Percentage Rents
Greens 40% 5.0/7.5%9/ 40% 5%-43%8/ 15%
Carts 40% --- 40% 8/10/18/25% 7/ 5%-43%8/ 15%
Range 30% --- 30% - 5%-43%18 15%
Merchandise 5% --- 5% 8% 6% 6%
Lessons --- --- --- --- --- 6%
Food and Beverage 10% --- 10% 10% 8% 6%
Liquor 12% --- 12% 10% 12% 6%
Banquet Room Rental 10% --- 10% --- 25% 6%
Required Capital Imps $700,000 4/ None $800,000 4/ $3.5M $500,000 $1.4M Repl Reserve Require ---3/ 25% of NOI ---3/ --- ---3/ --- Cost of Water Lessee Lessee Lessee Lessee Lessee Lessee 1/ Percentage rent increases to 50% for gross greens fees exceeding $1,650,000, cart revenue of $425,000 and range revenue of $125,000.
2/ Higher percentage applied to monthly gross revenue exceeding $150,000 for greens fees, $40,000 for carts, and $20,000 for practice range.
3/ 10% of greens fees, credited against lessee rental payments. 4/ Term extended for an additional 15 years with commitment of additional capital improvements. 5/ None in first 5 years; then 80% of year 5 percentage rent. 6/ Rent percentages apply to the 5-year option period, exercised in 2005. Years 1-2/3-10/11+. 7/ Percentages relate to years 1-2, 3-10, 11-18, and 19-25, respectively. 8/ Year 1;5%; year 2-10%; year 3-15%; year 4-20%; year 5-27%; year 6-33%; year 7-36%; year 8-39%; year 9- 41%; years 10 through 20-43%.
9/ In addition to minimum rent, 5.0% of total gross revenue between $2.5-$3.5 million; 7.5% of total gross revenue exceeding $3.5 million.
1/ Percentage rent increases to 50% for gross greens fees exceeding $1,650,000, cart revenue of $425,000 and range revenue of $125,000.
2/ Higher percentage applied to monthly gross revenue exceeding $150,000 for greens fees, $40,000 for carts, and $20,000 for practice range.
3/ 10% of greens fees, credited against lessee rental payments. 4/ Term extended for an additional 15 years with commitment of additional capital improvements. 5/ None in first 5 years; then 80% of year 5 percentage rent. 6/ Rent percentages apply to the 5-year option period, exercised in 2005. Years 1-2/3-10/11+. 7/ Percentages relate to years 1-2, 3-10, 11-18, and 19-25, respectively. 8/ Year 1;5%; year 2-10%; year 3-15%; year 4-20%; year 5-27%; year 6-33%; year 7-36%; year 8-39%; year 9- 41%; years 10 through 20-43%.
9/ In addition to minimum rent, 5.0% of total gross revenue between $2.5-$3.5 million; 7.5% of total gross revenue exceeding $3.5 million.
1/ Percentage rent increases to 50% for gross greens fees exceeding $1,650,000, cart revenue of $425,000 and range revenue of $125,000.
2/ Higher percentage applied to monthly gross revenue exceeding $150,000 for greens fees, $40,000 for carts, and $20,000 for practice range.
3/ 10% of greens fees, credited against lessee rental payments. 4/ Term extended for an additional 15 years with commitment of additional capital improvements. 5/ None in first 5 years; then 80% of year 5 percentage rent. 6/ Rent percentages apply to the 5-year option period, exercised in 2005. Years 1-2/3-10/11+. 7/ Percentages relate to years 1-2, 3-10, 11-18, and 19-25, respectively. 8/ Year 1;5%; year 2-10%; year 3-15%; year 4-20%; year 5-27%; year 6-33%; year 7-36%; year 8-39%; year 9- 41%; years 10 through 20-43%.
9/ In addition to minimum rent, 5.0% of total gross revenue between $2.5-$3.5 million; 7.5% of total gross revenue exceeding $3.5 million.
1/ Percentage rent increases to 50% for gross greens fees exceeding $1,650,000, cart revenue of $425,000 and range revenue of $125,000.
2/ Higher percentage applied to monthly gross revenue exceeding $150,000 for greens fees, $40,000 for carts, and $20,000 for practice range.
3/ 10% of greens fees, credited against lessee rental payments. 4/ Term extended for an additional 15 years with commitment of additional capital improvements. 5/ None in first 5 years; then 80% of year 5 percentage rent. 6/ Rent percentages apply to the 5-year option period, exercised in 2005. Years 1-2/3-10/11+. 7/ Percentages relate to years 1-2, 3-10, 11-18, and 19-25, respectively. 8/ Year 1;5%; year 2-10%; year 3-15%; year 4-20%; year 5-27%; year 6-33%; year 7-36%; year 8-39%; year 9- 41%; years 10 through 20-43%.
9/ In addition to minimum rent, 5.0% of total gross revenue between $2.5-$3.5 million; 7.5% of total gross revenue exceeding $3.5 million.
1/ Percentage rent increases to 50% for gross greens fees exceeding $1,650,000, cart revenue of $425,000 and range revenue of $125,000.
2/ Higher percentage applied to monthly gross revenue exceeding $150,000 for greens fees, $40,000 for carts, and $20,000 for practice range.
3/ 10% of greens fees, credited against lessee rental payments. 4/ Term extended for an additional 15 years with commitment of additional capital improvements. 5/ None in first 5 years; then 80% of year 5 percentage rent. 6/ Rent percentages apply to the 5-year option period, exercised in 2005. Years 1-2/3-10/11+. 7/ Percentages relate to years 1-2, 3-10, 11-18, and 19-25, respectively. 8/ Year 1;5%; year 2-10%; year 3-15%; year 4-20%; year 5-27%; year 6-33%; year 7-36%; year 8-39%; year 9- 41%; years 10 through 20-43%.
9/ In addition to minimum rent, 5.0% of total gross revenue between $2.5-$3.5 million; 7.5% of total gross revenue exceeding $3.5 million.
1/ Percentage rent increases to 50% for gross greens fees exceeding $1,650,000, cart revenue of $425,000 and range revenue of $125,000.
2/ Higher percentage applied to monthly gross revenue exceeding $150,000 for greens fees, $40,000 for carts, and $20,000 for practice range.
3/ 10% of greens fees, credited against lessee rental payments. 4/ Term extended for an additional 15 years with commitment of additional capital improvements. 5/ None in first 5 years; then 80% of year 5 percentage rent. 6/ Rent percentages apply to the 5-year option period, exercised in 2005. Years 1-2/3-10/11+. 7/ Percentages relate to years 1-2, 3-10, 11-18, and 19-25, respectively. 8/ Year 1;5%; year 2-10%; year 3-15%; year 4-20%; year 5-27%; year 6-33%; year 7-36%; year 8-39%; year 9- 41%; years 10 through 20-43%.
9/ In addition to minimum rent, 5.0% of total gross revenue between $2.5-$3.5 million; 7.5% of total gross revenue exceeding $3.5 million.
1/ Percentage rent increases to 50% for gross greens fees exceeding $1,650,000, cart revenue of $425,000 and range revenue of $125,000.
2/ Higher percentage applied to monthly gross revenue exceeding $150,000 for greens fees, $40,000 for carts, and $20,000 for practice range.
3/ 10% of greens fees, credited against lessee rental payments. 4/ Term extended for an additional 15 years with commitment of additional capital improvements. 5/ None in first 5 years; then 80% of year 5 percentage rent. 6/ Rent percentages apply to the 5-year option period, exercised in 2005. Years 1-2/3-10/11+. 7/ Percentages relate to years 1-2, 3-10, 11-18, and 19-25, respectively. 8/ Year 1;5%; year 2-10%; year 3-15%; year 4-20%; year 5-27%; year 6-33%; year 7-36%; year 8-39%; year 9- 41%; years 10 through 20-43%.
9/ In addition to minimum rent, 5.0% of total gross revenue between $2.5-$3.5 million; 7.5% of total gross revenue exceeding $3.5 million.

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Table VII-3: Regulation Length Public Golf Course Facility Lease Terms--Northern California Course Spring Valley Chuck Corica Crystal Springs Monarch Bay Metropolitan Pacific Grove Location Milpitas Alameda Burlingame San Leandro Oakland Pacific Grove Number of Holes 18 45 18 27 18 18
Lessor County of Santa
Clara
City of Alameda City/County of
San Francisco
City of San LeandroCity of Oakland City of Pacific
Grove
Lessee Jetters Golf Greenway Golf Crystal Springs
Golf Partners
American Golf Oakland Golf,
LLC
CourseCo
Agreement Date 1993 2012 1997 1997 2001 2014
Lease Term (years) (revised 2004)
Initial 30 20 20 25 25 9.5
Option Extension None One 5-year None Two 5-year Three 5-year Two 5-year Minimum Rent $250,000 $300,000 $1.25 million 11/$750,000 $400,000 5/ $300,000 CPI Adjusted No No Yes No Yes No
Percentage Rents
Greens 10.5% 2/ 8/10-8/121/ 25/35/32% 12/ 25/27/28/30 3/ 0/15/17.5/20/22. 5/
25/27.5 7/
Carts 10.5% 8/10-8/121/ 25/35/32% 25/27/28/30 3/ Min + 65% of total golf revenue
exceeding
$2.35M
Range 10.5% 8/10-8/121/ 25/35/32% 25/27/28/30 3/
Min + 65% of
total golf revenue
exceeding Merchandise 10.5% 8/10-8/12 $2.35M 1/ 8% 5/6% 4/ 0/4% 8/ Min + 65% of
total golf revenue
exceeding
$2.35M
Lessons 10.5% 8/10-8/121/ 25/35/32% 12/ 5/6% 4/ 0/4%
Min + 65% of
total golf revenue
exceeding
$2.35M
Food and Beverage 10.5% NA 8% 5/6% 4/ 0/4% ---
Liquor 10.5% NA 8% 5/6% 4/ 0/4% ---
Banquet Room Rental 10.5% NA 25/35/32% 12/ 5/6% 4/ 0/4% --- Required Capital Imps $2.5 million $5.7 million $1.98 million $8.2 million $8.0 million $100,000 Repl Reserve Require None 3.0% of total
gross revenue
6% (yrs.1-5);
2%(yr.6+)
of total gross
revenue
2% of gross 0% (1-2),
2% (3-4); 4% (5+)
of total gross

