city of palo alto (id # 7032) city council staff report

City of Palo Alto (ID # 7032) City Council Staff Report

Report Type: Action Items Meeting Date: 6/20/2016

City of Palo Alto

Summary Title: Approval of Contract and Budget Amendment for Golf Course Reconfiguration Project

Title: Approval of one Contract and two Contract Amendments: (1) Construction Contract with Wadsworth Golf Construction Company in the Amount of $11,964,620 for the Palo Alto Municipal Golf Course Reconfiguration Project, CIP PG-13003; (2) Deductive Change Order Number 1 With Wadsworth Golf Construction Company in the Amount of $1,191,800, Reflecting Cost Savings; and (3) Amendment Number 2 to Contract C13148028 with Golf Group, Ltd. in the Amount of $125,720 for Construction Support and Environmental Mitigation Monitoring Services; Discussion and Direction to Staff Regarding Updated Pro-Forma and Financing Options; Adoption of Resolution Declaring Intention to Reimburse Expenditures From the Proceeds of Tax-Exempt Obligations (e.g. Certificates of Participation) for a Not-To-Exceed Par Amount of $10.5 Million To Fund a Portion of the Cost of the Palo Alto Municipal Golf Course Reconfiguration Project; and Approval of a Budget Amendment in the General Capital Improvement Fund

From: City Manager

Lead Department: Public Works

Recommendation Staff recommends that Council:

1. Approve, and authorize the City Manager or his designee to execute, the attached contract with Wadsworth Golf Construction Company (Attachment A) in the amount of $11,964,620 for the Palo Alto Municipal Golf Course Reconfiguration Project, Capital Improvement Program Project PG-13003; and

2. Approve, and authorize the City Manager or his designee to execute, the

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attached deductive Change Order No. One to the contract with Wadsworth Golf Construction Company (Attachment B) in the amount of $1,191,800 to reflect negotiated cost savings measures to be incorporated into the project; and

3. Authorize the City Manager or his designee to negotiate and execute one or

more additional change orders to the contract with Wadsworth Golf Construction Company for related, additional but unforeseen, work which may develop during the project, the total value of which shall not exceed $1,077,282; and

4. Approve, and authorize the City Manager or his designee to execute, Amendment No. Two to Contract No. C13148028 with Golf Group, Ltd. (Attachment C) in the amount of $125,720 for construction support and environmental mitigation monitoring services for the Palo Alto Municipal Golf Course Reconfiguration Project (PG-13003). The amendment includes $52,395 for basic services and $73,325 for additional services. The revised total contract amount is not to exceed $1,127,751, including $831,995 for basic services and $295,756 for additional services; and

5. Adopt the attached Resolution declaring intention to reimburse expenditures from the proceeds of tax-exempt obligations (e.g. Certificates of Participation) for not-to-exceed par amount of $10,500,000 to fund a portion of the cost of the Palo Alto Municipal Golf Course Reconfiguration Project (Attachment D); and

6. Amend the Fiscal Year 2017 Budget Appropriation Ordinance for the General Capital Improvement Fund by either: OPTION 1

a. Increasing the estimate for Other Revenue from financing proceeds in the amount of $2,017,616;

b. Increasing the Capital Improvement Program appropriation for the Golf Reconfiguration & Baylands Athletic Center Improvements Project PG-13003 by $2,252,248; and

c. Decreasing the Capital Infrastructure Reserve by $234,632.

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OR OPTION 2 a. Increasing the estimate for Other Revenue from financing proceeds

in the amount of $3,218,955; b. Increasing the Capital Improvement Program appropriation for the

Golf Reconfiguration & Baylands Athletic Center Improvements Project PG-13003 by $2,252,248; and

c. Increasing the Capital Infrastructure Reserve by $966,707. Background On October 15, 2012, Council awarded a contract to Golf Group, Ltd. (aka Forrest Richardson & Associates) to design a reconfigured Municipal Golf Course, prepare final bid documents (plans, specifications, and cost estimate) for the reconfiguration project, and prepare an Environmental Impact Report (EIR) for the proposed Golf Course modifications based on a conceptual layout plan approved by Council in July 2012. In accordance with the adopted renovation plan, Forrest Richardson prepared construction documents based on a design concept that will reconfigure the Golf Course to conform to its Baylands setting and rebrand the facility as the Baylands Golf Links at Palo Alto. The Golf Course Reconfiguration Project plan modifies all 18 holes of the Golf Course, a portion of the driving range and practice facility, and replaces an outlying restroom facility, while retaining a regulation golf course with a par of 71. The reconfigured Golf Course will incorporate or modify existing low-lying areas into the Golf Course, reduce the area of managed irrigated turf, and introduce areas of native grassland and wetland habitat. The project design has been developed to achieve the following objectives:

Create a golf course that provides a more interesting layout for golfers of all levels, with enhanced wildlife habitat, improved wetland areas, and reduced usage of water, pesticides, and maintenance labor for turf and landscaping;

Expand recreation areas to satisfy existing and projected needs;

Integrate the Golf Course into the Baylands design theme;

Mitigate for impacts on the Golf Course resulting from the San Francisquito Creek Joint Powers Authority’s (JPA) flood control project;

Improve Golf Course playing conditions – turf, drainage, and irrigation; and

Increase rounds of play and expand recreational opportunities.

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On June 17, 2013, Council awarded a contract to Don Tucker & Son for the importation and stockpiling of soil for use on the Golf Course Reconfiguration Project. The contractor paid the City for the right to stockpile 365,000 cubic yards for the Golf Course Project at a soil stockpile site on the west side of the Golf Course. The soil importation process, which was completed in late summer 2015, generated $1.2 million that will be used to directly offset the cost of the golf course construction work. Implementation of the Golf Course Reconfiguration Project requires the acquisition of regulatory permits from state and federal resource agencies. Specifically, the project requires a Section 404 Permit from the U.S. Army Corps of Engineers (Corps) (which also involves consultation with the U.S. Fish and Wildlife Service with respect to potential impacts to federally-listed endangered species) and a Section 401 Water Quality Certification from the San Francisco Bay Regional Water Quality Control Board (Water Board). Permit applications for the Golf Course Reconfiguration Project were submitted on December 23, 2013. In order to increase the chances of retaining a qualifed golf course builder to build the project, staff implemented a prequalification process for potential bidders during Fall 2013. Interested contractors submitted information regarding their company with respect to specific golf course construction experience, audited financial statements, ability to provide required bonds and insurance, and on-the-job safety records for staff review. As a primary screening tool, the prequalification criteria required prospective bidders to hold status as Certified Golf Course Builders with the Golf Course Builders Association of America. Contractor submittals were reviewed and scored by staff to identify firms with the requisite experience, financial strength, safety record, and client relations to meet or exceed the minimum scoring criteria. As a result of the pre-qualification process, staff identified four golf course builders who had the exclusive right to submit a bid for the construction of the Golf Course Reconfiguration Project. On February 3, 2014, Council granted discretionary approval for the Site and Design Review application for the Golf Course Reconfiguration Project, certified the final EIR for the project, and adopted a Park Improvement Ordinance reflecting the physical changes being made to the dedicated parkland at the Golf Course.

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On February 24, 2014, a notice inviting formal bids (IFB) for the Golf Course Reconfiguration Project was posted at City Hall and sent to the pre-qualified golf course builders. Bids were received from all four pre-qualified contractors on April 15, 2014 and ranged from a low of $8,987,809 to a high of $9,940,488. Council ultimately was forced to reject all bids because the City was not able to secure the regulatory permits needed for project construction within the bid period. Permit acquisition became a much more significant obstacle to progress than staff or its environmental consultant originally anticipated. The state and federal permitting processes were slow and cumbersome, and were complicated by the Golf Course Reconfiguration Project’s location adjacent to and connectivity with the San Francisquito Creek Joint Powers Authority’s (JPA) Bay-to-Highway 101 Flood Protection Project. Staff received a draft Section 401 Water Quality Certification from the Water Board for the Project on June 15, 2016, and the draft Section 404 Permit from the Corps is forthcoming. The two final regulatory permits are expected to be received no later than June 30, thus providing the Golf Course Reconfiguration Project with full authorization to proceed. Staff will provide an update on permit status during its presentation to Council on June 20. Discussion Bid Process On March 1, 2016, staff implemented a second bidder prequalification process in an attempt to identify additional qualified golf course builders who would be eligible to submit bids for construction of the Golf Course Reconfiguration Project. No builders responded to the solicitation, so the original four pre-qualified firms were still the only ones authorized to submit bids for the project. On April 22, 2016, a notice inviting formal bids (IFB) for the Golf Course Reconfiguration Project was posted on the City’s project solicitation web portal and sent to the four pre-qualified golf course builders with a bidding period of 32 days. Bids were received from three of the pre-qualified contractors on May 24, 2016, as listed on the Bid Summary (Attachment E).

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Bid Name/Number Palo Alto Municipal Golf Course Reconfiguration Project, Capital Improvement Program Project PG- 13003/IFB # 163847

Proposed Length of Project Through September 11, 2017

Number of Bids Issued to Contractors 4 pre-qualified contractors Total Days to Respond to Bid 32

Pre-Bid Meeting? Yes Number of Company Attendees at Pre- Bid Meeting

4

Number of Bids Received 3

Bid Price Range $11,964,920 to $13,374,960 Staff has reviewed all bids submitted and recommends that the bid of $11,964,620 submitted by Wadsworth Golf Construction Company be accepted and that Wadsworth Golf Construction Company be declared the lowest responsible bidder. Staff recommends that the contract scope of work include the Base Bid only. The low bid is 20% percent above the engineer’s estimate of $9,964,651. The elevated bid prices are attributable to a number of factors:

(a) the requirement that the contractor pay prevailing labor wages (which was not in effect during the bid solicitation in 2014);

(b) higher construction material costs; and (c) a less competitive bidding environment due to the active economy. In

accordance with the provisions of the bid documents, the bids are valid through August 22, 2016.

Initial Deductive Contract Change Order As the low bid exceeds the budget established for the Municipal Golf Course Reconfiguration Project CIP, staff has been meeting with the low bidder to identify cost-saving changes that can be made to the project design in order to reduce construction costs without sacrificing project quality or functionality. Based upon discussions with the golf course architect and the low bidder, staff has negotiated a deductive change order that will eliminate or modify several non-essential components of the project without significantly affecting its functionality. For example, cost savings have been achieved by slight reductions in earthwork quantities, green and tee sizes, and cart path width, elimination of the

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soil moisture sensors and weather station, and minor modifications to the project specifications without impacting the overall scope and appeal of the new golf course. The change order also incorporates cost-saving value engineering ideas generated by the low bidder including modified fertilizer and soil amendments and alternative sand specifications that will result in further cost reductions. One moderately impactful cost savings item included in the proposed change order is the deferral of a new golf course restroom building. The work to install new sanitary sewer and electrical connections to the site of the new restroom is retained in the contract to facilitate the construction of the restroom at a later date. Inclusion of the restroom building in the proposed construction contract would increase the contract price by $225,000. An existing, but aged restroom will no longer be demolished and will be retained for use. The combination of recommended cost savings measures results in a deductive change order in the amount of $1,191,800. Staff recommends that Council approve, and authorize the City Manager or his designee to execute, the attached deductive Change Order No. One with Wadsworth Golf Construction Company in the amount of $1,191,800 that will be applicable concurrently with the construction contract. As modified by Change Order No. One, the base construction cost is $10,772,820. In addition, staff requests authority to execute future change orders to the contract with Wadsworth Golf Construction Company in the amount of $1,077,282 (which equals 10 percent of the net contract amount following execution of Change Order No. One) for related, additional but unforeseen work which may develop during the project. Therefore, the total construction contract would be $11,850,102. Amendment No. Two to Golf Course Architect Agreement During construction of the Golf Course Reconfiguration Project, there will be a continuing need for the professional services of Golf Course Architect Forrest Richardson and his environmental sub-consultants. Services include construction support services such as review of contractor submittals, responses to requests for information from the construction contractor, construction progress payment and change order review, and periodic site visits by Forrest Richardson to provide design guidance, inspect project progress, and ensure conformance with the Golf Course design aesthetic and functionality. In addition, Dale Siemens, a close

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associate of Forrest Richardson with extensive golf course construction experience, will be retained as a subcontractor to serve as an on-site project representative conducting quality control inspections and acting as the liaison between the contractor, City staff, and the Golf Course architect. The final component of the construction stage services is monitoring of the environmental mitigation measures stipulated in the EIR to be implemented during construction of the project. Monitoring tasks, including contractor training, site surveys and implementation of measures for the protection of sensitive plants, birds, wetlands, and cultural and paleontological resources, and other environmental control measures, will be performed by ICF International or Dr. Jeffrey Froke in their role as sub-consultants to Forrest Richardson. Some of the construction stage services described above were incorporated into Amendment No. One to the professional services agreement with Golf Group, Ltd. (aka Forrest Richardson & Associates), which was approved in June 2014. Much of the previously approved construction stage funding included in Amendment No. One was exhausted during the extensive project permitting process. The attached Amendment No. Two includes the supplemental funding needed for construction support services throughout the anticipated project duration. Financial Analysis In order to help assess the potential financial performance of the Golf Course during and after construction, staff entered into a contract with the National Golf Foundation (NGF) in 2012 to provide an independent Return on Investment analysis on the design options and long-range Golf Course plan. The NGF report was updated in 2014 to reflect the new project cost information received during the initial construction bidding process and revised service contracts for golf course management and maintenance. Once again, staff has retained NGF to update the pro-forma to reflect updated project costs and current economic conditions facing the golf course industry. The updated NGF report, pro formas, and sensitivity analysis (Attachment F) discuss the changes in project cost and the resulting changes to the projected future operational profit/loss status of the Golf Course that have occurred since the last Council update in 2014. NGF’s updated analysis does show a modest net attrition in golf participation nationwide, but that our regional area remains a strong golfing market with demographic profiles to support golf including population growth, higher median income, and higher average age. Despite the closure of some area golf courses

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due to supply and demand equilibrium and the existence of some local golf courses not able to fully recover overwhelming debt service expenses, NGF reports Palo Alto’s Option G reconfiguration should result in a desirable course with regional draw. NGF estimates the new Golf Course will generate sufficient revenues to cover both operating costs and debt service once the new course has reestablished itself in the region within one to two years after re-opening. Although staff concurs with the overall NGF analysis, there are risks and assumptions which do have the potential to negatively impact the course financially. The re-opening of the reconfigured golf course and rebranding as Baylands Golf Links relies heavily on the course being the highest quality public golf course experience in the region and a local economy that will continue to support high incomes, corporate presence, and visitation to the area. To supplement the reconfigured golf course in providing a superior golf experience resulting in a resurgence of rounds played and revenue, NGF emphasizes pairing with quality control, effective branding, customer service, and cosmetic improvements to the course entryway, buildings, and grounds. Because pro formas are based on some assumptions which we can control, such as pricing and golf course maintenance, and others we cannot, such as weather and the economy, staff asked NGF to run several scenarios of sensitivity analysis representing deviations from a “base” model. The three additional pro forma scenarios reflect

a) Number of rounds of golf played reduced to moderately lower than projected performance, continuing a downward trend;

b) Average green fees increasing over current fees by less than half the 15% projected increase in the base model; and

c) Number of rounds of golf played and average green fees both lower, in combination.

Because of the virtually limitless number of combinations, other variables such as fixed operating expenses remain the same as in the base scenario. Table 1 and Table 2 below represent adjusted NGF pro formas for two debt financing scenarios. The dollar amounts listed in the tables are Net Revenue (Loss).

Table 1 represents the lowest level of financing and assumes $1.2 million of project soft costs (design, environmental impact report, and attributed staff

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salaries and benefits) would be funded by the City’s General Capital Infrastructure Reserve.

Table 2 represents a higher level of financing that is inclusive of these $1.2 million in softs costs, assuming no support from the General Capital Infrastructure Reserve.

Both tables reflect adjustments to NGF’s pro formas to account for updated financing and debt service amounts from what was provided to NGF to prepare its report. Full details of NGF’s pro formas are contained in their report. (Attachment F) Pro forma scenario assumptions outlined in Table 1 and Table 2:

Base assumes 71,000 annual Rounds of Golf, Fee increase of 15% from current fees, and 10% of Revenue set aside for an Operating/Capital Reserve

Reduced Rounds assumes 61,000 Rounds of Golf instead of 71,000

Reduced Fees assumes only about half of the 15% fee increase

Reduced Rounds and Fees incorporates both of the above Table 1. Net Revenue (Loss) of Base and Three Pro Forma Scenarios in $000s:

$8,166,053 Financing w/ $495,529 annual Debt Service

FY 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026

Base ($842) ($733) $94 $406 $390 $374 $367 $370 $372 $374

Reduced Rounds

($842) ($1,011) ($261) $0 ($22) ($45) ($60) ($67) ($75) ($84)

Reduced Fees

($842) ($837) ($45) $247 $229 $210 $200 $189 $187 $184

Reduced Rounds and Fees

($842) ($1,100) ($380) ($136) ($160) ($185) ($203) ($214) ($225) ($238)

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Table 2. Net Revenue (Loss) of Base and Three Pro Forma Scenarios in $000s:

$9,367,392 Financing w/ $566,484 annual Debt Service

FY 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026

Base ($842) ($733) $23 $335 $319 $303 $296 $299 $301 $303

Reduced Rounds

($842) ($1,011) ($332) ($71) ($93) ($116) ($131) ($138) ($146) ($155)

Reduced Fees

($842) ($837) ($115) $176 $158 $139 $129 $118 $116 $113

Reduced Rounds and Fees

($842) ($1,100) ($451) ($207) ($231) ($256) ($274) ($285) ($296) ($309)

Fiscal Years 2017 and 2018 reflect operational losses between $842,000 and $1,100,000 due primarily to course closure and debt service incurred for prior debt issuance from 1998 ($429,020 annual debt service) and new debt issuance costs for the Project. The debt service from the 1998 financing will be retired in Fiscal Year 2018. Also, contained within the pro formas is an annual Operating and Capital Reserve, set at 10% of gross green fee revenue. The adjusted NGF pro forma analysis, especially for the reduced rounds of golf and reduced fee scenarios, shows that there are risks in the ability of the Golf Course to generate revenues sufficient to cover operating and debt service expenses. Should such a scenario emerge, it will be necessary for the City’s General Fund to subsidize Golf Course operations. There are limited cost reduction options once the Golf Course is back in operation. Since the majority of the work will be under contract, the operating expenses will have to be maintained at the recommended level to keep the course in desirable playing condition. In addition, the debt service is a binding legal obligation. It is difficult to predict if a future General Fund subsidy will be needed, but the potential exists. Staff would have to reduce other expenses in non-golf activities to reduce any impacts to General Fund reserves in the event future subsidies are required. The pro formas summarized above and in the NGF report include the full Golf Reconfiguration & Baylands Athletic Center Improvements (PG-13003) costs going forward. As described earlier, the estimated $1.2 million for golf course design, preparation of the Environmental Impact Report, and attributed staff salaries and benefits are not included in the assumed bond financing in Table 1. Also not included in the financial analysis in Table 1 or Table 2 is recovery of the Golf

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Course’s estimated losses over Fiscal Years 2014, 2015, and 2016 due to project permitting delays for both the JPA Flood Protection and Golf Course projects, in the amount of $2.2 million in the City’s General Fund. Should the $2.2 million in historical estimated losses be included in the bond financing, annual cost recovery for the Golf Course will be very difficult to attain as the debt service is expected to be higher than what the Golf Course will be able to cover through revenue and would likely result in annual General Fund subsidies to operate the Golf Course. Overall Project Funding Plan In order to minimize financing and administrative expense, staff is planning for the possibility of issuing Certificates of Participation (COPs) in late September or early October 2016 covering both the Golf Course renovation and the purchase of the Hamilton Avenue Post Office (PO). Council will meet on August 27 to consider buying the downtown Post Office. Should Council decide to move forward with this acquisition, escrow would close by the end of September, thereby allowing staff to issue COPs for both projects simultaneously, reducing financing and administrative expense accordingly. Moreover, by combining the COP issues, savings also will be realized for legal, financial and other bond issuance costs. Staff is providing Council with two financing options: 1) have the project cost funded via the General Fund Infrastructure Reserve will all but $1.2 million in project costs reimbursed by the issuance of COPs (Table 1); or 2) have the project cost funded via the General Fund Infrastructure Reserve (IR) with reimbursement of all costs by the issuance of the COPs (Table 2). Either scenario calls for the Golf Course operations to generate the net revenues needed to make the annual debt service, although there is risk of revenues being insufficient to meet future obligations. Project Funding and Certificates of Participation Staff estimates net funding of $9.4 million will be required to complete the Golf Course reconfiguration project, after accounting for outside revenue sources. The City has received $1.2 million in revenue from the importation of soil for the Golf Course reconfiguration and will receive $3.0 million from the San Francisquito Creek JPA as a mitigation payment for impacts to the Golf Course in calendar year 2017. The JPA will reimburse the City after $3.0 million in Flood Protection Project work is completed and it receives that amount in grant reimbursements from the State Department of Water Resources (estimated to be received in FY 2017).

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Table 3 shows the breakdown of total capital costs for the Golf Course Reconfiguration Project (including costs already incurred in prior years). Table 4 shows the net amount to be financed through COPs after accounting for receipt of outside reimbursements. Table 3: Breakdown of Golf Course Reconfiguration Project Capital Costs

A. Construction Contract (Attachment A) $ 11,964,620

B. Deductive Change Order (Attachment B) (1,191,800)

C. Revised Contract $ 10,772,820

D. 10% Contingency 1,077,282

E. Contract Total w/ Contingency $ 11,850,102

F. Construction Support / Monitoring Services (Att C) 125,720

G. Tree Removal Mitigation 220,000

H. Signage 66,000

I. Design and Environmental Impact Report 1,002,031

J. Salary & Benefits 199,308

K. Miscellaneous 84,061

L. Total Capital Costs for Project $ 13,547,222

Table 4: Calculation of Golf Course Reconfiguration Project Costs to be Financed by COPs

A. Total Capital Costs for Project $13,547,222

B. Soil Import Revenue ($1,179,830)

C. Net Funding Needed for Project $12,367,392

D. JPA Reimbursement ($3,000,000)

E. Net Costs of Project to be financed $ 9,367,392

In 2012 Council approved the Golf Reconfiguration Improvements CIP PG-13003, and approximately $1 million has been spent to-date on soft costs for project design, environmental assessment, and permitting. At the time of the printing of this report, the current available CIP balance is estimated at $9.9 million, slightly lower than levels assumed in the development of the FY 2017 Adopted Capital

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Budget ($10.3 million). Therefore, the funds needed to award the project, after adjusting for prior year expenditures, is $12.5 million, a variance of $2.6 million from the estimated available CIP balance (a variance of $2.3 million when compared to the FY 2017 Adopted Capital Budget). This increase in cost is recommended to be recovered through additional COP proceeds. A table outlining the necessary FY 2017 budget adjustments is outlined in the Resource Impacts section of this report. As outlined in Table 1 and Table 2 and the recommendation language in this report, there are two potential financing levels. Below is a summary of those options. Staff is requesting Council adopt a reimbursement resolution for a maximum of $10,500,000 to provide some flexibility in case interest rates move from the current estimate to the date of issuance of the COPs. A bond reimbursement resolution is attached (Attachment D) for Council consideration and is recommended for adoption. Option 1 Council may opt to fund the $1.2 million in “soft costs” from the General Capital Infrastructure Reserve. This option would result in a lower financed amount of $9,011,212. The consideration of the lower debt issuance amount is to improve the ability of the reconfigured golf course to achieve full cost recovery once back in operation. The components of this figure are outline below:

A. Net project financing of $8,166,053 B. Cost of capitalized interest would be $604,909

Expense to defer debt service payments until golf course opens C. Cost of issuance $240,250

Based on borrowing $8.2 million for 30 years at an estimated 3.51% interest rate, annual average debt service for the Golf Course is estimated at $495,529. Option 2 Council may adopt to include all costs associated with the capital project to be funded through financing, with no draw on the General Capital Infrastructure Reserve. This option would result in an estimated $10,301,541 in financing. The components of this figure are outline below:

A. Net project financing of $9,367,392 This estimated net project financing level assumes staff’s recommended

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reimbursement to the Infrastructure Reserve for $1.2 million in “soft costs.” This amount includes all of the Golf Course’s project costs (minus soil import revenue and JPA mitigation contribution).

