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HomeMy WebLinkAboutTayman Park Golf Group 2012-07-01; Addendum 3 2018-03-13COU No. 1617.112—A3 ADDENDUM 3 TO MUNICIPAL GOLF COURSE LEASE AGREEMENT This Agreement ("Addendum 3") entered in Ukiah, California on tA&WA 13 . 2018 ("Effective Date") amends the Municipal Golf Course Lease Agreement ("Lease"), dated July 1, 2012, between the City of Ukiah ("Lessor" or "City'), a general law municipal corporation, and Tayman Park Golf Course Group, Inc. ("Lessee" or "TPGG"), a corporation in good standing under the laws of the State of California. Except as expressly amended by Addendums 1, 2, and this Addendum 3, the original terms of the Lease remain in full force and effect between the Parties in accordance with its terms. Lessor and Lessee may be referred to herein as "Parties" and individually as "Party." RECITALS: 1. The City has received funding from the California Water Board and has awarded a construction contract for the first three phases of a four phase project ("Purple Pipe Project") to construct a recycled water system that will transport and deliver treated wastewater from the City's Wastewater Treatment Plant ("WWTP") to vineyards and public facilities, such as the Men's Softball Complex, Ukiah Cemetery District, City parks, school district facilities and the Ukiah Valley Golf Course for irrigation purposes. 2. Phase Four of the Purple Pipe Project will require the installation of additional facilities on the Back Nine holes of the Golf Course Property, including water mains, valves, holding ponds and related facilities, and a new golf course irrigation system to service the golf course irrigation needs with recycled water ("Purple Pipe Irrigation System"). 3. The City intends to apply for additional grant funding to construct Phases Four including the Purple Pipe Irrigation System. 4. The City engaged an Independent Certified Public Accountant to perform Agreed Upon Procedures designed by the City to obtain a better understanding of TPGG's Statement of Operations for the year ended June 30, 2017. 5. TPGG has provided the City with comprehensive rounds reporting to include all daily green fee categories, annual passes and complimentary rounds, and any other category for all periods, per the terms of the Agreement. 6. Based on the Agreed Upon Procedures and information provided by TPGG, the City has determined that the current rent under the Lease is not sustainable and the Golf Course Enterprise ("GCE") cannot continue to provide the Water Service Enterprise ("WSE") and the Purple Pipe System with access to and use of the Leased Premises without receiving adequate compensation therefor from the WSE and the Sewer Service Enterprise ("SSE"). 1 7. Other revisions to the Lease are required to make the Lease sustainable and a continuing benefit to the rate payer, the golfing community and the City. 8. TPGG commits to make every reasonable effort to enhancement golf course revenue and enhance service options to make the GCE sustainable. AGREEMENT. In consideration of and reliance upon the above recitals, the terms and conditions as stated below, and other good and valuable consideration, the adequacy and receipt of which is hereby acknowledged, the Parties hereby amend the Lease and agree as follows. Section 1. Definitions. As used herein the following capitalized terms shall have the following meaning. Capitalized terms used in this Addendum 3, not defined in this Section 1, shall have the meaning provided in the Lease. A. "Back Nine" means the property encompassing holes nine through seventeen, and the surrounding property. B. "Business Interruption Period" means any monthly period during the Initial Term when golf holes are closed on a hole by hole basis, or when multiple golf holes are shut down at the same time for the construction of components of the Purple Pipe System. C. "Extended Term" means the ten (10) years commencing on the Purple Pipe Date. D. "First Option Term" means the five (5) year period commencing at the expiration of the Extended Term, where both Parties have mutually approved the exercise of the option. E. "Front Nine" means the property housing holes one through eight and hole eighteen, and the surrounding property. F. "Golf Course" means the portion of the Leased Premises upon which golf is played, including tees, fairways, roughs, and greens that require irrigation. G. "Golf Course Normalcy Date" means the date, as determined by the City, when the Golf Course is restored to normal playing condition after the last Business Interruption Period. H. "Golf Course Property" means that property described in Exhibit A attached to the Lease. I. "Gross Revenue" means that starting July 1, 2017, the term Gross Revenue as used in the Lease is as defined in the Restated and Amended Exhibit G, attached