Agenda Item Wording:
title
Second reading and adoption of Ordinance 2023-09 approving Amendment #1 to the 2018 Lease Agreement with CourseCo, Inc.
body
Deadline for Action: None
Submitting Department: Administration
Contact Name and Phone Number:
Aaron Hensley, General Manager CourseCo, Inc., ahensley@playvalleyoaks.com
Michael Sharp, President and CEO CourseCo, Inc., Msharp@CourseCo.com
Nick Mascia, Assistant City Manager, Nick.Mascia@Visalia.City, (559) 713-4323
Department Recommendation:
Staff recommends that City Council conduct the second reading and adoption of Ordinance 2023-09 approving Amendment #1 to the 2018 Lease Agreement with CourseCo, Inc.
Summary:
On September 18th, City Council received a presentation on capital projects that are anticipated at the Visalia Oaks Golf Course (VOGC). Following the presentation, City Council heard the first reading of Ordinance 2023-09 approving Amendment #1 to the 2018 Lease Agreement with CourseCo, Inc. Staff is returning with the second reading and adoption of Ordinance 2023-09.
Background Discussion:
The City of Visalia contracted with CourseCo, Inc. (CourseCo) beginning in 2000 for the operation and maintenance of the 27-hole Valley Oaks Golf Course, driving range, club house, restaurant, parking and related facilities generally located in the southeast quadrant of the Plaza and State Route 198 interchange. The land where the Valley Oaks Golf Course sits is within an Airport Safety Zone which requires additional language within the lease for Federal Aviation Administration (FAA) requirements to be included within the agreement (Exhibit 1). In addition, numerous parcels which make up the Valley Oaks Golf Course are owned outright by the Visalia Airport. This is depicted in Exhibit 2 of this staff report.
In 2016, the City Council directed staff to change to a lease format and the existing lease agreement commenced on February 1, 2018, for a term of 20 years. It is currently in the sixth year of the lease. The City has been pleased with the services provided by CourseCo and course performance under their leadership. Course revenues have increased over the last couple of years through the renewed interest in golf due to the pandemic and CourseCo has done a good job of maintaining the course and leased grounds. CourseCo is finalizing a plan to expend the 3% set aside of gross revenues specified in the lease agreement for capital improvements and an overview of that plan is included in this report.
Proposed Improvements:
CourseCo is proposing the following capital projects at the Valley Oak Golf Course.
Gamification Retrofit of the Driving Range:
Utilizing the “Toptracer” technology, which is like a Topgolf experience, CourseCo intends to retrofit the driving range. This experience will allow the user choice to have an interactive experience over an assortment of games from the beginner who is looking for entertainment through the expert looking to improve their golf game. This will require the installation of technology (equipment), new range balls and new mats. If the user wants to only drive a bucket of golf balls, that option is still available, however the cost has yet to be determine for either option. Furthermore, an awning will be constructed over the entire driving range, and lounging/seating patio area for approximately forty guests with new furniture will be added directly adjacent to the range under new shade sails. Located at the center of the range a bar will be constructed to provide beverages for the customers.
Retrofit of the Existing Patio:
Within the existing patio, a new shade structure will be constructed to provide shade over outdoor dining or various events to be held. Furthermore, all new furniture and equipment will be purchased for this space.
Remodeling of the Clubhouse:
A complete remodel of the dining and restrooms will occur. New finishes of the flooring and walls, including new millwork at the bar and lighting throughout. A ‘garage door’ will be installed to allow access between the patio and the interior bar and dining. An additional interior non load baring wall will be installed at the cook line to remove the sight line into the kitchen from the dining area. The kitchen will not be improved at this time. Finally, all new furniture and equipment will be purchased for the dining area.
Because the kitchen will not be improved or expanded at this time, food and beverage service will remain similar to what it is today. The capacity of the kitchen is restricted and CourseCo is cognizant of that knowing that the proposed project anticipates improved dining space. CourseCo currently allows caterers, but it is not utilized. With the proposed improvements and the allowance of caterers, CourseCo anticipates increased events resulting in increased catering.
CourseCo expects the improvements to cost approximately $1.2 to $1.4 million and they will cover the balance of the project costs above and beyond the CIP balance. The costs identified herein are construction costs only and do not include the ongoing maintenance and operation. CourseCo will be responsible for recouping the maintenance and operation expenses.