1.5% of total
gross revenue
Cost of Water Lessee Lessee Lessee Lessee Lessee Lessee 1/ Rate applies to gross revenue from all sources.
2/ Percentages apply to first 15 years of agreement term. Beginning in year 16, rent equal to 10.5% of total gross revenue up to $3.0 million plus 15.0% of revenue between $3.0 and $4.0 million, plus 20.0% of gross revenue exceeding $4.0 million. 3/ Years 1-2 / 3-5 / 6-10 / 11+.
4/ Years 1-2 / 3+.
5/ Increases to $500,000 by Year 4.
6/ Escalates to $200,000 by Year 16.
7/ Years 1-2 / 3-5 / 6-10 / 11-15 / 16-20 / 21-25 / 26+. 8/ Years 1-2 / 3+.
9/ Years 1-5 / 6-10 / 11-15 / 16+.
10/ In addition to percentages, a supplemental contribution equal to 7% of total gross revenue is applied effective 10/1/2004. Further, the percentage rents are increased by CPI beginning in
2010
11/ Escalates steadily to $1,600,000 by Year 16.
12/ As revised – years 1-2 / 3-5 / 6-20.
1/ Rate applies to gross revenue from all sources.
2/ Percentages apply to first 15 years of agreement term. Beginning in year 16, rent equal to 10.5% of total gross revenue up to $3.0 million plus 15.0% of revenue between $3.0 and $4.0 million, plus 20.0% of gross revenue exceeding $4.0 million. 3/ Years 1-2 / 3-5 / 6-10 / 11+.
4/ Years 1-2 / 3+.
5/ Increases to $500,000 by Year 4.
6/ Escalates to $200,000 by Year 16.
7/ Years 1-2 / 3-5 / 6-10 / 11-15 / 16-20 / 21-25 / 26+. 8/ Years 1-2 / 3+.
9/ Years 1-5 / 6-10 / 11-15 / 16+.
10/ In addition to percentages, a supplemental contribution equal to 7% of total gross revenue is applied effective 10/1/2004. Further, the percentage rents are increased by CPI beginning in
2010
11/ Escalates steadily to $1,600,000 by Year 16.
12/ As revised – years 1-2 / 3-5 / 6-20.
1/ Rate applies to gross revenue from all sources.
2/ Percentages apply to first 15 years of agreement term. Beginning in year 16, rent equal to 10.5% of total gross revenue up to $3.0 million plus 15.0% of revenue between $3.0 and $4.0 million, plus 20.0% of gross revenue exceeding $4.0 million. 3/ Years 1-2 / 3-5 / 6-10 / 11+.
4/ Years 1-2 / 3+.
5/ Increases to $500,000 by Year 4.
6/ Escalates to $200,000 by Year 16.
7/ Years 1-2 / 3-5 / 6-10 / 11-15 / 16-20 / 21-25 / 26+. 8/ Years 1-2 / 3+.
9/ Years 1-5 / 6-10 / 11-15 / 16+.
10/ In addition to percentages, a supplemental contribution equal to 7% of total gross revenue is applied effective 10/1/2004. Further, the percentage rents are increased by CPI beginning in
2010
11/ Escalates steadily to $1,600,000 by Year 16.
12/ As revised – years 1-2 / 3-5 / 6-20.
1/ Rate applies to gross revenue from all sources.
2/ Percentages apply to first 15 years of agreement term. Beginning in year 16, rent equal to 10.5% of total gross revenue up to $3.0 million plus 15.0% of revenue between $3.0 and $4.0 million, plus 20.0% of gross revenue exceeding $4.0 million. 3/ Years 1-2 / 3-5 / 6-10 / 11+.
4/ Years 1-2 / 3+.
5/ Increases to $500,000 by Year 4.
6/ Escalates to $200,000 by Year 16.
7/ Years 1-2 / 3-5 / 6-10 / 11-15 / 16-20 / 21-25 / 26+. 8/ Years 1-2 / 3+.
9/ Years 1-5 / 6-10 / 11-15 / 16+.
10/ In addition to percentages, a supplemental contribution equal to 7% of total gross revenue is applied effective 10/1/2004. Further, the percentage rents are increased by CPI beginning in
2010
11/ Escalates steadily to $1,600,000 by Year 16.
12/ As revised – years 1-2 / 3-5 / 6-20.
1/ Rate applies to gross revenue from all sources.
2/ Percentages apply to first 15 years of agreement term. Beginning in year 16, rent equal to 10.5% of total gross revenue up to $3.0 million plus 15.0% of revenue between $3.0 and $4.0 million, plus 20.0% of gross revenue exceeding $4.0 million. 3/ Years 1-2 / 3-5 / 6-10 / 11+.
4/ Years 1-2 / 3+.
5/ Increases to $500,000 by Year 4.
6/ Escalates to $200,000 by Year 16.
7/ Years 1-2 / 3-5 / 6-10 / 11-15 / 16-20 / 21-25 / 26+. 8/ Years 1-2 / 3+.
9/ Years 1-5 / 6-10 / 11-15 / 16+.
10/ In addition to percentages, a supplemental contribution equal to 7% of total gross revenue is applied effective 10/1/2004. Further, the percentage rents are increased by CPI beginning in
2010
11/ Escalates steadily to $1,600,000 by Year 16.
12/ As revised – years 1-2 / 3-5 / 6-20.
1/ Rate applies to gross revenue from all sources.
2/ Percentages apply to first 15 years of agreement term. Beginning in year 16, rent equal to 10.5% of total gross revenue up to $3.0 million plus 15.0% of revenue between $3.0 and $4.0 million, plus 20.0% of gross revenue exceeding $4.0 million. 3/ Years 1-2 / 3-5 / 6-10 / 11+.
4/ Years 1-2 / 3+.
5/ Increases to $500,000 by Year 4.
6/ Escalates to $200,000 by Year 16.
7/ Years 1-2 / 3-5 / 6-10 / 11-15 / 16-20 / 21-25 / 26+. 8/ Years 1-2 / 3+.
9/ Years 1-5 / 6-10 / 11-15 / 16+.
10/ In addition to percentages, a supplemental contribution equal to 7% of total gross revenue is applied effective 10/1/2004. Further, the percentage rents are increased by CPI beginning in
2010
11/ Escalates steadily to $1,600,000 by Year 16.
12/ As revised – years 1-2 / 3-5 / 6-20.
1/ Rate applies to gross revenue from all sources.
2/ Percentages apply to first 15 years of agreement term. Beginning in year 16, rent equal to 10.5% of total gross revenue up to $3.0 million plus 15.0% of revenue between $3.0 and $4.0 million, plus 20.0% of gross revenue exceeding $4.0 million. 3/ Years 1-2 / 3-5 / 6-10 / 11+.
4/ Years 1-2 / 3+.
5/ Increases to $500,000 by Year 4.
6/ Escalates to $200,000 by Year 16.
7/ Years 1-2 / 3-5 / 6-10 / 11-15 / 16-20 / 21-25 / 26+. 8/ Years 1-2 / 3+.
9/ Years 1-5 / 6-10 / 11-15 / 16+.
10/ In addition to percentages, a supplemental contribution equal to 7% of total gross revenue is applied effective 10/1/2004. Further, the percentage rents are increased by CPI beginning in
2010
11/ Escalates steadily to $1,600,000 by Year 16.
12/ As revised – years 1-2 / 3-5 / 6-20.

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Table VII-4: Management Agreement Terms at Selected California Public Golf Courses Golf Course Buenaventura/
Olivas Links
Los Robles Carlsbad CrossingsGreen River Black Gold
Location Ventura Thousand Oaks Carlsbad Corona Yorba Linda Course Type Mid-market Muni Municipal Upscale Municipal Mid-mkt Daily Fee Upscale Municipal Number of Holes 36 18 18 36 18
Owner City of Ventura City of Thousand
Oaks
City of Carlsbad County of Orange City of Yorba Linda
Manager Kemper Sports EAGLE Golf Kemper Sports CourseCo Kemper Sports Mgmt.

Agreement Date 2009 2006 2012 2014 2011
Term (years) 5 10 5 5 5
Options One 5-year Four 5-year None None None
Options Holder City City --- --- ---
Annual Gross Revenue $4,500,000 $5,000,000 $4,000,000 $2,500,000(18 hole) $5,600,000 Base Annual Fee $150,000 $100,000 $125,000 $160,000 $195,000 CPI Adjusted Yes 2%/year No Yes Yes
Incentive Structure 5% of gross “golf
“revenue exceeding
$4,800,000
12% of NOI, ex depreciation5.0% of gross revenue
in excess of budget
None 5.0% of gross revenue in excess of
$5,800,000, subject
to maximum of 25%
of fixed fee
Management Functions
Course Maintenance X X X X X
Golf Operation X X X X X
Food and Beverage X X X X X
Annual Compensation
Base $150,000 $100,000 $125,000 $160,000 $250,000
Incentive --- 75,000 25,000 --- ---
Total $150,000 $175,000 $150,000 $160,000 $250,000
% of Total Gross Rev 3.3% 3.5% 3.8% 6.4% 4.5%
Reimbursements None Accounting None None None
Performance/Other DepositNone None None None $50,000
Non-Compete Restrictions None None None None No
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Table VII-4 (continued): Management Agreement Terms at Selected California Public Golf Courses Golf Course Shoreline SilverRock Boundary Oak Desert Willow Encinitas Ranch Location Mountain View La Quinta Walnut Creek Palm Desert Encinitas Course Type Municipal Upscale Municipal Municipal Upscale Municipal Municipal Number of Holes 18 18 18 36 18
Owner City of Mountain View City of La Quinta City of Walnut Creek City of Palm Desert Encinitas Ranch Golf Auth.

Manager Touchstone Golf Landmark Golf Mgmt. CourseCo Inc Kemper Sports J.C. Resorts Agreement Date 2012 2013 2009 2006 2012
Term (years) 5 5 5 2 10
Options One 5-year None None Two 1-year None
Options Holder City --- --- City ---
Annual Gross Revenue $3,000,0003/ $4,000,000 $4,000,000 $7,500,000 $4,500,000 Base Annual Fee $102,000 $96,000 $156,000 $300,000 $180,000 2/ CPI Adjusted No No Yes No Yes
Incentive Structure 10% of golf gross
revenue in excess of
$2,500,000
None 10% of golf gross
revenue exceeding
budget; 7.5% of F &
B gross exceeding
budget
5% of gross revenue
in excess of
$6,000,000
.75% of gross golf
revenue
Accounting reimbursement
direct
Management Functions
Course Maintenance X X X X X
Golf Operation X X X X X
Food and Beverage X X X X
Annual Compensation
Base $108,000 $96,000 $156,000 $300,000 $180,000
Incentive 25,000 --- $6,000 75,000 35,000
Total $133,000 $96,000 $162,000 $375,000 $215,000
% of Total Gross Rev 4.2% 2.4% 4.1% 5.0% 4.8%
Reimbursements None None None None Accounting - $24K/
year
Performance/Other
Deposit
None $25,000 None None None
Non-Compete RestrictionsNone None None 2 years None
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Table VII-5: Strengths and Weaknesses of Golf Course Operating Options Hybrid (Current Model) Facility Lease Management Agreement Modified Hybrid

STRENGTHS
• Provides high level of City
control over rates, policies,
practices, and overall golf
experience
• Availability of City overhead
support functions
• Strong participation in upside financial performance • Provides opportunity to
retain specialists in golf
operations and food and
beverage
• Preserves option to convert
to alternative operating
option
• Provides reasonably strong
financial return to City
• Produces guarantee minimum rent payment to City
• Minimizes financial risk
• Minimizes political influence
with less direct involvement
of City with setting fees,
policies, and practices
• Offers potential benefits in
golf management expertise
and specialized
maintenance support services
• May provide private capital
investment in facilities
• Provides strong financial
return to City.
• Provides high level of City
control
• Greater potential quality
assurance
• Opportunity to provide
shorter term contracts
• Potentially more compatible
with multiple operator options
• Provides opportunity to
retain specialists in professional golf management
• Captures benefits of private
sector wage and benefit
structure
• Provides high level of City
control over rates, policies,
practices, and overall golf
experience
• Availability of City overhead
support functions
• Strong participation in upside financial performance • Potential benefits from
lower private sector
maintenance payroll/
benefits
• Provides opportunity to
retain specialists in golf
operations and food and
beverage
• Preserves option to convert
to alternative operating
option

