HomeMy WebLinkAboutRes 2020-50 Desert Willow Golf Resort 5 Yr. Xtnsn of Loan - Defer InterestSTAFF REPORT
CITY OF PALM DESERT
FINANCE DEPARTMENT
MEETING DATE: June 11, 2020
PREPARED BY: Janet M. Moore, Finance Director
REQUEST: APPROVE AND ADOPT RESOLUTION NO. 2020-50
AUTHORIZING A FIVE YEAR EXTENSION ON THE $500,000
LOAN MADE BY THE CITY TO THE DESERT WILLOW GOLF
RESORT AND APPROVING THE DEFERRAL OF INTEREST
PAYMENTS ON ALL LOANS MADE BY THE CITY TO DESERT
WILLOW COMMENCING WITH THE 2019-2020 FISCAL YEAR
Recommendation
By Minute Motion, that the City Council:
1) Approve Resolution No. 2020 - 50 authorizing a five-year extension
to the term of the $500,000 loan made by the City to the Desert
Willow Golf Resort, and
2) Approve the deferral of interest payments on all loans made by the
City to Desert Willow Golf Resort, for two years commencing with
the 2019-2020 fiscal year through the 2020-21 fiscal year, and
3) Authorize the City Manager to extend the interest payment deferrals
for up to an additional two years.
Strateqic Plan Obiective
N/A
Executive Summary
The City's General Fund and the Golf Course Capital Fund have, to date, loaned the
Desert Willow Golf Resort ("Desert Willow") a combined $2 million (one of $500,000 and
another of $1.5 million). Desert Willow pays the City interest on the two outstanding
loans on an annual basis. The State ordered shutdown of all golf courses during the
height of the tourist season is estimated to cause a revenue loss of between $2 million
and $3 million to Desert Willow.
Given the revenue loss, payment of the interest due may require that Desert Willow
make an additional draw from the $1.5 million loan (which can be increased to $2
million) to cover operating expenses during the year until revenue begins to improve. In
addition, staff is requesting that the smaller of the term of the $500,000 loan be
extended for an additional 5 years for the same reasons noted, from its current maturity
of September 30, 2020 to September 30, 2025.
June 11, 2020 —Staff Report
City of Palm Desert — Approval of Resolution No.2020-50 Loan Extension and deferral
of Interest on City Loans to Desert Willow
Backuround Analvsis
On July 8, 2010, the City Council approved Resolution No. 2010-61, authorizing a loan
in the amount of $500,000 to the Desert Willow Golf Resort, funded from the golf course
capital account, to assist with the impact on operating expenses related directly to the
expansion of the Lakeview Terrace and the Desert Willow Clubhouse. On September
24, 2015, the City Council approved Resolution 2015-82; authorizing a 5-year extension
to the term of the $500,000 loan. The $500,000 loan matures on September 30, 2020.
Interest is due annually on September 30.
On April 13, 2017 the City Council also approved Resolution 2017-36 authorizing a loan
of up to $2 million from the City's unobligated General Fund Reserves to the Desert
Willow Golf Resort to assist with operating expenses. To date, $1.5 million of the
approved $2 million has been loaned to Desert Willow from the Unobligated General
Fund Reserves. Interest is due on an annual basis on each June 30. The loan matures
on June 30, 2022.
Given the fiscal impact to Desert Willow's operations during the State ordered shut
down, along with the added costs associated with the new operating guidelines, Desert
Willow's contracted manager, Kemper Sports, has requested that the City defer interest
payments on both loans, as well as extend the maturity date for the $500,000 loan for
an addition 5-years.
Fiscal Analvsis
As a direct result of the State ordered shutdown as well as the added costs associated
with the new operating guidelines, Desert Willow is estimating a significant revenue loss
of between $2 million and $3 million by the fiscal year end 2019-2020. The City receives
approximately $55,000 in interest annually from the loans. The deferral of interest and
the loan extension will assist with operating expenses at Desert Willow, possibly without
requesting an additional draw from the larger authorized amount. Desert Willow will be
required to repay the deferred interest upon the maturity of the loans or earlier
depending the Golf Resort's financial recovery from the economic impacts of the State
ordered shutdown and Coronavirus pandemic.