B. Capitalized interest $693,899 Expense to defer debt service payments until golf course opens

C. Cost of issuance of $240,250 Based on borrowing $9.4 million for 30 years at an estimated 3.51% interest rate, annual average debt service for the Golf Course is estimated at $566,484. Timeline Implementation of the Golf Course Reconfiguration Project is scheduled to conform to the following milestone dates: June 20, 2016 Award of construction contract July 1, 2016 Start of construction

Closure of Golf Course for public use Sept/Oct, 2016 Issuance of Certificates of Participation October 1, 2017 Open Baylands Golf Links for public use Staff has received confirmation from Bond Counsel that the City may lawfully issue debt after construction has begun. Resource Impact The construction phase of the project and attributed staff salaries and benefits is estimated at $12.5 million, of which $10.3 million has been appropriated as part of the FY 2017 Adopted Capital Budget which also assumes $3 million in revenue from the San Franscisquito Creek JPA and $1.2 million in revenue from the imported soil. Therefore, staff is requesting an additional $2,252,248 appropriation for Capital Improvement Program Project PG-13003, Golf Course Reconfiguration Project. As previously discussed, the Council has an option to have all funds reimbursed through financing or have the General Capital Infrastructure Reserve (IR) absorb $1.2 million for the soft costs. Should the Council opt to finance the lower level, the $1.2 million draw on the IR could potentially be mitigated by updated FY 2016

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General Fund tax revenue projections. As reference in the Finance Committee 3rd Quarter Financial Report, based on current FY 2016 projections, revenue receipts may reach $1.1 million above assumptions, primarily due to increased property and utility tax revenues. These increased revenues would be transferred between the General Fund and the General Capital Improvement Fund as part of the FY 2016 year end process. The details of the two financing options and the impacts on the FY 2017 Adopted Budget are outlined below. OPTION 1

Prior Year Actuals

FY 2017 Adopted Budget

Recommended Adjustment

FY 2017 Revised Budget

PROJECT TOTAL

Revenues Soil Imports 1,179,830 0 1,179,830 1,179,830

SF Creek Joint Powers* 2,935,944 0 2,935,944 2,935,944

Financing Proceeds 6,148,437 2,017,616 8,166,053 8,166,053

Total Revenues 10,264,211 2,017,616 12,345,883 12,345,883

Expenses Golf Course Reconfiguration

1,003,979 10,291,001 2,252,248 12,543,249 13,547,222

Impact to IR (234,632) (1,201,339) * It is anticipated that actual reimbursements will be $3.0 million.

OPTION 2

Prior Year Actuals

FY 2017 Adopted Budget

Recommended Adjustment

FY 2017 Revised Budget

PROJECT TOTAL

Revenues Soil Imports 1,179,830 0 1,179,830 1,179,830

SF Creek Joint Powers* 2,935,944 0 2,935,944 2,935,944

Financing Proceeds 6,148,437 3,218,955 9,367,392 9,367,392

Total Revenues 10,264,211 3,218,955 13,547,222 13,547,222

Expenses Golf Course Reconfiguration

1,003,979 10,291,001 2,252,248 1,543,249 13,547,222

Impact to IR 966,707 0 * It is anticipated that actual reimbursements will be $3.0 million.

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Environmental Review An Environmental Impact Report (EIR) was prepared to evaluate the proposed potential impacts of the Palo Alto Municipal Golf Course Reconfiguration Project and to identify the appropriate mitigation measures in accordance with the provisions of the California Environmental Quality Act (CEQA). Council, acting on behalf of the City of Palo Alto in its role as lead agency for purposes of CEQA, adopted a resolution on February 3, 2014, certifying the final EIR for the project. Attachments:

Attachment A - Contract (PDF)

Attachment B - Deductive Change Order (PDF)

Attachment C - Contract Amendment (PDF)

Attachment D - Resolution Golf Course COPs Reimbursement (PDF)

Attachment E - Bid Summary (PDF)

Attachment F - NGF Palo Alto Report - 2016 Final Version (PDF)

Invitation for Bid (IFB) Package 1 Rev. April 27, 2016 CONSTRUCTION CONTRACT

CONSTRUCTION CONTRACT

Contract No. C16163847

City of Palo Alto

Palo Alto Municipal Golf Course Reconfiguration Project

lolmos

Text Box

Attachment A


CONSTRUCTION CONTRACT TABLE OF CONTENTS

SECTION 1 INCORPORATION OF RECITALS AND DEFINITIONS…………………………………….…………..6

1.1 Recitals…………………………………………………………………………………………………………………….6

1.2 Definitions……………………………………………………………………………………………………………….6

SECTION 2 THE PROJECT………………………………………………………………………………………………………...6

SECTION 3 THE CONTRACT DOCUMENTS………………………………………………………………………………..7

3.1 List of Documents…………………………………………………………………………………………….........7

3.2 Order of Precedence……………………………………………………………………………………………......7

SECTION 4 CONTRACTOR’S DUTY…………………………………………………………………………………………..8

4.1 Contractor's Duties…………………………………………………………………………………………………..8

SECTION 5 PROJECT TEAM……………………………………………………………………………………………………..8

5.1 Contractor's Co-operation………………………………………………………………………………………..8

SECTION 6 TIME OF COMPLETION…………………………………………………………………………………….......8

6.1 Time Is of Essence…………………………………………………………………………………………………….8

6.2 Commencement of Work…………………………………………………………………………………………8

6.3 Contract Time…………………………………………………………………………………………………………..8

6.4 Liquidated Damages…………………………………………………………………………………………………8

6.4.1 Other Remedies……………………………………………………………………………………………………..9

6.5 Adjustments to Contract Time………………………………………………………………………………….9

SECTION 7 COMPENSATION TO CONTRACTOR……………………………………………………………………….9

7.1 Contract Sum……………………………………………………………………………………………………………9

7.2 Full Compensation……………………………………………………………………………………………………9

SECTION 8 STANDARD OF CARE……………………………………………………………………………………………..9

8.1 Standard of Care…………………………………………………………………………………..…………………9

SECTION 9 INDEMNIFICATION…………………………………………………………………………………………..…10

9.1 Hold Harmless……………………………………………………………………………………………………….10

9.2 Survival…………………………………………………………………………………………………………………10

SECTION 10 NON-DISCRIMINATION……..………………………………………………………………………………10

10.1 Municipal Code Requirement…………….………………………………..……………………………….10

SECTION 11 INSURANCE AND BONDS.…………………………………………………………………………………10


11.1 Evidence of Coverage…………………………………………………………………………………………..10

SECTION 12 PROHIBITION AGAINST TRANSFERS…………………………………………………………….…11

12.1 Assignment………………………………………………………………………………………………………….11

12.2 Assignment by Law.………………………………………………………………………………………………11

SECTION 13 NOTICES …………………………………………………………………………………………………………….11

13.1 Method of Notice …………………………………………………………………………………………………11

13.2 Notice Recipents ………………………………………………………………………………………………….11

13.3 Change of Address……………………………………………………………………………………………….12

SECTION 14 DEFAULT…………………………………………………………………………………………………………...12

14.1 Notice of Default………………………………………………………………………………………………….12

14.2 Opportunity to Cure Default…………………………………………………………………………………12

SECTION 15 CITY'S RIGHTS AND REMEDIES…………………………………………………………………………..13

15.1 Remedies Upon Default……………………………………………………………………………………….13

15.1.1 Delete Certain Services…………………………………………………………………………………….13

15.1.2 Perform and Withhold……………………………………………………………………………………..13

15.1.3 Suspend The Construction Contract…………………………………………………………………13

15.1.4 Terminate the Construction Contract for Default………………………………………………13

15.1.5 Invoke the Performance Bond………………………………………………………………………….13

15.1.6 Additional Provisions……………………………………………………………………………………….13

15.2 Delays by Sureties……………………………………………………………………………………………….13

15.3 Damages to City…………………………………………………………………………………………………..14

15.3.1 For Contractor's Default…………………………………………………………………………………..14

15.3.2 Compensation for Losses…………………………………………………………………………………14

15.4 Suspension by City……………………………………………………………………………………………….14

15.4.1 Suspension for Convenience……………………………………………………………………………..14

15.4.2 Suspension for Cause………………………………………………………………………………………..14

15.5 Termination Without Cause…………………………………………………………………………………14

15.5.1 Compensation………………………………………………………………………………………………….15

15.5.2 Subcontractors………………………………………………………………………………………………..15

15.6 Contractor’s Duties Upon Termination………………………………………………………………...15

SECTION 16 CONTRACTOR'S RIGHTS AND REMEDIES……………………………………………………………16

16.1 Contractor’s Remedies……………………………………..………………………………..………………….16


16.1.1 For Work Stoppage……………………………………………………………………………………………16

16.1.2 For City's Non-Payment…………………………………………………………………………………….16

16.2 Damages to Contractor………………………………………………………………………………………..16

SECTION 17 ACCOUNTING RECORDS………………………………………………………………………………….…16

17.1 Financial Management and City Access………………………………………………………………..16

17.2 Compliance with City Requests…………………………………………………………………………….17

SECTION 18 INDEPENDENT PARTIES……………………………………………………………………………………..17

18.1 Status of Parties……………………………………………………………………………………………………17

SECTION 19 NUISANCE……………………………………………………………………………………………………….…17

19.1 Nuisance Prohibited……………………………………………………………………………………………..17

SECTION 20 PERMITS AND LICENSES…………………………………………………………………………………….17

20.1 Payment of Fees…………………………………………………………………………………………………..17

SECTION 21 WAIVER…………………………………………………………………………………………………………….17

21.1 Waiver………………………………………………………………………………………………………………….17

SECTION 22 GOVERNING LAW AND VENUE; COMPLIANCE WITH LAWS……………………………….18

22.1 Governing Law…………………………………………………………………………………………………….18

22.2 Compliance with Laws…………………………………………………………………………………………18

22.2.1 Palo Alto Minimum Wage Ordinance…………….………………………………………………….18

SECTION 23 COMPLETE AGREEMENT……………………………………………………………………………………18

23.1 Integration………………………………………………………………………………………………………….18

SECTION 24 SURVIVAL OF CONTRACT…………………………………………………………………………………..18

24.1 Survival of Provisions……………………………………………………………………………………………18

SECTION 25 PREVAILING WAGES………………………………………………………………………………………….18

SECTION 26 NON-APPROPRIATION……………………………………………………………………………………….19

26.1 Appropriation………………………………………………………………………………………………………19

SECTION 27 AUTHORITY……………………………………………………………………………………………………….19

27.1 Representation of Parties…………………………………………………………………………………….19

SECTION 28 COUNTERPARTS………………………………………………………………………………………………..19

28.1 Multiple Counterparts………………………………………………………………………………………….19

SECTION 29 SEVERABILITY……………………………………………………………………………………………………19

29.1 Severability………………………………………………………………………………………………………….19

SECTION 30 STATUTORY AND REGULATORY REFERENCES …………………………………………………..19


30.1 Amendments of Laws…………………………………………………………………………………………..19

SECTION 31 WORKERS’ COMPENSATION CERTIFICATION………………………………………………….….19

31.1 Workers Compensation…………………………………………………………………………………….19

SECTION 32 DIR REGISTRATION AND OTHER SB 854 REQUIREMENTS………………………………..…20

32.1 General Notice to Contractor…………………………………………………………………………….20

32.2 Labor Code section 1771.1(a)…………………………………………………………………………….20

32.3 DIR Registration Required…………………………………………………………………………………20

32.4 Posting of Job Site Notices…………………………………………………………………………………20

32.5 Payroll Records…………………………………………………………………………………………………20


CONSTRUCTION CONTRACT

THIS CONSTRUCTION CONTRACT entered into on June 20, 2016 (“Execution Date”) by and between the CITY OF PALO ALTO, a California chartered municipal corporation ("City"), and Wadsworth Golf Construction Company ("Contractor"), is made with reference to the following:

R E C I T A L S: A. City is a municipal corporation duly organized and validly existing under the laws of the State of California with the power to carry on its business as it is now being conducted under the statutes of the State of California and the Charter of City. B. Contractor is a Corporation duly organized and in good standing in the State of Delaware, Contractor’s License Number 455877 and Department of Industrial Relations Registration Number 1000029901. Contractor represents that it is duly licensed by the State of California and has the background, knowledge, experience and expertise to perform the obligations set forth in this Construction Contract. C. On April 22, 2016, City issued an Invitation for Bids (IFB) to contractors for the Palo Alto Municipal Golf Course Reconfiguration Project (“Project”). In response to the IFB, Contractor submitted a Bid. D. City and Contractor desire to enter into this Construction Contract for the Project, and other services as identified in the Contract Documents for the Project upon the following terms and conditions.

NOW THEREFORE, in consideration of the mutual promises and undertakings hereinafter set forth and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, it is mutually agreed by and between the undersigned parties as follows:

SECTION 1 INCORPORATION OF RECITALS AND DEFINITIONS.

1.1 Recitals. All of the recitals are incorporated herein by reference. 1.2 Definitions. Capitalized terms shall have the meanings set forth in this Construction Contract and/or in the General Conditions. If there is a conflict between the definitions in this Construction Contract and in the General Conditions, the definitions in this Construction Contract shall prevail.

SECTION 2 THE PROJECT. The Project is the Palo Alto Municipal Golf Course Reconfiguration Project, located at 1875 Embarcadero Road, Palo Alto, CA. 94303.


SECTION 3 THE CONTRACT DOCUMENTS.

3.1 List of Documents. The Contract Documents (sometimes collectively referred to as “Agreement” or “Bid Documents”) consist of the following documents which are on file with the Purchasing Division and are hereby incorporated by reference.

1) Change Orders

2) Field Orders 3) Contract

4) Bidding Addenda 5) Special Provisions 6) General Conditions 7) Project Plans and Drawings 8) Technical Specifications 9) Instructions to Bidders 10) Invitation for Bids 11) Contractor's Bid/Non-Collusion Declaration

12) Reports listed in the Contract Documents 13) Public Works Department’s Standard Drawings and Specifications (most current version at

time of Bid) 14) Utilities Department’s Water, Gas, Wastewater, Electric Utilities Standards (most current

version at time of Bid) 15) City of Palo Alto Traffic Control Requirements

16) City of Palo Alto Truck Route Map and Regulations

17) Notice Inviting Pre-Qualification Statements, Pre-Qualification Statement, and Pre-

Qualification Checklist (if applicable) 18) Performance and Payment Bonds

3.2 Order of Precedence.

For the purposes of construing, interpreting and resolving inconsistencies between and among the provisions of this Contract, the Contract Documents shall have the order of precedence as set forth in the preceding section. If a claimed inconsistency cannot be resolved through the order of precedence, the City shall have the sole power to decide which document or provision shall govern as may be in the best interests of the City.


SECTION 4 CONTRACTOR’S DUTY.

4.1 Contractor’s Duties Contractor agrees to perform all of the Work required for the Project, as specified in the Contract Documents, all of which are fully incorporated herein. Contractor shall provide, furnish, and supply all things necessary and incidental for the timely performance and completion of the Work, including, but not limited to, provision of all necessary labor, materials, equipment, transportation, and utilities, unless otherwise specified in the Contract Documents. Contractor also agrees to use its best efforts to complete the Work in a professional and expeditious manner and to meet or exceed the performance standards required by the Contract Documents.

SECTION 5 PROJECT TEAM.

5.1 Contractor’s Co-operation. In addition to Contractor, City has retained, or may retain, consultants and contractors to provide professional and technical consultation for the design and construction of the Project. The Contract requires that Contractor operate efficiently, effectively and cooperatively with City as well as all other members of the Project Team and other contractors retained by City to construct other portions of the Project. SECTION 6 TIME OF COMPLETION. 6.1 Time Is of Essence.

Time is of the essence with respect to all time limits set forth in the Contract Documents. 6.2 Commencement of Work.

Contractor shall commence the Work on the date specified in City’s Notice to Proceed. 6.3 Contract Time.

Work hereunder shall begin on the date specified on the City’s Notice to Proceed and shall be completed

not later than September 11, 2017. within calendar days () after the commencement date specified in City’s Notice to

Proceed.

By executing this Construction Contract, Contractor expressly waives any claim for delayed early completion.

6.4 Liquidated Damages. Pursuant to Government Code Section 53069.85, if Contractor fails to achieve Substantial Completion of the entire Work within the Contract Time, including any approved extensions thereto, City may assess liquidated damages on a daily basis for each day of Unexcused Delay in achieving Substantial Completion, based on the amount of Three Thousand Five Hundred dollars ($3500) per day, or as otherwise specified in the Special Provisions. Liquidated damages may also be separately assessed for failure to meet milestones specified elsewhere in the Contract Documents, regardless of impact on the time for achieving Substantial Completion. The assessment of liquidated damages is not a penalty but considered to be a reasonable


estimate of the amount of damages City will suffer by delay in completion of the Work. The City is entitled to setoff the amount of liquidated damages assessed against any payments otherwise due to Contractor, including, but not limited to, setoff against release of retention. If the total amount of liquidated damages assessed exceeds the amount of unreleased retention, City is entitled to recover the balance from Contractor or its sureties. Occupancy or use of the Project in whole or in part prior to Substantial Completion, shall not operate as a waiver of City’s right to assess liquidated damages. 6.4.1 Other Remedies. City is entitled to any and all available legal and equitable remedies City may have where City’s Losses are caused by any reason other than Contractor’s failure to achieve Substantial Completion of the entire Work within the Contract Time. 6.5 Adjustments to Contract Time. The Contract Time may only be adjusted for time extensions approved by City and memorialized in a Change Order approved in accordance with the requirements of the Contract Documents. SECTION 7 COMPENSATION TO CONTRACTOR. 7.1 Contract Sum. Contractor shall be compensated for satisfactory completion of the Work in compliance with the Contract Documents the Contract Sum of Eleven Million Nine Hundred Sixty-Four Thousand Six Hundred Twenty Dollars ($11,964,620).

[This amount includes the Base Bid and Additive Alternates N/A.] 7.2 Full Compensation. The Contract Sum shall be full compensation to Contractor for all Work provided by Contractor and, except as otherwise expressly permitted by the terms of the Contract Documents, shall cover all Losses arising out of the nature of the Work or from the acts of the elements or any unforeseen difficulties or obstructions which may arise or be encountered in performance of the Work until its Acceptance by City, all risks connected with the Work, and any and all expenses incurred due to suspension or discontinuance of the Work, except as expressly provided herein. The Contract Sum may only be adjusted for Change Orders approved in accordance with the requirements of the Contract Documents.

SECTION 8 STANDARD OF CARE. 8.1 Standard of Care. Contractor agrees that the Work shall be performed by qualified, experienced and well-supervised personnel. All services performed in connection with this Construction Contract shall be performed in a manner consistent with the standard of care under California law applicable to those who specialize in providing such services for projects of the type, scope and complexity of the Project.


SECTION 9 INDEMNIFICATION. 9.1 Hold Harmless.

To the fullest extent allowed by law, Contractor will defend, indemnify, and hold harmless City, its City Council, boards and commissions, officers, agents, employees, representatives and volunteers (hereinafter individually referred to as an “Indemnitee” and collectively referred to as "Indemnitees"), through legal counsel acceptable to City, from and against any and liability, loss, damage, claims, expenses (including, without limitation, attorney fees, expert witness fees, paralegal fees, and fees and costs of litigation or arbitration) (collectively, “Liability”) of every nature arising out of or in connection with the acts or omissions of Contractor, its employees, Subcontractors, representatives, or agents, in performing the Work or its failure to comply with any of its obligations under the Contract, except such Liability caused by the active negligence, sole negligence, or willful misconduct of an Indemnitee. Contractor shall pay City for any costs City incurs to enforce this provision. Except as provided in Section 9.2 below, nothing in the Contract Documents shall be construed to give rise to any implied right of indemnity in favor of Contractor against City or any other Indemnitee.

Pursuant to Public Contract Code Section 9201, City shall timely notify Contractor upon receipt of any third-party claim relating to the Contract.

9.2 Survival.

The provisions of Section 9 shall survive the termination of this Construction Contract.

SECTION 10 NON-DISCRIMINATION. 10.1 Municipal Code Requirement. As set forth in Palo Alto Municipal Code section 2.30.510, Contractor certifies that in the performance of this Agreement, it shall not discriminate in the employment of any person because of the race, skin color, gender, age, religion, disability, national origin, ancestry, sexual orientation, housing status, marital status, familial status, weight or height of such person. Contractor acknowledges that it has read and understands the provisions of Section 2.30.510 of the Palo Alto Municipal Code relating to Nondiscrimination Requirements and the penalties for violation thereof, and will comply with all requirements of Section 2.30.510 pertaining to nondiscrimination in employment.

SECTION 11 INSURANCE AND BONDS. 11.1 Evidence of coverage. Within ten (10) business days following issuance of the Notice of Award, Contractor shall provide City with evidence that it has obtained insurance and shall submit Performance and Payment Bonds satisfying all requirements in Article 11 of the General Conditions.


SECTION 12 PROHIBITION AGAINST TRANSFERS. 12.1 Assignment. City is entering into this Construction Contract in reliance upon the stated experience and qualifications of the Contractor and its Subcontractors set forth in Contractor’s Bid. Accordingly, Contractor shall not assign, hypothecate or transfer this Construction Contract or any interest therein directly or indirectly, by operation of law or otherwise without the prior written consent of City. Any assignment, hypothecation or transfer without said consent shall be null and void, and shall be deemed a substantial breach of contract and grounds for default in addition to any other legal or equitable remedy available to the City. 12.2 Assignment by Law. The sale, assignment, transfer or other disposition of any of the issued and outstanding capital stock of Contractor or of any general partner or joint venturer or syndicate member of Contractor, if the Contractor is a partnership or joint venture or syndicate or co-tenancy shall result in changing the control of Contractor, shall be construed as an assignment of this Construction Contract. Control means more than fifty percent (50%) of the voting power of the corporation or other entity. SECTION 13 NOTICES. 13.1 Method of Notice. All notices, demands, requests or approvals to be given under this Construction Contract shall be given in writing and shall be deemed served on the earlier of the following: (i) On the date delivered if delivered personally; (ii) On the third business day after the deposit thereof in the United States mail, postage prepaid, and addressed as hereinafter provided; (iii) On the date sent if sent by facsimile transmission; (iv) On the date sent if delivered by electronic mail; or (v) On the date it is accepted or rejected if sent by certified mail. 13.2 Notice to Recipients. All notices, demands or requests (including, without limitation, Change Order Requests and Claims) from Contractor to City shall include the Project name and the number of this Construction Contract and shall be addressed to City at: To City: City of Palo Alto City Clerk 250 Hamilton Avenue P.O. Box 10250 Palo Alto, CA 94303

Copy to: City of Palo Alto Public Works Administration 250 Hamilton Avenue Palo Alto, CA 94301 Attn: Joe Teresi AND

[Include Construction Manager, If Applicable.]


