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BACKGROUND
<br /> In August 2001, the City solicited proposals from various golf course operators to
<br /> operate and maintain the proposed municipal golf course in the Happy Valley area
<br /> (Callippe Preserve). A total of ten (10) proposals were received and reviewed by a
<br /> screening committee comprised of Golf Committee members and City staff. Three (3)
<br /> firms were invited to make presentations to a selection subcommittee and, after a
<br /> careful review and visitations to several currently operated courses, Pleasanton Golf,
<br /> LLC was recommended as the proposed operator for Callippe Preserve.
<br /> CourseCo, Inc. is a Petaluma based company that has been operating public golf
<br /> courses since 1989. These facilities include Riverside and Palm Lakes in Fresno, Deep
<br /> Cliff in Cupertino, Mather and Lawrence Links in Sacramento County, Crystal Springs in
<br /> Burlingame, Eureka Municipal in Eureka, Mallard Lake in Yuba City, Kennedy Park in
<br /> Napa, Rancho del Pueblo and Los Lagos in San Jose, Valley Oaks in Visalia, Foxtail
<br /> Golf Club in Sonoma County, Metropolitan Golf Links in Oakland, and Callippe Preserve
<br /> in Pleasanton.
<br /> In 2004, the City of Pleasanton entered into two (2) separate agreements with
<br /> Pleasanton Golf, LLC, which is wholly owned by CourseCo, Inc., to prepare Callippe
<br /> Preserve Golf for public play, and to operate the course for the City once it was opened.
<br /> The Grow -In Agreement, which provided mowing, irrigation, fertilization, weed and
<br /> disease control, and relocation /addition of drainage area, commenced after the
<br /> construction contractor (Ferma) completed initial grass seeding and watering of the golf
<br /> area. The Operator Agreement commenced prior to the opening of the golf course, to
<br /> allow sufficient time for Pleasanton Golf, LLC to secure staff and equipment. Under the
<br /> later agreement, Pleasanton Golf, LLC has acted as the City's agent in all matter related
<br /> to golf course operations, including employment of all golf course personnel.
<br /> The five -year Operator Agreement with Pleasanton Golf, LLC is scheduled to end on
<br /> June 30, 2010. When the original agreement was approved, there was mutual interest
<br /> in a longer term agreement of ten (10) or more years. However, because the Callippe
<br /> Preserve Golf Course was partially funded through Certificates of Participation (COP)
<br /> financing, the Internal Revenue Services (IRS) sets limits on the Agreement's length to
<br /> ensure that a private operator does not unduly benefit from the City's ability to issue tax
<br /> exempt, low -cost financing. There are three (3) term options that are allowed under the
<br /> IRS rules; 5, 10, and 15 year terms. A five (5) year agreement requires that 50% of the
<br /> management fee must be fixed and 50% must be incentive based. In a ten (10) year
<br /> agreement, 80% of the management fee must be fixed and 20% must be incentive
<br /> based.
<br /> Example:
<br /> In the current year (year five of the contract), the maximum annual operating fee
<br /> of $174,000 is comprised of a 50% fixed fee ($87,000) and the potential for a
<br /> 50% incentive fee (an additional $87,000) predicated on exceeding revenue
<br /> benchmarks for golf related revenues and food and beverage sales. If the
<br /> current contract had a ten (10) year term, the maximum annual operating fee of
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