WEAKNESSES
• Constrains ability of management to adapt and respond to dynamic market conditions
• Entails high level of financial
risk
• Involves higher public sector wage and benefit structure for maintenance • Reduces opportunity to
attract private capital due
to reduced lessee control
• Potential conflicts of multiple concessionaires
• Relatively high City monitoring requirements
• Minimum operational and
quality control
• May involve long-term contractual commitment
• Minimizes financial upside,
particular in current market
• Current weak market for
facility leases
• Potential conflicts over
capital reinvestment responsibilities of contracting
parties
• Requires more City involvement than facility lease
option
• Minimizes private capital
investment in facilities.
• Entails greatest level of City
financial risk
• May constrain ability of
management to adapt and
respond to dynamic market
conditions
• Entails high level of financial
risk
• May involve higher public
sector wage and benefit
structure
• Reduces opportunity to
attract private capital due
to reduced lessee control
• Potential conflicts of multiple concessionaires
• Relatively high City monitoring requirements
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VIII. Economics of Golf Course Operating Options
The following section illustrates the comparative economics of the various golf course operating options available to the City of Santa Barbara. The options evaluated include the following:
‣ Management Agreement, with and without application of the City’s Living Wage Ordinance ‣ Facility Lease
‣ Hybrid Model (current), assuming golf operations concessionaire, food and beverage concessionaire, and City maintenance
‣ Hybrid Model (modified), assuming golf operations concessionaire, food and beverage concessionaire, and contract maintenance
Summary Economics
A comparative summary of the economics related to each of the operating options outlined above is presented below. The economics illustrate the net cash flow accruing to the City under each option. An allowance for capital improvements/equipment costs and debt service (actual 2014 debt service) are deducted from net operating income, yielding net cash flow to the City for each option.

SBGC Comparative Baseline Operating Options Economics
(thousands of constant 2014 dollars)
City Hybrid
Actual FY2014
Hybrid Management Agreement Facility
Lease
City Hybrid
Actual FY2014
City
Maintenance*
Contract
Maintenance
No Living
Wage
With Living
Wage
Facility
Lease
Net Operating Income $411.0 $380.7 $578.1 $805.3 $583.3 $445.2 Less: CIP Allowance 214.5 225.0 225.0 225.0 225.0 108.1 Less: Debt Service 264.8 264.8 264.8 264.8 264.8 264.8
Net Cash Flow ($68.3) ($109.1) $88.3 $315.5 $93.5 $71.3 Variance From Hybrid
Model w/ City Maint.
$40.8 --- $197.4 $424.6 $202.6 $180.4
* Represents current City hybrid model.

Baseline Revenues
A baseline revenue estimate is first established in evaluating each of the golf course operating options. The revenue estimate is employed uniformly for the various options. The baseline revenue employed in the analysis is effectively actual FY2014 revenues, excluding any one-time revenue components. As shown in Table VIII-1, annual baseline revenue is indicated at just under $3.9 million, including nearly $1.4 million in food and beverage gross revenue.

SBGC Option Economics

PGCC 2-15-23

Living Wage Ordinance
The City of Santa Barbara has adopted a “living wage” ordinance which stipulates a minimum hourly wage for businesses which are supplying services to the City on a contract basis, with some exemptions provided depending on the type of business and service provided. The current “living wage” is $16.70 per hour, with no additional benefits provided.

The living wage ordinance would apply to some of the operating options, while not affecting others. The following assumptions are employed in the analysis:
‣ The current hybrid model (golf operations concessionaire; food and beverage concessionaire; City course maintenance) is not subject to the Living Wage ordinance. ‣ A management agreement model may or may not be subject to the Living Wage ordinance, depending on the interpretation of the ordinance by City staff. This scenario is analyzed with and without the Living Wage.
‣ The Living Wage ordinance would not apply to the facility lease model. ‣ Contract golf course maintenance, in conjunction with any form of golf operations, would be subject to the Living Wage ordinance.
‣ The food and beverage operation would be structured such that it would be exempt from the Living Wage ordinance.

The effect of the Living Wage ordinance is reflected in higher operating expenses (payroll and benefits) for both golf course maintenance and golf operations relative to those operating options subject to the ordinance.

Operating Expenses
Annual operating expenses by major expense classification are shown in Table VIII-2. The expenses are shown both with and without application of the Living Wage ordinance, and are consistent with current staffing levels. The expenses relate to a single entity bearing responsibility for all of the golf course functions and departments. Note that food and beverage expenses are not included since the analysis is based on the premise that only the net contribution from food and beverage operations are included under revenue.

There is a $225,000 annual allowance or reserve for capital improvements replacement, which consists of approximately $150,000 for golf course and support facilities and $75,000 for maintenance equipment.

The expenses, which total $1.84 million per year assuming no Living Wage and $2.06 million with the Living Wage, are used in analyzing several of the operating options, including the management agreement model.

The impact of the Living Wage is reflected in the golf course maintenance payroll and benefits line, golf operations (pro shop) payroll and benefits, and cart operation/outside services. In total, the differential in payroll and benefits between the scenario with the Living Wage versus the one without the Living Wage is approximately $220,000 per year, of which $150,000 is attributed to golf course maintenance.

SBGC Option Economics

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Management Agreement
The economics of the management agreement operating option, whereby the City retains an outside management company or director of golf to administer all golf course functions (including food and beverage), is presented in Table VIII-3. As noted above, the management agreement model may or may not be subject to the Living Wage ordinance, and thus this option is evaluated with and without application of the ordinance.

Annual gross revenue totals $2,714,500, which includes the “net contribution” from the food and beverage operation, estimated at 15 percent of food and beverage gross revenue. That is, the net contribution of the food and beverage operation is included rather than total gross revenue, which reflects deductions for cost of sales and operating expenses. Cost of sales related to merchandise are deducted, resulting in gross profit of $2,571,800.

Assuming no Living Wage, deducting operating expenses from gross profit yields annual net operating income of $733,800. Allowances for City contract administration of $80,000 and the Citywide Overhead allocation of $73,500 are deducted, resulting in adjusted annual net operating income of $580,300. The current annual debt service obligation (264,800) is not deducted.

With the Living Wage applied, net operating income is projected at $511,800 after deducting cost of sales and operating expenses. Then, deducting an allowance for City contract administration and the Citywide Overhead allocation yields adjusted net operating income of $269,300 under the management agreement model. The current annual debt service ($264,800) is not deducted.

The management agreement model, assuming no Living Wage, produces the highest net operating income among the various models. The model also provides for a relatively high level of City control as the policies and fee structure is entirely set by the City, with input from the retained management individual/firm. The principal weakness of this model is that the City continues to bear most, if not all, of the financial risk.

Facility Lease
Based on the limited recent experience with municipal facility leases, the characteristics and performance of SBGC, and typical lessee operating economics, the economics related to a facility lease for all functions, excluding food and beverage operations, are based on the following representative lease terms. The terms are based on the assumption that the Living Wage ordinance does not apply. If the ordinance is applicable, the rental lease terms (minimum rent and percentage rental rates) would be adjusted downward to reflect the mandated higher wages.

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Summary of Facility Lease Terms
Term (years) 15
Renewal Options none
Initial Lessee Capital Improvements $500,000
Annual Base Rent $300,000
Percentage Rent (% of departmental
gross revenue
Greens, Carts and Range 15.0%
Merchandise 5.0%
Instruction 5.0%
Food & Beverage 10.0%
Capital Improvement Replacement
Reserve

5.0% of golf revenues (greens, carts,
range)
Note that, given the current conditions of the golf course, a moderate level of initial lessee-funded capital improvements are required. To the extent that such improvements are not required, the minimum and percentage rent would be accordingly adjusted upward.

The rent paid by the lessee is equal to the greater of the minimum rent ($300,000 per year) or the percentage rents based on applying the rental rate factors to gross revenue. Typically, the minimum rent is set a about 75 percent of the expected percentage rent, and thus generally the minimum rent is exceeded by percentage rent.

Applying the percentage rent factors to the baseline annual gross revenue yields rent to the City, as shown in Table VIII-4 (note that rent due is the greater of “base rent” or “percentage rent” produced). Also included is the lessee’s required CIP replacement reserve contribution at 5.0% of “golf” gross revenue (greens fees, cart fees, and practice range revenue). A corresponding outflow for the City’s contribution to the capital improvement reserve fund and an allowance for City contract administration/overhead are deducted. Note that the capital improvement replacement reserve contribution is less than the scheduled allowance of $225,000 per year. The lower amount is attributed to the lessee providing maintenance equipment at their cost, and the initial lessee-funded capital improvements, estimated at $500,000, which reduces the ongoing capital needs.

As shown in the table, gross revenue (including the full food and beverage gross revenue) totals $3.85 million.

Applying the percentage rental factors produces $597,700 to the City, including $108,100 in the capital improvement replacement reserve contribution. Deducting the reserve for capital improvements (assumed to be SBGC Option Economics

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equal to the contribution), a $80,000 allowance for City contract administration, and a $73,500 allowance for the Citywide Overhead allocation results in net cash flow to the City of $336,100. The current annual debt service ($264,800) is not deducted.

The facility lease option produces somewhat less net cash flow to the City than under the management model, but is accompanied by less financial risk. The level of City control and influence on the golf course operations and maintenance is clearly less than under the management model, although the City still retains control of greens fees and can set standards for maintenance. It should be noted that over the past 10-15 years, many municipalities have moved away from facility leases and towards management agreements. At the same time, the weakness in the golf market has curbed interest from the private sector for lease agreements.

Hybrid Agreement
There are numerous forms of operating agreements which combine aspects of the management and facility lease options. The current operating structure at SBGC--a golf operations concessionaire with City maintenance and overall administration--represents one such hybrid. An alternative hybrid operating agreement would involve a golf operations concessionaire and contract golf course maintenance. There are a number of private contractors which provide golf course maintenance on a fee-for-service basis. The analysis of this hybrid is predicated on application of the Living Wage ordinance under contract golf course maintenance.

Table VIII-5 illustrates the economics of these hybrid options. The projected revenue accruing to the City is shown with both continued City maintenance and with private contract maintenance, and compared with the current (FY 2014) actual results.

As with the current situation at SBGC, City revenue consists of 100 percent of greens fees, plus concession revenues from the golf operations and food and beverage functions, along with some miscellaneous income.

In total, based on the assumed golf operations and food and beverage concession terms, total City revenue under this hybrid operating model is shown at $2,013,700. Note that the assumed concession terms are identical to the current terms recently negotiated between the City and the golf operations concessionaire.

However, since the average percentage rent terms for FY2013 were slightly higher than the current term (the agreement was renegotiated during FY2014), the City revenue for the Hybrid model is slightly less than realized in FY2014.

Under the Hybrid model with City maintenance, golf course maintenance, clubhouse related expenses, general and administrative expenses, an allowance for capital improvements/equipment, and contract administration/ Citywide overhead are deducted, yielding $155,700 per year in net operating income. The current debt service is not deducted.