City of Palo Alto Utilities Engineering 250 Hamilton Avenue Palo Alto, CA 94301 Attn: In addition, copies of all Claims by Contractor under this Construction Contract shall be provided to the following:

Palo Alto City Attorney’s Office 250 Hamilton Avenue P.O. Box 10250 Palo Alto, California 94303

All Claims shall be delivered personally or sent by certified mail. All notices, demands, requests or approvals from City to Contractor shall be addressed to:

Wadsworth Golf Construction Company 600 North 195th Avenue Buckeye, Az 85326 Attn: Patrick Karnick

13.3 Change of Address.

In advance of any change of address, Contractor shall notify City of the change of address in writing. Each party may, by written notice only, add, delete or replace any individuals to whom and addresses to which notice shall be provided.

SECTION 14 DEFAULT. 14.1 Notice of Default.

In the event that City determines, in its sole discretion, that Contractor has failed or refused to perform any of the obligations set forth in the Contract Documents, or is in breach of any provision of the Contract Documents, City may give written notice of default to Contractor in the manner specified for the giving of notices in the Construction Contract, with a copy to Contractor’s performance bond surety. 14.2 Opportunity to Cure Default.

Except for emergencies, Contractor shall cure any default in performance of its obligations under the Contract Documents within two (2) Days (or such shorter time as City may reasonably require) after receipt of written notice. However, if the breach cannot be reasonably cured within such time, Contractor will commence to cure the breach within two (2) Days (or such shorter time as City may reasonably require) and will diligently and continuously prosecute such cure to completion within a reasonable time, which shall in no event be later than ten (10) Days after receipt of such written notice.


SECTION 15 CITY'S RIGHTS AND REMEDIES. 15.1 Remedies Upon Default.

If Contractor fails to cure any default of this Construction Contract within the time period set forth above in Section 14, then City may pursue any remedies available under law or equity, including, without limitation, the following:

15.1.1 Delete Certain Services. City may, without terminating the Construction Contract, delete certain portions of the Work, reserving to itself all rights to Losses related thereto. 15.1.2 Perform and Withhold. City may, without terminating the Construction Contract, engage others to perform the Work or portion of the Work that has not been adequately performed by Contractor and withhold the cost thereof to City from future payments to Contractor, reserving to itself all rights to Losses related thereto. 15.1.3 Suspend The Construction Contract. City may, without terminating the Construction Contract and reserving to itself all rights to Losses related thereto, suspend all or any portion of this Construction Contract for as long a period of time as City determines, in its sole discretion, appropriate, in which event City shall have no obligation to adjust the Contract Sum or Contract Time, and shall have no liability to Contractor for damages if City directs Contractor to resume Work. 15.1.4 Terminate the Construction Contract for Default. City shall have the right to terminate this Construction Contract, in whole or in part, upon the failure of Contractor to promptly cure any default as required by Section 14. City’s election to terminate the Construction Contract for default shall be communicated by giving Contractor a written notice of termination in the manner specified for the giving of notices in the Construction Contract. Any notice of termination given to Contractor by City shall be effective immediately, unless otherwise provided therein. 15.1.5 Invoke the Performance Bond. City may, with or without terminating the Construction Contract and reserving to itself all rights to Losses related thereto, exercise its rights under the Performance Bond. 15.1.6 Additional Provisions. All of City’s rights and remedies under this Construction Contract are cumulative, and shall be in addition to those rights and remedies available in law or in equity. Designation in the Contract Documents of certain breaches as material shall not waive the City’s authority to designate other breaches as material nor limit City’s right to terminate the Construction Contract, or prevent the City from terminating the Agreement for breaches that are not material. City’s determination of whether there has been noncompliance with the Construction Contract so as to warrant exercise by City of its rights and remedies for default under the Construction Contract, shall be binding on all parties. No termination or action taken by City after such termination shall prejudice any other rights or remedies of City provided by law or equity or by the Contract Documents upon such termination; and City may proceed against Contractor to recover all liquidated damages and Losses suffered by City.

15.2 Delays by Sureties. Time being of the essence in the performance of the Work, if Contractor’s surety fails to arrange for completion of the Work in accordance with the Performance Bond, within seven (7) calendar days from the date of the notice of termination, Contractor’s surety shall be deemed to have waived its right to complete the Work under the Contract, and City may immediately make arrangements for the completion of the Work through use of its own forces, by hiring a replacement contractor, or by any other means that City determines advisable under the circumstances. Contractor and its surety shall be jointly and severally


liable for any additional cost incurred by City to complete the Work following termination. In addition, City shall have the right to use any materials, supplies, and equipment belonging to Contractor and located at the Worksite for the purposes of completing the remaining Work. 15.3 Damages to City.

15.3.1 For Contractor's Default. City will be entitled to recovery of all Losses under law or equity in the event of Contractor’s default under the Contract Documents.

15.3.2 Compensation for Losses. In the event that City's Losses arise from Contractor’s default under the Contract Documents, City shall be entitled to deduct the cost of such Losses from monies otherwise payable to Contractor. If the Losses incurred by City exceed the amount payable, Contractor shall be liable to City for the difference and shall promptly remit same to City.

15.4 Suspension by City

15.4.1 Suspension for Convenience. City may, at any time and from time to time, without cause, order Contractor, in writing, to suspend, delay, or interrupt the Work in whole or in part for such period of time, up to an aggregate of fifty percent (50%) of the Contract Time. The order shall be specifically identified as a Suspension Order by City. Upon receipt of a Suspension Order, Contractor shall, at City’s expense, comply with the order and take all reasonable steps to minimize costs allocable to the Work covered by the Suspension Order. During the Suspension or extension of the Suspension, if any, City shall either cancel the Suspension Order or, by Change Order, delete the Work covered by the Suspension Order. If a Suspension Order is canceled or expires, Contractor shall resume and continue with the Work. A Change Order will be issued to cover any adjustments of the Contract Sum or the Contract Time necessarily caused by such suspension. A Suspension Order shall not be the exclusive method for City to stop the Work. 15.4.2 Suspension for Cause. In addition to all other remedies available to City, if Contractor fails to perform or correct work in accordance with the Contract Documents, City may immediately order the Work, or any portion thereof, suspended until the cause for the suspension has been eliminated to City’s satisfaction. Contractor shall not be entitled to an increase in Contract Time or Contract Price for a suspension occasioned by Contractor’s failure to comply with the Contract Documents. City’s right to suspend the Work shall not give rise to a duty to suspend the Work, and City’s failure to suspend the Work shall not constitute a defense to Contractor’s failure to comply with the requirements of the Contract Documents.

15.5 Termination Without Cause.

City may, at its sole discretion and without cause, terminate this Construction Contract in part or in whole upon written notice to Contractor. Upon receipt of such notice, Contractor shall, at City’s expense, comply with the notice and take all reasonable steps to minimize costs to close out and demobilize. The compensation allowed under this Paragraph 15.5 shall be the Contractor’s sole and exclusive compensation for such termination and Contractor waives any claim for other compensation or Losses, including, but not limited to, loss of anticipated profits, loss of revenue, lost opportunity, or other consequential, direct, indirect or incidental damages of any kind resulting from termination without cause. Termination pursuant to this provision does not relieve Contractor or its sureties from any of their obligations for Losses arising from or related to the Work performed by Contractor.


15.5.1 Compensation. Following such termination and within forty-five (45) Days after receipt of a billing from Contractor seeking payment of sums authorized by this Paragraph 15.5.1, City shall pay the following to Contractor as Contractor’s sole compensation for performance of the Work : .1 For Work Performed. The amount of the Contract Sum allocable to the portion of the Work properly performed by Contractor as of the date of termination, less sums previously paid to Contractor. .2 For Close-out Costs. Reasonable costs of Contractor and its Subcontractors:

(i) Demobilizing and (ii) Administering the close-out of its participation in the Project (including, without limitation, all billing and accounting functions, not including attorney or expert fees) for a period of no longer than thirty (30) Days after receipt of the notice of termination.

.3 For Fabricated Items. Previously unpaid cost of any items delivered to the Project Site which were fabricated for subsequent incorporation in the Work.

.4 Profit Allowance. An allowance for profit calculated as four percent (4%) of the sum of the above items, provided Contractor can prove a likelihood that it would have made a profit if the Construction Contract had not been terminated.

15.5.2 Subcontractors. Contractor shall include provisions in all of its subcontracts, purchase orders and other contracts permitting termination for convenience by Contractor on terms that are consistent with this Construction Contract and that afford no greater rights of recovery against Contractor than are afforded to Contractor against City under this Section.

15.6 Contractor’s Duties Upon Termination. Upon receipt of a notice of termination for default or for convenience, Contractor shall, unless the notice directs otherwise, do the following:

(i) Immediately discontinue the Work to the extent specified in the notice; (ii) Place no further orders or subcontracts for materials, equipment, services or facilities,

except as may be necessary for completion of such portion of the Work that is not discontinued;

(iii) Provide to City a description in writing, no later than fifteen (15) days after receipt of the notice of termination, of all subcontracts, purchase orders and contracts that are outstanding, including, without limitation, the terms of the original price, any changes, payments, balance owing, the status of the portion of the Work covered and a copy of the subcontract, purchase order or contract and any written changes, amendments or modifications thereto, together with such other information as City may determine necessary in order to decide whether to accept assignment of or request Contractor to terminate the subcontract, purchase order or contract;

(iv) Promptly assign to City those subcontracts, purchase orders or contracts, or portions thereof, that City elects to accept by assignment and cancel, on the most favorable terms reasonably possible, all subcontracts, purchase orders or contracts, or portions thereof, that City does not elect to accept by assignment; and

(v) Thereafter do only such Work as may be necessary to preserve and protect Work already in progress and to protect materials, plants, and equipment on the Project Site or in transit thereto.

Upon termination, whether for cause or for convenience, the provisions of the Contract Documents remain in effect as to any Claim, indemnity obligation, warranties, guarantees,


submittals of as-built drawings, instructions, or manuals, or other such rights and obligations arising prior to the termination date.

SECTION 16 CONTRACTOR'S RIGHTS AND REMEDIES. 16.1 Contractor’s Remedies.

Contractor may terminate this Construction Contract only upon the occurrence of one of the following:

16.1.1 For Work Stoppage. The Work is stopped for sixty (60) consecutive Days, through no act or fault of Contractor, any Subcontractor, or any employee or agent of Contractor or any Subcontractor, due to issuance of an order of a court or other public authority other than City having jurisdiction or due to an act of government, such as a declaration of a national emergency making material unavailable. This provision shall not apply to any work stoppage resulting from the City’s issuance of a suspension notice issued either for cause or for convenience. 16.1.2 For City's Non-Payment. If City does not make pay Contractor undisputed sums within ninety (90) Days after receipt of notice from Contractor, Contractor may terminate the Construction Contract (30) days following a second notice to City of Contractor’s intention to terminate the Construction Contract.

16.2 Damages to Contractor. In the event of termination for cause by Contractor, City shall pay Contractor the sums provided for in Paragraph 15.5.1 above. Contractor agrees to accept such sums as its sole and exclusive compensation and agrees to waive any claim for other compensation or Losses, including, but not limited to, loss of anticipated profits, loss of revenue, lost opportunity, or other consequential, direct, indirect and incidental damages, of any kind.

SECTION 17 ACCOUNTING RECORDS. 17.1 Financial Management and City Access.

Contractor shall keep full and detailed accounts and exercise such controls as may be necessary for proper financial management under this Construction Contract in accordance with generally accepted accounting principles and practices. City and City's accountants during normal business hours, may inspect, audit and copy Contractor's records, books, estimates, take-offs, cost reports, ledgers, schedules, correspondence, instructions, drawings, receipts, subcontracts, purchase orders, vouchers, memoranda and other data relating to this Project. Contractor shall retain these documents for a period of three (3) years after the later of (i) Final Payment or (ii) final resolution of all Contract Disputes and other disputes, or (iii) for such longer period as may be required by law.


17.2 Compliance with City Requests.

Contractor's compliance with any request by City pursuant to this Section 17 shall be a condition precedent to filing or maintenance of any legal action or proceeding by Contractor against City and to Contractor's right to receive further payments under the Contract Documents. City many enforce Contractor’s obligation to provide access to City of its business and other records referred to in Section 17.1 for inspection or copying by issuance of a writ or a provisional or permanent mandatory injunction by a court of competent jurisdiction based on affidavits submitted to such court, without the necessity of oral testimony.

SECTION 18 INDEPENDENT PARTIES. 18.1 Status of parties. Each party is acting in its independent capacity and not as agents, employees, partners, or joint ventures’ of the other party. City, its officers or employees shall have no control over the conduct of Contractor or its respective agents, employees, subconsultants, or subcontractors, except as herein set forth.

SECTION 19 NUISANCE. 19.1 Nuisance Prohibited. Contractor shall not maintain, commit, nor permit the maintenance or commission of any nuisance in connection in the performance of services under this Construction Contract.

SECTION 20 PERMITS AND LICENSES. 20.1 Payment of Fees. Except as otherwise provided in the Special Provisions and Technical Specifications, The Contractor shall provide, procure and pay for all licenses, permits, and fees, required by the City or other government jurisdictions or agencies necessary to carry out and complete the Work. Payment of all costs and expenses for such licenses, permits, and fees shall be included in one or more Bid items. No other compensation shall be paid to the Contractor for these items or for delays caused by non-City inspectors or conditions set forth in the licenses or permits issued by other agencies.

SECTION 21 WAIVER. 21.1 Waiver. A waiver by either party of any breach of any term, covenant, or condition contained herein shall not be deemed to be a waiver of any subsequent breach of the same or any other term, covenant, or condition contained herein, whether of the same or a different character.


SECTION 22 GOVERNING LAW AND VENUE; COMPLIANCE WITH LAWS. 22.1 Governing Law. This Construction Contract shall be construed in accordance with and governed by the laws of the State of California, and venue shall be in a court of competent jurisdiction in the County of Santa Clara, and no other place. 22.2 Compliance with Laws. Contractor shall comply with all applicable federal and California laws and city laws, including, without limitation, ordinances and resolutions, in the performance of work under this Construction Contract.

22.2.1 Palo Alto Minimum Wage Ordinance. Contractor shall comply with all requirements of the Palo Alto Municipal Code Chapter 4.62 (Citywide Minimum Wage), as it may be amended from time to time. In particular, for any employee otherwise entitled to the State minimum wage, who performs at least two (2) hours of work in a calendar week within the geographic boundaries of the City, Contractor shall pay such employees no less than the minimum wage set forth in Palo Alto Municipal Code section 4.62.030 for each hour worked within the geographic boundaries of the City of Palo Alto. In addition, Contractor shall post notices regarding the Palo Alto Minimum Wage Ordinance in accordance with Palo Alto Municipal Code section 4.62.060.

SECTION 23 COMPLETE AGREEMENT. 23.1 Integration. This Agreement represents the entire and integrated agreement between the parties and supersedes all prior negotiations, representations, and contracts, either written or oral. This Agreement may be amended only by a written instrument, which is signed by the parties.

SECTION 24 SURVIVAL OF CONTRACT. 24.1 Survival of Provisions. The provisions of the Construction Contract which by their nature survive termination of the Construction Contract or Final Completion, including, without limitation, all warranties, indemnities, payment obligations, and City’s right to audit Contractor’s books and records, shall remain in full force and effect after Final Completion or any termination of the Construction Contract.

SECTION 25 PREVAILING WAGES.

This Project is not subject to prevailing wages. Contractor is not required to pay prevailing wages in the performance and implementation of the Project in accordance with SB 7, if the public works contract does not include a project of $25,000 or less, when the project is for construction work, or the contract does not include a project of $15,000 or less, when the project is for alteration, demolition, repair, or maintenance (collectively, ‘improvement’) work. Or

Contractor is required to pay general prevailing wages as defined in Subchapter 3, Title 8 of the California Code of Regulations and Section 16000 et seq. and Section 1773.1 of the California Labor Code. Pursuant to the provisions of Section 1773 of the Labor Code of the State of California, the City Council has obtained the general prevailing rate of per diem wages and the general rate for holiday and overtime work


in this locality for each craft, classification, or type of worker needed to execute the contract for this Project from the Director of the Department of Industrial Relations (“DIR”). Copies of these rates may be obtained at the Purchasing Division’s office of the City of Palo Alto. Contractor shall provide a copy of prevailing wage rates to any staff or subcontractor hired, and shall pay the adopted prevailing wage rates as a minimum. Contractor shall comply with the provisions of all sections, including, but not limited to, Sections 1775, 1776, 1777.5, 1782, 1810, and 1813, of the Labor Code pertaining to prevailing wages.

SECTION 26 NON-APPROPRIATION. 26.1 Appropriations. This Agreement is subject to the fiscal provisions of the Charter of the City of Palo Alto and the Palo Alto Municipal Code. This Agreement will terminate without any penalty (a) at the end of any fiscal year in the event that the City does not appropriate funds for the following fiscal year for this event, or (b) at any time within a fiscal year in the event that funds are only appropriated for a portion of the fiscal year and funds for this Construction Contract are no longer available. This section shall take precedence in the event of a conflict with any other covenant, term, condition, or provision of this Agreement.

SECTION 27 AUTHORITY. 27.1 Representation of Parties. The individuals executing this Agreement represent and warrant that they have the legal capacity and authority to do so on behalf of their respective legal entities.

SECTION 28 COUNTERPARTS 28.1 Multiple Counterparts. This Agreement may be signed in multiple counterparts, which shall, when executed by all the parties, constitute a single binding agreement.

SECTION 29 SEVERABILITY. 29.1 Severability. In case a provision of this Construction Contract is held to be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not be affected. SECTION 30 STATUTORY AND REGULATORY REFERENCES. 30.1 Amendments to Laws. With respect to any amendments to any statutes or regulations referenced in these Contract Documents, the reference is deemed to be the version in effect on the date that the Contract was awarded by City, unless otherwise required by law. SECTION 31 WORKERS’ COMPENSATION CERTIFICATION. 31.1 Workers Compensation. Pursuant to Labor Code Section 1861, by signing this Contract, Contractor certifies as follows:


“I am aware of the provisions of Section 3700 of the Labor Code which require every employer to be insured against liability for workers’ compensation or to undertake self-insurance in accordance with the provisions of that code, and I will comply with such provisions before commencing the performance of the Work on this Contract.” SECTION 32 DIR REGISTRATION AND OTHER SB 854 REQUIREMENTS.

32.1 General Notice to Contractor. City requires Contractor and its listed subcontractors to comply with the requirements of SB 854. 32.2 Labor Code section 1771.1(a) City provides notice to Contractor of the requirements of California Labor Code section 1771.1(a), which reads: “A contractor or subcontractor shall not be qualified to bid on, be listed in a bid proposal, subject to the requirements of Section 4104 of the Public Contract Code, or engage in the performance of any contract for public work, as defined in this chapter, unless currently registered and qualified to perform public work pursuant to Section 1725.5. It is not a violation of this section for an unregistered contractor to submit a bid that is authorized by Section 7029.1 of the Business and Professions Code or Section 10164 or 20103.5 of the Public Contract Code, provided the contactor is registered to perform public work pursuant to Section 1725.5 at the time the contract is awarded.” 32.3 DIR Registration Required. City will not accept a bid proposal from or enter into this Construction Contract with Contractor without proof that Contractor and its listed subcontractors are registered with the California Department of Industrial Relations (“DIR”) to perform public work, subject to limited exceptions. 32.4 Posting of Job Site Notices. City gives notice to Contractor and its listed subcontractors that Contractor is required to post all job site notices prescribed by law or regulation and Contractor is subject to SB 854-compliance monitoring and enforcement by DIR. 32.5 Payroll Records. City requires Contractor and its listed subcontractors to comply with the requirements of Labor Code section 1776, including:

(i) Keep accurate payroll records, showing the name, address, social security number, work classification, straight time and overtime hours worked each day and week, and the actual per diem wages paid to each journeyman, apprentice, worker, or other employee employed by, respectively, Contractor and its listed subcontractors, in connection with the Project.

(ii) The payroll records shall be verified as true and correct and shall be certified

and made available for inspection at all reasonable hours at the principal office of Contractor and its listed subcontractors, respectively.


(iii) At the request of City, acting by its project manager, Contractor and its listed subcontractors shall make the certified payroll records available for inspection or furnished upon request to the project manager within ten (10) days of receipt of City’s request.

City requests Contractor and its listed subcontractors to submit the certified

payroll records to the project manager at the end of each week during the Project.

(iv) If the certified payroll records are not produced to the project manager within

the 10-day period, then Contractor and its listed subcontractors shall be subject to a penalty of one hundred dollars ($100.00) per calendar day, or portion thereof, for each worker, and City shall withhold the sum total of penalties from the progress payment(s) then due and payable to Contractor. This provision supplements the provisions of Section 15 hereof.

(v) Inform the project manager of the location of contractor’s and its listed

subcontractors’ payroll records (street address, city and county) at the commencement of the Project, and also provide notice to the project manager within five (5) business days of any change of location of those payroll records.

IN WITNESS WHEREOF, the parties have caused this Construction Contract to be executed the date and year first above written.

CITY OF PALO ALTO ____________________________

Purchasing Manager City Manager

APPROVED AS TO FORM: ____________________________ City Attorney or designee APPROVED: ____________________________ Public Works Director

CONTRACTOR By:___________________________ Name:________________________ Title:__________________________ Date: _________________________

GOLF COURSE RECONFIGURATION PROJECT ‐ CIP PG‐13003

No cost change: N/A

Increase cost by $0.00 days

Decrease cost by ‐$1,191,800.00 • days Excusable Delay

• days Compensable Delay

days

The date of completion as of this change order is

Unit Price(s)

Lump sum

CONTRACT CHANGE ORDERCITY OF PALO ALTO

DEPARTMENT: PUBLIC WORKS ENGINEERING SERVICES

Contract Change Order #1

C16163847

This change order will:

Change Order:

Project Title:

Contract Number:

GOLF COURSE RECONFIGURATION PROJECT

WADSWORTH GOLF CONSTRUCTION COMPANY

Description of Work to be Performed:

Incorporates Field Order Number(s):

The low bid received for the project exceeded the available project budget. Staff and the golf course

architect negotiated the terms of this change order with the low bidder to reduce the cost of this project

without compromising the quality and functionality of the reconfigured golf course.

The contract modifications listed below are necessary to lower the project cost to within the available

project budget.

See attached itemization of the cost savings proposals accepted by the City.

N/A

Contractor:

Project No.:

Date:

PG‐13003

June 20, 2016

1

This change order will:

Description of Change Order

Background Information:

Change Order Justification:

Basis for change in cost:

Compensation for Compensable Delay

Time and Materials

G/L account number (s):

Monday, September 11, 2017

Cost

Increase time by

Decrease time by

No change time

Time

PAGE 1 OF 6 CONTRACT CHANGE ORDER – REV. FEBRUARY 2013

lolmos

Text Box

Attachment B

Contract Change Order - continued

CONTRACTOR aRT1FlCAnON: By sisning below, Contractor agrees that this Change Order constitutes full resolution, settlement. accord and satisfaction with respect to

any and all pendlll8 or future Claims for cost and extensions of time that were asserted, or that could have been asserted. in connection with the wort covered by this Chal'l8e Order, as more fully set forth in Artic~ 1 of the Contract General Conditions.

