CC MEETING: April 21, 2020
DATE: April 13, 2020
TO: Erin Rinehart, City Manager
FROM: Scott Whitaker, Parks & Recreation Director
Title
Consider Authorizing City Manager To Execute An Amendment To A Contract With Orion Management Solutions For Management Of Indian Creek Golf Course In An Amount Not To Exceed $316,644.00 For A Total Contract Amount Not To Exceed $476,644.00.
Body
BACKGROUND:
Indian Creek Golf Club (ICGC) is a 36-hole municipal golf course that has been operated by a golf management company, Orion Management Solutions since January 2017. The contract is a shared revenue model, in which the contractor manages all operations of golf and both the City and contractor receive a percentage of total revenue. This allows for both the City and contractor to share in the risk and reward.
As part of the 2018 bond election, funds were approved to enhance the Lakes Course at ICGC. This construction project entailed closing one 18-hole course for an extended period of time. Due to the planned closure staff proposed we enter into a new contract with Orion Management Solutions. The new contract, that was approved on the December 5, 2018 Council meeting and took into consideration the loss of revenue from the planned closure of the Lakes Course. The city moved to a management fee structure until March 2020. This contract would have returned to a revenue share model beginning in April 2020. By making these adjustments the city would pay all the expenses and collect all the revenue of the golf operations. This decision was made due to reduced revenue from green fees, tournaments, merchandise and food and beverage sales.
Since ICGC is closed, due to the Coronavirus, staff is proposing to extend the management fee structure agreement for two additional months. This would put in place the original revenue share agreement effective June 1, 2020.
The City has made a great investment into ICGC and the community has been very excited about the upgrades to the Lakes Course as well as the playability of the Creek Course. Even in a very slow month of February, having both courses open exceeded revenue projections by over $15,000.00. Orion has continued to be a good contractor and has made noticeable reductions in expenses while the facility is not collecting any revenue. The golf maintenance staff is still working to maintain the property, similar to what we are doing in the Parks Department.
There is an expense to maintaining the property and moving all the tournaments that were scheduled to later this summer and in the fall.
FINANCIAL IMPLICATIONS:
City staff budgeted a loss for 2019 and 2020 due to the planned closure of the Lakes Course. Clearly no one anticipated this additional closure and a need for two more months of city funding. This amendment would transition back to a revenue share model in June 2020. The goal of the revenue share model is for the operator/contractor to generate sufficient funds to sustain the golf operations, overhead and bond payment in the future with little to no subsidy from the general fund. A large number of tournaments have rebooked for play later this year, so we are hopeful additional budget amendments are coming to an end.
STAFF RECOMMENDATION/ACTION DESIRED:
Staff recommends the City Council authorize the City Manager to negotiate and amend the contract with Orion Management Solutions for all golf operations at ICGC in an amount not to exceed $316,644.00 for a total contract amount not to exceed $476,644.00. There is a 10% contingency built into this proposal.