Under the Hybrid model with contract maintenance, the golf course maintenance expenses relate to private contract maintenance, based on application of the Living Wage ordinance. In addition, a 10 percent contractor fee is added to the projected cost, yielding a total maintenance budget of $1,140,700. The golf course maintenance expenses under contract maintenance are approximately $230,000 per year below SBGC Option Economics

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current City maintenance expenses. Deducting operating expenses, CIP reserves, and an allowance for contract administration/Citywide overhead results in net income of $353,100. Again, the current debt service is not deducted.

While there are some strengths of the hybrid model such as specialization in the various operating functions (maintenance, golf operations, food and beverage) and the City retains substantial control over operating policies, fees and maintenance quality, the hybrid model has a number of key weaknesses. Most notably is the absence of benefits related to a single coordinated operating entity where efficiencies of operation can be achieved and a more seamless and consistent product can be offered.

Summary of Options Economics
A comparative summary of the various operating models is presented in Table VIII-6. In comparing the economics of the various options, it is important to recognize that revenues are uniformly the same for each of the options--that is, all of the operating alternatives are assumed to be equally efficient, which may not be the case. Moreover, there clearly are varying degrees of risk, as well as upside participation, among the various alternatives.

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Table VIII-1: SBGC Baseline Annual Gross Revenue
(thousands of dollars)
Department Baseline Projection
(2014 dollars)
Annual Total Rounds 62,500
Gross Revenue
Greens Fees/Cards $1,664.7
Cart Rentals 422.4
Practice Range 95.5
Merchandise 190.3
Food & Beverage 1,377.9
Other Pro Shop1/ 85.2
Other Revenue 49.7
Total $3,885.6
1/ Includes pro shop rentals, lessons income, and other miscellaneous sources.

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Table VIII-2: Santa Barbara Golf Club
Projected Annual Operating Expenses
Management Agreement Model*
(thousands of constant 2014 dollars)
No Living
Wage
With Living
Wage
Course Maintenance
Payroll and Benefits $480 $637
Services and Supplies 175 175
Utilities 225 225
Maintenance Equipment ---1/ ---1/
Subtotal $880 $1,037
Golf Operations
Payroll and Benefits $145 $180
Cart Leasing 58 58
Cart Operation/Outside Services 65 95
Range 20 20
Services and Supplies 25 25
Subtotal $313 $378
Food & Beverage ---
Undistributed Clubhouse $30 $30
General & Administrative
Payroll and Benefits $120 $120
Insurance 40 40
Property Taxes --- ---
Marketing/Promotion 25 25
Credit Card 30 30
Services and Supplies 50 50
Management Fee 125 125
Subtotal $390 $390
Total $1,613 $1,835
Capital Improvement Replacement Reserve $225 $225
Total $1,838 $2,060
* Operating expenses relate to “management agreement” model, and thus assume non-City employment costs. The maintenance expenses also are employed in “hybrid model with living wage.”
1/ An annual allowance of $75,000 is included in CIP Reserve.

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Table VIII-3: SBGC Projected Annual Net Operating Income--Management Agreement (thousands of constant 2014 dollars)
Department No Living Wage With Living Wage
Gross Revenue
Greens Fees/Cards $1,664.7 $1,664.7
Cart Rentals 422.4 422.4
Practice Range 95.5 95.5
Merchandise 190.3 190.3
Food & Beverage--Net Contribution (@15%) 206.7 206.7
Other Pro Shop 85.2 85.2
Other Revenue 49.7 49.7
Total Gross Revenue $2,714.5 $2,714.5
Less: Cost of Sales (merchandise) 142.7 142.7
Gross Profit $2,571.8 $2,571.8
Operating Expenses
Course Maintenance $880.0 $1,037.0
Golf Operations 313.0 378.0
Food & Beverage --- ---
Clubhouse Undistributed 30.0 30.0
General & Administrative 390.0 390.0
Capital Improvement Replacement Reserve 225.0 225.0
Total Expenses $1,838.0 $2,060.0
Net Operating Income (EBITDA)1/ $733.8 $511.8
Less: City Contract Administration 80.0 80.0
Citywide Overhead Allocation 73.5 73.5
Adjusted Net Operating Income (EBITDA)1/ $580.3 $269.3
1/ Earnings before interest, taxes, debt and amortization, and before Citywide contract administration expenses.

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Table VIII-4: SBGC Projected Annual Net Lease Income
Facility Lease
(thousands of constant 2014 dollars)
Department Annual Amount
Gross Revenue
Greens Fees/Cards $1,664.7
Cart Rentals 422.4
Practice Range 95.5
Subtotal-Golf $2,182.6
Merchandise 190.3
Food & Beverage--Net Contribution 1,377.9
Instruction/Other 97.5
Total Gross Revenue $3,848.3
Percentage Rent to City
Golf (greens fees, carts, range) @15% $327.4
Merchandise @5% 9.5
Food & Beverage Rent (@10%) 137.8
Instruction/Other Pro Shop(@5%) 4.9
Other Revenue 10.0
CIP Reserve @5% of golf 108.1
Total Rent/CIP Contribution $597.7
Less: CIP Expenditures/Reserve 108.1
City Contract Administration 80.0
Citywide Overhead Allocation 73.5
Net Income to City $336.1
1/ Earnings before interest, taxes, depreciation and amortization, and before Citywide contract administration expenses.

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Table VIII-5: SBGC Projected Annual Net Operating Income--Hybrid Agreement With Golf Concessionaire (thousands of constant 2014 dollars)
Department Current Hybrid
Actual FY2014
City Maintenance* Contract
Maintenance2/
Gross Revenue
Greens Fees/Cards $1,664.7 $1,664.7 $1,664.7
Cart Rentals 422.4 422.4 422.4
Practice Range 95.5 95.5 95.5
Merchandise 190.3 190.3 190.3
Food & Beverage 1,377.9 1,377.9 1,377.9
Other Pro Shop 85.2 85.2 85.2
Other Revenue 12.3 12.3 12.3
Interest/Creeks Income 37.4 37.4 37.4
Total Gross Revenue $3,885.6 $3,885.6 $3,885.6
City Revenue/Rent
Greens Fees @100% $1,664.7 $1,664.7 $1,664.7
Cart Rentals @ 30% 138.4 126.7 126.7
Practice Range @25% 28.7 23.8 23.8
Merchandise @4% 9.2 7.6 7.6
Food & Beverage @10% 139.1 137.8 137.8
Lessons/Other Pro Shop (@4%) 13.3 3.4 3.4
Other Revenue/Interest/Creeks 49.7 49.7 49.7
Total Revenue/Rent $2,043.1 $2,013.7 $2,013.7
Less: Golf Course Maintenance 1,369.1 1,370.0 1,140.73/ General & Admin/Clubhouse Expenses 71.4 71.4 71.4
City Contract Administration 118.1 118.1 150.0
CIP Reserve 214.5 225.0 225.0
Citywide Overhead Allocation 73.5 73.5 73.5
Subtotal $1,846.6 $1,858.0 $1,660.6
Net Operating Income (EBITDA)1/ $196.5 $155.7 $353.1
* * Represents current City Hybrid model with current terms. 1/ Earnings before interest, taxes, debt and amortization; 2/ Assumes Living Wage ordinance; 3/ Represents maintenance expense with Living Wage, plus 10 percent contractor fee. * * Represents current City Hybrid model with current terms. 1/ Earnings before interest, taxes, debt and amortization; 2/ Assumes Living Wage ordinance; 3/ Represents maintenance expense with Living Wage, plus 10 percent contractor fee. * * Represents current City Hybrid model with current terms. 1/ Earnings before interest, taxes, debt and amortization; 2/ Assumes Living Wage ordinance; 3/ Represents maintenance expense with Living Wage, plus 10 percent contractor fee. * * Represents current City Hybrid model with current terms. 1/ Earnings before interest, taxes, debt and amortization; 2/ Assumes Living Wage ordinance; 3/ Represents maintenance expense with Living Wage, plus 10 percent contractor fee.

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Table VIII-6: Comparative Baseline Operating Options Economics (thousands of constant 2014 dollars)
City Hybrid
Actual
FY2014
Hybrid Management Agreement Facility
Lease1/
Department
City Hybrid
Actual
FY2014 City
Maint*
Contract
Maint with
Living Wage
No Living
Wage
With Living
Wage
Facility
Lease1/
City Revenue/Rent
Greens Fees Revenue $1,664.7 $1664.7 $1664.7 $1,664.7 $1,664.7 --- Golf Operations Revenue --- --- --- 793.4 793.4 ---
Facility/Golf Ops Concession Rent 189.6 161.5 161.5 --- --- $449.9 Food & Beverage Rent 139.1 137.8 137.8 206.7 206.7 137.8 Other Revenue 49.7 49.7 49.7 49.7 49.7 10.0
Total $2,043.1 $2,013.7 $2,013.7 $2,714.5 $2,714.5 $597.7 Less: Cost of Sales --- --- --- 142.7 142.7 ---
Gross Profit $2,043.1 $2,013.7 $2,013.7 $2,571.8 $2,571.8 $597.7 Operating Expenses
Course Maintenance $1,369.1 $1,370.0 $1,140.72/ $880.0 $1,037.0 --- Golf Operations --- --- --- 313.0 378.0 ---
G & A/Clubhouse 71.4 71.4 71.4 420.0 420.0 ---
City Contract Administration 118.1 118.1 150.0 80.0 80.0 80.0 Citywide Overhead Allocation 73.5 73.5 73.5 73.5 73.5 73.5 Total $1,632.1 $1,633.0 $1,435.6 $1,766.5 $1,988.5 $153.5 Net Operating Income (EBITDA)3/ $411.0 $380.7 $578.1 $805.3 $583.3 $445.2 Less: CIP Replacement Reserve 214.5 225.0 225.0 225.0 225.0 108.1 Debt Service 264.8 264.8 264.8 264.8 264.8 264.8
Net Cash Flow ($68.3) ($109.1) $88.3 $315.5 $93.5 $71.3 Variance From Current Hybrid
Model, With City Maintenance
$40.8 --- $197.4 $424.6 $202.6 $180.4
* Represents current City Hybrid model with current terms. 1/ Assumes no Living Wage ordinance; 2/ Assumes Living Wage ordinance; 3/ Earnings before interest, taxes, depreciation, debt service and amortization. * Represents current City Hybrid model with current terms. 1/ Assumes no Living Wage ordinance; 2/ Assumes Living Wage ordinance; 3/ Earnings before interest, taxes, depreciation, debt service and amortization. * Represents current City Hybrid model with current terms. 1/ Assumes no Living Wage ordinance; 2/ Assumes Living Wage ordinance; 3/ Earnings before interest, taxes, depreciation, debt service and amortization. * Represents current City Hybrid model with current terms. 1/ Assumes no Living Wage ordinance; 2/ Assumes Living Wage ordinance; 3/ Earnings before interest, taxes, depreciation, debt service and amortization. * Represents current City Hybrid model with current terms. 1/ Assumes no Living Wage ordinance; 2/ Assumes Living Wage ordinance; 3/ Earnings before interest, taxes, depreciation, debt service and amortization. * Represents current City Hybrid model with current terms. 1/ Assumes no Living Wage ordinance; 2/ Assumes Living Wage ordinance; 3/ Earnings before interest, taxes, depreciation, debt service and amortization. * Represents current City Hybrid model with current terms. 1/ Assumes no Living Wage ordinance; 2/ Assumes Living Wage ordinance; 3/ Earnings before interest, taxes, depreciation, debt service and amortization.