FAILURE TO EXeCUTE: If Contractor fails to promptly execute this Change Order after it has been submitted for Contractor's siBnature, the City may unllateralty approve

this ( hallie Order as set forth in Article 1 of the Contract General Conditions. Contractor may dispute the terms of a unilaterall.,approved Chanle Order, in whole or in part, by submitting a Claim in accordance with the Dispute Resolution Procedures set forth herein within fourteen (14) days after the Change Order is approved by the City I(Contractor fails to submit a Claim within that 14-day period, with respect to a ll or part of the unilaterally·approved Change Order, those portions of the Change Order which have not been disputed by timely submiSSion of a Claim shall be deemed to have the same effect as if the Change Order was ful ty executed by both parties as set forth above.

Ac.a!pted for Contractor: , / Accepted for City of Pa~ Alto:

By: 4 '/~ ~ ....... BV:

Tide: Patrick " . k KarnlC , Pres ide nt Title: Senior Enlineer, Public Worb Engineerlns Services

Date: June 7, 2016 Date:

Scope of Work

, • ;5 " ~ ;;; • il: 0 0 Description Amount Rea~nfor Cha",e ~

Net effect of all chanses on attached list ·$I,191.soo.00 Cost savings implemented to bring project cost within available budget.

Total for this chanle order .$1,191,800.00

PAGE 2 OF6 CONTRACT OiANGE ORDER - RfV. FEBRUARY 20U

By:

Date:

By:

Date:

By:

Date:

Title:Assistant Director, Public Work Engineering

Title:Mike Sartor

Signature required on all change orders

Signature required when any individual Change Order exceeds $10,000.

Director of Public Works

Brad Eggleston

City Approval ‐ Department Head

Document Preparation

Senior Engineer

Joe Teresi Title:

City Approval ‐ Division Head

Summary of Amounts Payable Under Contract (For Internal Purposes Only)

Change orders shall not be initiated for Council‐approved contracts if the revised contract total exceeds the total authorized funding amount.

Original Contract Amount:

Previous Change Orders:

This Change Order:

Revised Contract Amount:

11,964,620.00$

‐$

‐$

1,077,282.00$

10,772,820.00$

‐$

1,077,282.00$

11,850,102.00$

Contract Change Order ‐ Continued

Contingency:

Contingency added:

Used to date:

Balance remaning:

Original Contract Authorization:

Contract Amendement Authorizations:

Contingency Authorizations:

Total Authorized Funding:

Compare to:

1,077,282.00$

‐$

(1,191,800.00)$

10,772,820.00$

PAGE 3 OF 6 CONTRACT CHANGE ORDER – REV. FEBRUARY 2013

PALO ALTO MUNICIPAL GOLF COURSE RECONFIGURATION PROJECT

Value Engineering Cost Savings Proposal by Wadsworth Golf Construction Company

DEDUCTIVE CHANGE ORDER #1 JUNE 7, 2016

Bid Item # Description Value Engineering Idea Cost Adjustment

6 Existing Feature & Restroom Removal Ex. Restroom to remain (5,000.00)$

8 Existing Turf Removal Disc Ex. Turf in lieu of Strip & Bury (20,000.00)$

11 Imported Fill Distribution of Stockpile to be adjusted * (100,000.00)$

15 4" Perforated Pipe Reduce Quantity by 50%

Proposal Qnty Qnty Reduction Unit Cost

17,800 ‐8,900 10.00$ (89,000.00)$

6" Solid Pipe Reduce Quantity by 15%


27,640 ‐4,000 10.50$ (42,000.00)$

20 Modified Greens Construction

Reduce Gravel Layer: 4" to 3" (30,000.00)$

Reduce Mix Layer: 12" to 11" (30,000.00)$

Increase Tile Spacing to 25' (20,000.00)$

Reduce Green Area by an average of 10% (40,000.00)$

21 Modified Tee Construction

4" Screened Sand in lieu of Specified Sand (45,000.00)$

Reduce Tee Area by an average of 10% (7,000.00)$

22 Modified Bunker Construction

Reduce Bunker Area by 10% (18,000.00)$

23 Irrigation Eliminate Soil Sensors


44 ‐44 1,850.00$ (81,400.00)$

Delete weather station (10,000.00)$

31 Cart and Foot Paths ‐ Concrete Decrease width at Fairways from 7' to 6.5' **

net change (45,760.00)$

Increase Expansion Joint Spacing : 25' to 100' (20,000.00)$

35‐37 Fertilizer & Amendment Package Revise specification for native areas *** (40,000.00)$

40 Grassing ‐ Fairways & Roughs Reduce Quantity by 6 Acres


16 ‐6 28,185.00$ (169,110.00)$

41 Grassing ‐ Tees, Fairways & Roughs Increase Quantity by 6 Acres (In place of Sod)

Proposal Qnty Qnty Addition Unit Cost

62 6 6,620.00$ 39,720.00$

47 Youth Area Fence Delete fence; City to construct separately (40,000.00)$

52 New Synthetic Turf Delete synthetic turf (200,000.00)$

Irrigation system modification allowance 15,000.00$

53 Restroom Building Defer new restroom building (225,000.00)$

54 Sewer Discharge System Sewer line only ‐ no connections included **** (750.00)$

55 Electrical System Electric conduit only ‐ no connections ***** (18,500.00)$

Allowance for Plugging Wetlands Allowance ‐ final price to be negotiated ****** 50,000.00$

TOTAL POTENTIAL COST ADUSTMENTS (1,191,800.00)$

WADSWORTH BID PROPOSAL 11,964,620.00$

TOTAL POTENTIAL ADJUSTED COST 10,772,820.00$

* = The proposed cost reduction is based on raising the proposed grades within the existing stockpile area by approximately

two (2) vertical feet in an effort to reduce the amount of material required to be hauled from the stockpile. In conjuction,

the proposed grades on the remainder of the golf course would be adjusted to account for the decreased quantity of

fill material. Globally, the quantity equates to reducing the proposed fill by approximately three inches. Wadsworth Golf

and the Design Team would work together to manage the reduced fill. This Item would subsequently become a

LUMP SUM PRICE of $1,638,800.00.

** = Quantity Reduction of 214,000 sf @$4.84/sf = $1,035,760

Quantity Addition of 200,000 sf @ $4.95/sf = $990,000

Net Deduction of $45,760

*** = The proposed cost reduction is based on a revised fertilizer and amendment package as agreed upon by the

Design Team for the Native Areas only.

**** = The proposed cost reduction is based on installing the force main sewer line ONLY and capping both ends of the sewer

line with no connections at either end.

***** = The proposed cost reduction is based on installing the electrical conduit ONLY and capping both ends of the

conduit for future use.

****** = New requirement to vegetate a portion of the Baylands native areas with additional plant species and to plug some of

the plants with dee pot‐sized specimens. The $50,000 is an allowance; final price will be negotiated with the Contractor.

6/7/2016

DocuSign Envelope ID: 4209E41D-9476-4780-8595-5BA9624F8529

1 Revision April 28, 2014

AMENDMENT NO. TWO TO CONTRACT NO. C13148028 BETWEEN THE CITY OF PALO ALTO AND

GOLF GROUP, LTD.

This Amendment No. Two to Contract No. C13148028 (“Contract”) is entered into June 7, 2016 by and between the CITY OF PALO ALTO, a California chartered municipal corporation (“CITY”), and GOLF GROUP, LTD., an Arizona corporation authorized to do business in the State of California, dba FORREST RICHARDSON & ASSOCIATES, located at 2337 East Orangewood Avenue, Phoenix, AZ 85020 (“CONSULTANT”). R E C I T A L S

A. The Contract was entered into between the parties for the provision of golf course architecture and environmental services for the design of the Palo Alto Municipal Golf Course Reconfiguration Project.

B. The parties wish to amend the Contract to increase the scope of services to include additional construction stage services and environmental mitigation monitoring services and increase compensation.

NOW, THEREFORE, in consideration of the covenants, terms, conditions, and provisions of this Amendment, the parties agree:

SECTION 1. Section 1, SCOPE OF SERVICES is hereby amended to read as follows: “CONSULTANT shall perform the Services described in the attached Exhibit “A-3” as an addition to the Scope of Services described in Exhibits “A”, “A-1”, and “A-2” of the amended Contract and in accordance with the terms and conditions contained in this Agreement. The performance of all Services shall be to the reasonable satisfaction of CITY.”

SECTION 2. Section 4, NOT TO EXCEED COMPENSATION is hereby amended

to read as follows:

“The compensation to be paid to CONSULTANT for performance of the Basic Services described in Exhibit “A-3” in addition to the compensation for performance of the Basic Services described in Exhibits “A”, “A-1”, and “A-2” of the amended Contract, including payment for professional services and reimbursable expenses, shall not exceed eight hundred thirty-one thousand nine hundred ninety-five dollars ($831,995). In the event Additional Services are authorized, the total compensation for services and additional services and reimbursable expenses shall not exceed one million one hundred twenty-seven thousand seven hundred fifty-one dollars ($1,127,751). The applicable labor rates are set out in Exhibit “C-1” of the original Contract.


Additional Services for this Contract Amendment, if any, shall be authorized in accordance with and subject to the provisions of Exhibits “C”, “C-2”, and “C-3”. CONSULTANT shall not receive any compensation for Additional Services performed without the prior written authorization of CITY. Additional Services shall mean any work that is determined by CITY to be necessary for the proper completion of the Project, but which is not included within the Scope of Services described in Exhibits “A”, “A-1”, “A-2”, and “A-3”.

SECTION 3. The following exhibit(s) to the Contract is/are hereby amended to read as set forth in the attachment(s) to this Amendment, which are incorporated in full by this reference:

a. Exhibit “A-3” entitled “SCOPE OF ADDITIONAL CONSTRUCTION STAGE AND ENVIRONMENTAL MITIGATION MONITORING SERVICES”.

b. Exhibit “B-2” entitled “AMENDMENT NO. TWO SCHEDULE OF

PERFORMANCE”. c. Exhibit “C-3” entitled “AMENDMENT NO. TWO COMPENSATION”.

SECTION 4. Except as herein modified, all other provisions of the Contract, including any exhibits and subsequent amendments thereto, shall remain in full force and effect.

IN WITNESS WHEREOF, the parties have by their duly authorized representatives executed this Amendment on the date first above written. CITY OF PALO ALTO ____________________________ City Manager APPROVED AS TO FORM: _____________________________ Senior Asst. City Attorney

GOLF GROUP LTD. By:___________________________ Name:_________________________ Title:________________________

Attachments:


Forrest Richardson

Pres.


EXHIBIT "A-3": SCOPE OF ADDITIONAL CONSTRUCTION STAGE AND ENVIRONMENTAL MITIGATION MONITORING SERVICES

EXHIBIT "B-2": AMENDMENT NO. TWO SCHEDULE OF PERFORMANCE EXHIBIT “C-3”: AMENDMENT NO. TWO COMPENSATION


EXHIBIT “A-3” SCOPE OF ADDITIONAL CONSTRUCTION STAGE AND

ENVIRONMENTAL MITIGATION MONITORING SERVICES

BASIC SERVICES The CONSULTANT’s Basic Services consist of the services described below: Task (6) Construction Support Services (Golf Course Architect) Task (7) Construction Support Services (Project Representative) Task 6 - Construction Support Services (Golf Course Architect) (a) The CONSULTANT shall assist and support the CITY during the construction of

the Project, including attending a pre-construction conference; providing clarifications/interpretations of plans and specifications; preparing and/or reviewing required shop drawings and submittal reviews; assisting with the preparation of contract change orders; providing recommendations for changes required by design discrepancies, utility conflicts, or other unforeseen circumstances that may develop during construction; and preparing punch lists prior to final acceptance of the Work.

(b) The CONSULTANT shall make periodic site visits to observe progress and assist

the CITY during the construction of the Project. Administration of the construction of the Project shall be the responsibility of the CITY unless additional services are contracted between the parties for construction administration services. The CONSULTANT has provided a Construction Management Services scope of work as a potential Additional Service to this Contract to be utilized at the discretion of the CITY.

(c) Construction Support will commence with the award of the construction contract

(or individual contracts in the case of multiple contractors being engaged for this project or the Project being incrementally constructed) and will terminate when the CITY has determined final completion of the Work covered by the CONSULTANT’s plans and specifications. Final completion of the Work shall mean acceptance by the CITY of the Work upon completion of the Work to the CITY’s satisfaction.

(d) The CONSULTANT, as a representative of the CITY during the Construction

Support phase, shall advise and consult with the CITY, and all of the CITY’s instructions to the Contractor(s) working on the Project shall be issued simultaneously to the CONSULTANT. The CONSULTANT shall have authority to act on behalf of the CITY to the extent provided in the design Agreement.


(e) The CONSULTANT shall at all times have access to the Project wherever it is in progress. (f) The CONSULTANT or his representative(s) shall make periodic visits to the site

of the Project to familiarize himself generally with the progress and quality of the Work to determine in general if the Project is proceeding in accordance with the Construction Documents prepared by the CONSULTANT. On the basis of these on-site observations, the CONSULTANT shall endeavor to guard the CITY against defects and deficiencies in the Work of the Contractor(s). The quantity of on-site observation visits of the CONSULTANT shall be not less than thirty (30) and not more than forty (40) during the construction of the Work. An on-site visit is defined as one (1) personnel on-site for two (2) or more hours per calendar day inclusive of travel time to and from the site.

(g) The CONSULTANT shall review and approve shop drawings, samples, change

orders and other submissions of the Contractor(s) only for conformance with the design concept of the Project and for compliance with the information given in the Construction Documents.

(h) Upon completion of any portion of the Work, and prior to payment to the

Contractor(s) of amounts due for such portion of the work, the CONSULTANT shall certify to the CITY in writing the percentage of the Work of the Contractor(s) which has been performed and completed in conformance with the Construction Documents.

Task 7 - Construction Support Services (Project Representative) (a) A Project Representative(s) shall be mutually selected by the CONSULTANT and

the CITY with duties, responsibilities and limitations of authority to be set forth in writing, as agreed to by the City and the CONSULTANT. Provisions shall be included to permit the CONSULTANT to impart instructions and interpretations to the Project Representative(s) for the purpose of implementing the golf course plans and their design intent. The Project Representative mutually agreed upon by all parties shall be the firm DL Siemens Inc, who shall be represented by Dale Siemens, California Contractors License #872425, Class A, 1039 E. Santa Ana Ave, Fresno, CA.

(b) The on-site observations by Project Representative(s) of the Work as it progresses

is for the purpose of providing further protection for the CITY against the failure of the Work to conform to the Construction Documents, but providing the services of the Project Representative(s) shall not modify the rights or obligations of the CONSULTANT as provided herein.

(c) The Project Representative(s) shall be under contract by the CONSULTANT.


(d) Through the on-site observations by Project Representative(s) of the Work as it progresses, the CONSULTANT shall consult with the CITY on matters pertaining to performance of the Work and conformance to the design and specifications of the golf course aspects of the Work.

(e) The Project Representative(s) shall perform the following construction

administration services from award of the construction contract by the CITY through final acceptance of the Project:

(1) Provide regular, on-site observations averaging 3 days per week of the Project

Representative’s time to ascertain progress, compliance and quality of the work performed by the Contractor(s)

(2) Review of weekly progress reports by the Contractor(s) (3) Provide coordination of the site visits of the CONSULTANT (4) Coordinate required meetings for scheduling, approvals and administration

including:

(a) Leading weekly or bi-weekly on-site progress construction meetings including minutes and notes thereof.

(b) Processing and tracking of contractor submittals as required by the

project documents

(c) Review, comment and updating of Contractor’s project progress schedule.

(5) Provide contract administration and coordinate timely payment approvals

consistent with that of the CONSULTANT (6) Impart instructions and interpretations from the Golf Course Architect to the

Contractor (7) Meet with the CITY in person or via telephone and/or email to convey

pertinent information regarding the project status, discuss issues, make advisements, and record CITY decisions and directives in matters of the construction.

(8) The Project Representative shall not be empowered to, nor shall he make

decisions on behalf of the CITY. The Project Representative shall only be empowered to convey CITY decisions timely to the Contractor and/or Golf Course Architect.


(9) Coordinate, document and accept comments, observations, concerns of CITY provided staff, consultants or maintenance contractors with regard to the project progress and conformance with the Construction Documents.

(10) Coordinate the projects grow-in acceptance schedule and “punch-list”

between the Golf Course Contractor and the CITY’s Golf Course Maintenance Contractor.

ADDITIONAL SERVICES The following services may be provided by the Consultant if approved in advance by the City’s Project Manager. Mitigation Measure BIO-2b: Confine Construction Disturbance and Protect Special-Status Plants during Construction (ICF) (As-needed) This mitigation measure is only required if special-status plants are observed

during the pre-construction survey. Golfauna staff will consult with CA Department of Fish & Wildlife, identify exclusion areas, and oversee installation of protective fencing.

Deliverable: One day to oversee the installation of fencing. Assumptions: 2-3 of hours to consult with agencies is assumed. It is

assumed that the City’s Contractor will install the fence per Golfauna biologist’s direction.

Schedule/Timing: 2-3 days prior to construction Mitigation Measure BIO-2c: Compensate for Loss of Special-Status Plants (ICF) (As-needed) This mitigation measure is only required if special-status plants are observed during the pre-construction survey. Golfauna will prepare a compensation plan for loss of special-status plant species. Deliverable: Compensation Plan for loss of special-status plant species. Assumptions: There may be costs from other contractors, primarily associated with preserving a population of the species of interest, or with a nursery collecting seed and creating a new population. These tasks are not included in the scope of work. Schedule/Timing: 2-3 days prior to construction


Mitigation Measure BIO-2d: Develop and Implement Special-Status Plant Species Monitoring Plan (ICF) (As-needed)*

This mitigation measure is only required if special-status plants are observed during the pre-construction survey. Golfauna staff will prepare a monitoring plan. Typically CA Department of Fish & Wildlife requires monitoring for a period of five years. Services are to conduct monitoring for two days a year for five years.

Deliverable: Monitoring plan and annual monitoring reports. Assumptions: Five year monitoring period. Schedule/Timing: During blooming period for species observed twice a year.

* Services required after September 2017 may be assigned to the City under separate agreement.

Mitigation Measure BIO-2e: Deposit Landscape Waste Exclusively in Developed or Ruderal Areas Absent of Special-Status Plant Species (ICF) (As-needed)

If special-status plants are found during pre-construction survey, ICF will prepare a handout and give training to the City’s Golf Course operations and maintenance staff regarding where to deposit landscape waste in order to avoid impacting special-status plants. Deliverable: O&M worker awareness training. Special-status plant species handout and trainee sign-in sheet. Assumptions: One day training for City’s Golf Course operations and maintenance staff. Schedule/Timing: After construction, but before golf course becomes operational (e.g., start of O&M activities).

Mitigation Measure (CUL-2): Stop Work if Cultural Resources, Including Human Remains, are Encountered during Ground-Disturbing Activities (ICF) (As-needed)

In the unlikely event of finding any human remains, ICF cultural resources specialist will visit the site and advise the crew regarding recovery of artifacts. Deliverable: Site visit and guidance. Memo of findings and recommendations for further action.


Assumptions: Does not assume preparation of a treatment plan or coordination with Native American tribes. Assumes 16 hours of monitoring. Schedule/Timing: As needed during construction.

Mitigation Measure CUL-5: Stop Work if Paleontological Resources are Encountered during Ground-Disturbing Activities (ICF) (As-needed)

In the unlikely event of finding any paleontological resources, ICF cultural resources specialist will visit the site and advise the crew regarding recovery of artifacts. Deliverable: Site visit and guidance. Memo of findings and recommendations for further action. Assumptions: Does not assume preparation of a treatment plan. Assumes 16 hours of monitoring. Schedule/Timing: As needed during construction.


EXHIBIT “B-2” AMENDMENT NO. TWO SCHEDULE OF PERFORMANCE

CONSULTANT shall perform the Services so as to complete each milestone within the number of days/weeks specified below. The time to complete each milestone may be increased or decreased by mutual written agreement of the project managers for CONSULTANT and CITY so long as all work is completed within the term of the Agreement. CONSULTANT shall provide a detailed schedule of work consistent with the schedule below within 2 weeks of receipt of the notice to proceed.

Milestones Completion

No. of Weeks From NTP

Task 6 - Construction Support Services (Golf Course Architect) 78

Task 7 - Construction Support Services (Project Representative) 78


EXHIBIT “C-3” AMENDMENT NO. TWO COMPENSATION

The CITY agrees to compensate the CONSULTANT for professional services performed in accordance with the terms and conditions of this Agreement, and as set forth in the budget schedule below. Compensation shall be calculated based on the hourly rate schedule attached as exhibit C-1 up to the not to exceed budget amount for each task set forth below.

The compensation to be paid to CONSULTANT under this Agreement for all services described in Exhibit “A-3” (“Basic Services”) and reimbursable expenses shall not exceed $52,395. CONSULTANT agrees to complete all Basic Services, including reimbursable expenses, within this amount. In the event CITY authorizes any Additional Services, the maximum compensation shall not exceed $125,720. Any work performed or expenses incurred for which payment would result in a total exceeding the maximum amount of compensation set forth herein shall be at no cost to the CITY.

CONSULTANT shall perform the tasks and categories of work as outlined and budgeted below. The CITY’s Project Manager may approve in writing the transfer of budget amounts between any of the tasks or categories listed below provided the total compensation for Basic Services, including reimbursable expenses, does not exceed $52,395 and the total compensation for Additional Services does not exceed $73,325.

BUDGET SCHEDULE NOT TO EXCEED FEES REIMBURSABLES

Task 6 $ 1,968 $ 7,800 (Construction Support Services - Golf Course Architect)

Task 7 $ 42,627 (Construction Support Services – Project Representative)

Sub-total Basic Services $ 44,595

Reimbursable Expenses $ 7,800 Total Basic Services and Reimbursable expenses $ 52,395

Additional Services (Not to Exceed) $ 73,325

Maximum Total Additional Compensation $ 125,720

REIMBURSABLE EXPENSES

The administrative, overhead, secretarial time or secretarial overtime, word processing, photocopying, in-house printing, insurance and other ordinary business expenses are


included within the scope of payment for services and are not reimbursable expenses. CITY shall reimburse CONSULTANT for the following reimbursable expenses at cost. Expenses for which CONSULTANT shall be reimbursed are:

(a) Telephone and communications charges; computer-aided-drafting/design (CADD) plots, photocopies and other reproductions; all expendable surveying supplies; and any required and approved travel expenses, plus a per diem amount of $50 per day per person for food when traveling or on-site for six (5) or more continuous hours.

(b) Mileage at a rate of fifty-nine (59) cents per mile for use of personal or company

vehicles. All requests for payment of Reimbursable Expenses shall be accompanied by appropriate

backup information. Any expense anticipated to be more than $7,800 shall be approved in advance by the CITY’s project manager.

