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terms. A five (5) year agreement requires that 50% of the management fee must be fixed and 50% must be incentive based. In a ten (10) year agreement, 80% of the management fee must be fixed and 20% must be incentive based. Example: In the current year (year five of the contract), the maximum annual operating fee of $204,000 is comprised of a 50% fixed fee ($102,000) and the potential; for a 50% incentive fee (an additional $102,000) predicated on exceeding revenue benchmarks for golf related revenues and food & beverage sales. If the current contract had a ten (10) year term, the maximum annual operating fee of $204,000 would be comprised of a 80% fixed fee ($163,200) and the potential; for a 20% incentive fee (an additional $40,800). At the time, the five (5) year agreement facilitated greater flexibility for the City and encouraged the contractor to generate more revenue in order to receive their maximum management fee. The more revenue the vendor generated, the more the city was able to make annual debt service payments on the bonds sold to finance the course construction, and secondly can pay back the General Fund. The recommended extension and amendment to the Operator Agreement (Attachment 1) includes changes to the term and fee structure described in (Attachment 2), but retains all relevant provisions including staffing, payment practices, course policies/procedures, environmental permit requirements, accounting, insurance default provisions, etc. It is important to note, that in years one through four of the current agreement, golf revenue did not exceed the base performance standards, therefore an incentive fee was not earned. However, the base performance standards for food, beverage and merchandise revenue was met in years one through four and the 15% incentive fee was earned, as indicated in Attachment 2. On March 12, 2015, the Parks and Recreation Commission reviewed the proposed agreement. The Commission recommended approval of the extension and amendment to the Operator Agreement and directed that staff forward it to the City Council for its final review and approval. Listed below are brief explanations of what staff considers the primary deal points: • Term —The proposed term of the Agreement is for a period of five (5) years. Now that the golf course bonds have been paid off, the contract term is no longer subject to the Internal Revenue Service (IRS) limits on the length and payment options for management contracts. Therefore a five (5) year extension to the current agreement is allowable and is the most beneficial at this time, due to CourseCo's understanding of best maintenance practices and knowledge of the Course's infrastructure during the drought and mandatory water restrictions, the environmental mitigation requirements and the recently established course goals for increasing rounds and revenue, capital improvement projects to improve course conditions, and improving food and beverage operations. Both staff and Pleasanton Golf, LLC representatives have had a mutually beneficial relationship and, based on our experience during the past ten (10) years, feel confident retaining them as the City's golf course operator. Page 3 of 4