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Pro Forma Advisors Qualifications and Experience
Pro Forma Advisors is a diversified consulting firm founded in 2008 which provides a wide range of research services in economics, finance, and market analysis. The four founding principals were senior partners at Economics Research Associates (ERA), one of the established and most experienced commercial recreation economic consulting firms in the country since its founding in 1958. ERA was acquired by AECOM in 2008 and incorporated in AECOM’s planning and economics division. Pro Forma Advisors has carried on the commercial recreation practice, providing the same services and dedication to quality and client service ERA provided for over 50 years. The company website is www.proformaadvisors.com.

Pro Forma Advisors’ principals are the most experienced golf economics consults servicing the western United States. Pro Forma’s clients include municipalities, other public agencies, public / private joint ventures, private developers, financial institutions, and golf course operators. Pro Forma’s assignments in the golf industry include market evaluations, financial analysis, management / operational audits, clubhouse evaluations, appraisals, and evaluations of golf course operating options.

Importantly, Pro Forma Advisors is a fully independent consulting firm with no other business lines such as brokerage, management, ownership, or association/affiliation with industry groups which would bias or prejudice the firm in any way. Advisory services offered include:

Site Evaluation and Selection; Analysis of Market Feasibility; Financial Feasibility; Analysis of Financial Options; Operations Analysis; Analysis of Lease Arrangements; Developer/Operation Negotiations; Valuation/Appraisal.

The principals at Pro Forma Advisors have conducted well over 100 golf-related assignments in the western United States over the past 10 years. Pro Forma Advisors’ golf advisory practice is heavily oriented to representing public entities, with the principals providing services to over 70 municipalities throughout the western U.S. region.

The principals at Pro Forma Advisors have conducted numerous relevant golf course operations assessments and business plan assignments. Mr. Krekorian, when employed at Economics Research Associates, was deeply involved with the planning and assessment of San Francisco’s Harding Park redevelopment which will serve as the venue for the 2020 PGA Championship. As well, Mr. Krekorian was involved with some of the original planning and financial analysis for the Bandon Dunes Resort in southwest Oregon. Operational reviews for West Coast public agencies include the following:

West Coast Operational Review Assignments

1. City of Palo Alto (Palo Alto Municipal--Operations Review)

2. City of Oxnard (RiverRidge Golf Club--Operations Review)

3. County of Los Angeles (Marshall Canyon, Victoria Golf Course--Operations Review)

4. City of Los Angeles (Rancho Park, Griffith Park, Encino-Balboa--Master Plan Economics)

5. City of Mountain View (Shoreline Golf Links--Operations Review)

6. East Bay Regional Park District (Willow Park Golf Course--Operations Review)

7. City of Portland (Heron Lakes--Operations Review)
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8. City of Modesto (Modesto Muni, Dryden Park, Creekside--Operations Review)

9. City of Santa Cruz (Delaveaga--Operations Review)

10. City of Walnut Creek (Boundary Oak Golf Club--Operations Review)

11. City of Anaheim (Dad Miller, Anaheim Hills--Operations Review)

12. City of Reno/County of Washoe (Rosewood Lakes, Washoe, Sierra Sage, Wildcreek, Northgate-- Operations Review)

13. City of Ontario (Whispering Lakes--Operations Review)

14. City of Indian Wells (Golf Resort at Indian Wells--Operations Review)

15. City of Oceanside (Oceanside Municipal--Operations Review)

16. City of Chula Vista (Chula Vista Municipal--Operations Review)

17. City of Santa Barbara (Santa Barbara Muni--Operations Review)

18. City of Ventura (Olivas Links and Buenaventura--Operations Review)

19. City of Costa Mesa (Costa Mesa Country Club--Operations Review)

20. City of Manteca (Manteca Golf Course--Operations Review)

21. City of Seattle (West Seattle, Jackson Park, Jefferson Park--Operations Review)

22. City of Lynnwood (Lynnwood Golf Course--Operations Review)

23. City of Seattle (West Seattle, Jackson Park, Jefferson Park--Master Plan Economic Analysis)

24. City of Kent (Riverbend Golf Course--Operations Review)

25. County of Los Angeles (Marshall Canyon, Victoria Golf Courses--Strategic Master Plan) PGCC 2-15-23

Gene P. Krekorian, Principal, Pro Forma Advisors LLC
Mr. Krekorian has been involved with all of the assignments noted in Pro Forma Advisors’ “experience and qualifications” material presented above. Highlights of his qualifications are outlined below:
✓ Principal Pro Forma Advisors LLC
✓ Over 35 years golf course consulting experience
✓ Major role in over 100 golf assignments over the past ten years ✓ Represented over 70 West Coast public agencies regarding golf issues ✓ Authored a series of articles on the golf industry, a principal contributor to ULI’s “Golf Course Development and Real Estate, “ and participated in numerous golf industry conferences ✓ Extensive knowledge and work experience on the Pacific Coast ✓ Certified General Real Estate Appraiser, specializing in golf course appraisal A professional resume is presented below.

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Gene P. Krekorian, Principal
Mr. Krekorian is a skilled golf course consultant with more than 35 years experience in the industry. He has been involved with various facets of the golf course industry including concept development, evaluation of market support for municipal, daily fee, and private country clubs, operations audits, analysis of public golf course operating options, analysis of financial performance, golf course valuation analysis, assessment of equity club conversion potential, and analysis of various other golf-related issues. The following are representative assignments conducted by Mr. Krekorian during tenure at multiple firms during his career.

Feasibility
‣ Harding Park Golf Course (redevelopment), San Francisco, California (City of San Francisco ‣ Sharp Park Golf Course (redevelopment), Pacifica, California (San Francisco Public Golf Alliance) ‣ Black Golf Golf Club, Yorba Linda, California (City of Yorba Linda) ‣ SilverRock Resort Golf Course, La Quinta, California (City of La Quinta) ‣ Tustin Ranch Golf Club, Tustin, California (The Irvine Company) ‣ Tijeras Creek Golf Club, Rancho Santa Margarita, California (Rancho Santa Margarita Company) ‣ The Raven at Sabino Springs, Tucson, Arizona (Perini Land and Development) ‣ Greyhawk Golf Club, Scottsdale, Arizona (Core North Associates) ‣ Desert Willow Golf Club, Palm Desert, California (City of Palm Desert) ‣ George Wright Golf Course (redevelopment), Boston, Massachusetts (Friends of George Wright/ Boston Parks Department)
Valuation/Appraisal
‣ Pelican Hill, Newport Coast, California (The Irvine Company) ‣ The Presidio Golf Club, San Francisco (National Park Service) ‣ Half Moon Bay Golf Links, Half Moon Bay, California (Ocean Colony Partners) ‣ Robert Trent Jones Golf Club, Lake Manassas, Virginia (Robert Trent Jones Golf Club) ‣ Shipyard/Port Royal Golf Club, Hilton Head, South Carolina (National Golf Properties) ‣ Orinda Country Club, Orinda, California (Aegon Insurance) ‣ Coyote Creek Golf Club, San Jose, California (Commonwealth Business Bank) ‣ Tour 18 Golf Club, Dallas, Texas (Wilshire State Bank) ‣ Oak Quarry Golf Club, Riverside, California (Wilshire State Bank) ‣ Lake Jovita Country Club, Lake Jovita, Florida (Wilshire State Bank) ‣ Horseshoe Bay, Texas (Horseshoe Bay Development)
Operations Audit/Reviews
‣ City of Los Angeles Golf Division (13 courses), Los Angeles, California (City of Los Angeles) ‣ Palo Alto Muni Golf Course, Palo Alto, California (City of Palo Alto) ‣ DeLaVeaga Golf Course, Santa Cruz, California (City of Santa Cruz) ‣ Wildcreek, Northgate, Rosewood Lakes, Sierra Sage, Washow, Reno Nevada (City of Reno, Washoe County, RSCVA)
‣ Jefferson Park, Jackson Park, West Seattle, Seattle, Washington (City of Seattle) ‣ Anaheim Hills Golf Course, Anaheim, California (City of Anaheim) ‣ Sunriver Resort, Sunriver, Oregon (Connecticut Mutual) ‣ Los Lagos Golf Course, Costa Mesa, California (City of Costa Mesa) ‣ Semiahmoo Resort, Blaine, Washington (Lehman Bros)
‣ Diablo Creek, Concord, California (City of Concord)
‣ Olivas Park, Ventura, California (City of Ventura)
Master Development Golf Strategies
‣ Irvine Ranch Long-term Golf Strategy, Irvine, California (The Irvine Company) ‣ The Woodlands Golf Development Strategy, Houston, Texas (The Woodlands Company) ‣ La Paloma Resort, Tucson, Arizona (La Paloma Development) PGCC 2-15-23

‣ Rancho Park/Encino-Balboa Golf Courses, Los Angeles, California (City of Los Angeles) ‣ Ventana Canyon Resort, Tucson, Arizona (Estes Company) Public Agency Representation/Golf Operating Options
‣ Santa Barbara Golf Club, Santa Barbara, California (City of Santa Barbara) ‣ Shoreline Golf Links, Mountain View, California (City of Mountain View) ‣ Willow Park Golf Course, Castro Valley (East Bay Regional Park District) ‣ Mile Square Golf Course, Fountain Valley, California (Mile Square Associates) ‣ Oceanside Municipal Golf Course, Oceanside, California (City of Oceanside) ‣ Crystal Springs Golf Club, Burlingame, California (San Francisco PUC) ‣ Metropolitan Golf Links, Oakland, California (CourseCo/City of Oakland) ‣ Heron Lakes Golf Club, Portland, Oregon (City of Portland) ‣ Carlton Oaks Golf Club, Santee, California (City of San Diego) ‣ Trump National Golf Club, Rancho Palos Verdes, California (Palos Verdes Peninsula USD) As demonstrated by the above sampling of completed assignments, Mr. Krekorian is a skilled golf course analyst. Some of the major clients he has served as consultant include The Irvine Company, The Woodlands Corporation, Connecticut Mutual, Los Angeles Athletic Club, Sunrise Corporation, the Bixby Ranch Company, Pacific Mutual, Lowe Enterprises, National Golf Properties, Lennar Homes, Starwood and other private developers/operators. Public clients include the City of Los Angeles, County of Los Angeles, City of Phoenix, San Francisco, Seattle, Anaheim, Santa Barbara, Poway, Rancho Palos Verdes, Carlsbad, Santa Ana, County of Los Angeles, Escondido, Costa Mesa, Ventura, Oxnard, Concord, and the National Park Service.

Prior to joining Pro Forma Advisors in 2010, Mr. Krekorian was a Partner with Economics Research Associates (ERA) for over 30 years until ERA was acquired by AECOM. Mr. Krekorian received a B.A. degree in Mathematics and Economics from Pomona College and a M.S. degree in Business Economics from the University of California at Los Angeles. Mr. Krekorian is a Certified General Real Estate Appraiser as licensed by the State of California.