thereto J. "Initial Term" means the term commencing on the Effective Date of the Lease and ending on the earlier of ten (10) years plus any period of extension thereof, or the Purple Pipe Date. K. "Leased Premises" means the real property and improvements referenced and described in Section 1 of the Lease and Exhibit A thereto, amended to reflect the removal of that property ceded back to CSD by TPGG to accommodate the final design configuration of the holding ponds of the Purple Pipe Project, attached thereto. L. "Potable Water" means drinking quality water delivered to the Leased Premises through the City Water Enterprise distribution system for irrigation of the Ukiah Valley Golf Course ("UVGC"). M. "Purple Pipe System" means all components of the system used for the delivery of tertiary treated recycled wastewater produced by the City's Wastewater Treatment Plant ("WWTP") and delivered through the system to the golf course, including, but not limited to, fencing, pipes, valves, ponds, pumping and controlling equipment and all the components of the Purple Pipe Irrigation System, and any Potable Water system components used in conjunction with the Purple Pipe Irrigation System. N. "Purple Pipe Date" means the date as determined by City on which the recycled water ponds, related equipment and new golf course irrigation systems become operational as the primary source of water for golf course irrigation. O. "Purple Pipe Irrigation System" means the irrigation system installed on the Leased Premises to allow the use of Purple Pipe Water to irrigate the Golf Course. P. "Purple Pipe Water" means recycled treated wastewater that is distributed for irrigation to the Golf Course through the Purple Pipe System. Q. "Right of Entry" means the City's right to access and cross any portion of the Leased Premises for the design, construction and use of the Purple Pipe System. "Second Option Term" means the five (5) year period commencing at the expiration of the First Option Term, where both Parties have mutually approved the exercise of the option. S. "TPGG Leasehold" means the Leased Premises as described in Exhibit A of the Lease, amended to reflect the removal of that property ceded back to CSD by TPGG to accommodate the final design configuration of the holding ponds of the Purple Pipe Project, attached thereto. 3 T. "UVGC" means the Ukiah Valley Golf Course, the City of Ukiah's municipal golf course, which is operated as a division of TPGG under the terms of the Lease, as amended. Section 2. Right of Entry Granted. TPGG grants City a Right of Entry into and across the Leased Premises to perform all activities related to planning, design, construction, testing and maintenance of all components of the Purple Pipe System used for the delivery of Purple Pipe Water to the Golf Course, including, but not limited to, fencing, pipes, valves, ponds, pumping and controlling equipment and all the components of the Purple Pipe Irrigation System as well as any Potable Water system components used in conjunction with the Purple Pipe Irrigation System for flushing and all other purposes, during the term of the Lease, including all extended terms of the Lease. Section 3. Compensation to TPGG for Right of Entry and Ceding of Leased Property. In full compensation for the Right of Entry to the Leased Premises described in Section 2 above, and for the ceding back of that leased golf course property to CSD as described in the amended Exhibit A of the Lease (Attachment 1), during the Business Interruption Period and until Golf Course Normalcy Date, City will provide TPGG with revenue make-up payments, as provided in Subsection B, below, and certain water services as described in Sections 4 and 5 below. A. As a condition to receiving the compensation provided in subsection B, below, TPGG is required to, and commits to make every commercially reasonable effort to maximize Gross Revenue during the Business Interruption Period. B. On a month by month basis during the Business Interruption Period and until Golf Course Normalcy Date, City shall provide TPGG with a revenue make up payment for any month when the total Gross Revenue, as reported to City by TPGG on the prescribed forms, is less than that same month's adjusted revenue for FY 2017 (July 1, 2016 to June 30, 2017) as shown in the attached Exhibit 1 (Attachment #2). C. TPGG agrees to fully cooperate with City and any Independent Certified Public Accountant ("CPA") retained by City to perform a review of the UVGC Statement of Operations or to apply any Agreed Upon Procedures designed by City to verify any UVGC monthly revenue during the Business Interruption Period(s), the cost of the CPA's services to be paid for by City. Such cooperation at TPGG's expense shall include complete and prompt access to all UVGC financial statements and records and any