ADDITIONAL SERVICES

The CONSULTANT shall provide additional services only by advanced, written authorization from the CITY. The CONSULTANT, at the CITY’s project manager’s request, shall submit a detailed written proposal including a description of the scope of services, schedule, level of effort, and CONSULTANT’s proposed maximum compensation, including reimbursable expense, for such services based on the rates set forth in Exhibit “C-1”. The additional services scope, schedule and maximum compensation shall be negotiated and agreed to in writing by the CITY’s Project Manager and CONSULTANT prior to commencement of the services. Payment for additional services is subject to all requirements and restrictions in this Agreement. Potential Additional Service tasks are outlined in Exhibit “A-2” of this Agreement.

Estimated Additional Services Expense Breakdown

Mitigation Measure BIO-2b (ICF) $ 2,697

Mitigation Measure BIO-2c (ICF) $ 6,529

Mitigation Measure BIO-2d (ICF) $ 16,738

Mitigation Measure BIO-2e (ICF) $ 2,160

Mitigation Measure CUL-2 (ICF) $ 2,376

Mitigation Measure CUL-5 (ICF) $ 2,376

Contingency for Golf Course Architect Construction Services $ 13,485


Contingency for Project Representative Construction Services $ 18,354

Contingency for Mitigation Measures $ 8,610

ADDITIONAL SERVICES TOTAL $ 73,325


NOT YET APPROVED

160609 jb 0131526 1

Resolution No. _______ Resolution of the Council of the City of Palo Alto Declaring Its Intention to

Reimburse Expenditures from the Proceeds of Tax-Exempt Obligations to be Issued by the City

R E C I T A L S

A. The City proposes to undertake the project referenced below, to issue, execute

and deliver a tax-exempt financing lease, either on a private placement basis or using certificates of participation (the “Lease”) to finance such project, and use a portion of the proceeds of the Lease to reimburse expenditures made for the project prior to the issuance of the Lease.

B. United States Income Tax Regulations section 1.150-2 provides generally that

proceeds of tax-exempt debt are not deemed to be expended when such proceeds are used for reimbursement of expenditures made prior to the date of issuance of such debt unless certain procedures are followed, one of which is a requirement that prior to the payment of any such expenditure, the issuer declares an intention to reimburse such expenditure.

C. It is in the public interest and for the public benefit that the City declares its official

intent to reimburse the expenditures referenced herein. NOW, THEREFORE, the Council of the City of Palo Alto RESOLVES as follows: SECTION 1. The City intends to cause the Lease to be executed and delivered for the

purpose of paying the costs of renovating and reconfiguring the Palo Alto Municipal Golf Course (the "Project").

SECTION 2. The City hereby declares that it reasonably expects (i) to pay certain costs

of the Project prior to the date of execution and delivery of the Lease, and (ii) to use a portion of the proceeds of the Lease for reimbursement of expenditures for the Project that are paid before the date of execution and delivery of the Lease.

SECTION 3. The maximum principal amount of the Lease is expected to be Ten Million

Five Hundred Thousand dollars ($10,500,000). / / / / / / / /

NOT YET APPROVED

160609 jb 0131526 2

SECTION 4. The Council finds that the adoption of this resolution does not constitute a project under the California Environmental Quality Act and CEQA Guidelines, and therefore, no environmental assessment is required.

INTRODUCED AND PASSED: AYES: NOES: ABSENT: ABSTENTIONS: ATTEST: __________________________ ________________________________ City Clerk Mayor APPROVED AS TO FORM: APPROVED: __________________________ ______________________________ Senior Asst. City Attorney City Manager ______________________________ Director of Administrative Services ______________________________ Director of Community Services

PALO ALTO MUNICIPAL GOLF COURSE RECONFIGURATION PROJECT - CIP PG-13003Bid Results - May 24, 2016

1 2 3Item Quantity Units Unit Cost Total Wadsworth Duininck Frontier

1 Mobilization/Bond (NTE 1.5% of Total Bid) 1 LS 120000 120,000 179,465 190,000 190,0002 Staking/Layout 1 LS 60000 60,000 55,500 150,000 100,0003 Existing Tree & Wetland Protections 1 LS 50000 50,000 88,790 87,000 115,6004 Construction Mitigation Measures under Special Provisio 1 LS 60000 60,000 20,000 175,000 70,000

Schedule 1 Total 290,000 343,755 602,000 475,600

5 Demo Cart Paths/Bury 1 LS 60000 60,000 48,400 45,000 55,0006 Demo Existing Features, Bunkers, Greens & Restroom 1 LS 25000 25,000 30,500 38,000 70,0007 Tree Removal/Bury 650 Ea 100 65,000 110,220 35,000 36,500

Schedule 2 Total 150,000 189,120 118,000 161,500

8 Strip Existing Sod 1 LS 40000 40,000 96,050 92,000 95,0009 Baylands Areas/Pond Earthwork (cuts) 70000 CY 2.6 182,000 103,500 150,000 264,00010 Topsoil Management (Harvest /Place Soils) 38000 CY 4.5 171,000 288,890 340,000 152,00011 Place Import Fill from Stockpile 326000 CY 3.5 1,141,000 1,738,800 1,650,000 1,764,18012 SWPPP/Erosion Control Scope 1 LS 200000 200,000 316,800 260,000 230,00013 Golf Feature Shaping 1 LS 200000 200,000 275,250 365,000 360,00014 Grade/Shape Buffer Mounding 1 LS 17000 17,000 9,750 40,000 22,000

Schedule 3 Total 1,951,000 2,829,040 2,897,000 2,887,180

15 New Subsurface Drainage Piping 4" Perf 17828 LF 8 142,626 178,000 178,000 186,90016 New Subsurface Drainage Piping 6" Non-Perf 27012 LF 10 270,120 313,345 275,000 402,00017 New Catchments 235 EA 200 47,000 88,115 90,000 112,87518 Modify Existing Backbone Drain Inlets 21 Ea 1100 23,100 28,150 10,000 58,00019 12" Drainage Culvert Pipes & FES 1 LS 10000 10,000 12,235 7,500 8,500

Drainage Subtotal 619,845 560,500 768,275

20 Greens Construction Sand Only Method 147300 SF 3.75 552,375 802,560 800,000 1,249,00021 Tee Construction 118000 SF 1.4 165,200 163,330 225,000 313,00022 Bunker Construction New 43840 SF 4.5 197,280 321,535 285,000 347,000

Schedule 4 Totals 1,407,701 1,907,270 1,870,500 2,677,275

23 Irrigation - Golf, Youth, Practice Areas 1 LS 1895000 1,895,000 2,231,480 2,450,000 2,418,65824 Irrigation - Native areas 1 LS 110000 110,000 115,910 170,000 132,73025 Irrigation - Buffer Mounding 1 LS 30000 30,000 15,460 50,000 30,63026 Irrigation – Embarcadero Road Area 1 LS 25000 25,000 44,270 35,000 16,33627 Irrigation - Athletic Field Supply Pipeline 1 LS 23000 23,000 21,880 20,000 26,54628 Irrigation Staking, Programming and Asbuilt Fees 1 LS 45000 45,000 42,270 45,000 42,372

REVISED 2016 PROBABLE COST ESTIMATE

lolmos

Text Box

Attachment E




Irrigation Subtotal 2,471,270 2,770,000 2,667,272

29 Replacement of Irrigation Pump Station 1 LS 250000 250,000 161,065 200,000 158,25530 Add Potable Water Pump Station 1 LS 200000 200,000 91,130 100,000 89,848

Schedule 5 Totals 2,578,000 2,723,465 3,070,000 2,915,375

31 Cart Paths and Foot Paths 208000 SF 3.2 665,600 1,035,760 856,000 920,20032 Path Roll Curb 3000 LF 2 6,000 13,500 12,000 14,10033 Cart Path 4" Curbing 3000 LF 8 24,000 15,750 15,000 14,10034 Maintenance Routes (Gravel) 2000 LF 8.5 17,000 25,560 21,300 20,590

Schedule 6 Totals 712,600 1,090,570 904,300 968,990

35 Finish Shaping 1 LS 140000 140,000 140,880 250,000 125,00036 Fine Grade Prep & Soil Amend Fairways & Roughs 79 AC 2700 213,300 388,120 550,000 630,00037 Fine Grade/Soil Prep Native areas 55 AC 850 46,750 163,260 200,000 117,00038 Native Area "A" Hydro Seeding 42 AC 4200 176,400 138,140 120,000 204,25039 Baylands Area "B" Hydro Seeding 13 AC 4000 52,000 60,870 600,000 59,11040 Paspaulum Sod - Platinum 16.0 AC 26000 416,000 470,080 672,000 498,32041 Sprigged Paspaulum Areas - Platinum 61.5 AC 5200 319,800 410,440 291,400 275,59042 Bentgrass Seeded Greens with Amendments 148000 SF 0.2 29,600 17,980 36,000 90,00043 Greens Ryegrass Sod Collars 50000 SF 0.4 20,000 30,415 36,000 26,97044 Fescue Sod 1 LS 6500 6,500 10,630 8,000 5,60045 New Trees 300 Ea 285 85,500 101,300 90,000 90,30046 Landscape Along Embarcadero 1 LS 35000 35,000 72,770 70,000 50,00047 Youth Golf Area Fence, Bollards 1 LS 42000 42,000 45,590 60,000 56,00048 Turf Establishment 1 LS 150000 150,000 217,480 325,000 235,000

Schedule 7 totals 1,732,850 2,267,955 3,308,400 2,463,140

49 Driving Range Poles and Netting 1 LS 60000 60,000 45,800 50,000 77,00050 Barrier Fencing 1 LS 4000 4,000 28,250 55,000 18,00051 Concrete Range Tee 1 LS 11000 11,000 15,610 19,000 13,90052 New Synthetic Turf 35000 SF 3.5 122,500 220,320 175,000 367,000

Schedule 8 Totals 197,500 309,980 299,000 475,900

53 Restroom 1 LS 125000 125,000 247,775 200,000 236,00054 RR Sewer 1 LS 35000 35,000 18,990 40,000 60,00055 RR Electrical Supply 1 LS 20000 20,000 36,700 35,000 54,000

Schedule 9 Totals 180,000 303,465 275,000 350,000




ADD INFLATION 2% 2.0% 9000000 180,000 ADD FOR PREVAILING WAGE 6% 6.5% 9000000 585,000

Subtotal Construction Hard Costs 9,964,651 11,964,620 13,344,200 13,374,960

Alternate Additional or Deductive ItemsA Add Youth Golf Area Greens – 3 Greens Total 1 LS 35000 35,000 59,910 32,000 60,000B Add Youth Golf Area Green West – 1 Green Total 1 LS 20000 20,000 29,230 19,000 40,000C Add Class 2 Base Section to Cart Paths 1 LS 150000 150,000 207,580 214,000 214,000D Add Wire Mesh Reinforcement to Cart Paths 1 LS 50,000 50,000 81,320 85,600 85,600E Add Bridge & Bulkheads 1 LS 80000 80,000 79,980 130,000 70,200F Add Upgrade to Pro-Matrix mulch in Hydroseed “A” 1 LS 30000 30,000 64,150 75,000 73,710G Add Upgrade to Pro-matrix mulch Hydroseed “B” 1 LS 10000 10,000 16,690 20,000 21,333

HAdd Alt Upgrade to Add Peat Moss in Greensmix, Include Alts A&B 159300 SF 0.5 79,650 136,805 110,000 105,000

I

Add Alt Upgrade to use Profile in Greensmix over Peat option above Include Alts A&B 159300 LS 1 159,300 187,790 160,000 155,000

J

Alternate Additive Unit Cost to provide Platinum Paspaulum turf in sodded form in lieu of using hydrosprig method for Bid Item #41 61.5 AC 19136 1,176,864 1,430,960 496,000 1,647,464

K

Alternate Deduct item - Adjust Turf Establishment costs for use of all sod if Alternate J above is accepted.

1.0 LS -50000 (50,000) -10,000 -100,000 115,000

L

Alternate add or deduct (strike one) to provide Hydroseeded Dynasty Paspaulum in seed form in lieu of Platinum Paspaulum in sprig form for Bid Item #41 61.5 AC -900 (55,350) -70,680 496,000

M

Alternate add or deduct (strike one) to provide Dynasty Paspaulum turf in sodded form for Bid Item #40 (Sodded Platinum Paspaulum) 16.0 AC 0 - 464,640 676,800

N

Alternate add or deduct (strike one) to provide Dynasty Paspaulum sod in lieu of Platinum Paspaulum sod for Bid Item #41 61.5 AC 0 - 3,231,440 2,622,600




O

Alternate Deduct item - Adjust Turf Establishment costs for use of all Dynasty Paspaulum sod if Alternate N above is accepted. 1.0 LS -50000 (50,000) -10,000 -100,000 -115,000

P Deductive Alt - Prefabricated Restroom 1 LS -20000 (20,000) -64,940 -35,000 -92,000

Updated Analysis and Pro Forma Projections for Reconfiguration Option G

Palo Alto Municipal Golf Course

Prepared For:

City of Palo Alto Lam Do, Superintendent Open Space, Parks, and Golf

Community Services Department 3201 East Bayshore Road

Palo Alto, CA 94303

Prepared By:

1150 South U.S. Highway One, Suite 401

Jupiter, FL 33477 (561) 744-6006

May, 2016

Updated Analysis and Pro Forma Projections for Reconfiguration Option G

Palo Alto Municipal Golf Course

Table of Contents

INTRODUCTION & PURPOSE .................................................................................................. 1

PALO ALTO MUNICIPAL GOLF COURSE RECONFIGURATION OPTION ‘G’ ....................... 2

Option G ............................................................................................................................. 3

Palo Alto GC Performance FY 2012 – FY 2016 .................................................................. 4

EXTERNAL FACTORS ............................................................................................................. 5

Market Overview ................................................................................................................. 5

Demographics ............................................................................................................................... 5

Golf Industry Overview 2015 ......................................................................................................... 6

Bay Area Market ............................................................................................................................ 7

Local and Regional Golf Supply and Demand Indicators.............................................................. 8

Competitive Golf Market ................................................................................................................ 9

Summary of Findings – Key Changes Since 2012 Report .......................................................... 12

CONCLUSIONS & UPDATED FINANCIAL PROJECTIONS ....................................................14

Basis for Rounds And Revenue Projections – 2016 ...........................................................14

Financial Projections – ‘Baylands Golf Links’ (2017-2026) .................................................16

Key Assumptions ......................................................................................................................... 16

Pro Forma Estimate for ‘Option G’ Scenario – FY2017 – FY2026 ............................................. 20

NGF Projection Sensitivity Analysis ...................................................................................23

Sensitivity Analysis - Summary for 2020 ..................................................................................... 23

Financial Projections Summary ..........................................................................................24

SUMMARY STATEMENT .........................................................................................................25

APPENDICES...........................................................................................................................26

Appendix A – Golf & The Millennial Generation ..................................................................27

Appendix B – Sensitivity Analysis Pro Formas ...................................................................28

Sensitivity Analysis - Summary for FY 2020 ............................................................................... 28

Reduced Rounds Sensitivity Spreadsheet .................................................................................. 29

Reduced Fee Sensitivity Spreadsheet ........................................................................................ 31

Reduced Rounds and Fee Sensitivity Spreadsheet .................................................................... 33

Appendix C – PAGC Management Structure ......................................................................35

Appendix D – Consideration Of Other Improvements .........................................................36

Expanded Meeting Space ........................................................................................................... 36

Range Performance Center ........................................................................................................ 36

National Golf Foundation Consulting, Inc. – City of Palo Alto Final Report – 1

Introduction & Purpose

National Golf Foundation Consulting, Inc. was retained by the City of Palo Alto in furtherance of the City’s due diligence relative to the planned renovation of the Palo Alto Golf Course, which would be rebranded as Baylands Golf Links. The original impetus for the renovation was the San Francisquito Creek Flood Control Project, which would involve the reconfiguration of at least six holes at the golf course. NGF was originally retained in early 2012 to help the City identify the expected financial impact from the improvements related to the reconfiguration work under Plan Options A, D, F, and G, submitted by golf course architect Forrest Richardson, ASGCA.

The primary goal of this spring 2016 due diligence, which was prompted by the lengthy delay in construction, is to reassess the validity of the key assumptions – especially those related to golf market conditions - that drove the financial projections for ‘Reconfiguration Option G’ as the recommended plan. As of early May 2016, construction permits have not been granted and the latest tentative dates have golf course renovations beginning in July 2016 and continuing through June 2017. Turf grow-in would follow in July 2017 through October 2017, with the facility re-opening in November 2017. City staff hopes to seek construction bids and Council approval based on these dates. The total estimated amount to be bonded by the City for this project is $8.29 million, including associated fees.

Key components of this study include:

Reviewing current construction plans and timing. Collecting and reviewing the relevant facility data and performance history since our

last study, including activity levels, revenues, and expenses. Updating external factors, such as demographic trends, that have the potential to

affect performance at Baylands Golf Links. Identifying substantive changes to the competitive market since our initial report,

including any golf course closings, openings, or major renovations. Reassessing the proposed Baylands Golf Links fee structure, recommended market

positioning, and other key assumptions for ‘Option G’ in the context of the current and expected competitive golf market (assuming October/November 2017 re-opening date).

Revising Option G 10-year pro forma as market conditions and other assumptions warrant, including sensitivity analysis of key variables.

The study effort was managed by NGF Director of Consulting Services Ed Getherall and Senior Director of Consulting Services, Richard B. Singer. Activities conducted in completion of this report included: desktop market analysis and research, including interviews with area golf operators; analysis of recent financial performance; phone meetings with key City staff from the Recreation & Golf Services, Administration, Community Services, and Finance Departments; and a phone interview with the Head Golf Professional.

Following is the consultants’ report summarizing key findings. Throughout this report, we may refer to shortened names for: the City of Palo Alto (“City”), the Palo Alto Municipal Golf Course (“Palo Alto Golf Course”, “Palo Alto GC”, “PAGC”, or “Baylands Golf Links”), and National Golf Foundation Consulting, Inc. (“NGF Consulting” or “NGF”).


Palo Alto Municipal Golf Course Reconfiguration Option ‘G’

In early 2012, NGF Consulting was provided four course reconfiguration options prepared by Forrest Richardson, ASGCA. These options were identified by the titles “Option A,” Option D,” “Option F” and “Option G,” and each had unique characteristics. The options represented four possible scenarios for adjusting the course to accommodate the SFCJPA flood mitigation project. The process for developing options was thorough, with extensive input from golfers, staff, concessionaires and the public at large. NGF Consulting reviewed notes and summaries from those meetings to better understand the goals and objectives desired by those who will use and operate the facility following reconfiguration.

Among the goals and objectives set forth to guide the design process for reconfiguration options, in addition to the fundamental goal to accommodate the flood project, were:

Establish a more natural, aesthetic landscape that incorporates a “Baylands” theme Improve tree care and variety via a theme to use appropriate tree selection Find ways to eliminate geese and burrowing animals from ruining the course Improve bunkers (condition, strategy and aesthetics) Improve overall course conditioning (drainage, irrigation, turf, etc.) Adjust yardage so the course is shorter for beginners, women and seniors Create a “wow factor” to remain competitive with other regional facilities Add interest to the course strategy (dog-legs, differentiation of holes, etc.) Find ways to offer player development opportunities (short game area, range, etc.)

Additionally, there was a strong desire to address long range issues that face the aging facility beyond those on the golf course itself. The City commissioned its own scope of work to address these issues concurrently with the course reconfiguration planning. These long range areas included the following:

Clubhouse planning Entry, parking and signage Practice areas Cart storage and staging On-course restrooms Branding and image Trail connections from the Baylands and existing trails

The objective of the additional long-range planning was to look beyond the golf course to ensure that reconfiguration options would not preclude improvements to the areas on the above list. Specific goals and objectives included the following:

Find ways to bring non-golfers to the facilities (group events, restaurant, etc.) Expand the clubhouse to seat 200 so larger groups can be accommodated Develop areas to hold multiple outings/events simultaneously


Improve the arrival experience, entry aesthetics, trail connections and security Develop a cart storage area/facility Make overall improvements to the clubhouse and grounds (exterior and interior) Improve and expand the practice range Create new player development and practice opportunities Plan for upgrading the on-course restroom facility Develop a new brand and image consistent with the reconfiguration goals and design

A common thread among the long range planning components was a strong desire to return the facilities, with golf course approaching its 60th year and the clubhouse its 30th, to a “Point of Pride” status within the community. Along with this primary objective come the benefits of leveraging the facility for economic development, tourism and as a home to annual and special events. Secondarily, the community had a strong desire to see the golf course be more compatible with the Baylands environment. This goal was echoed by Mr. Richardson in his reconfiguration options, each of which adds more naturalized areas to the golf course. In addition, long range design concepts associated with the clubhouse, entry and image go hand-in-hand with this goal.

OPTION G

Option G represents a plan to remove more land from golf course use, setting aside this land for potential future use as multiple athletic fields and non-golf recreation purpose. This land is shown conceptually as athletic field use. This option was added to the reconfiguration scope of the golf course architect based on the direction of the City to investigate whether the viability of the golf course could be preserved while opening more area (than with Option F) for non-golf recreation. The constraint placed on the planning work was to retain a regulation layout with a par of 70 or 71. Safety from the new trail system and within adjoining holes was to be maintained with no compromise to standard guidelines.

Option G also facilitates the San Francisquito Creek realignment as required by the SFCJPA. The option involves the removal of approximately 10.5 acres from the golf course parcel. This land area is shown as athletic field use (three full sized NCAA soccer fields or combination of fields and field types of the same proportion and area), and additionally shows areas for a small playground, wetlands park and picnic space, and trails connecting to the San Francisquito Creek levee trails, Baylands and neighborhood. The reconfiguration departs from the common parallel routing of the existing course. Golf holes are moved away from the levee to form new views and variation. Bunker work and naturalization enhancements are made throughout the course in order to provide a more consistent golf experience and landscape. Virtually all areas of the existing course would be reconstructed, enhanced and improved.

The NGF projection model for “Option G” represented a significant change from other options presented, as it involved a complete renovation of the golf course (to be re-branded as “Baylands Golf Links). The project would involve a full closure of the golf course (now slated for 12 months construction and an additional 4 months grow-in) and re-opening as a brand new golf course with high quality features that will stand out in this public golf market. The full golf course irrigation system would be replaced and three new soccer fields would be added to the site. Subsequent to the initial draft report, the City Finance Committee recommended that this option include rebuilding of all 18 greens, re-grassing of all fairways, construction of an on-course restroom, and rebuilding the practice green area. These changes should further enhance the product’s marketability and the golfer experience.


PALO ALTO GC PERFORMANCE FY 2012 – FY 2016

The most recent five-year performance history of Palo Alto GC is shown in the table below.