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Agenda No. 13 A

CITY OF PACIFIC GROVE
300 Forest Avenue, Pacific Grove, California 93950
TO: Honorable Mayor and Members of the City Council
FROM: Katie Clark, Recreation Manager
MEETING DATE: February 15, 2023
SUBJECT: 2023-2024 Special Events Calendar
CEQA: Does not constitute a “Project” per California Environmental Quality Act Guidelines Section 15378

RECOMMENDATION

1. Approve the Fiscal Year 2023-2024 Special Events Calendar

2. Approve 7 proposed events as Special Events to be billed at full cost recovery rates Approve 20 proposed events as City Sponsored Events and waive the fees for City staff support and equipment/facility usage

3. Allow alcohol to be served in the confines of a tent for the 4 music series events at Jewell Park per Municipal Code Section 11.04.020, Consumption in Public Spaces

4. DISCUSSION
At the beginning of each calendar year, the Recreation Board reviews a list of proposed Special Events scheduled to occur during the upcoming fiscal year (July – June) and then makes a recommendation for City Council to approve these events as classified pursuant to City Council Policy No. 900-1. The Recreation Board reviewed the proposed 2023-2024 Special Events Calendar, cost estimates and staff recommendations at the Recreation Board meeting held on January 26, 2023. The Recreation Board recommends that City Council approve the 2023-2024 Special Events Calendar and event classifications except for Pacific Grove Summer Lights. They recommend that a revised presentation for the Pacific Grove Summer Lights event be brought before the Recreation Board for review before being presented to City Council for final approval. After reviewing the Pacific Grove Summer Lights presentation, scheduled for the February 23, 2023 Recreation Board meeting, the Board will provide a recommendation to City Council with regards to the event. City Staff will bring forth the Pacific Grove Summer Lights event at a future Council meeting for approval and to include as an addition to the 2023-2024 Special Event Calendar.

The Fiscal Year 2023-2024 Special Events Calendar has 28 proposed events, which is an increase of 1 event from the prior year. The calendar and estimated costs associated with each event can be found within Attachment 1.

CITY COUNCIL POLICY 900-1: SPECIAL EVENTS
City Council Policy 900-1 Special Events provides clear guidance for all Special Events held within the City of Pacific Grove. This policy outlines the process for application submission, application review, event classification, billing, late submissions and approval by City Council. Each year the application is PGCC 2-15-23

event classification, billing, late submissions and approval by City Council. Each year the application is posted during the summer. Completed applications are due by November 30th, reviewed by City Staff, presented to the Recreation Board in January, and then taken to City Council for final approval in February. This policy helps to ensure that a healthy and financially feasible balance between the number and scope of these events in relation to the ability of our neighborhoods, parks and facilities to accommodate such events remains in place. As such, Special Events are to be classified as either:

Special Events: These are Special Events that require exclusive use of City property and require support from Police, Fire and / or Public Works. Special Events will be deemed full cost recovery.

1. City Sponsored Events: These events include traditional events that are primarily hosted by the Chamber of Commerce, the School District, or the City and shall receive full City Support. These events will be noted annually on the Special Events Calendar for approval by the City Council.

2. PROPOSED CLASSIFICATIONS
Special Events (Full Cost Recovery): Events are billed at the full cost recovery rates for staff support and facility/equipment use. Most of these events consist of a variety of fundraisers, races, walks and car shows.

Special Events (Full Cost Recovery) include Hiroshima-Nagasaki Remembrance Day, Celebration of our Lady of Fatima, Classic Kick-Off Car Show, Legends of the Autobahn, AIM for Awareness Walk & Rally, BSIM Monterey Bay Half Marathon & 5K/By the Bay 3K, Rudolph Run 1K & 5K Walk/Run.

City Sponsored: All costs associated with these events including staffing and equipment/facility use are proposed to be waived, with an increased emphasis of utilizing volunteers whenever possible.

City Sponsored Events include 4th of July Celebration, Music in the Parks Series, Pet Parade, Pacific Grove Summer Lights Dance, National Night Out, Little Car Show, P.G. Concours Auto Rally, Walk with Pride, Butterfly Parade, Butterfly Days, Veterans Day Ceremony, Holiday Tree Lighting, Holiday Parade of Lights, Stillwell’s Holiday in the Park, Quilt Show, Good Old Days, and the Walk of Remembrance.

Per Municipal Code Section 11.04.020, Consumption in public places, the City Council needs to approve the erection of a tent where beer and wine will be served in Jewell Park as part of the Music Series events. Per this section of the City's code, the City Council can grant permission for the consumption of alcohol as long as it is served in an enclosed building or a tent.

Pacific Grove Summer Lights: As specified previously, the Recreation Board requested to have City staff return to their February meeting with a revised report and presentation for the Pacific Grove Summer Lights event.

The Little Car Show: City Staff is recommending that the Little Car Show be a City Sponsored event as it has been in previous years. The Little Car Show is a unique event that draws hundreds to our downtown, but event organizers have expressed that they will not be able to continue to host the event unless it is once again City sponsored. When the event was City sponsored, the organizers donated all proceeds to the Youth Center and the Library, a pledge that they stated would continue if the event is City Sponsored. If the event is classified as full cost recovery, then they may have to withdraw their application and not proceed with the event in Pacific Grove. City staff feels that this unique event brings significant economic vitality to our downtown.

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OPTIONS

1. Take no action

2. Provide alternate direction
FINANCIAL IMPACT:

Each application has been reviewed by City Staff including Public Works, Police, Fire and Recreation for safety, feasibility and all anticipated costs to be incurred by the City or sponsoring organization.

City Staff is recommending that 7 events be classified as Special Events to be billed at full cost recovery rates. The fees for City personnel, equipment usage, facility rental, and all other permitting costs will be the responsibility of the organization hosting the event. City Staff is recommending 20 special events to be classified as City Sponsored Events. The fees for City personnel, including Public Works, Police, Fire and Recreation would be subsidized by the City of Pacific Grove. The fees for equipment usage, facility rentals, and any permitting charges would be waived.

Staffing costs for Public Works, Police, Fire and Recreation to provide city services such as setup and breakdown of equipment, crowd control and safety management, traffic control and other types of support have become very costly. The estimated staffing costs for all 28 events, including the Pacific Grove Summer Lights event, is $169,257.79. Fees for staffing, equipment/facility usage and permit processing from the full cost recovery events will provide an estimated $58,715.48 in revenue. The City of Pacific Grove will need to subsidize an estimated $110,542.31 in order to safely and successfully execute the 28 events listed on the proposed FY 2023-2024 Special Events Calendar. The estimated staffing costs for all 27 events and excluding the Pacific Grove Summer Lights event is $131,810.05.

Fees for staffing, equipment/facility usage and permit processing from the full cost recovery events will provide an estimated $58,715.48 in revenue.The City of Pacific Grove will need to subsidize an estimated $73,094.57 in order to safely and successfully execute the 27 events listed on the FY 2023-2024 Calendar, excluding the Pacific Grove Summer Lights event. City staff will continue working with event organizers to reduce the City’s associated costs of these events whenever possible by utilizing volunteers, community groups and students seeking community service hours.

The proposed Fiscal Year 2023-2024 Special Events Calendar provides a lineup of events that offer many benefits to our local community. These events allow our residents and visitors a chance to enjoy a variety of activities, support local businesses and non-profit groups, and engage with each other. The total economic impact and benefits in the form of increased Transient Occupancy and Sales taxes are not known, but special events traditionally have made a positive impact to the City’s economy. Many of these events attract participants and visitors from outside the peninsula. Many of these same people return to participate in other Pacific Grove events.

GOAL ALIGNMENT: Not Applicable.

Attachments
2023-2024 Special Events Calendar
2023-2024 Special Events Cost Estimate
City Council Policy 900-1
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# Event Organization Day Date Time Location
1 4th of July Celebration Chamber of Commerce Tuesday July 4, 2023 11:00 AM Jewell Park 2 Music in the Park #1 Chamber of Commerce Thursday July 27, 2023 5:30 PM Jewell Park 3 Pet Parade Youth Ambassadors Friday July 28, 2023 2:00 PM Downtown (Lighthouse Ave) 4 Pacific Grove Summer Lights Dance Youth Ambassadors Friday July 28, 2023 6:00 PM Chautauqua Hall 5 Pacific Grove Summer Lights Youth Ambassadors Saturday July 29, 2023 11:00 AM Lover's Point Park & Pier 6 National Night Out City of Pacific Grove Tuesday August 1, 2023 5:00 PM Caledonia Park 7 Hiroshima-Nagasaki Remembrance Day Women's International League Saturday August 5, 2023 7:00 PM Lover's Point Beach & Pier 8 Celebration of Our Lady of Fatima Lady of Fatima Society Sunday August 13, 2023 Varies Downtown (Lighthouse Ave) 9 Classic Motorsports Kick-Off Classic Motorsports Tuesday August 15, 2023 2:00 PM Downtown (Lighthouse Ave) 10 Little Car Show Marina Motorsports Wednesday August 16, 2023 10:00 AM Downtown (Lighthouse Ave) 11 Legends of the Autobahn BMW Car Club Thursday August 17, 2023 9:00 AM Pacific Grove Golf Links 12 PG Concours Auto Rally PG Rotary Club Friday August 18, 2022 12:00 PM Downtown| Chautauqua Hall 13 Music in the Park #2 Chamber of Commerce Friday August 25, 2023 5:30 PM Jewell Park 14 AIM for Awareness Walk & Rally AIM Youth Mental Health Sunday September 10, 2023 1:00 PM Lovers Point Park 15 Walk With Pride PG Pride Saturday September 16, 2023 9:00 AM Recreation Trail 16 Music in the Park #3 Chamber of Commerce Friday September 29, 2023 5:30 PM Jewell Park 17 Butterfly Parade PG Unified School District Saturday October 7, 2023 10:30 AM Downtown (Lighthouse Ave) 18 Butterfly Days PG Heritage Society Sat / Sun October 7-8, 2023 Varies Downtown |Chautauqua Hall 19 Music in the Park #4 Chamber of Commerce Friday October 27, 2023 5:30 PM Jewell Park 20 Veterans Day Ceremony City of Pacific Grove Friday November 11, 2023 TBD TBD 21 BSIM 3K/5K & Mty Bay Half Marathon Big Sur International Sat / Sun November 11-12, 2023 Varies Lovers Point | Ocean View 22 Holiday Tree Lighting Ceremony City of Pacific Grove Monday November 27, 2023 6:00 PM Jewell Park 23 Holiday Parade of Lights Chamber of Commerce Friday December 1, 2023 6:00 PM Downtown (Lighthouse Ave) 24 Stillwell’s Holiday in the Park Chamber of Commerce Saturday December 2, 2023 11:00 AM Caledonia Park | Chautauqua Hall 25 Rudolph Run 1K & 5K Walk/Run Arthritis Research Coalition Saturday December 9, 2023 7:30 AM Lovers Point | Ocean View 26 Quilt Show Monterey Peninsula Quilters Fri -Sun May 4-6, 2024 Varies Chautauqua Hall 27 Good Old Days Chamber of Commerce Fri-Sun May 4-6, 2024 Varies Downtown | Jewell Park 28 Walk of Remembrance Museum of Natural History Saturday May 11, 2024 1:00 PM Central Ave | Rec Trail City Sponsored - 21 Full Cost Recovery (F. C. R.) - 7 Indicates event that requires additional information PGCC 2-15-23