other information sought by the CPA in the course of and for the purpose of conducting the review or Agreed Upon Procedures. Section 4. Potable Water Fees Suspended. A. Retroactive to July 1, 2017, TPGG shall receive Potable Water from the City until the earlier of the last day of the Initial Term or the Purple Pipe Date. To avoid any subsidy by other ratepayers for Potable Water used by TPGG, the City shall make those rd payments to the WSE in accordance with Section 6 of City Council Resolution No. as described in Section 4B below. B. Until the Purple Pipe Date, TPGG will apply Potable Water to irrigate the Golf Course in a professional manner. Retroactive to July 1, 2017, the GCE will pay up to $185,000 of City's annual charges to TPGG for Potable Water. TPGG shall pay any charges in excess of $185,000. TPGG's use of Potable Water under this Subsection B is subject to any more restrictive mandatory water use limitation regulations imposed upon or by the City. C. Any refund by WSE to TPGG for Potable Water payments credited under 4.13 above, for payments made by TPGG after July 1, 2017, will first be applied by the City to full payment of the forty -thousand ($40,000) dollar annual Lease payments due the GCE for FY2018. The remaining balance, if any, will be paid to TPGG to be used for UVGC purposes. Section 5. Use and Cost of Potable and Purple Pipe Water. Commencing on the Purple Pipe Date, TPGG shall receive Purple Pipe Water without charge for the Extended Term, but not for any extensions of the Extended Term, except as provided in Subsections D and E, below. A. TPGG shall discharge Purple Pipe Water through the golf course irrigation system, when requested by the City to provide needed storage capacity in the Purple Pipe System storage ponds. TPGG shall not be required to discharge Purple Pipe Water at the City's request, if the discharge could damage the Golf Course or unreasonably interfere with the use or maintenance of the Golf Course. B. In order to adequately conserve water and comply with water use regulations adopted by or imposed on the City during the Extended Term and any extensions thereof, the City, at its sole discretion, may set a reasonable annual limit on the use of Potable Water, based upon experience, after the Purple Pipe System becomes operational. The City shall give TPGG written notice of the annual limit. When such written notice has been given by the City, TPGG shall limit its use of Potable Water immediately by using no more than the annual prorated amount allowed by the City in the remainder of the twelve months ending June 30, and the annual amount allowed thereafter. C. TPGG will pay existing water rates for any use of Potable Water in excess of the amount allowed in Subsection B, above. D. At the mutual exercise of the First Option Term by the Parties, subject to TPGG having met substantially all of the performance standards of the Agreement during the 5 Extended Term as determined by the City, TPGG may use Purple Pipe Water without charge for the First Option Term. E. At the mutual exercise of the Second Option Term by the Parties, subject to TPGG having met substantially all of the performance standards of the Agreement during the First Option Term as determined by the City, TPGG may use Purple Pipe Water without charge for the Second Option Term. Section 6. Weekly Water Use Reports Required. TPGG will provide a detailed weekly water use report for both Potable Water and Purple Pipe Water to City in a form acceptable to City. Providing the required water use reports is a performance standard of TPGG, subject to Section 1.6 of the Lease. Section 7. Extended Term and First and Second Options to Further Extend Term. A. City shall give written notice to TPGG of the Purple Pipe Date as determined by the City. B. If the Purple Pipe Date takes place during the Initial Term the Lease is automatically extended for ten (10) years from the Purple Pipe Date with the availability of a First Option Term and a Second Option Term. Section 8. Rent. A. The Rent payment deferral previously allowed by City Council action is eliminated retroactively to July 1, 2017. B. Section 4.1 of the Lease is amended in its entirety. Instead of the rent as provided in Section 4.1 a -d, Rent is fixed at three -thousand three -hundred and thirty-three ($3,333.33) dollars and thirty-three cents a month (forty -thousand ($40,000) dollars per year) retroactively to July 1, 2017. Such rate shall remain in effect until the earlier of the last day of the Initial Term, or twelve (12) months after the Purple Pipe Date month, at which time Rent payments will revert to the Rent payment percentage schedule of the Agreement as provided in Section 4.1, and the Amended and Restated Exhibit G (Attachment #3) for the remainder of the Initial Term, including any extensions or option terms thereof. Section 9. Capital Improvement Payment. A. The Capital Improvement Payment (CIP) deferral previously allowed by City Council action is eliminated retroactively to July 1, 2017. B. The amended required accelerated Capital Improvement Payments are described in 10A and 10B below. 