Palo Alto Municipal Golf Course Historical Revenue and Expense Performance (2012-2016*)

REVENUES FY2012 FY2013 FY2014 FY2015 FY2016* Tournament Fees $1,878 $1,670 $4,037 $37,517 $152 Green Fees (+Cards) 1,940,725 1,781,405 1,103,410 922,800 625,894 Driving Range 355,594 343,883 313,633 296,933 190,528 Cart Fee 301,225 279,795 225,310 216,541 152,117 Pro Shop Lease 29,966 27,248 25,051 24,818 18,473 Restaurant Lease 43,827 48,880 53,487 39,191 33,318 Restaurant Utilities 21,600 21,600 16,260 16,980 13,500 Other Fee 25,325 24,319 20,075 22,239 11,768 TOTAL REVENUE $2,720,140 $2,528,800 $1,761,263 $1,577,019 $1,045,750 Operating Expenses Salaries & Benefits $129,586 $134,948 $122,634 $85,683 $50,531 Advertising & Publishing 13,781 11,307 7,916 5,599 4,216 Supplies and Materials 12,238 3,292 6,986 1,106 (595) General Expense 754 1,014 1,038 74 49 Facilities Repairs & Maint. 4,538 7,259 9,706 Water Expense 241,630 381,966 319,204 253,314 216,049 Other Direct Charges 44,061 48,448 46,126 44,173 30,255 Indirect Charges 28,961 93,702 35,858 31,017 14,210 Subtotal $475,549 $681,936 $539,762 $430,673 $314,715 Contract Services Golf Maintenance $772,539 $808,801 $780,755 $831,130 $623,682 Miscellaneous 546 940 Range Fees 135,310 130,676 119,181 112,835 72,401 Cart Rentals 114,621 112,083 86,034 81,767 57,107 Club Rentals 6,061 5,951 4,666 4,880 3,133 Fixed Management Fees 343,544 339,045 338,292 319,057 288,762 GF to Golf Professional (5%) 0 0 0 0 0 Credit Card Fees 41,474 38,000 30,000 Subtotal $1,413,549 $1,434,555 $1,359,474 $1,350,608 $1,045,084 Total Operating Expenses $1,889,099 $2,116,491 $1,899,236 $1,781,281 $1,359,800 Net Income Operations $831,041 $412,309 ($137,973) ($204,262) ($314,050) Debt and Other Charges 1998 Debt Service $559,539 $428,180 $429,020 $428,194 $429,020 Cost Plan Charges 24,837 23,871 27,349 20,459 25,000 Capital Reserve 0 0 0 0 0 Subtotal - Debt + Other $584,376 $452,051 $456,369 $448,653 $454,020 Net Income (Loss) $246,665 ($39,742) ($594,342) ($652,915) ($768,070) Golf Rounds 62,971 58,026 46,527 42,048 30,289

Source: City of Palo Alto *FY2016 Actual Through March.

Rounds played at Palo Alto GC decreased steadily from FY2012 to FY2016, a result of changes to the golf course (e.g., temporary greens, reduced par) caused by storage of imported soil. During the same time, golf revenues declined by over $1.2 million and net income from operations declined by almost $1.03 million.

The recent decline has led the Palo Alto GC to fall below break-even on operations, meaning that when debt service and cost plan charges are included, the course is losing well in excess of $650,000 in FY2015, the last full year.


External Factors

Below, NGF Consulting provides a summary update of key “external” factors that characterize the trade area in which the Palo Alto Golf Course operates. We include basic demographic variables that have the potential to affect the economic performance of the golf facility, as well as an analysis of supply and demand indicators in the public golf market.

MARKET OVERVIEW

Below we provide an overview of recent and emerging trends with respect to golf participation and municipal golf, as well as a summary of golf demand and supply indicators in the Bay Area region and local Palo Alto market. NGF Consulting utilizes predictive models as benchmarks for estimating potential market strength.

Demographics

In the table below, NGF provides the population, median age, and median household income trends for San Mateo and Santa Clara counties, the U.S., and the 3-, 10-, and 15- mile market rings surrounding the PAGC. Source: Applied Geographic Solutions, Inc.

Palo Alto Golf Course 3 miles 10 miles 15 miles San

Mateo County

Santa Clara

County U.S.

Summary Demographics Population 1990 Census 94,005 696,969 1,480,582 649,627 1,496,700 248,584,652 Population 2000 Census 99,863 769,033 1,663,189 707,165 1,682,590 281,399,034 CAGR 1990-2000 0.61% 0.99% 1.17% 0.85% 1.18% 1.25% Population 2010 Census 103,357 807,540 1,750,575 718,451 1,781,642 308,745,538 CAGR 2000-2010 0.34% 0.49% 0.51% 0.16% 0.57% 0.93% Population Estimate 2015 112,010 855,326 1,862,466 756,286 1,903,592 319,998,423 Population 2020 Projected 121,210 923,070 2,009,226 808,754 2,076,498 332,811,226 CAGR 2015-2020 0.99% 0.96% 0.95% 0.84% 1.09% 0.49% CAGR 2010-2020 2.01% 1.69% 1.74% 1.49% 1.93% 0.94% Median HH Income (2014 Estimate) $93,513 $99,371 $93,371 $89,279 $91,521 $52,747 Median Age (2014 Estimate) 36.6 37.5 37.7 40.1 37.3 37.8 CAGR = Compound Annual Growth Rate

NGF Consulting has made the following observations regarding the demographics of Palo Alto and surrounding areas:

The 10-mile and 15-mile markets around Palo Alto GC are dense, with 2015 estimates of about 855,000 and 1.862 million residents, respectively. The 10-mile market has added nearly 48,000 net new residents since 2010, while the 15-mile market grew by nearly 112,000 people. Population growth is projected to be even more robust through 2020, at more than twice the national rate of growth. The 10-mile market is expected to add about 68,000 net new residents during that time.

The Median Ages in the subject market areas are generally similar to the national median of 37.8 years, though San Mateo County is significantly higher at 40.1 years. In general, the propensity to play golf with greater frequency increases with age, making older markets more attractive to golf facility operators, all factors being equal.


Median Household Incomes in the area are much higher than the national median. For instance, the 10-mile market median income is 77% higher than the national median income of $52,747. In general, higher income residents are more likely to participate in golf, and they play more frequently than lower income residents. Locally, these high figures are mitigated by the high cost of living in the Bay Area.

Golf Industry Overview 2015 While socio-demographic, financial and cultural headwinds certainly persist for golf, the industry continued its macro trend toward stabilization in 2014-2015. Golf’s pay-for-play green fee revenues and other spending on the sport will always be vulnerable to outside forces such as weather and the economy, but the game remains popular and is fortunate to have a deep well of interested prospects. Still, some socioeconomic and demographic trends continue to present challenges for golf operators. For instance, golf is having trouble attracting and retaining young adults (i.e., Millennials – see Appendix A); though this segment continues to account for a large percentage of annual play and spending, factors such as debt and competing recreational activities have suppressed golf demand from this segment. The smartest, best-managed and most innovative golf facilities will win market share and have the best opportunity for growth.

Key Trends

Participation - The national golfer number (participation) appears to be continuing a stabilization trend, though there has been continued net attrition, primarily among occasional/less committed golfers. Overall, NGF survey research indicates that in 2015 there were 24.1 million people in the U.S. that played at least one round of golf in the prior year, about ±1 million fewer than in 2012. However, the vast majority of “core” golfers remain in the game.

Rounds Played / Looking Ahead – Despite poor weather that suppressed first-quarter play in 2015, rounds played nationally finished the year 1.8% ahead of 2014, according to Golf Datatech. The overall Pacific region was up 2.7%, while the San Francisco/Oakland submarket was up 1%. The next couple of years should provide a stronger indication of whether playable day- adjusted rounds have stabilized.

Golf Course Supply - The correction in golf course supply continued in 2015 at a level comparable with the previous three years. According to NGF data, since the market correction in golf course supply began in 2006, there has been a cumulative net reduction of 679.5 golf courses (18HEQ), which represents a drop of about 5% off the peak supply year of 2005. For perspective, golf supply grew by 40% in the previous 20 years (1985-2005). We note that not all golf courses are closing due to competitive dynamics; rather, some golf courses – especially in geographies where developable land is at a premium – are closing because residential or commercial is a much “higher and better use”. Whatever the reasons, this much-needed move toward supply/demand equilibrium is expected to continue for the next several years.

Baby Boomer Effect – As Baby Boomers age and retire over the next 15 years, we expect to see a measurable increase in total rounds played in the U.S. Boomers - born between 1946 and 1964 - are currently 51 to 69 years old. About 6 million of them are golfers; that’s about 1/4 of all golfers, and they currently play about 1/3 of all rounds. Boomers started turning 65 in 2011, and already about 1 million golfing Boomers have reached retirement age (though not all have retired). Both the Social Security Administration and Pew Research Center report that 10,000 or more Boomers retire every day. And 300,000 Boomer golfers will turn 65 each year for the next 15 years. Retired Boomers (age 65+) play about twice as much as younger, non-retired Boomers (40 rounds vs 21 rounds).


Other Measures of Health Other perhaps equally important metrics to consider when measuring the health of, and prospects for, golf include: Engagement, Beginners, and Latent Demand.

Engagement: Several years ago NGF developed a scale to gauge participant engagement/ passion for golf. NGF annual golfer survey research indicates that the number of engaged golfers has remained steady at 20 to 21 million for the past four years. But the proportion of engaged golfers has increased from 78% to 83% over this period. These engaged golfers are responsible for over 94% of rounds played, and 97% of equipment spend. Those who are more engaged are significantly more likely to continue playing.

Beginners: The number of beginners – about 2 million in 2015 - looks to be on the upswing again, more evidence of the participation bubble that began to build in 1997.

Latent Demand: It is also encouraging to know that overall interest in playing golf remains very high. NGF survey research indicates there is more than one prospect golfer for every existing golfer, or about 25 million strong.

Summary

Positive economic indicators, an increase in weather-adjusted rounds played, and the return of private equity funding to the industry are just a few of the under-reported developments in golf that tell the current story of the industry. The continued supply correction, though painful for some operators, will result in more favorable competitive situations in some markets. Finally, participation has historically tracked closely with Real Adjusted Household Income, suggesting that if income increases, there’s a likelihood that the golfer trajectory would increase with it.

Bay Area Market

As was the case with nearly every golf market NGF examined nationally, average annual rounds played at many Bay Area golf courses dropped by 25% or more between the late 1990s / 2000 and the middle part of the 2000s. Based on rounds reported to NGF as part of our study effort back in 2011-12, rounds played among the direct competitive continued to decline through the Great Recession and into the 2010-11 period, though decreases in some of those years were at least partly attributable to weather variations.

The decrease in activity levels was due to the number of golfers falling from its peak in the early 2000’s that resulted from a number of factors, including the “Tiger Effect” and the increased exposure of professional golf on network television. Another factor contributing significantly to the decline in average rounds played from its peak, both nationally and regionally, was the furious run-up in golf course supply during that time, especially in the public segment. Though the population growth of the Bay Area somewhat mitigated the increase in the number of golf courses, operators still felt the pain. For the nine-county Bay Area region, 27 total golf facilities were added between 1997 and 2006. This included 6 private (comprising 90 holes) and 21 public (360 holes) facilities. Still, even with the sharp decline off of peak activity levels, rounds played per 18 holes among the subset of municipal golf courses that Palo Alto GC competes with remain among the highest in the U.S.

As we will note below in the ‘Competitive Golf Market’ section below, NGF’s tracking of activity trends (operator interviews) in PAGC’s primary trade area indicate that rounds played have stabilized over the last several years on a playable-day adjusted basis. (Subject notwithstanding, whose decline since 2012 can mostly be attributed to the disruption of the golf course in advance of construction). According to Golf DataTech, in 2015 the Pacific region saw rounds increase by 2.7%, while the San Francisco/Oakland submarket was up 1%.


Rounds Played Annual % Change Year Over Year

Census Divisions 2008 2009 2010 2011 2012 2013 2014 2015 San Francisco/Oakland -3.1% 0.4% -9.4% 2.1% 2.7% 10.0% -5.3% 1.0% United States -1.8% -0.6% -2.3% -2.5% 5.7% -4.9% -1.7% 1.8%

The table above shows the longer-term trend in year-over-year rounds played, from both a national and Bay Area perspective. Though the Bay Area saw a larger rounds decrease in 2014 than the nation overall, NGF believes that the next few years will provide a stronger indication of whether playable day- adjusted rounds have stabilized, and whether the increasing population, coupled with the standstill in new course development, may result in activity levels rebounding somewhat.

Local and Regional Golf Supply and Demand Indicators

Below is a summary of key findings regarding the public golf supply/demand dynamic in Palo Alto GC’s primary trade area. This information is derived from the NGF Demand Model (based on ongoing NGF golf participation research), NGF U.S. Golf Facilities Database, and NGF Golf Market Analysis Platform (GolfMAP).

There are thirteen total, including eight public, golf facilities (including Palo Alto GC) in the 10-mile market area, and 25 total facilities, including 21 public, within 15 miles of Palo Alto GC. The NGF database reveals no new golf course projects currently in planning or under construction within 15 miles of Palo Alto GC.

Golf participation rates in the subject markets around Palo Alto GC are very similar to the national benchmark. However, due to the density of the population, the area has significantly more golfing households per 18 holes of golf than the nation overall. For example, in the 10-mile market area surrounding Palo Alto GC, there are 3.4 times as many golfing households per total 18 holes of golf than in the overall U.S.

Supplementing golf demand from permanent residents are: (1) The area’s large number of major corporate and public employers, including many high-tech companies. These large employers are prime targets for soliciting tournament/outing play, which are generally strong revenue generators and expose a number of golfers to a facility for the first time; (2) Visitors to the Palo Alto area - though visitation numbers were not available for Palo Alto specifically, about 17 million people visit San Francisco alone each year, and the overall Bay Area has considerably more visitors than that. NGF research shows that roughly one-third of all golfers participate in the activity while traveling. With Baylands Golf Links should get its fair share of visitor demand, as it is designed to have “destination” appeal.

People who express an interest in playing golf but have not yet started include former golfers and those who have never tried. The demographic profile of latent demand tends to be more female and younger than the population as a whole. Surveys show these golf-interested non-golfers cite several barriers to entry in golf, including the cost and social aspects (no one to play with). NGF research estimates that about 120,000 interested non-golfers live in PAGC’s 10-mile market. This represents a rich well of “prospects”, some of whom can be activated with creative programming aimed at inviting and “onboarding” them into the game.


Competitive Golf Market

NGF reviewed the public access golf market in which the current Palo Alto GC operates, with a focus on changes that may have occurred among the key competitors identified in the 2012 NGF study, plus Golf Club Moffett Field, which went public since the previous study. This group of potential competitors was chosen based on NGF market experience, with input from Palo Alto GC Golf Professional Brad Lozares and other area operators. The list is intended to be a representative subset, and is not totally exhaustive. For example, the city of San Jose’s “Muni” golf course is considered a key competitor, while the city’s other 18-hole offering – the shorter-length and much less popular Los Lagos – is not.

The map below shows the location of these facilities in relation to Palo Alto Golf Course. Following the map are summary operational tables for these key competitors to PAGC and, potentially, to the reimagined Baylands Golf Links.

Competitive Facility Location Map


Summary Information – Primary Competitors

The table below provides summary information regarding the golf courses we have identified as Palo Alto GC’s primary competitors.

Palo Alto Municipal Golf Course Key Competitors – Summary Information

Golf Facility Location Type Year Open Par / Slope

Front Tee / Back Tee

Location Relative to PAGC*

Palo Alto Municipal Golf Course Palo Alto MU 18H 1956 67 / 104 4,482 / 5,558 --

Crystal Springs Golf Course Burlingame MU 18H 1924 72 / 125 5,530 / 6,628 16 mi NW

Golf Club of Moffett Field Mountain View DF 18H 1956 72 / 117 5,386 / 6,572 4.5 mi

Poplar Creek Golf Course San Mateo MU 18H 1933 70 / 115 4,768 / 6,042 14.5 mi NW

San Jose Municipal Golf Course San Jose MU 18H 1968 72 / 118 4,200 / 6,700 13 mi SE

Santa Clara Golf & Tennis Club Santa Clara MU 18H 1987 72 / 118 5,459 / 6,722 8.5 mi SE

Santa Teresa Golf Club San Jose DF 27H 1963 71 / 126 5,460 / 6,737 24.5 mi SE

Shoreline Golf Links Mountain View MU 18H 1983 72 / 127 5,437 / 6,608 2.5 mi SE

Spring Valley Golf Course Milpitas DF 18H 1956 70 / 113 5,453 / 6,139 15 mi E

Sunnyvale Golf Course Sunnyvale MU 18H 1969 70 / 118 5,173 / 6,255 5.5 mi SE

*Air miles from subject site, rounded to half-mile; actual driving distances will likely be greater. Type: DF – Daily Fee; MU – Municipal


The table below shows summary rounds played and green fee information regarding Palo Alto Municipal Golf Course and its primary competitors.

Summary Operating Data – Palo Alto Municipal Golf Course and Primary Competitors

Golf Facility 2011

Rounds 2015

Rounds

Average 2015 Green + Cart

Fee per Round

18-Hole Resident

Green Fee (WD/WE)

18-Hole Non-

Resident Green Fee (WD/WE)

Per Person 18-Hole Cart

Fee

18-Hole Twilight

Green Fee (WD/WE)

18-Hole Senior

Resident Green Fee (WD/WE)

18-Hole Super-Twi Green Fee (WD/WE)

Palo Alto Municipal GC 66,740 42,048 $27 DNA $29/$39 $15 single rider $13 pp $25/$30 $25/DNA $16/$17

Crystal Springs Golf Course 63,000* 69,577 $32 DNA $47/$69 $17 $39/$46 $32/DNA $28/$38

Golf Club of Moffett Field N/A 39,985 N/A Google emp. $22 / $27 guest $35 / $49 $15 $14/$17 g/e

$22/$30 guest DNA $12/$12 g/e $16/$22 guest

Poplar Creek Golf Course 70,709 63,903 $36* $33/$45 $38/$53 $19 single rider $14 pp $27/$33 $27/DNA1 $19/$25

San Jose Municipal GC 78,000* 80,000 $38 DNA $38/$52 $15 $26/$33 $24/DNA $20/$24

Santa Clara Golf & Tennis 81,000 60,000 $31 $28/$38 $37/$53 $16 single rider $14 pp

$17/$24 res $26/$30 n/r DNA $12/$14 res

$16/$18 n/r

Santa Teresa GC3 (18H) 72,000* 80,000 $39* DNA $42/$47/$63 $20 single rider $14 pp $25/$29/$34 $26/$26/DNA $17/$19/$25

Shoreline Golf Links 50,000 82,000 $27* $31/$47 $38/$54 $18 single rider $14 pp

$18/$21 res $25/$28 n/r $21/DNA1 $10/$10 res

$16/$18 n/r

Spring Valley Golf Course N/A 61,000 N/A DNA $41/$60 $15 $30/$34 $30 M-F $19/$22

Sunnyvale Golf Course 72,535 73,000 $32* DNA/$45 $37/$50 $14 DNA/$27 res $27/$32 n/r DNA2 $17/$22

KEY *NGF Consulting estimate N/A – Information not available DNA – Does not apply / Not offered Note: For San Jose, Santa Teresa, “afternoon” rates used for twilight and “twilight” for super twilight; for Spring Valley, “afternoon” and evening used for twi / super-twi; Palo Alto late afternoon used for super-twi. 1 Non-resident seniors: $28 at Shoreline; senior discounts at Poplar Creek are for residents only; 2 Sunnyvale offers senior discount card. 3 Rounds listed are for regulation 18-hole course only. Source: Area golf operators; City CAFRs; City of San Jose golf audit.


Summary of Findings – Key Changes Since 2012 Report

Posted green fees, and average daily green + cart rates, have been flat for most of the competitive set for the last several years, with a few exceptions. The subject Palo Alto GC has reduced rates due to the course reconfiguration necessitated by the stockpiling of soil, while Santa Clara GC has reduced fees when course conditions warrant (fairways are now used for event parking, such as 49er games and concerts). Also, Mountain View’s Shoreline Golf Links, which hired a management company in 2012, has been aggressively discounting fees (e.g., through very affordable unlimited play monthly passes) to drive volume.

Even considering the 25% or so decline in activity off of peak rounds achieved in the late 1990s, more than half of this competitive set hosts between 70,000 and 80,000 rounds each year, or more than twice the national average. There are few submarkets in the nation that produce these kinds of activity levels, which are largely attributable to the high number of golfers per 18 holes in the area.

NGF interviews indicate that there have been no major facility improvements at Palo Alto GC’s key competitors since the time of our previous study, with the exception that a driving range was added at the City of San Mateo’s Poplar Creek.

San Mateo is looking for ways to address the financial deficit at Poplar Creek, and has just issued an RFP for a feasibility study to explore alternative recreational uses for the property. Though the golf course generated an operational profit of ±$200,000 in FY 14, it was close to break-even operationally in FY 15, on just under 64,000 rounds. Annual $675,000 payments on $7.465 MM in golf course debt (for golf course renovation in 2000) brings the overall Golf Fund significantly into the red each year. Also, the General Fund charges the Golf Fund ~$140,000 annually for allocated overhead charges, and another ~$200,000 for Payment in Lieu of Taxes. NGF believes that, even with the addition of a driving range, Poplar Creek offers a significantly inferior product to what is proposed for Baylands. The course averages three out of five stars on both Yelp and GolfAdvisor, with most negative reviews centering on pace of play, poor drainage and overall course conditions.

Golf Club Moffett Field, which is now owned by Google, has gone fully public since the time of the previous study, and hosted just under 40,000 rounds in 2015. Google recently finished improvements to the clubhouse, and is now improving the driving range, with a new grass tee line, target greens, and improved irrigation and drainage. There is also a tree program being implemented aimed at removing dead trees and trimming others throughout the golf course.

As noted, PAGC’s chief competitor, the city of Mountain View’s Shoreline Golf Links, has reduced fees to drive volume. The strategy has worked, with the facility doing about 30,000 more rounds than it did back in 2011. Of course, Shoreline has also been the biggest beneficiary of Palo Alto GC’s disrupted operation.

NGF noted macro Bay Area golf participation trends earlier. In terms of the direct competitive set, all but the subject Palo Alto GC and Santa Clara Golf & Tennis (SCG&T) have maintained, or even grown, their activity levels since our previous study. Santa Clara has lost about 25% of its play over the last four years, due to the aforementioned event parking. In 2015, the course lost 38 days to event parking (25 events, 47,000 cars), plus another 10 days for the Super Bowl. Sunnyvale GC has also reportedly lost some play recently after restaurant and bar closed due to the vendor leaving.


Also contributing to the drop in activity levels at SCG&T is the uncertainty over the course’s future, as Related Santa Clara, a proposed mixed use city center concept, is likely to displace the golf course in the next year or two. This has resulted in the golf facility losing many large tournaments. Santa Clara’s closure should positively impact Baylands’ market share, as would the potential repurposing of Poplar Creek. Another potential closure would likely have less impact if it happened; San Jose’s Los Lagos GC, which the city has reportedly discussed repurposing in the face of operating deficits and an $18MM debt load, is a shorter length Los Lagos that NGF does not consider to be a key competitor of PAGC (will be even less so for Baylands Golf Links).

Although not a direct competitor to Palo Alto Golf Course, 36-hole Sunol Valley GC and its ~80,000 rounds were removed from the market in late 2015. Though most of its customers will likely play elsewhere in the East Bay, some will likely find themselves occasionally coming across the Dumbarton Bridge to play at the new Baylands Golf Links. Also set to close is Pin High Golf Center in north San Jose, a popular stand-alone driving range.


Conclusions & Updated Financial Projections

NGF Consulting has prepared an analysis to show the potential economic performance of the newly branded Baylands Golf Links under Option G, taking into account our update of the external market place and the macro environment for golf participation in 2016. Our projections represent a “fair estimate of performance” for this facility based on our analysis of external factors, and our anticipation of the high quality golf experience that Baylands will bring to market, including excellent customer service.

