DISCUSSION
City of San Bernardino
Request for Council Action
Date: October 7, 2026
To: Honorable Mayor and City Council Members
From: Eric Levitt, City Manager;
Luis Portillo, Director of Economic Development
Department: Economic Development
Subject: Shandin Hills Golf Club General Fund Budget
Appropriation and Amendment (Ward 5, Ward 6)
Recommendation:
It is recommended that the Mayor and City Council of the City of San Bernardino, California, adopt Resolution No. 2026-170:
1. Authorizing the City Manager, or designee, to appropriate funds in the amount of $500,000.00 for the Shandin Hills Golf Club to cover payroll and operational deficit costs during the interim period while the audit is being finalized;
2. Authorizing the Director of Finance & Management Services, or designee, to amend the FY 2026/2027 Operating Budget in the amount of $500,000.00 from the General Fund for the Shandin Hills Golf Club, and increasing the Economic Development Department’s Real Property Division revenues and expenditures budgets to reflect the receipt and expenditure of the funds; and
3. Authorizing the Director of Finance and Management Services, or designee, to issue a purchase order in the amount of $500,000.00 to Local Golf Management, LLC.
City Manager's Comments
During our review of the Shandin Hills operations it was determined that the City does not currently and has not in previous years had an appropriation for expenditures of funds at the golf course. Instead of an appropriation (budget), there has been an account set up where LGM has placed funds into a bank account and then expended out of the bank account. We have recently set up a bank account with City oversight that is used by the LGM. We are additionally through this action setting up an appropriation. The audit is looking at the cash calls as part of the audit (additional cash needed through a General Fund subsidy). We are unsure if $500,000 is sufficient for the Fiscal Year but will establish a base line with staff able to come back to City Council if further appropriation is required. This appropriation would be for the operational account. In addition, the City Council has appropriated $1 million in the Capital Fund.
Executive Summary
The City owns Shandin Hills Golf Club, which is operated by Local Golf Management, LLC (LGM) under a five-year Management Agreement effective June 1, 2023. The agreement places day-to-day operations with LGM, while the City retains approval, funding, account-control, inspection, and audit rights. The City is currently working with Eadie & Payne LLP to complete an agreed upon audit procedures engagement for the period of June 1, 2023, through May 31, 2026.
On August 19, 2026, Finance provided the City Council with an update on the status of the audit. As part of that discussion, the City Council directed staff to incorporate additional items into the scope of the engagement. Staff put together an expanded scope based on the Council meeting. The audit (financial review) is split into two parts in order to provide the first phase of the report to the Council when completed while the expanded scope has extended the anticipated timeline for completion of the entire report.
While the audit remains ongoing, as of September 24, 2026, the Economic Development Department has funded three Shandin Hills cash calls from LGM totaling $255,371.02 for payroll and operating expense deficits. Staff is requesting funding to reimburse the Economic Development Department for these amounts and additional funding to address the management fee, and potential payroll and operational cash calls through December 31, 2026.
Recent cash calls have also resulted in delays in processing due to requests being received shortly before scheduled check runs and incomplete supporting documentation in the information provided with the requests. Establishing funding specifically for Shandin Hills will allow the department to process future cash calls from funds designated for the golf course.
The funding requested is intended to address the immediate cash-flow needs of Shandin Hills should there be additional payroll or operational deficits while the audit is completed. Once the audit (financial review) is finalized, the City will have more complete and verified records of the applicable revenues, expenditures, cash calls, and related financial activity, which will allow staff to reconcile outstanding amounts and determine how much additional action is necessary at a future City Council meeting.
Background
On May 3, 2023, the City Council adopted Resolution No. 2023-058, approving Amendment No. 3 to the Interim Management Agreement with CF Shandin Hills Arcis LLC. On May 17, 2023, the Council adopted Resolution No. 2023-063, approving the current Management Agreement with LGM. The current agreement took effect June 1, 2023, and runs through May 31, 2028, unless ended earlier under its terms or continued month-to-month by mutual agreement.
The agreement provides for a $180,000 annual management fee, paid at $15,000 per month and adjusted annually by the Consumer Price Index (CPI). LGM must operate under a City-approved Annual Plan, maintain the operating account required by Section 6.1.1, provide monthly and annual reports, notify the City of projected overruns, and maintain a five-year capital plan. Section 6.3 makes the City responsible for approved working capital and operating needs under the agreement and Annual Plans.
That funding responsibility is real, but it does not replace Council appropriation, an approved plan, or supporting records. Article 10 treats major capital improvements costing more than $25,000 separately and leaves them within the City's control and discretion.
The December 13, 2024, report covered selected activity from June 1, 2023, through June 30, 2024. It was a limited-scope examination, not a full financial audit. The report concluded that LGM followed the agreement in all material respects for the elements examined, and it identified four control matters: no City signer had been added to the operating account; merchant-processing statements were not reconciled to deposits; only one person had the safe combination and there was no backup access procedure; and inventory counts were not performed monthly. The present engagement includes procedures to determine the status of those matters.