2 C. Capital Improvement credits will be given to TPGG as described in 10C and 10D below. Section 10. TPGG Required Improvements to Cart Paths and Club House. A. 1. During the period February 15 —June 30, 2018, TPGG will commence and complete club house food & beverage facilities and related club house improvements using plans preapproved and acceptable to City, spending four -hundred thousand ($400,000) dollars of TPGG funds. 2. If TPGG fails to complete this project by June 30, 2018, then as a penalty, the Rent schedule described in the Amended and Restated Exhibit G will become effective on July 1, 2018, retroactively to July 1, 2017 and continue to be in effect until the month end following the date City accepts and approves the completed project. 3. Such penalty may be waived in whole or in part at the sole discretion of the City Manager for good reason. 4. An extension of the June 30, 2018 project completion date may be given at the sole discretion of the City Manager for good reason. 5. If the project can be completed for less than $400,000, then TPGG will spend the balance of that amount on golf course improvements as preapproved and agreed to by City. 6. All food and beverage equipment and club house improvements purchased with this expenditure will be considered to be leasehold improvements to the Leased Premises real property, and as such, control and possession will revert to the City upon the termination of Lease by either Party for any reason. If TPGG secures a loan to fund the acquisition of any such food and beverage equipment and the construction of club house improvements, any improvements constituting "fixtures," as defined in Section 9102(41) of the Uniform Commercial Code, upon which the lender has perfected a security interest, shall remain subject to said security interest until the loan is fully repaid or the lender otherwise releases the security interest in any such property. B. Within two weeks following the Purple Pipe Date, or sooner if agreed to by the Parties, TPGG shall commence the complete rehabilitation of the golf course cart paths according to plans preapproved and acceptable to City. The cart path rehabilitation will be completed within four (4) months of the commencement date, or sooner if possible. TPGG commits to complete the project using two -hundred thousand dollars $200,000 of its funds. If the project can be completed for less than $200,000, then TPGG shall spend the balance of that amount on golf course improvements as preapproved and agreed to by the City. C. Upon City's approval of the completed club house improvement project, commencing in FY2018, TPGG shall be given a credit of $200,000 towards the CIP requirement of Section 4.2 of the Lease ($40,000 X five (5) years). D. Upon City's approval of the completed cart path improvement project, commencing in FY2018, TPGG shall be given a credit for three (3) years of one -hundred and twenty - thousand dollars ($120,000) towards the CIP requirement of Section 4.2 of the Lease ($40,000 x 3 years). E. Before TPGG receives credit for CIP, TPGG shall provide documentation that is acceptable to City to confirm that the amounts represented as expended by TPGG for the Projects described in 10A and 10B are accurate. F. After the CIP credits described in 10C and 10D for the club house and cart path project expenditures have been exhausted, TPGG will be required to resume the annual forty -thousand ($40,000) dollar CIP contributions as adjusted for CPI from FY2017 as described in Section 4.2 of the Lease. Under no circumstances will a refund of these credits be due to TPGG for any reason, even if the lease term with all extension and option periods do not fully amortize the CIP credits. Section 11. Golf Course Support Fee Notice. Upon written notice from City, given no more than ninety (90) days before a reasonable estimate of the Purple Pipe Date, TPGG will start to collect, on a date specified by the City as further described in Restated and Amended Exhibit G, a per round Golf Course Support Fee ("GCSF") of one dollar ($1.00) on all paid daily play rounds, and a six percent (6%) GCSF on all fees for annual passes and other non -daily rates collected, and will pay over such amounts to the City monthly, along with City prescribed reports prepared by TPGG. Amounts collected will be deposited in a Golf Course enterprise account. Such funds will be dedicated to the payment of Golf course related expenditures, as determined by the City. A. In consultation with TPGG, but not more often than every other