The Baylands Golf Links performance has been projected under the assumption that the operation is continued ‘as-is’ with three separate contracts for maintenance, pro shop and food/beverage. The basic contract terms provided to NGF by the City in 2016 are assumed to continue through FY2027. The NGF has also assumed a “standard” set of external assumptions for regional economic performance, consumer discretionary income, and weather, with neither severe declines nor increases in any of these measures through 2027.

BASIS FOR ROUNDS AND REVENUE PROJECTIONS – 2016

For this 2016 updated assessment of Reconfiguration Option G, NGF has lowered its base scenario stabilized play projection from 75,700 rounds (NGF 2012 projection) to 71,000 rounds, based on the following factors:

Though activity levels remain robust among PAGC’s competitive set, with several approaching or exceeding 80,000 annual rounds, NGF feels that it is prudent to take into account PAGC’s steady pattern of declining rounds from the FY 07 through FY 11 period (and continuing through the FY 15 season, though due to mitigating circumstances). Though the Baylands Golf Links is proposed to far exceed Palo Alto GC in quality, a conservative posture necessitates taking PAGC’s slide into account when making future projections for Baylands.

Though NGF Consulting, based on its experience, is of the belief that “all golf is local”, we have taken into account the national attrition in the number of golfers over the last five years, as golf has faced some participation headwinds from occasional golfers and from golfer segments such as young adults.

Having said that, NGF is confident that the current 2016 projections - based on market demand factors and the assumption that Baylands Golf Links will stand out as Silicon Valley’s best public golf course - are justifiable and achievable. The stabilized activity we have projected is 71,000 rounds, a number only moderately higher than PAGC achieved in FY 2010 with a product that was inferior to what a reconfigured and re-branded golf course will bring to market. Also, we feel we have been conservative in terms of green fees, with the highest riding rate of $69 (weekend mornings) very comparable to what the club’s current competitors are charging.

Pro formas are, by their nature, models based on a set of assumptions that may or may not become reality and which are subject to a number of uncontrollable factors (e.g., weather variations, the economy, quality/quantity of the competition), but NGF believes that our projections represent a “reasonable” estimate of performance for the “Baylands” facility based on the factors discussed in this report. The overriding assumption is that Baylands, when completed, will stand out as the premier public golf experience in the south Peninsula / South


Bay market. (‘Experience’ encompasses many things, including a challenging layout, appeal to multiple segments of golfers, excellent customer service, pleasing aesthetics, and good pace of play). Among the factors considered when crafting our projections for each model are:

Expected high quality of the Baylands Golf Links at Palo Alto, which should stand out as the public golf gem of the Silicon Valley. Results of ERA’s 2008 survey for the City revealed that the number one reason Palo Alto GC was not the primary course of respondents was “course quality/play experience”.

As noted, NGF believes there is a lack of truly outstanding direct competitors to Baylands Golf Links. None of the primary competitors have made major facility improvements since our last study, though Poplar Creek has added a driving range and the now fully public Golf Club Moffett Field is in the midst of clubhouse and driving range improvements.

Re-branding and effective marketing of the new club, along with more proactive direct selling of outings and tournaments.

Maintenance conditions that will position the facility in the upper tier of municipal golf courses in this market. Superior level of customer service.

With initial green fees similar to what its current competitors are charging now, “Baylands” will offer a strong price/value proposition that will ensure that the improved golf course remains very competitive in the area market.

This regional submarket (south Peninsula/South Bay) remains one of the most active markets for municipal golf in the nation. At the peak of the market, Palo Alto and several of its chief competitors realized annual activity levels approaching, or even exceeding, 100,000 rounds. Though play levels may never approach these extraordinary numbers again, several facilities are holding steady at ±80,000 rounds, despite offering only average golf experiences.

The Bay Area and Silicon Valley economies are very strong, with the tech industry helping to shield the area from severe economic downturns. The area has some specific economic attributes that act as natural demand drivers for quality golf courses, including high incomes, an extremely robust corporate presence, high visitation (both leisure and business travelers), and low unemployment. The Milken Institute's Best-Performing Cities Index ranked the Santa Clara County metro area as No. 1 and the San Francisco-San Mateo region No. 2 for 2015.

The area has significantly more golfing households per 18 holes of golf than the nation overall. For example, in the 10-mile market area surrounding Palo Alto GC, there are 3.4 times as many golfing households per total 18 holes of golf than in the overall U.S. Despite Moffett Field going fully public in 2014 (was semi-private at time of previous NGF study), there are plenty of golfers available to support public golf in this market. It is likely that no new golf course inventory will be added to this market for the foreseeable future, and the potential of further closures – most likely Santa Clara Golf & Tennis – will only help the supply/demand balance for public golf.

NGF believes that the significant rounds played decreases at PAGC since the time of our last study are largely attributable to the course disruption and temporary reconfiguration of the golf course due to soil stockpiling, as well as uncertainty over when, or if, construction would begin on the new golf course. Baylands should be able to quickly win back many of the lost customers.


FINANCIAL PROJECTIONS – ‘BAYLANDS GOLF LINKS’ (2017-2026)

The NGF projection model assumes continued operation of the facility under the improvement scenario previously identified as “Option G.” This option would involve a complete renovation of the Palo Alto Municipal Golf Course (to be re-branded as “Baylands Golf Links”). The project will necessitate a full closure of the golf course from July 2016 through October 2017, with the facility re-opening as a brand new golf course with high quality golf features and higher fees than were in place prior to 2012. The full golf course irrigation system would be replaced and three new soccer fields would be added to the site. The improvement program includes rebuilding of all 18 greens, re-turfing of all fairways, construction of an on-course restroom, and rebuilding the practice green area. These changes should further enhance the product’s marketability and the golfer experience.

The NGF revenue estimates have been crafted in consideration of the current operating structure at PAGC, and provide projections of Baylands Golf Links performance for the next 10 years. Projections for rounds and revenues assume successful completion of the proposed upgrades. The NGF has projected growth to approximately $3.27 million in total gross revenues (from all sources) to the City by 2020.

Key Assumptions

The Base assumptions in preparing the projected financial performance estimates cover several categories, including rounds activity, green fees, average revenues (carts, range, concessions, etc.), total revenue, expenses, capital and debt. The NGF has assumed use of more complimentary and discount rounds in the initial years after reopening for the purposes of gaining back lost customers, stimulating trial, and general promotions.

Rounds Performance The rounds activity performance assumptions include:

Baylands Golf Links will be closed for the entire 12 months of FY2017, and the first four months of FY2018, with no activity on the golf course. We assume the driving range will remain open during this period.

Baylands Golf Links is projected to re-open in November 2017, and host a total of 48,000 rounds in the final eight months of FY2018. In 2019, we project growth to 62,700 rounds and then 71,000 rounds in FY2020. This FY2020 level of rounds activity is projected to remain stable through FY2026.

Rounds projections assume the general mix of play by category remains constant through FY 2026, with modest increases in tournament and junior rounds.

The 71,000 total ‘stabilized’ rounds activity represents a 5.4% increase over actual rounds activity in FY 2011 (last full year before changes), but is about 11% lower than the recent peak of just over 79,900 rounds hosted in FY2007. The NGF expects our stabilized estimate of 71,000 rounds is representative of market observations in 2016, and reflective of operating the golf course at a higher price point than previous years. In public golf, higher green fees typically lead to reduced rounds, but increased revenue overall.

The overall distribution of rounds by category is shown in the table below:


Palo Alto Municipal Golf Course (Baylands Golf Links) Projected Activity (2017-2026)

Closed 12 mos. For full renov.

Closed Jul-Oct Open Nov-June (4 mos. Closed)

Operating on 18 holes for full year

FY2017 FY2018 FY2019 FY2020

-2026 Weekday 18-Hole 0 4,000 5,000 6,000 Senior Non-Resident 0 4,700 5,500 6,200 9-Hole 0 1,100 1,300 1,500 Senior 0 600 800 1,000 Junior 0 1,000 1,300 1,500 Early Bird 0 500 700 900 Twilight 0 8,400 11,000 11,600 Specials 0 5,600 7,600 8,500 Junior Card 0 800 1,000 1,200 Senior Card 0 600 800 1,000 Non-Resident Senior Card 0 3,000 4,200 4,700 Sub-Total Weekday 0 30,300 39,200 44,100 Weekend 18-Hole 0 7,600 10,500 11,600 9 Hole 0 1,400 1,800 2,200 Junior 0 600 800 1,200 Twilight 0 4,600 5,500 5,900 Sub-Total Weekend 0 14,200 18,600 20,900 Complimentary Play 0 2,200 2,500 2,500 Tournaments 0 1,300 2,400 3,500 TOTAL ROUNDS 0 48,000 62,700 71,000

Average Fees / Revenue The average green fees per round by category are shown in the table that follows. Key assumptions driving this estimate include:

Upon re-opening on 18 holes (assumed November 1, 2017), average fees in each category are increased approximately 15% over FY2012 (rounded). This equates to a highest 18-hole weekend green fee of $54 (max at $69 with cart) and a highest weekday fee of $42.50 ($57.50 with cart). Other green fees are adjusted accordingly, with the lowest fees for Juniors ($17/$18) and various other specials at $22.00. All green fees are assumed to increase at 1.0% per year through 2020, 1.5% from 2021-2022, 2.0% in 2023-2024 and 2.5% in 2025-2026.

Average Cart fee and driving range revenue per round in FY2017 is based on the actuals in FY2012, and then increased by 2% per year through 2026.

Average merchandise sales per round in FY2017 is based on the actuals in FY2012, and then increased by 2% per year through 2026.


Average food and bar sales in FY2017 are based on the actual in FY2012, and then increased by 2% per year through 2026.

The NGF estimates for average green fees by category and ancillary revenue per round:

Palo Alto Municipal Golf Course (Baylands Golf Links) Projected Average Green Fees and Ancillary Revenue per Round (2018-2026)

FY2018 FY2019 FY2020 FY2021 FY2022 FY2023 FY2024 FY2025 FY2026 Weekday 18-Hole $42.50 $42.93 $43.35 $44.00 $44.66 $45.56 $46.70 $47.86 $49.06 Senior Non-Resident $37.00 $37.37 $37.74 $38.31 $38.88 $39.66 $40.65 $41.67 $42.71 9-Hole $24.00 $24.24 $24.48 $24.85 $25.22 $25.73 $26.37 $27.03 $27.70 Senior $32.00 $32.32 $32.64 $33.13 $33.63 $34.30 $35.16 $36.04 $36.94 Junior $17.00 $17.17 $17.34 $17.60 $17.87 $18.22 $18.68 $19.15 $19.62 Early Bird $26.50 $26.77 $27.03 $27.44 $27.85 $28.41 $29.12 $29.84 $30.59 Twilight $34.50 $34.85 $35.19 $35.72 $36.26 $36.98 $37.91 $38.85 $39.83 Specials $22.00 $22.22 $22.44 $22.78 $23.12 $23.58 $24.17 $24.78 $25.40 Junior Card $22.50 $22.73 $22.95 $23.30 $23.65 $24.12 $24.72 $25.34 $25.97 Senior Card $27.00 $27.27 $27.54 $27.96 $28.38 $28.94 $29.67 $30.41 $31.17 Non-Res. Senior Card $31.50 $31.82 $32.13 $32.62 $33.10 $33.77 $34.61 $35.48 $36.36 Weekend 18-Hole $54.00 $54.54 $55.09 $55.91 $56.75 $57.89 $59.33 $60.82 $62.34 9 Hole $28.50 $28.79 $29.07 $29.51 $29.95 $30.55 $31.31 $32.10 $32.90 Junior $18.00 $18.18 $18.36 $18.64 $18.92 $19.30 $19.78 $20.27 $20.78 Twilight $39.00 $39.39 $39.78 $40.38 $40.99 $41.81 $42.85 $43.92 $45.02 Tournaments $40.00 $40.40 $40.80 $41.42 $42.04 $42.88 $43.95 $45.05 $46.17 Additional Revenue Center (per Round) Avg. Cart Fee / Round $4.60 $4.69 $4.79 $4.88 $4.98 $5.08 $5.18 $5.28 $5.39 Avg. Range / Round $5.25 $5.36 $5.46 $5.57 $5.68 $5.80 $5.91 $6.03 $6.15 Merchandise / Round $9.94 $10.14 $10.34 $10.55 $10.76 $10.97 $11.19 $11.42 $11.65 Food per Round $9.56 $9.75 $9.95 $10.15 $10.35 $10.56 $10.77 $10.98 $11.20 Bar per Round $2.23 $2.27 $2.32 $2.37 $2.41 $2.46 $2.51 $2.56 $2.61

Other Revenue Assumptions

Total green fee revenue includes all discount (10-play) cards and monthly passes.

Ancillary revenue per round (carts, merchandise, range, food, bar, other) is derived from total rounds, including complimentary rounds.

Concession revenue to the City of Palo Alto assumes the same current contract basics through FY2026. The City is assumed to collect: (1) 7% of all F & B revenue; and (2) 5% of merchandise sales.

Utility payment is estimated by NGF as fixed at $18,000 during construction (FY2017) and $26,000 beginning in FY2018 with 2% annual inflation.

Expense Assumptions

Labor expenses are for City oversight only. These include allocations for contract oversight, Parks and Recreation Director, Division manager, etc. The estimate is intended to include both salary and benefits allocation and is increased by 4.8% in 2019, 4.1% in 2020, 3.9% in 2021-2022 and 3.8% for 2023 – 2026.


Commissions paid to the pro shop vendor include 20% of gross driving range and cart revenue, plus 5% of green fee revenue after re-opening in FY2018.

The pro shop management fee is fixed at $30,500 for FY2017 (during construction), increasing to $300,000 per year after full reopening (2018-2026). Increases for inflation are assumed at 2.6% per year through FY2026.

Reimbursements for merchant fees (mostly credit card fees) are assumed to be $4,500 for FY2017, and then set at 1.4% of total facility revenue.

Contract maintenance expense to the City of Palo Alto assumes:

$18,158 per month for the full FY2017 (course closed).

$415,000 lump sum for the first four months of FY2018 (manage grow-in), then $64,105 per months for the last 8 months of FY2018.

$66,800 per month in FY2019, growing at 2.6% annually through 2026.

Other expenses such as repairs, maintenance, supplies, club fees, materials and other indirect expenses are all based on City estimates for FY2017, and then based on previous years’ actual expenses for 2018-2026, with variable increases between 1.7% and 3.9% as per City schedule.

Advertising and publishing expense is increased to $30,000 in FY2018 to account for enhanced marketing of the upgraded facility and re-theme as “Baylands Golf Links.” Advertising and publishing expense is then reduced in subsequent years to a “standard” of around $17,000 per year (increasing between 1.7% and 3.9% through FY2026 as per City schedule).

Water expense has been highly variable and NGF projections are based on previous years’ average with adjustment for the new golf course design. The NGF has used the average of 2012-2014 water expense ($313,600), with a 9.5% reduction factor from the new design. NGF also applied a 5% inflation factor to water expense to provide some conservatism to the expense estimate with the greatest unknown in the operation.

Other direct charges (including electric) are derived from the City estimate for FY2017, increasing between 1.7% and 3.9% through FY2026 as per City schedule.

Debt Service and Other Non-Operating Expense Assumptions

The NGF has assumed that the $8,288,700 in cost needed to complete the Baylands upgrade project will be funded via the issuance of a new debt program (revenue or General Obligation Bond). A debt service payment schedule to retire the new $8,288,700 loan was provided by the City, and assumes a 25-year payback.

Non-operating revenue attributed to the existing debt service is assumed to continue at 6% of debt service payment as long as payments continue (through FY2018).

The Cost Plan Charges are based on actual FY2017 charge of $25,000 with historical 5% growth through the end of FY2026.

The NGF has added a new “Operating & Capital Reserve” line to the pro forma beginning in FY2018, set at 10% of green fee revenue.


Pro Forma Estimate for ‘Option G’ Scenario – FY2017 – FY2026

Utilizing the above assumptions and activity/revenue estimates, NGF Consulting has prepared a pro forma for the next 10 years of operation. The table shows that the renovated Baylands Golf Links could produce net income to the City in the range of $1.17 to $1.18 million (stable) before debt, cost plan and reserves. After all existing and future debt service obligations are considered, the facility is expected to produce net income to the City, after all expenses and charges, in the range of ±$290,000 (stable). As this is a projection, all operating revenue and expense figures have been rounded to the nearest $100 for simplicity.


Palo Alto Municipal Golf Course (Baylands Golf Links) Projected Total Revenue and Expense (FY 2017 – FY 2026)

Closed – only range

open

Open 8 months + Closed 4

months Full 18

holes open Full 18

holes open Full 18

holes open Full 18

holes open Full 18

holes open Full 18

holes open Full 18

holes open Full 18

holes open

Revenues FY2017

Projected FY2018

Projected FY2019

Projected FY2020

Projected FY2021

Projected FY2022

Projected FY2023

Projected FY2024

Projected FY2025

Projected FY2026

Projected Golf Course Revenues Green Fees (Incl. Cards) $0 $1,571,252 $2,091,470 $2,395,409 $2,431,340 $2,467,810 $2,517,166 $2,580,096 $2,644,598 $2,710,713

Cart Fees 0 220,800 294,200 339,800 346,600 353,500 360,600 367,800 375,200 382,700 Driving Range 155,000 252,000 335,800 387,800 395,600 403,500 411,500 419,800 428,200 436,700 Tournament / League Fees 0 1,400 1,900 2,100 2,100 2,100 2,100 2,100 2,100 2,100

Other 24,000 8,600 11,300 12,800 12,800 12,800 12,800 12,800 12,800 12,800

Total Golf Course Revenues $179,000 $2,054,052 $2,734,670 $3,137,909 $3,188,440 $3,239,710 $3,304,166 $3,382,596 $3,462,898 $3,545,013 Concession Payments Food and Beverage Concession Minimum Lease $18,000 $0 $0 $0 $0 $0 $0 $0 $0 $0 Variable Portion $0 $39,600 $52,800 $61,000 $62,200 $63,400 $64,700 $66,000 $67,300 $68,700 Utility Payment $18,000 $26,000 $26,500 $27,000 $27,500 $28,100 $28,700 $29,300 $29,900 $30,500 Total from F & B Concession $36,000 $65,600 $79,300 $88,000 $89,700 $91,500 $93,400 $95,300 $97,200 $99,200 Pro Shop Lease Minimum Lease $18,000 $0 $0 $0 $0 $0 $0 $0 $0 $0 Merchandise (4%) $0 $23,900 $31,800 $36,700 $37,400 $38,200 $39,000 $39,700 $40,500 $41,300 Total From Pro Shop Concession $18,000 $23,900 $31,800 $36,700 $37,400 $38,200 $39,000 $39,700 $40,500 $41,300 Total Gross to City $233,000 $2,143,552 $2,845,770 $3,262,609 $3,315,540 $3,369,410 $3,436,566 $3,517,596 $3,600,598 $3,685,513


Operating Expenses FY2017

Projected FY2018

Projected FY2019

Projected FY2020

Projected FY2021

Projected FY2022

Projected FY2023

Projected FY2024

Projected FY2025

Projected FY2026

Projected Salaries & Benefits $129,900 $163,800 $171,700 $178,700 $185,700 $192,900 $200,200 $207,800 $215,700 $223,900

Range Fees 31,700 50,400 67,200 77,600 79,100 80,700 82,300 84,000 85,600 87,300

Cart Fees 0 44,200 58,800 68,000 69,300 70,700 72,100 73,600 75,000 76,500

Club Fees 4,200 4,300 4,500 4,700 4,900 5,100 5,300 5,500 5,700 5,900

Fixed Management Fee 30,500 300,000 307,800 315,800 324,000 332,400 341,000 349,900 359,000 368,300

Merchant Fees Reimbursement 4,500 28,800 38,300 43,900 44,600 45,400 46,300 47,400 48,500 49,600

Contract Maintenance 218,000 927,800 801,600 812,300 833,400 855,100 877,300 900,100 923,500 947,500

Repairs & maintenance 6,700 43,700 45,400 46,600 47,800 49,000 50,300 51,600 52,900 54,300

Advertising & Publish 15,000 30,000 17,000 17,400 17,900 18,400 18,900 19,400 19,900 20,400

Supplies and Materials 13,500 45,000 46,800 48,000 49,200 50,500 51,800 53,100 54,500 55,900

Water Expense 60,000 295,000 308,300 323,700 339,900 356,900 374,700 393,400 413,100 433,800

Other Direct Charges (Incl. Electric) 41,500 43,100 44,800 46,000 47,200 48,400 49,700 51,000 52,300 53,700

Indirect Charges 65,900 103,500 107,500 110,300 113,200 116,100 119,100 122,200 125,400 128,700

Total City Operating Expenses $621,400 $2,079,600 $2,019,700 $2,093,000 $2,156,200 $2,221,600 $2,289,000 $2,359,000 $2,431,100 $2,505,800

Net Income From Operations (Loss) ($388,400) $63,952 $826,070 $1,169,609 $1,159,340 $1,147,810 $1,147,566 $1,158,596 $1,169,498 $1,179,713

Non-operating Capitalized Interest $369,350 $184,675 $0 $0 $0 $0 $0 $0 $0 $0

Total Non-operating $369,350 $184,675 $0 $0 $0 $0 $0 $0 $0 $0

Total Income (Incl. Non-operating) ($19,050) $248,627 $826,070 $1,169,609 $1,159,340 $1,147,810 $1,147,566 $1,158,596 $1,169,498 $1,179,713

Debt Service $429,020 $429,020 $0 $0 $0 $0 $0 $0 $0 $0

New Debt Service $369,350 $369,350 $569,350 $573,350 $572,050 $573,450 $574,450 $575,050 $570,250 $570,250

Operating & Capital Reserve $0 $157,125 $209,147 $239,541 $243,134 $246,781 $251,717 $258,010 $264,460 $271,071

Cost Plan Charges $25,000 $26,300 $27,600 $29,000 $30,500 $32,000 $33,600 $35,300 $37,100 $39,000

Total Debt / Other Charges $823,370 $981,795 $806,097 $841,891 $845,684 $852,231 $859,767 $868,360 $871,810 $880,321

Net Income or (Loss) ($842,420) ($733,168) $19,973 $327,718 $313,656 $295,579 $287,800 $290,236 $297,688 $299,392


NGF PROJECTION SENSITIVITY ANALYSIS

As noted, pro forma projections have been made under a set of assumptions that may or may not come to fruition. Also, projections are subject to several uncontrollable factors such as yearly weather variations, economic conditions, and the nature of the competition. Therefore, in the interest of conservatism we have prepared a sensitivity analysis for Baylands Golf Links projections of two key variables related to revenues – rounds played and average green fee. Specifically, we have run three scenarios that present deviations from the “base” model presented above: (1) Rounds reduced to moderately lower than projected FY2020 performance, continuing downward trend; (2) Average green fee increasing over current by just less than half the 15% projected increase in base model; and (3) Rounds and average green fees both lower, in combination. Because of the virtually limitless number of combinations, other variables, such as fixed operating expenses, remain the same as in the base scenario.

The sensitivity scenarios reveal that the lower than projected (base) green fee growth would result in a reduction in net income of approximately 48% from the base case. Reduced rounds result in a ±$405,600 reduction in net income, while the “worst case” – both rounds and green fee increases below the projected base model – produces about $541,400 lower net income. (See Appendix B for full pro formas).