On August 16, 2023, the Council approved future consideration of a review of contracts for City-owned revenue-producing properties, including Shandin Hills. The current review follows that accountability objective and uses the independent review right in Section 6.8 of the Management Agreement.
On July 15, 2026, the City Council Adopted Resolution No. 2026-121, authorizing Bank of America and designated City officers for the Shandin Hills operating accounts. This provided the City direct access to the banking operations at Shandin Hills.
On August 19, 2026, Finance brought forward an item for the City Council to receive and file in which the current Shandin Hills Audit Update was provided and discussed.
Council provided staff direction to add additional items into the scope of engagement and from that direction the engagement letter with Eadie & Payne is being modified appropriately along with the updated completion timeline.
Discussion
The current Shandin Hills Management Agreement with LGM provides for City responsibility for approved working capital and operating needs under the agreement and applicable Annual Plans. At the same time, City funding remains subject to the City’s appropriation, approved plans, and supporting documentation. Since the audit is ongoing and not finalized, staff is seeking a temporary funding solution to address the immediate cash-flow requirements without prejudging the audit findings or the ultimate reconciliation of Shandin Hills revenues and expenditures.
To date, four cash calls have required the Economic Development Department to advance funds for Shandin Hills expenses. The payments issued were:
Cash Calls: Checks Issued in the Amount of: Payment to Cover:
07/23/2026 $20,000.00 Payroll
08/06/2026 $35,953.74 Payroll
09/03/2026 $59,945.28 Payroll, SCE, and the
Water Department
9/24/2026 $139,472.00 Management Fees
and Operational
Funds to cover
projected payroll,
vendors, insurance,
upcoming utilities,
maintenance, and
other Operating
Expenses through
September 30, 2026.
Total Paid as of
9/24 /2026
$255,371.02
The Department funded the above cash calls directly while awaiting resolution of the audit and related funding matters. The requested action will restore the Economic Development Department’s budget for the $255,371.02 already expended and established additional funding capacity for potential cash calls and the management fee anticipated through December 31, 2026.
Staff has also experienced administrative and processing delays associated with these cash calls. Requests have, in some instances, been received only one day before the City’s scheduled check run, and supporting documentation not provided until after the checks have already been cut and provided to LGM. These circumstances reduce the time available for departmental review, Finance and Accounts Payable processing, verification of supporting documentation, and completion of the City’s normal payment process. Establishing sufficient funding in advance will not eliminate the need for appropriate review and documentation, but it will allow the department to respond more efficiently when cash call needs arise.
The additional funding requested is intended as interim funding through December 31, 2026, rather than a determination that all future cash calls are allowable or ultimately payable by the City. Once the expanded agreed-upon audit procedures are complete, the City will have a verified record of applicable revenues, expenditures, cash calls, management fees, and related financial activity. Staff can then reconcile the outstanding amounts and return to the City Council with any additional recommendations or corrective actions warranted by the audit findings.
Strategic Goals and Priorities
The request aligns with Goal No 1: Improved Operational & Financial Capacity. It established a reliable record and gives the City Council a documented basis for corrective action and future funding decisions.
Fiscal Impact
The General Fund impact associated with this request is $500,000.00 The Fiscal FY26-27 Operating Budget would need to be amended; and the Economic Development Department Real Property Division revenues and expenditures budgets would be increased accordingly.
Conclusion
It is recommended that the Mayor and City Council of the City of San Bernardino, California, adopt Resolution No. 2026-170:
1. Authorizing the City Manager, or designee, to appropriate funds in the amount of $500,000.00 for the Shandin Hills Golf Course to cover operational and payroll short fall costs during the interim period while the audit is being finalized; and
2. Authorizing the Director of Finance & Management Services to amend the FY 2026/2027 Operating Budget in the amount of $500,000.00 from the General Fund for the Shandin Hills Golf Course, and increasing the Economic Development Department’s Real Property Division revenues and expenditures budgets to reflect the receipt and expenditure of the funds; and
3. Authorizing the Director of Finance and Management Services, or designee, to issue a purchase order in the amount of $500,000.00 to Local Golf Management, LLC.
Attachments
Attachment 1 – Resolution No. 2026-170
Attachment 2 – Management Agreement between the City of San Bernardino and LGM
Attachment 3 – Cash Call Signed Payment Acknowledgement Letters Ward:
Fifth Ward
Synopsis of Previous Council Actions:
May 3, 2023 Mayor and City Council Adopted Resolution No. 2023-058, approving Amendment No 3 to the Interim Management Agreement with CF Shandin Hills Arcis LLC.
May 17, 2023 Mayor and City Council Adopted Resolution No. 2023-063, approving the Management Agreement with Local Golf Management, LLC.
August 16, 2023 Mayor and City Council approved future consideration of a review of contracts for City-owned revenue-producing properties, including Shandin Hills Golf Club.
July 15, 2026 Mayor and City Council Adopted Resolution No. 2026-121, authorizing Bank of America and designated City officers for the Shandin Hills operating accounts.
August 19, 2026 Mayor and City Council Received and Filed the Shandin Hills Golf Club Management Agreement-Audit Status Update.
CC
Eric Levitt, City Manager