year, after City Manager's approval, the GCSF may be increased for play occurring in any twelve- month period commencing July 1. City will provide written notice to TPGG, by May 31 of such increases. GCSF increases will be in one dollar ($1) increments to a maximum of three dollars ($3) on all paid daily play rounds, and/or in one percent (1%) or two percent (2%) increments to a maximum of ten percent (10%) on all fees for annual passes and other non -daily rates collected. Such percentage adjustments will be rounded to the nearest dollar. B. City Manager's approval is required for any TPGG rate changes initiated before the Purple Pipe Date. N Section 12. Food and Beverage Franchise or License. TPGG is authorized to enter a franchise or license agreement with a third -party for TPGG to provide food and beverage services at the Ukiah Valley Golf Course. A. If TPGG enters a franchise, license or other agreement with a third -party for TPGG to provide food or beverage services upon the Leased Premises, TPGG agrees to indemnify, defend and hold City harmless from and against any claim, action, damages, costs (including, without limitation, the fees of attorneys, experts, investigators, consultants or any other litigation expenses), injuries, or liability, arising out of entry into or performance under said agreement by TPGG or the third - party and the provision of food and beverage services at the golf course. Should City be named in any suit, or should any claim be brought against it by suit or otherwise, whether the same be groundless or not, for which indemnification is required by this Section 12.A, TPGG shall defend City (at City's request and with counsel satisfactory to City) and indemnify City for any judgment rendered against it or any sums paid out in settlement or otherwise. For purposes of this section "City" includes City's officers, elected officials, and employees. This Section 12.A will survive termination of this Agreement. The requirements as to the types and limits of insurance coverage to be maintained by TPGG, and any approval of such insurance by City, are not intended to and will not in any manner limit or qualify the liabilities and obligations otherwise assumed by TPGG pursuant to this Section 12.A. B. TPGG shall not enter any franchise, license or other agreement with a third -party for TPGG to provide food or beverage service upon the Leased Premises unless and until the City, by its City Manager, has reviewed and approved it. C. At the City's option, TPGG will insure that the City is named as a third -party for TPGG beneficiary of any franchise, license or other agreement with a third -party to provide food or beverage service upon the Leased Premises. Section 13. Extension of Term. A. The Initial Term is extended by nine (9) months to March 31, 2023. B. If the City determines that the Purple Pipe Date will not occur before the end of the Initial Term, then, no later than six (6) months before the end of the Initial Term, the Parties shall either extend the Initial Term by a mutually agreed period of time or mutually agree to renegotiated Lease provisions. If the parties fail to agree on an extension of the term or renegotiated Lease provisions, the Lease shall expire at the end of the Initial Term. Section 14. Modifications of Lease. Paragraph 28 of the Lease is amended to read: OJ "No modification to the terms of this Agreement shall be enforceable, unless approved by Lessee and the City and set forth in a written addendum or amendment of this Lease signed by authorized representatives of the Parties. The City Manager may approve amendments to this Lease on behalf of the City that do not change the term, rent, other provisions relating to rent or the payment of money or the provision of water to TPGG, the description of the leased premises or otherwise alter the purpose of the lease. All other amendments must be approved by the City Council. Upon the written request of Lessee, the Parties shall meet and negotiate in good faith amendments to this agreement that Lessee believes are warranted by changed circumstances. The City Manager or his/her designee shall meet with authorized representatives of Lessee within fifteen days of the date notice is given pursuant to this paragraph and shall continue to negotiate in good faith until agreement is reached or until either party declares that further negotiations would be unlikely to result in agreement. Neither party is required to reach agreement as a result of good faith negotiations." WHEREFORE, this Addendum 3 to the Municipal Golf Course Lease is made and entered on the Effective Date. CITY OF UKIAH ATTEST: Kristine Lawler, City Clerk 10 TAYMAN PARK GOLF GROUP, INC. ATTEST: It Corporate Secretary By: a� ATTEST: Kristine Lawler, City Clerk 10 TAYMAN PARK GOLF GROUP, INC. ATTEST: It Corporate Secretary