Total Staff Costs Other Fees Usage Fees Unsubsidized
All other fees Facility/Parks Without City
Hrs Costs Hrs Costs Hrs Costs Hrs Costs Sponsorship
1 4th of July Celebration 8 815.96 $ $ 815.96 $ 541.00 $ 1,432.00 $ 2,788.96 2 Music in the Park #1 10 $ 1,019.50 6 1,463.88 $ $ 2,483.38 $ 245.00 $ 2,148.00 $ 4,876.38 3 Pet Parade 20 $ 1,826.00 $ 1,826.00 $ 219.00 $ 156.00 $ 2,201.00 4 Pacific Grove Summer Lights Dance 6 547.80 $ $ 547.80 $ 350.00 $ 2,568.00 $ 3,465.80 5 Pacific Grove Summer Lights 175 $ 15,977.50 88 $ 21,470.24 $ 37,447.74 $ 1,422.00 $ 6,208.00 $ 45,077.74 6 National Night Out 4 365.20 $ $ 365.20 -$ -$ $ 365.20 7 Hiroshima-Nagasaki Remembrance Day $ 304.00 - $ -$ $ 304.00 8 Celebration of Our Lady of Fatima 4 365.20 $ $ 365.20 $ 395.00 -$ $ 760.20 9 Classic Motorsports Kick-Off 18 $ 1,771.74 10 $ 2,439.80 $ 4,211.54 $ 672.00 -$ 4,883.54 $ 10 Little Car Show 18 $ 1,771.74 22 $ 3,903.68 $ 5,675.42 $ 672.00 -$ 6,347.42 $ 11 Legends of the Autobahn 8 730.40 $ 28 $ 6,831.44 $ 7,561.84 $ 1,344.00 -$ 8,905.84 $ 12 PG Concours Auto Rally 18 $ 1,771.74 28 $ 6,831.44 $ 8,603.18 $ 672.00 -$ 9,275.18 $ 13 Music in the Park #2 10 $ 1,019.50 6 1,463.88 $ $ 2,483.38 $ 245.00 $ 2,148.00 $ 4,876.38 14 AIM for Awareness Walk & Rally $ 304.00 - $ $ 1,638.00 $ 1,942.00 15 Walk With Pride $ 304.00 - $ $ 1,820.00 $ 2,124.00
16 Music in the Park #3 10 $ 1,019.50 6 1,463.88 $ $ 2,483.38 $ 245.00 $ 2,148.00 $ 4,876.38 17 Butterfly Parade 50 $ 4,565.00 21 $ 5,123.58 $ 9,688.58 $ 1,059.00 -$ 10,747.58 $ 18 Butterfly Days 11 $ 1,004.30 $ 1,004.30 $ 1,177.00 $ 9,454.00 $ 11,635.30 19 Music in the Park #4 10 $ 1,019.50 6 1,463.88 $ $ 2,483.38 $ 245.00 $ 2,148.00 $ 4,876.38 20 Veterans Day Ceremony 8 730.40 $ $ 730.40 $ 730.40
21 BSIM 3K/5K & Mty Bay Half Marathon 30 $ 2,952.90 80 $ 19,518.40 $ 22,471.30 $ 4,540.00 $ 4,368.00 $ 31,379.30 22 Holiday Tree Lighting Ceremony 6 611.97 $ $ 611.97 $ 611.97 23 Holiday Parade of Lights 60 $ 5,691.90 10 $ 2,439.80 $ 8,131.70 $ 1,059.00 -$ 9,190.70 $ 24 Stillwell’s Holiday in the Park 6 611.97 $ $ 611.97 $ 654.00 $ 468.00 $ 1,733.97 25 Rudolph Run 1K & 5K Walk/Run 30 $ 2,952.90 15 $ 3,659.70 $ 6,612.60 $ 1,016.00 $ 2,912.00 $ 10,540.60 26 Quilt Show 8 730.40 $ $ 730.40 $ 350.00 $ 7,704.00 $ 8,784.40 27 Good Old Days 100 $ 23,894.50 64 $ 15,614.72 $ 39,509.22 $ 3,590.00 $ 4,833.00 $ 47,932.22 28 Walk of Remembrance 3 338.07 $ 6 1,463.88 $ $ 1,801.95 $ 428.00 $ 728.00 $ 2,957.95 Totals $ 169,257.79 $ 22,052.00 $ 52,881.00
City Sponsored = 21 Events
Full Cost Recovery (F. C. R.) = 7 Events Total Staffing Costs* $ (169,257.79) Full Cost Recovery Staffing* 41,222.48 $
*All estimates are based on projected hours & resources submitted in application by event organizers. Full Cost Recovery Fees $ 17,493.00 *Employee costs are based on Fully Burdened Rates for employees. Total Net Loss** $ (110,542.31) **Model reflects amount to be subsidized by the City with approval of proposed City Sponsored Events Event Name
2023-2024 Special Events Budget Estimate
Staff Costs
Public Works Police Fire Recreation
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CITY OF PACIFIC GROVE

CITY COUNCIL POLICY
SUBJECT POLICY NO. EFFECTIVE DATE PAGE NO.

Special Events 900-1 February 16, 2011 1 of 3

PURPOSE
The intent of this policy is to provide guidance for the conduct of special events in the City and ensure an appropriate balance between the number and scope of special events with the ability of City neighborhoods and facilities to adequately handle such events.

POLICY
I. General
The City shall have the discretion to limit the number of special events in any fiscal year.

All special events will be limited to those activities that benefit Pacific Grove residents or businesses.

Most special events are either one-time or annual. Certain special events, such as the Farmers' Market, are periodic and ongoing.

The Council reserves the right to take actions creating exceptions to this policy in the event of special circumstances.

Americans with Disabilities Act (ADA) Requirements
The ADA requires the City of Pacific Grove and public accommodations to provide equitable access for people with disabilities. Event organizers are expected follow ADA guidelines and provide and maintain access for people with disabilities. This may include providing a clear path of travel to and on sidewalks, curb cuts and restrooms; maintaining already-designated parking for people with disabilities, providing additional parking for people with disabilities if parking is provided; and providing accessible restrooms.

Non-Discrimination Policy
The City of Pacific Grove (City) requires that no person shall be excluded from participation in, be denied the benefits of, or be otherwise subjected to discrimination under any program or activity on the grounds of race, color, sex, age, disability or national origin, as provided by Title VI of the Civil Rights Act of 1964, and the Civil Rights Restoration Act of 1987 (P.L. 100.259) or due to breastfeeding in a public place, gender identity, marital status, political ideology, religion, sexual orientation, or military status or veteran status. The City of Pacific Grove also includes immigration status, ethnic background and Neurodivergent people, in its non-discrimination policy. The City further assures every effort will be made to ensure nondiscrimination and inclusivity in all of its programs and activities, whether those programs and activities are federally funded or not. Permitted special events must comply with the City's nondiscrimination policy and all applicable City, state and federal laws, rules and regulations.

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*Neurodivergent or ND refers to variations in the human brain and cognition, for instance in sociability, learning, attention, mood and other mental functions.

II. Types of Special Events
The City will create an annual calendar of special events. Events included in the annual calendar shall have first priority for the scheduled locations and times. Requests for inclusion in the annual calendar shall be submitted to the City by November 30th for any event to be held during the following fiscal year.

Such events will not be approved if they conflict with already approved events. Events requiring City Council approval are those that:
• Require City sponsorship or other City support;
• Preclude others from using an entire outdoor public facility (e.g., Caledonia Park); • Are likely to have a significant impact on substantial numbers of residents or businesses (e.g., closure of multiple or high-traffic streets for a significant amount of time, as determined by the City Manager); or
• Have other characteristics that warrant public consideration by the Council.

More limited events may be approved by staff. A neighborhood event, requiring closure only of a neighborhood street, for example, would not require Council approval. In these cases, those persons incurring the costs of the street closure are the same persons benefiting from the event.

III. Information Required
Each application for special events shall contain the following information:

A. A description of the proposed event.

B. A statement of the purpose of the event and its benefits to the City including actions of inclusivity that are reflective of the diverse community which we aim to be.

C. The name of the sponsoring organization.

D. The date, location, and time (to include preparation and clean up) of the event. In the case of a race or parade, a map of the proposed route shall be submitted.

E. An estimate of the number of participants and/or spectators.

F. A description of City facilities, support, and personnel required.

G. A list of personnel to be provided by the sponsor.

H. A description of parking arrangements for the event.

I. If electronic sound amplification equipment will be used, an application for the necessary permit shall be made as required by Chapter 11.94 of the Pacific Grove Municipal Code.

J. A description of the proposed refuse management and recycling program for plastics, glass, paper, and aluminum during the event.

K. A listing of accommodations provided by the sponsor pursuant to the Americans with Disabilities Act.

L. A listing of fees proposed to be charged, commercial sales, commercial filming, and the service or sale of food and/or alcohol.

III. Conditions of Permit
Once the Council approves an application, the sponsoring organization shall comply with the following conditions:

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A. At least 30 days prior to the event, furnish the City with a certificate of insurance in an amount not less than $2 million naming the City of Pacific Grove as an additional insured.

Such insurance shall be primary to any City insurance, and the City must have at least ten days’ notice of cancellation.

B. The sponsoring organization shall reimburse the City for all direct and incidental expenses for the use of the City personnel and facilities. The sponsor has the option of using volunteers or other non-City personnel for some functions (e.g., placing barricades, emptying public trash cans, etc.) Other functions (e.g., Police security) require City personnel. The City has the absolute discretion to determine the number of personnel who will be provided for a particular event.

C. The sponsor is responsible for all sign removal, litter control, clean-up activities, and for providing necessary containers and personnel for recycling activities, as determined by the City.

D. The sponsor shall provide portable restroom facilities if deemed necessary by the City and in compliance with the ADA.

E. The sponsor shall be advised that the sponsor is responsible for determining what, if any, accommodations are required of sponsor pursuant to the American with Disabilities Act.

F. An approved Special Event Application is required for all groups and shall be in the possession of the sponsor or representative at the event.

G. The City will review applications and additional approvals may be deemed necessary.

H. If amplification is to be used a deposit of $500 will need to be paid along with the application fee. If it is determined that amplification exceeds allowable levels or has locations have not been preapproved by City Staff then the deposit may not be returned.

The City of Pacific Grove reserves the right to revoke permissions for an event at any time.

IV. Event Classifications
The Council established the following classification of events to be used in determining the events scheduled for each calendar year: Special Events and City Sponsored Events.

Special Events: These are Special Events that require exclusive use of City property and require support from Police, Fire and / or Public Works. Special Events will be deemed full cost recovery
City Sponsored Events: These events include traditional events that are primarily hosted by the Chamber of Commerce, the School District, or the City and shall receive full City Support. These events will be noted annually on the Special Events Calendar for approval by the City Council.

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V. Review, Approval, and Scheduling of Events
All activities approved are authorized for the subsequent year only and, continued Council approval should not be assumed. Activities may be discontinued if they become too large or if they create problems that would substantially disrupt the peace and quiet of a neighborhood.

Should the City receive requests for more activities than may be accommodated, the City will establish an appropriate random drawing type of system or other suitable method for determining those activities to be approved.