LEGAL REVIEW
WLS
William L. Strausz
City Attorney
DEPT. REVIEW
Ya ve. r'X. "vou
Janet M. Moore
Director of Finance
City Manager, Lauri Aylaian: XkT
FINANCIAL
REVIEW
Janet M. Moore
Director of Finance
ATTACHMENTS: Resolution 2020-50
Deferral Request from Desert Willow
ASSISTANT
CITY MANAGER
N/A
Andy Firestine
Assistant City Manager
RESOLUTION NO. 2020-50
A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF PALM
DESERT, CALIFORNIA, AUTHORIZING AND APPROVING AN
EXTENSION OF THE TERM AND DEFERRAL OF INTEREST PAYMENTS
ON LOANS MADE BY THE CITY TO THE DESERT WILLOW GOLF
RESORT
WHEREAS, the City Council approved Resolution 2010-61 authorizing a loan in the
amount of $500,000 to the Desert Willow Golf Resort, funded from the golf course capital
account; and
WHEREAS, the City Council approved Resolution 2015-82 extending the term of the
$500,000 loan approved by Resolution 2010-61; and
WHEREAS, the City Council approved Resolution 2017-36 authorizing a loan of up to
$2,000,000 to the Desert Willow Golf Resort, funded from the Unobligated General Fund, and
the City has disbursed $1,500,000 of that loan for operating cash flow to fund the day-to-day
operations of Desert Willow Golf Resort; and
WHEREAS, the City Council recognizes the fiscal impacts of the COVID-19 public health
crises are such that the City desires to further extend the term of the $500,000 loan and defer
interest payments on the loans described above.
NOW, THEREFORE, the City Council of the City of Palm Desert, California, DOES
HEREBY DETERMINE, ORDER AND RESOLVE, as follows:
Section 1. The above recitals are true and correct.
Section 2. The City Council herby authorizes and approves a further extension of
the term of the $500,000 loan for five years and a deferral of interest payments on loans
made by the City to the Desert Willow Golf Resort as described herein commencing with
the fiscal year 2019-2020 through the fiscal year 2020-2021 and further authorizing the
City Manager to extend the interest payment deferrals for up to an additional two years.
Section 3. The Director of Finance is hereby directed to take any such actions to
facilitate the deferral of interest payments described herein.
Section 4. The City Manager or his/her designee is hereby authorized and directed
to take any such actions necessary to implement this resolution.
PASSED, APPROVED and ADOPTED this 111h day of June 2020, by the following vote to wit:
AYES:
NOES:
ABSENT:
ABSTAIN:
ATTEST:
GRACE L. ROCHA, ACTING CITY CLERK
CITY OF PALM DESERT, CALIFORNIA
GINA NESTANDE, MAYOR
Memorandum
To: Lauri Aylaian
CC: Janet Moore, Andy Firestine. Tom Garcia. Randy Chaves. Anthony Hernandez
From: Derek White
Date: 4/21 /2020
Re: Request for Ikferral of loan interest payment and rent payment
Desert Willow requests to defer both interest loan payments and rent payments for 2019-
2020. In the past, we have always strictly followed the conditions of our loan and
annual rent payments to the City. However, due to the unforeseen and current
economic conditions that we arc experiencing we feel that allowing us to defer the
below payments will assist with our current cash flow as we head into the slower
summer months and into the fall as well.
• Defer interest payments on both City operating loans totaling approximately
$55.000
• Defer our annual rent payment of $96.000 and the repayment of back rent of
$57.000 totaling $ I53,000.
We believe this is a temporary issue as long as restrictions are eventually lifted. We have
employed strategies to adapt to current restrictions and will implement expense reductions in
FY2021 to minimize losses to the extent possible.
I am confident that if approved this .$208,000 w ill help keep our cash flow, positive going into
the fall and hopefully business levels can return soon to the levels we've experienced these past
couple year,,
Therefore, I am requesting that our interest loan and rent payments be modified and deferred
until the end of fiscal year 2021.
Respectfully
Derek White
General Manager