Sensitivity Analysis - Summary for 2020

Summary in FY2020 (Stabilized Year)

Expected Case

(Base Scenario)

Reduced Rounds Scenario

Reduced Fees Scenario

Reduced Rounds + Fees

Scenario

FY2020 Projected

FY2020 Projected

FY2020 Projected

FY2020 Projected

TOTAL ROUNDS 71,000 61,100 71,000 61,100 ANNUAL ROUNDS REVENUE $2,395,409 $2,052,277 $2,219,315 $1,901,376 AVERAGE GREEN FEE PER ROUND $33.74 $33.59 $31.26 $31.12 Total Golf Course Revenues $3,137,909 $2,691,177 $2,961,815 $2,540,276 Concessions

Total from F & B Concession $88,000 $79,500 $88,000 $79,500 Total From Pro Shop Concession $36,700 $31,600 $36,700 $31,600 Total Gross to City $3,262,609 $2,802,277 $3,086,515 $2,651,376 Expenses

Total City Operating Expenses $2,093,000 $2,072,600 $2,093,000 $2,072,600 Net Income From Operations (Loss) $1,169,609 $729,677 $993,515 $578,776 Total Debt/Other Charges $841,891 $807,578 $824,281 $792,488

Net Income or (Loss) $327,718 ($77,901) $169,233 ($213,712)


FINANCIAL PROJECTIONS SUMMARY

The results of the NGF Consulting financial projections for the proposed-to-be upgraded “Baylands Golf Links,” based on the analysis and assumptions presented in this report, show that the facility will generate improved revenue performance compared to the existing facility before recent changes. We have assumed that the construction to renovate the facility will take a full year to complete, plus an additional four months of “grow-in,” meaning the golf course will be closed for a full 16 months (July 2016 – October 2017). The key observations regarding NGF-projected “Baylands Golf Links at Palo Alto” financial performance:

NGF has projected significant economic loss during the two fiscal years during which the course will be renovated. In FY2017, NGF projects a loss on operations of ($842,400), which includes the $369,350 debt payment noted on the schedule provided by the City, as well as the existing debt service of $429,020 through FY 18. In FY2018, the course would be open for eight months, but still suffer a projected ($733,200) loss on operations (including debt service).

After re-opening and recovery to a stabilized 71,000 rounds of golf, NGF is projecting total City revenue in excess of $3.14 million, equal to the $3.14 million the City generated in a recent peak year in FY2008. The FY2008 revenue was generated from 77,989 total rounds, or an average of $40.24 per round of golf. In FY2020, the NGF is projecting total average City revenue per round to be $45.95, showing improved average revenue per round on slightly fewer total rounds hosted.

Based on the schedule of debt payments provided by the City, the NGF is projecting that the newly upgraded “Baylands Golf Links at Palo Alto” will fully cover all obligations beginning in FY2019, the first full (12 months) year of operation after re-opening. The NGF expects net income after debt and other charges to stabilize between $290,000 and $320,000 each year from FY2020 through FY2026.

In reviewing sensitivity, NGF projections show that a 15% decline in estimated rounds would lead to reduced net income that may not be sufficient to fully cover the debt service needed to retire the project cost. However, this total of 61,000 stabilized rounds is much lower than several of the area’s public golf competitors, many of which have much lower quality than is expected of the new Baylands Golf Links. Also, the sensitivity estimate of 61,000 rounds is also lower than the 62,900+/- hosted in 2012 when the City began its stockpile of soil and temporary reconfiguration of the golf course, resulting in reduced rounds.

If Palo Alto is not able to increase(or sustain increases) in golf fees, the NGF projects the new Baylands Golf Links will still remain profitable after debt costs with rounds at 71,000. This estimate shows that rounds activity is the key driving force in the golf course’s profitability. The NGF estimate is for total net income after debt to be around $100,000 (stabilized), even if golf fees come in 7.5% lower than expected in the base case.

When combined with smaller fee increases, the reduced rounds activity could lead to revenues falling as low as $2.5 million +/-, and the City being as much as ($310,000) short of covering total debt service in a stable year after re-opening.


Summary Statement

After reassessing the basic assumptions driving activity level and economic projections for PAGC’s reconfiguration Option G, NGF has concluded that our fundamental premise in assessing the likely market impact of the newly branded Baylands Golf Links – that the club, as planned, will stand out as the highest quality public golf experience in the Silicon Valley - remains very sound. However, in consideration of the attrition in rounds played at the subject facility over the last decade, as well as some participation headwinds that golf has been facing with less engaged golfers, we have lowered our stabilized rounds projections for Baylands facility by about 6.5%.

This regional submarket (south Peninsula/South Bay) remains one of the most active markets for municipal golf in the nation. Several direct competitors to Palo Alto GC continue to achieve ±80,000 annual rounds played, despite offering only average golf experiences. The fundamental golf demand profile of the market remains very solid. The local economy is strong, and the area has economic attributes that act as natural demand drivers for quality golf courses, including high incomes, a strong corporate presence, high visitation, and low unemployment. Also, the 10-mile market has added nearly 48,000 net new residents since 2010, and latent demand (interested non-golfers) is very robust in the area, providing an opportunity for savvy operators to “activate” these prospects.

We believe that proper implementation (adequate budgets, quality control, effective branding and marketing, and customer service commensurate with the golf experience) of the program will have a dramatic effect on driving new business to the “new” golf facility. Though replacement or major of the clubhouse is not planned at this time, NGF recommends that, at the least, cosmetic improvements (e.g., fresh paint, landscaping) be done to the buildings, grounds and entryway. Also, as noted in our previous study, a commitment on the City’s part to becoming certified with Audubon International as a “Sanctuary Golf Facility” is an integral part of the ability to market the course as a “green” aware golf facility.

NGF is confident that the current projections, based on market factors and the assumption that Baylands Golf Links will stand out as Silicon Valley’s best public golf course, are justifiable and achievable. The stabilized activity we have projected is 71,000 rounds, a number only moderately higher than PAGC achieved in FY 2010 with a product that was inferior to what a reconfigured and re-branded golf course will bring to market. Based on the schedule of debt payments provided by the City, NGF projects that the newly upgraded “Baylands Golf Links at Palo Alto” will fully cover all obligations beginning in FY2019, the first full (12 months) year of operation after re-opening. The NGF expects net income after debt and other charges to stabilize between $290,000 and $320,000 each year from FY2020 through FY2026.

Other considerations that were not part of the scope of this study include whether the management structure of the facility – multiple concessions – will be the best fit for Baylands Golf Links going forward, and whether other major improvements, including addition of meeting space, should be undertaken concurrently with the golf course improvements to maximize market impact. NGF has included our initial high-level opinions on these issues, initially presented in the 2012 study, in Appendices C and D.

……..


Appendices

APPENDIX A – GOLF & THE MILLENNIAL GENERATION

APPENDIX B – SENSITIVITY ANALYSIS PRO FORMAS

APPENDIX C – PALO ALTO GOLF COURSE MANAGEMENT STRUCTURE

APPENDIX D – CONSIDERATION OF OTHER IMPROVEMENTS


APPENDIX A – GOLF & THE MILLENNIAL GENERATION

In 2015, the NGF completed a comprehensive review of golf participation among the 18-34 year-old group known collectively as the “Millennial” generation. The NGF’s study of Millennials was in response to a drop in participation among this age group and a part of an industry effort to better understand golfing habits of young adults. What we discovered was that while this important segment of the population is more closely tethered to the sport than most think, the commitment isn’t what it was compared to previous generations when they were the same age.

The NGF study of Millennials confirmed that one out of every four golfers is a Millennial, and that there are 12 million non-golfers among the generation that are “very or somewhat interested” in playing golf now. This contradicts media coverage of golf and Millennials that suggests progressive lifestyles, preferences and stressed finances are misaligned with golf’s old-fashioned sensibilities and pay-for-play nature. The fact is there are six million Millennials playing about 90 million rounds and spending $5 billion on golf annually.

However, millennial golfers are not all created equal when it comes to their connection to the sport, as significant differences exist among this generation. The NGF divided the generation into three distinct segments based on key attitudinal and perceptual traits. Understanding each of these is crucial to better adapting to and serving needs and expectations. The good news for golf is that more than half of millennial golfers are committed to the game and are unlikely to leave the sport barring any significant health or life-changing situations. It’s the second half of the population where golf has challenges. The segments include:

“Throwbackers” (3.3 million golfers, 51% of millennial golfers) – Akin to golf purists or traditionalists, ‘Throwbackers’ tend to behave just as avid golfers did generations before them and therefore share perceptions of the game that mirror the Boomer (parents’) generation. This group enjoys the challenge and is motivated by competition and staying fit. They work on their game, keep score and respect the rules. While they do have concerns about the game and shouldn’t be taken for granted, we expect this group is “very likely” to continue playing in the future.

“Breakfast Ballers” (1.4 million golfers, 22% of millennial golfers) - This segment is drawn to the game for vastly different reasons. They play less frequently and are more motivated by excitement, adrenaline and the opportunity to socialize. Golf for them is not a lifestyle but a conduit for their social lives. Golf is appealing, but it’s not enough – they want Golf-Plus. They’re likely to enhance the experience with music, alcohol, gambling and social media. Although competitive, roughly half of Breakfast Ballers don’t keep score, and many pay little attention to the rules. Though generally committed to the game, most think golf is too serious, stuffy and in need of reform. It’s this segment that presents the best opportunity for participation growth.

“Dabblers” (1.7 million golfers, 27% of millennial golfers) - While we count these participants as “golfers” because they played golf during the past year, most of them don’t really consider themselves golfers. Dabblers tend to be more female, and play infrequently, typically at the urging of someone else. They don’t keep score and only one-third say they enjoy golf “a lot.” These customers are just “dabbling” at golf, and without some intervention are unlikely to develop into better customers.

The last group notwithstanding, golf has a far more active and committed base of younger participants than it’s been given credit for. Still, the sport is not as attractive to this age group when compared to previous generations, and a better understanding of motivations for engaging in golf will help the sport golf attract even more young people.


APPENDIX B – SENSITIVITY ANALYSIS PRO FORMAS

The tables below illustrate the three sensitivity analysis pro formas that present deviations from the “base” model: (1) Rounds reduced to moderately lower than projected FY2020 performance; (2) Average green fee increasing over current by just less than half the 15% projected increase in base model; and (3) Rounds and average green fees both lower, in combination.

Sensitivity Analysis - Summary for FY 2020

Summary in FY2020 (Stabilized Year)

Expected Case

(Base Scenario)

Reduced Rounds Scenario

Reduced Fees Scenario

Reduced Rounds + Fees

Scenario

FY2020 Projected

FY2020 Projected

FY2020 Projected

FY2020 Projected

TOTAL ROUNDS 71,000 61,100 71,000 61,100 ANNUAL ROUNDS REVENUE $2,395,409 $2,052,277 $2,219,315 $1,901,376 AVERAGE GREEN FEE PER ROUND $33.74 $33.59 $31.26 $31.12 Total Golf Course Revenues $3,137,909 $2,691,177 $2,961,815 $2,540,276 Concessions

Total from F & B Concession $88,000 $79,500 $88,000 $79,500 Total From Pro Shop Concession $36,700 $31,600 $36,700 $31,600 Total Gross to City $3,262,609 $2,802,277 $3,086,515 $2,651,376 Expenses

Total City Operating Expenses $2,093,000 $2,072,600 $2,093,000 $2,072,600 Net Income From Operations (Loss) $1,169,609 $729,677 $993,515 $578,776 Total Debt/Other Charges $841,891 $807,578 $824,281 $792,488

Net Income or (Loss) $327,718 ($77,901) $169,233 ($213,712)


Reduced Rounds Sensitivity Spreadsheet

Palo Alto Municipal Golf Course (Baylands Golf Links) Projected Total Revenue and Expense - Reduced Rounds Sensitivity (FY 2017 – FY 2026)


open


months Full 18

holes open Full 18

holes open Full 18

holes open Full 18

holes open Full 18

holes open Full 18

holes open Full 18

holes open Full 18

holes open

FY2017

Projected FY2018

Projected FY2019

Projected FY2020

Projected FY2021

Projected FY2022

Projected FY2023

Projected FY2024

Projected FY2025

Projected FY2026

Projected Rounds -0- 41,100 54,000 61,100 61,100 61,100 61,100 61,100 61,100 61,100 Golf Course Revenues Green Fees (Incl. Cards) $0 $1,334,132 $1,789,587 $2,052,277 $2,083,061 $2,114,307 $2,156,593 $2,210,508 $2,265,770 $2,322,415


Other 24,000 7,400 9,700 11,000 11,000 11,000 11,000 11,000 11,000 11,000




Projected FY2018

Projected FY2019

Projected FY2020

Projected FY2021

Projected FY2022

Projected FY2023

Projected FY2024

Projected FY2025

Projected FY2026


Range Fees 31,700 43,200 57,800 66,700 68,100 69,400 70,800 72,200 73,700 75,200

Cart Fees 0 37,800 50,700 58,500 59,700 60,800 62,100 63,300 64,600 65,900

Club Fees 4,200 4,300 4,500 4,700 4,900 5,100 5,300 5,500 5,700 5,900







Water Expense 60,000 295,000 308,300 323,700 339,900 356,900 374,700 393,400 413,100 433,800




Net Income From Operations (Loss) ($388,400) ($238,068) $440,687 $729,677 $712,161 $693,707 $684,293 $684,408 $683,770 $682,415


Total Non-operating $369,350 $184,675 $0 $0 $0 $0 $0 $0 $0 $0 Total Income (Incl. Non-operating) ($19,050) ($53,393) $440,687 $729,677 $712,161 $693,707 $684,293 $684,408 $683,770 $682,415 Debt Service $429,020 $429,020 $0 $0 $0 $0 $0 $0 $0 $0 New Debt Service $369,350 $369,350 $569,350 $573,350 $572,050 $573,450 $574,450 $575,050 $570,250 $570,250




Net Income or (Loss) ($842,420) ($1,011,476) ($335,221) ($77,901) ($98,695) ($123,174) ($139,416) ($146,993) ($150,157) ($159,077)


Reduced Fee Sensitivity Spreadsheet

Palo Alto Municipal Golf Course (Baylands Golf Links) Projected Total Revenue and Expense – Reduced Fee Sensitivity (FY 2017 – FY 2026)


open


months Full 18

holes open Full 18

holes open Full 18

holes open Full 18

holes open Full 18

holes open Full 18

holes open Full 18

holes open Full 18

holes open

FY2017

Projected FY2018

Projected FY2019

Projected FY2020

Projected FY2021

Projected FY2022

Projected FY2023

Projected FY2024

Projected FY2025

Projected FY2026



Other 24,000 8,600 11,300 12,800 12,800 12,800 12,800 12,800 12,800 12,800




Projected FY2018

Projected FY2019

Projected FY2020

Projected FY2021

Projected FY2022

Projected FY2023

Projected FY2024

Projected FY2025

Projected FY2026


Range Fees 31,700 50,400 67,200 77,600 79,100 80,700 82,300 84,000 85,600 87,300

Cart Fees 0 44,200 58,800 68,000 69,300 70,700 72,100 73,600 75,000 76,500

Club Fees 4,200 4,300 4,500 4,700 4,900 5,100 5,300 5,500 5,700 5,900







Water Expense 60,000 295,000 308,300 323,700 339,900 356,900 374,700 393,400 413,100 433,800






Total Non-operating $369,350 $184,675 $0 $0 $0 $0 $0 $0 $0 $0 Total Income (Incl. Non-operating) ($19,050) $133,183 $672,371 $993,515 $980,604 $966,394 $962,521 $957,923 $963,809 $968,882 Debt Service $429,020 $429,020 $0 $0 $0 $0 $0 $0 $0 $0 New Debt Service $369,350 $369,350 $569,350 $573,350 $572,050 $573,450 $574,450 $575,050 $570,250 $570,250




Net Income or (Loss) ($842,420) ($837,067) ($118,356) $169,233 $152,794 $132,304 $121,259 $109,631 $112,568 $109,643


Reduced Rounds and Fee Sensitivity Spreadsheet

Palo Alto Municipal Golf Course (Baylands Golf Links) Projected Total Revenue and Expense – Reduced Rounds and Fee Sensitivity (FY 2017 – FY 2026)


open


months Full 18

holes open Full 18

holes open Full 18

holes open Full 18

holes open Full 18

holes open Full 18

holes open Full 18

holes open Full 18

holes open

FY2017

Projected FY2018

Projected FY2019

Projected FY2020

Projected FY2021

Projected FY2022

Projected FY2023

Projected FY2024

Projected FY2025

Projected FY2026



Other 24,000 7,400 9,700 11,000 11,000 11,000 11,000 11,000 11,000 11,000




Projected FY2018

Projected FY2019

Projected FY2020

Projected FY2021

Projected FY2022

Projected FY2023

Projected FY2024

Projected FY2025

Projected FY2026


Range Fees 31,700 43,200 57,800 66,700 68,100 69,400 70,800 72,200 73,700 75,200

Cart Fees 0 37,800 50,700 58,500 59,700 60,800 62,100 63,300 64,600 65,900

Club Fees 4,200 4,300 4,500 4,700 4,900 5,100 5,300 5,500 5,700 5,900







Water Expense 60,000 295,000 308,300 323,700 339,900 356,900 374,700 393,400 413,100 433,800






Total Non-operating $369,350 $184,675 $0 $0 $0 $0 $0 $0 $0 $0 Total Income (Incl. Non-operating) ($19,050) ($151,410) $309,154 $578,776 $558,996 $538,245 $525,722 $521,872 $517,172 $511,651 Debt Service $429,020 $429,020 $0 $0 $0 $0 $0 $0 $0 $0 New Debt Service $369,350 $369,350 $569,350 $573,350 $572,050 $573,450 $574,450 $575,050 $570,250 $570,250




Net Income or (Loss) ($842,420) ($1,099,692) ($453,602) ($213,712) ($236,543) ($263,090) ($282,130) ($293,275) ($300,096) ($312,764)


APPENDIX C – PAGC MANAGEMENT STRUCTURE

With all three vendor contracts set to expire in April 2018, the City would like to explore the implications of changing the operating structure at Palo Alto Golf Course to a management contract. NGF has been asked to offer our opinion as to whether this type of structure would be more effective, or produce higher net operating income to the City, than the current “hybrid” structure that involves both a management fee and a concession on the golf operations side, privatized maintenance, and a separate food & beverage concession.

As Economic Research Associates (ERA) noted in their 2008 Operations Review of the Palo Alto Municipal Golf Course, the current agreement for golf operations evolved due to IRS regulations related to the tax-exempt financing utilized for the late 1990s renovation of the golf course. Specifically, at least 50% of the compensation within a management agreement must be fixed fee in such a case. ERA, after doing the full operations analysis, concluded that the current pro shop deal was “slightly favorable” to the concessionaire.

After running cash flow models under various operating scenarios, ERA concluded that City Net Income was maximized with private maintenance (subsequently put in place) and “market rate” concession terms. However, they also noted that “market rate”, which involved lower concession rents to the City and an elimination of the management fee, was not permissible by the IRS without a restructuring of the current debt. ERA concluded that, among the operating models that were permissible within the current debt framework, the structure that is now in place at Palo Alto Golf Course – no change in contract terms, but with private maintenance – produced the highest City Net Income. A full-service Management Agreement produced the second highest City Net Income.

Without doing a full operations review, NGF does not have sufficient information to critically evaluate ERA’s analysis or to identify the operating structure that would be the best fit for Palo Alto GC. While there are a number of advantages to the full service management contract structure, it is also true that “no one size fits all”. There are many factors and variables to consider when evaluating options, and it would be unfair to both the City and the current vendors for a consultant to make a recommendation regarding the optimal structure without being retained to do a full facility analysis. Carefully evaluating the value proposition that each of the current vendors brings to the table would be just one component of such an analysis. For instance, the golfer survey that ERA implemented as part of their 2008 study showed that Brad Lozares was rated quite high by golfers, indicating considerable goodwill and “equity” built up in the golf shop. Similarly, NGF has been told of improved maintenance conditions (as well as considerable cost savings) since ValleyCrest was brought on.

Significant unknowns include how the newly improved facility will cash flow after being brought back to market and “re-branded”, and how the pro shop concession agreement may need to be altered again if the City uses tax-exempt debt to fund the construction of the golf course. NGF recommends that the City wait until after renovation is completed and the improved facility has been up and running for a year or more before considering a substantive change in structure. This strategy will provide additional information that will put the City in a better position to make an informed decision regarding operating structure (for instance, the City may find that the improved “Baylands Golf Links” has significant upside revenue potential, thus making it relatively more attractive to control all revenues under the management contract structure).


APPENDIX D – CONSIDERATION OF OTHER IMPROVEMENTS

Expanded Meeting Space

Palo Alto GC has limited meeting space that has significantly constrained meeting and banquet business at the facility. Not being able to accommodate larger events of ±250 people precludes the facility from competing for the most lucrative, high margin food & beverage business. Based on the estimated cost provided of $1.7 million in 2012, and assuming the City incurs all of the cost of the improvement, the annual debt service on a 20-year note at 3.5% would be $120,000 (rounded). In 2012, NGF has calculated that the incremental annual gross food & beverage revenue necessary to generate $120,000 in additional rents to the City to meet the annual debt service was more than $1.71 million, based on the rent of 7%.

In its 2008 study, ERA noted: “Based on the experience of similar golf course oriented banquet facilities and the demographics of the area, expanding the clubhouse to accommodate special events with up to 250 attendees would add $600,000 to $700,000 in annual special event revenue. This rental income would justify about one-half of the cost of the improvements.” NGF concurs that generating this level of incremental gross revenue would likely be an achievable goal, but with updated cost estimates, this level of revenue would justify only about 40% of the investment cost. Therefore, the balance of the City investment in the expanded facility would have to be justified through the incremental rounds and associated revenues attributable directly to the expanded meeting facilities. Based on current and projected average green + cart (City share) fee revenue per round, it would take 2,000 to 3,000 of these rounds to help fund the expanded facilities. Of course, the equation would change markedly if gross revenues accrued to the City under an alternate operating structure.

Range Performance Center

In the table below, we provide the break-even analysis for the range performance center from the 2012 NGF report, using Mr. Richardson’s 2012 cost estimate of $600,000 that included the additional 6-bay range expansion. In the table below, we illustrate the number of years it would take for the City to break even on this investment, assuming different levels of incremental gross driving range revenue per round (gross per round was $5.15 in FY 11), the rent percentage of 62%, and stabilized rounds activity of 71,000 rounds. Of course, it cannot be determined what percentage of range activity is a function of number of bays as opposed to rounds played, so we chose to do a sensitivity analysis by increasing average revenue per round rather than per tee station. Another factor driving this methodology is that the performance center bays will be used for teaching, and will likely have less utilization than the already existing bays.

We also assume that all incremental expenses associated with the expanded range remain the responsibility of the concessionaire, and that there will be no incremental City operating costs associated with the new building. Finally, we assume that the City receives no lesson revenue.

Palo Alto Golf Course – B/E Analysis for Range Performance Center + 6-Bay Expansion

Average Gross Range Revenue Per Round Increase $0.50 $0.75 $1.00 $1.25 $1.50 Incremental Gross Revenue* $35,500 $53,250 $71,000 $88,750 $106,500 Incremental Revenue to City* $22,010 $33,015 $44,020 $55,025 $66,030 Years to B/E* 27.3 18.2 13.6 10.9 9.1

*Assumes $600,000 estimated cost and stabilized rounds played of 71,000.