Completed special event applications received by November 30 will be given priority for the upcoming fiscal year July 1 – June 30. Key dates for review and approval are:
 November – Recreation Department receives completed applications  December – Staff prepares recommendation
 January – Recreation Board prepares recommendation
 February – Council approves events, calendar, and city sponsorship  March – Staff publishes Special Events calendar
Completed special event applications received after November 30 (off-cycle) shall be considered if:

1. Not in conflict with approved special events or issued park/facility permit

2. Received a minimum 150 days in advance of the event

3. Off-cycle events brought forward for review will not be recommended as “City

4. Sponsored” special events.

Off-cycle applications will undergo the same review and approval process as for applications received by November 30.

Adopted: July 20, 2022 by Minute Order.

Adopted: July 6, 2022 by Minute Order
Adopted: April 16, 1986-Resolution No. 5705
Amended: January 7, 1987-Resolution No. 5787
Amended: February 5, 1992-Resolution No. 6238
Amended: March 3, 1993-Resolution No. 6331
Amended: November 15, 1995-Resolution No. 6489
Amended: November 5, 1997-Resolution No. 7-057
Amended: June 2, 2010-Resolution No. 10-044
Amended: February 16, 2011-Resolution No. 11-012
Amended: October 17, 2018 – Resolution 18-037
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Agenda No. 13 B

CITY OF PACIFIC GROVE
300 Forest Avenue, Pacific Grove, California 93950
TO: Honorable Mayor and Members of the City Council
FROM: Steve Lilley, Planning Commission Chair
MEETING DATE: February 15, 2023
SUBJECT: Historic Determination 22-0255 for 1352 Lighthouse Avenue (APN 007-011-005) CEQA: Does not constitute a “Project” per California Environmental Quality Act Guidelines Section 15378

RECOMMENDATION
The Planning Commission recommends that the City Council fund a Phase 1 historical resource assessment by an independent, qualified historical consultant to determine if the property at 1352 Lighthouse Avenue is eligible to be put on the Historic Resources Inventory (HRI).

DISCUSSION
With the recent sale of the NOAA building, located at 1352 Lighthouse Avenue, there has been significant public interest and comment about placing this property on the HRI. Pacific Grove Municipal Code (PGMC) 23.76.030 specifies that properties can be added or removed from that Historic Resources Inventory by initiation either of the Historic Resources Committee (HRC) or the property owner.

While the HRC can initiate the process of adding properties to the HRI, the City has neither the staff nor a consultant under contract with the necessary knowledge and qualifications to conduct historic screenings of buildings and provide the necessary evidence to list structures on the HRI. Therefore, in order to consider listing the NOAA building on the HRI, the City Council will need to approve a contract with a qualified individual and/or firm to evaluate the building and prepare a Phase I report using the criteria established in PGMC Section 23.76.025, as listed below:
(a) Whether the structure has significant character, interest or value as part of the development, heritage or cultural characteristics of the city of Pacific Grove, the state of California, or the United States;
(b) Whether it is the site of a significant historic event; (c) Whether it is strongly identified with a person who, or an organization which, significantly contributed to the culture, history or development of the city of Pacific Grove; (d) Whether it is a particularly good example of a period or style; (e) Whether it is one of the few remaining examples in the city of Pacific Grove possessing distinguishing characteristics of an architectural type or specimen; (f) Whether it is a notable work of an architect or master builder whose individual work has significantly influenced the development of the city of Pacific Grove; (g) Whether it embodies elements of architectural design, detail, materials or craftsmanship that represent a significant architectural innovation;
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(h) Whether it has singular physical characteristics uniquely representing an established and familiar visual feature of a neighborhood, community, or of the city of Pacific Grove; (i) Whether a resource with historical or cultural significance retains historic integrity.

At its September 28, 2022, regular meeting, the HRC conducted a public hearing on this matter and voted, “To make a recommendation to the City Council to direct staff to contract with a qualified individual, different one than what the owner used, to evaluate the property and make a determination of eligibility, and that the chair will be speaking about this to the City Council.” At its October 13, 2022, regular meeting, the Planning Commission voted to call up this item for review at a public hearing scheduled for the November 10, 2022, meeting. Reasons for this action included the need to conduct a timely review of the Phase I report prepared by the property owner’s historical consultant. The report was not available until the day prior to the HRC meeting. In addition, the HRC was unable to question the historical consultant about the Phase I report, as he could not log into the meeting. In addition, the HRC did not ask staff to describe protections already in place for the property through our local coastal plan or zoning.

At its regular meeting of November 10, 2022, the Pacific Grove Planning Commission conducted a de novo hearing on the item. The Commission received 20 letters from citizens regarding this item; at the public hearing, a total of 20 different people made presentations.

At the conclusion of the hearing, which lasted two (2) hours and twenty (20) minutes, the Planning Commission voted four (4) to three (3) to recommend, “The City Council request a historical resource assessment to determine if the property at 1352 Lighthouse Avenue is eligible to be put on the HRI, and the Chair represent the Planning Commission to the City Council at some future meeting to recommend we do a Phase I review of the property on Lighthouse.” The Commission did not take a position on whether the property should be listed on the HRI.

GOAL ALIGNMENT:

The Planning Commission’s recommendation complies with several goals or policies identified in the current General Plan.

Parks and Recreation, Chapter 5
The property at 1352 Lighthouse Avenue is part of the Pt. Pinos Lighthouse Reservation, as identified as “Other Parks, Recreational Facilities, and Open Space Areas,” #28 on figure 5-1, page 95 of the General Plan.

The Planning Commission’s recommendation addresses the following goal/policy:
“Goal 2, Policy 4: Protect sensitive habitats, natural landforms, and scenic resources in planning for recreation facilities and for open space, taking into account the carrying capacity of the areas.” Historical and Archaeological Resources, Chapter 7
As stated in Chapter 7.4, page 126 of the General Plan, “The purpose of preservation is to identify, protect, and preserve the structures of Pacific Grove’s cultural and architectural history, to assert pride in the community and what makes it unique, and to draw on the past as an invaluable guide for future growth.”
The Planning Commission’s recommendation addresses the following goals/policy:
“Goal 1, Policy 9: Promote the preservation and enhancement of historic neighborhoods, commercial areas, and government districts.
“Goal 2: Foster an understanding and appreciation of Pacific Grove’s history and architecture. “Goal 4: Protect Pacific Grove’s archaeological resources.” PGCC 2-15-23

OPTIONS

Deny the recommendation of the Planning Commission to retain the services of a qualified, third-party historical consultant to complete a Phase I study of the property at 1352 Lighthouse in order to determine if it is eligible for listing on the HRI.

1. 2. Determine the property at 1352 Lighthouse Avenue is ineligible for listing on the HRI.

FINANCIAL IMPACT:

There is a fiscal impact associated with retaining a qualified, third-party historical consultant. Funds have not been included in the Fiscal Year 22/23 Budget. It is believed that the cost for a historical consultant would fall within the City Manager's spending authority.

If this item is approved, a budget amendment ordinance will be generated to amend the Fiscal Year 22/23 Budget. It is anticipated there should be sufficient funds available in the unassigned general fund balance to support this contract.

GOAL ALIGNMENT: Not Applicable.

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Agenda No. 13 C

CITY OF PACIFIC GROVE
300 Forest Avenue, Pacific Grove, California 93950
TO: Honorable Mayor and Members of the City Council
FROM: Luke Coletti, Councilmember, Lori, McDonnell, Councilmember MEETING DATE: February 15, 2023
SUBJECT: Wildlife Disturbances Caused by Operation of Unmanned Aircraft Systems (“drones”)
CEQA: Does not constitute a “Project” per California Environmental Quality Act Guidelines Section 15378

RECOMMENDATION
Receive report regarding wildlife disturbances caused by operation of unmanned aircraft systems (“drones”).

DISCUSSION
The City of Pacific Grove is seeing an increase in the number of Recreational Unmanned Aerial Vehicles (UAVs) or Systems (UASs), also referred to as “drones,” being flown within the city limits that are impacting our wildlife. Likely reasons for the increase include:

An increasing hobbyist drone market, as evident from the number of interactions with Volunteer Naturalists monitoring our local wildlife along the city’s coastline.

The researcher who ran Monterey Audubon's Seawatch migratory seabird census at Pt.

Pinos for six weeks in November -December of 2022 reported “Almost every day of my 45-day stint at Pinos, I saw at least one UAV being flown in the immediate vicinity of Pt.

Pinos. To see multiple (generally 2-3) UAVs being flown daily was the norm I observed, and on a few days there were at least 4.”
Data from the Central Coast Black Oystercatcher Monitoring Program shows an increase in documented drone disturbances.

Increased demand for drones used in research.

Data for permitted research drones being flown in the NOAA Overflight restricted area (NROZ) shows an increase in research drone flights from 1 flight in 2017 to 124 flights in 2022.

Detection of illegal flights often falls to the various agencies whose volunteers monitor the wildlife including Bay Net (NOAA) and the Central Coast Black Oystercatcher Monitoring Program (BLM/Monterey Audubon). Numerous cases of drone flights disturbing wildlife, including nesting shorebirds and harbor seals, have been documented by these volunteers, but they lack enforcement authority.

While the current Pacific Grove drone ordinance prohibits the flying of unmanned aircraft without a permit, it does not contain language indicating that it is unlawful to disturb the wildlife as included in PGCC 2-15-23

permit, it does not contain language indicating that it is unlawful to disturb the wildlife as included in the Marine Mammal Protection Act, The Endangered Species Act, Migratory Bird Treaty Act, and Airborne Hunting Act (see below). These federal acts prohibit the disturbance of a variety of species and apply to drone operations.

PG Municipal Code 11.72.010: It is unlawful for any person to launch or land an aircraft, including a helicopter, drone, or other unmanned aircraft, without a permit. [Ord. 17-025 § 2, 2017; Ord. 1511 N.S. § 1, 1986].

The Code of Federal Regulations, in Subpart M - Monterey Bay National Marine Sanctuary, § 922.132 Prohibited or otherwise regulated activities. prohibits disturbances to marine mammals or seabirds. Although the City of Pacific Grove opted not to be included in the designated Marine Protected Areas (MPAs) at the time of their creation, this statute clearly indicates “Failure to maintain a minimum altitude of 1,000 feet above ground level above any such zone is presumed to disturb marine mammals or seabirds.”
Airborne Hunting Act (16 U.S. Code § 742j–1):

Any person who—
(2) uses an aircraft to harass any bird, fish, or other animal; or (3) knowingly participates in using an aircraft for any purpose referred to in paragraph (1) or (2); shall be fined not more than $5,000 or imprisoned not more than one year, or both. (*) “Aircraft” is defined in this provision as any contrivance used for flight in the air.

Next Steps:

Banning recreational drones flights is an important step in mitigating negative impact on our protected and sensitive wildlife and the privacy of our residents and visitors. It would enable research and limited commercial drone flights to be more easily monitored and managed, make enforcement easier, and provide regulatory consistency with Pebble Beach, Asilomar State Park, and all National Parks, which have outlawed recreational drones.

OPTIONS
Do nothing.

Provide alternate direction.

FINANCIAL IMPACT:

There is no financial impact in receiving a report.

GOAL ALIGNMENT: Not Applicable.

PGCC 2-15-23