|MS LOYA’S 11/2/2010 COUNCIL PRESENTATION||CORRECTING MS. LOYA’S PRESENTATION|
|MANAGEMENT AGREEMENT – USING CORRECT AMOUNTS
FOR MANAGEMENT FEE & PRINCIPAL & INTEREST COSTS
|CITY LEASE REVENUE||$420,000||–||–|
|AM. GOLF M. FEE||–||$500,000||$670,000|
|RZEDB DEBT||–||$36,520||$203,323||*Average cost to city for principal and|
|interest over 20 years of the bond|
|including 45% federal interest rebate.|
|NET REVENUE||$670,000||American||$553,480||CITY||$216,677||Actual Average City Revenue earned|
|Golf||under Management Agreement.|
|Average yearly loss for city by changing from former Lease agreement to Management agreement ($420,000 – $216,677) = $203,323|
|Overstatement of average net revenues under the Management agreement = $553,400 less $216,667 = $336,332.|
|Alice Loya claimed on 11/2/10 before council that the Mngmnt. A. would net an additional $133,480 dollars to the city while in fact it lost $203,323 dollars.|
|* Total series A Principal $2,705,000/20 years = $135,250 + (total series A interest $2,475,381/20 years = $123,769 x .55 = $68,073) = $203,323.|
|Therefore, Ms Loya’s presentation to the council that this change from a lease agreement to a management agreement would over the course of the bond bring in more revenue to the city was in fact not correct.|
|Over the course of the 20-year life of the RZED Bond, the city will loose conservatively at least 4,000,000 dollars in net revenue and at the same time it takes on liablilites that did not exist under the former lease agreement.|
|Please also note that under the lease agreement city revenues would have increased based on the increased gross revenues from the golf course which was already up over 13% from FY 2011 to FY 2014/2015 as reported by Ms. Loya in January, making this an even worse deal than the numbers above show|
|Finally, the amount Ms. Loya presented to the committee last month for the Management fee for FY 2014/2015 of $587,000 is understated by $103,302 as the correct amount is actually $690,302 ($670,000 in base year times three one percent annual increases per contract terms.)|
|The RZED Bond Debt amount per Ms. Loya is also grossly understated. The correct amount is (100K principal + ($185,550 int. X .55 = $102,053) = $202,053 and not $107,000 as Ms. Loya reported to this committee last month.|
|Conclusion: The numbers as presented by Alice Loya to council on 11/2/2010 and on 01/11/2016, to the Park and Recreation Committee, misrepresent the financial benefit of the Management Agreeement (M.A.) over the former lease agreement. This resulted in the council approving a M.A. that will cost the taxpayers 4 to 5 million dollars in lost net revenue over 20 years.|
Fullerton Golf Course Management Agreement 12/01/10, Page 12 of 23
reports of claims activities on a schedule and in a format reasonably acceptable to the City. City understands and agrees that with respect to all policies of insurance required under this Article 4 (whether such policies are maintained by City or by AGC), the portion of any losses, damages, and expenses paid with respect to such claims which is subject to a deductible amount or a self- insurance or a self-assumption amount shall be the sole responsibility of City. If at any time during the term of this Agreement, City desires to assume responsibility for handling of claims, the parties may amend this provision as provided in Section 11.8, subject to (i) the approval of the applicable insurance companies, and (ii) the reasonable approval of AGC.
ARTICLE 5 – MANAGEMENT FEES
In addition to the costs and expenses to be reimbursed to AGC pursuant to this Agreement, City shall pay AGC the Management Fee computed and payable as follows:
5.1 Management Fee. In consideration of AGC’s services during the Operating Period, City shall pay to AGC a “Management Fee.” For the first twelve (12) months of the term of this Agreement, the Management Fee shall equal Six Hundred Seventy Thousand Dollars ($670,000) per annum (i.e., Fifty Five Thousand Eight Hundred Thirty Three Dollars and Thirty Three Cents ($55,833.33) per month). The Management Fee shall increase on each anniversary of the Effective Date (until termination of this Agreement) by one percent (1%) of the Management Fee in effect immediately prior to the applicable increase. The Management Fee shall be paid to AGC, in equal monthly installments, in accordance with Section 5.2 of this Agreement.
5.2 Payment Schedule. If the Commencement Date does not fall on the first day of the month, then the Management Fee for the first partial month of the Operating Period shall be the pro-rata portion of the Management Fee and such amount shall be payable on the Commencement Date. Commencing with the first full month of the Operating Period, City shall pay AGC the Management Fee monthly in advance on the first day of the month to which it pertains.
ARTICLE 6 – ACCOUNTS; WORKING FUNDS; RECORDS AND REPORTS
6.1 Bank Accounts. City shall establish bank accounts for the Facility at a banking institution or institutions reasonably selected by City, (which banking institution or institutions shall have branches located in close proximity to the Facility), such accounts to be in City’s name (the “City Accounts”). AGC shall also establish bank accounts for the Facility at a banking institution or institutions reasonably approved by City, (which banking institution or institutions shall have branches located in close proximity to the Facility), such accounts to be in City’s name (the “Facility Accounts”). AGC will deposit into the City Accounts all monies received by AGC from the operation of the Facility. City shall deposit all funds required to be furnished by City as working funds under Section 6.3 of this Agreement into the Facility Accounts, and AGC will disburse those monies from the Facility Accounts only for the purposes set forth in Section 6.2. Notwithstanding the provisions of the foregoing, AGC shall be entitled to maintain funds in reasonable amounts in “cash register banks” or in petty cash funds at the Facility.