COUNCIL DISTRICT:
Citywide
SNI: N/A
It is recommended the City Council:
1. Adopt a resolution to increase fees in Fiscal Year 2002-2003 at Rancho del Pueblo Golf Course as described in this staff report superceding the fees approved by Resolution Number 68996 and authorizing the City Manager to approve future fee increases at the facility and to establish discount rates for groups and promotional packages as described in the staff report; and,
2. Adopt a resolution authorizing the City Manager to negotiate and execute a Second Amendment to the Operations and Maintenance Agreement extending the submission date to September 1, 2002 for the final audit for the period of March 1, 2000 through June 30, 2001, and extending the submission date to May 30, 2003 for the final audit for the period of July 1, 2001 through June 30, 2002.
BACKGROUND
Rancho del Pueblo Golf Course is a City-owned, 9-hole, Par 28, golf course with a lighted driving range. The facility is located on Hermocilla Way, adjacent to King Road, in Council District 5.
The City, in accordance with the Operations and Maintenance Agreement with San Jose Golf, LLC (facility operator), has the direct and primary responsibility of reviewing and approving all operating and capital budgets for the golf course including the review and approval of user fees and charges at the facility.
Staff is recommending City Council approval of greens fee and range fee increases at the course, the first proposed fee increases since the facility’s opening on March 1, 2000. Additionally, staff is recommending the City Manager be authorized to negotiate and execute a Second Amendment to the Operations and Maintenance Agreement with San Jose Golf, LLC to extend audit submission dates, and that the City Manager be authorized to approve future fee increases at the facility.
In Appendix A, there is a summary of the financial performance of Rancho del Pueblo, since it’s opening, and the debt service paid by the City on the bonds issued to finance the land acquisition and development costs of the course.
Original greens fees and range fees approved by Council for Rancho del Pueblo were based on the National Golf Foundation Consulting, Inc. (NGFC) feasibility study proforma prepared in 1997, prior to the course’s development. There have been no increases of greens fees or driving range fees since Rancho del Pueblo opened on March 1, 2000.
In setting fees, the primary method used by golf professionals is to survey comparable facilities for rates. There are four (4) courses in the local market area considered comparable to Rancho del Pueblo. Golf course staff has performed a greens fee survey of the following facilities:
· Blackberry Farm (a 9-hole, Par 29 course in Cupertino)
· Sunken Gardens (a 9-hole, Par 29 course in Sunnyvale)
· Pruneridge (a 9-hole, Par 31 course in Santa Clara)
· Santa Teresa short course (the 9-hole, Par 27 course at Santa Teresa in San Jose)
The average greens fees and range fees from this survey are compared to the current rates at Rancho del Pueblo below:
Four-Facility Rancho del Pueblo
Type of Fee Average Rate Current Rates
Weekend/Holiday – Regular $15.38 $13.00
Weekday – Regular $13.00 $11.00
Senior $11.50 (at two courses only) $ 9.00
Twilight None $ 9.00
Range Bucket Size
-Small (30-55 balls) $3.67 $ 3.50
-Medium (65-85 balls) $5.50 Not Available
-Large (104-110 balls) $7.50 $ 6.50
The recommended rate changes for Rancho del Pueblo Golf Course are:
Year 1 Maximum Rate Change
Weekends[1] & Holidays – 9-hole round, regular $15.00 $2.00
Weekdays[2] – 9-hole round, regular $13.00 $2.00
Weekdays2 – Twilight[3] $10.00 $1.00
Weekdays2 – Seniors/62 and older (before 10AM) $10.00 $1.00
Range/Buckets:
Small $ 4.00 $0.50
Large $ 7.50 $1.00
No rate changes are recommended for Juniors. The current rates are $8.00 (Weekends/Holidays) and $7.00 (Weekdays). Juniors are persons of age 17 or younger.
Based on Rancho’s F/Y 02-03 operating budget, the proposed increases in greens fees and range fees (assuming implementation in the second week of May) is estimated to increase the net operating income (NOI) by approximately $19,000 for a F/Y 02-03 total of approximately $59,000. This would commensurately reduce General Fund support for the City’s debt service obligation; however, it would not eliminate the need for General Fund support.
If the proposed rates are approved, there would be a posting period of approximately two weeks prior to the rates becoming effective.
Certain flexibility in the rate structure should be provided for creating packages (e.g. a round of golf, cart, food and beverage, etc.) to fill times of the day when play is slow. Therefore, staff recommends that the rate resolution provide that the City Manager be authorized to approve reduced rates for groups and/or promotional packages to generate additional revenue for the course.
Proposed Second Amendment to the Operations and Maintenance Agreement:
Staff recommends the approval of a Second Amendment to the Operations and Maintenance Agreement with San Jose Golf, LLC to provide extensions of audit submission dates. The extension dates, if approved, would be as follows:
Audit Period |
Extended Audit Submission Date |
|
March 1, 2000 through June 30, 2001 |
September 1, 2002 |
|
July 1, 2001 through June 30, 2002 |
May 30, 2003 |
The operator submitted the audit for the period of March 1, 2000 through June 30, 2001 that has been reviewed by City Finance staff. A change in auditor was proposed by the operator to prepare the July 1, 2001 through June 30, 2002 audit. Since accounting was transitioned from a cash basis to generally-accepted accounting principles (GAAP) between the 00-01 and 01-02 fiscal years, Finance staff worked with the operator to identify modifications needed to the scope of the F/Y 01-02 audit. This delayed commencement of the actual work and necessitates the extension of the submission date.
The Second Amendment also provides that the City Manager would be authorized to further extend the submission date for the F/Y 01-02 audit, if the operator can provide reasonable justification for the extension.
Future Proposed Rate Changes:
Staff recommends Council authorize the City Manager to approve future rate changes in greens fees and range fees. Proposed fee changes would be recommended to the Parks, Recreation and Neighborhood Services Director by the operator as part of each fiscal year operating budget submission for Rancho and accompanied by a survey of comparable facilities’ rates. The Director, if in concurrence with the recommended fee changes, would request approval of those changes from the City Manager.
The golf course operator is not proposing any additional fee changes at Rancho del Pueblo for F/Y 03-04 based on the F/Y 03-04 operating budget submitted to the City in February 2003.
Public outreach has been conducted during the survey process of comparable facilities in bringing this recommendation to Council for consideration.
This memorandum has been coordinated with the City Manager’s Office, City Manager’s Budget Office, City Attorney’s Office and Finance Department.
There are no cost implications associated with this staff report.
This is not a project.
SARA L. HENSLEY
Director of Parks, Recreation and
Neighborhood Services