3% Capital Improvement Fund:
CourseCo holds in a trust 3% of gross revenues each year that must be used benefits to improve the premises. In addition, CourseCo was required, per the agreement, to withhold $300,000 of their own funds within the first three years to contribute to the trust. Furthermore, within the first three years of the lease, not less than a total of $450,000 was committed to be expended by CourseCo.
Currently the total amount placed in the trust year to date is approximately $775,000 and per the lease the funds have to be used as capital investments into the City’s assets with written approval by the City. Per the agreement under Article 8.3 (c), the capital improvement fund shall be…
“used exclusively for additional capital items or the repair and replacement of capital items which are needed to repair or replace, over time, capital items which are subject to wearing out after a useful life and which are included in, located on or used in connection with the Premises,…
…the term “capital items” does not include, golf carts, golf course maintenance equipment, and other Personal Property used in the normal course of operating and maintaining the Premises.”
During the term of the lease, CourseCo has spent $232,809.48 on the following projects depicted in the following table. Not all these projects fall within the definition of a capital project within the agreement, however, the funds have been spent in prior fiscal years.
|
Year |
Expenditure |
Project |
|
2018 |
$ 23,550.00 |
Course Accessories |
|
2018 |
$ 34,640.97 |
Bunker Renovation (Lakes) |
|
2019 |
$ 52,163.51 |
Bunker Renovation (Valley Oaks) |
|
2020 |
$ 73,580.00 |
Tee Leveling |
|
2020 |
$ 19,175.00 |
Tree Maintenance |
|
2020 |
$ 29,700.00 |
Safety Netting |
|
|
$232,809.48 |
|
As April of 2023, the capital fund trust balance is $546,788.01. With the proposed improvements presented to City Council, CourseCo intends to use all of the remaining balance from the capital fund trust leaving $50,000 for future capital projects.
Proposed Amendment:
CourseCo, Inc. has agreed to the following terms that have been identified within the Amendment #1 (Exhibit 3) of the original Lease Agreement. These changes are summarized below:
1. A one (1) additional five (5) year extension to the lease with an increase of the annual base rent to $130,000 for each year of this extension.
2. Expanding the usable space (fence line) to allow CourseCo to formally utilize additional land for “storage”. See Exhibit 4. All proposed improvements will need to follow the normal development process and the project will need to address anything that results from or determined by site plan review.
3. Adjustment to the dollar threshold for major maintenance within Article 9.2 of the agreement “City’s Responsibility for Maintenance and Repair”. The current threshold is $1,000 with all costs under being the Tenant’s responsibility and above the $1,000 amount the responsibility of the City. This amount will change from $1,000 to $2,500 with an addition of an annual CPI increase (round to the nearest 10 dollar) starting the current year through the remainder of the lease.
Fiscal Impact:
Per the Amendment, the City will receive an increase in the annual base rent the final five years of the agreement. All other fiscal aspects of the original lease remain.
Prior Council Action:
September 18th, 2023 - City Council received a presentation on proposed CIP for the VOGC and had a first reading of Ordinance 2023-09 amending the lease with CourseCo, Inc.
July 18th, 2023 - City Council in Closed Session received proposal for capital improvements and a counteroffer to adjust the lease for said improvements.
June 19th, 2023 - City Council in Closed Session received proposal for capital improvements and an offer to adjust the lease for said improvements.
June 5th, 2023 - City Council received an update on the current operations, revenue and overall status of the lease via a work session.
October 2nd, 2017 - City Council heard the second reading and adoption of Ordinance No. 2017-10.
September 18th, 2017 - City Council heard the first reading of Ordinance No. 2017-10 authorizing the City Manager to enter into a twenty (20) year lease agreement with CourseCo, Inc. for operation and maintenance of Valley Oaks Golf Course.
April 3rd, 2017 - City Council authorized staff in closed session to negotiate a Lease Agreement with CourseCo, Inc. for the operation of Valley Oaks Golf Course.
Alternatives:
Reject the amendment.
Recommended Motion (and Alternative Motions if expected):
recommendation
I move to adopt Ordinance No. 2023-09 authorizing the City Manager to amend the current lease agreement with CourseCo, Inc. for operation and maintenance of Valley Oaks Golf Course.
end
Environmental Assessment Status:
N/A
CEQA Review:
N/A
Attachments:
1. Exhibit 1 - 2017 CourseCo Agreement
2. Exhibit 2 - Map from Agreement
3. Exhibit 3 - 2023 Proposed Amendment #01
4. Exhibit 4 - Amendment #01 Exhibit
5. Exhibit 5 - Ordinance No. 2023-09