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HomeMy WebLinkAboutC35730 Extension Management Agreement for Desert Willow Golf Resort (DWGR)STAFF REPORT CITY OF PALM DESERT CITY MANAGER'S OFFICE MEETING DATE: May 23, 2019 PREPARED BY: Christopher Gerry, Management Analyst REQUEST: Consider exercising the option to extend by one year the management agreement between the City of Palm Desert, Kemper Sports Management, and the Palm Desert Recreational Facilities Corporation to operate and manage the Desert Willow Golf Resort, and amending said agreement to reflect State labor code. Recommendation By Minute Motion: Consider an amendment to Contract No. C35730 to exercise the option to extend by one year the agreement between the City of Palm Desert, Kemper Sports Management, and the Palm Desert Recreational Facilities Corporation to operate and manage the Desert Willow Golf Resort. 2. Amend Contract No. C35730 to incorporate labor code provisions through the duration of the management agreement. Background Consider an amendment to the manaqement agreement for an additional vear On October 3, 2016, City staff issued a request for proposal (RFP) to operate and manage the Desert Willow Golf Resort. As a result of this RFP, the City received proposals from Kemper Sports Management (Kemper Sports), Marriot International, and Century Golf Partners. The City assembled a review committee comprised of 10 members that included two Councilmembers, the City Manager, a golf professional from First Tee, the Director of Business Development for the Career Builder Challenge, a golf course superintendent from a local course, several City staff including Directors from Economic Development, Finance, and Public Works and the City's Financial Analyst. Following a thorough evaluation of these proposals and presentations from each of the responding companies, the review committee unanimously selected Kemper Sports as the best proposal. The City Council approved Contract No. C35730 (management agreement) with Kemper Sports on April 13, 2017. The initial term of the management agreement was three years (June 30, 2020) with two one-year options to extend (June 30, 2021, and June 30, 2022). While the initial term of the contract does not expire until June 30, 2020, the management agreement requires the City to notify Kemper Sports if electing a one-year option by December 31, 2019. The previous staff report can be found as Attachment A. May 23, 2019 - Staff Report Desert Willow Golf Resort Page 2of2 Therefore, City staff requests consideration of the two options, as follows: If the City Council elects to exercise the first one-year extension, City staff recommends amending the management agreement accordingly. The proposed amendment can be found as Attachment B. If the City Council does not elect to exercise the first one-year extension, City staff recommends authorizing the issuance of an RFP to operate and manage the Desert Willow Golf Resort. Although the management agreement is currently valid through June 30, 2020, City staff will have to commence the RFP process beginning next week due to the steps involved and noticing requirements in said agreement. The RFP timeline and activities can be found as Attachment C. Labor code provisions Under the State labor code, all workers employed on eligible projects (contracts) must be paid prevailing wages determined by the Director of the Department of Industrial Relations (DIR) according to the type of work and location of the project. After an extensive review of the labor code by City staff and the City Attorney's Office, it is recommended to incorporate labor code provisions within existing and future management agreements for the Desert Willow Golf Resort. Following a review of job classifications and duties relative to compensation, City staff does not anticipate any current impacts to existing wage rates; however, ultimately it is the responsibility of the contractor to ensure labor compliance at the Desert Willow Golf Resort. The State labor code requirements are incorporated in the proposed amendment as well. If the City Council prefers to not elect the one-year extension, City staff recommends that the City Council direct staff to revise the draft amendment to remove Section 1 and approve the proposed amendment, as revised, in order to ensure labor compliance with the existing management agreement. Fiscal Analvsis There is no fiscal impact associated with this request. LEGAL REVIEW DEPT. REVIEW FINANCIAL REVIEW CITY MANAGER Approved as to form wa Robert W. Hargreaves Lauri Aylaian ! Janet M. Moore - Lauri Aylaian City Attorney City Manager Director of Finance City Manager Attachments A. Staff Report (April 13, 2018) B. Proposed Amendment C. Request for Proposal Timeline and Activities Attachment A Staff Report (April 13, 2017) CITY OF PALM DESERT FINANCE DEPARTMENT STAFF REPORT CONTRACT NO. C35730 RESOLUTION NO. 2017-36 Request: APPROVE THE MANAGEMENT AGREEMENT BETWEEN THE CITY OF PALM DESERT, KEMPER SPORTS MANAGEMENT, INC., AND THE PALM DESERT RECREATIONAL FACILITIES CORPORATION TO OPERATE AND MANAGE THE DESERT WILLOW GOLF RESORT AND APPROVE RESOLUTION 2017- 36 AUTHORIZING AN INCREASE IN THE LOAN AMOUNT FROM THE CITY TO DESERT WILLOW Submitted By: Rudy Acosta, Assistant City Manager Date: April 13, 2017 Contents: Management Agreement with Kemper Sports and Palm Desert Recreational Facilities Corporation Resolution 2017- 36 Recommendation By Minute Motion, that the City Council, 1) Approve the management agreement between the City of Palm Desert, Kemper Sports Management, Inc., and the Palm Desert Recreational Facilities Corporation to operate and manage Desert Willow Golf Resort, substantially as to the form presented; and 2) Adopt Resolution No. 2017- 36 authorizing an increase to the loan to Desert Willow from the City up to an additional $2,000,000 from the unobligated General Fund reserves; and 3) Authorize the City Manager and legal counsel to finalize the agreement; and 4) Authorize the Mayor to execute the agreement and the City Manager and the Director of Finance to take actions necessary to effectuate the actions taken herewith. Discussion On December 8, 2016 the City Council directed staff to negotiate a new management agreement between the City of Palm Desert (the City), the Palm Desert Recreational Facilities Corporation (PDRFC), and Kemper Sports, Inc. (Kemper) to operate and manage the Desert Willow Golf Resort. City staff and Kemper have negotiated and agreed upon the management agreement attached. The new agreement is for three years commencing on July 1, 2017 and expiring on June 30, 2020. In addition, two one-year options to extend per Section 2.1(B) of the management agreement are available to exercise at the City's discretion. The following changes to the new management agreement were addressed and added to the new management agreement: 1) Article 1, Definitions, regarding Key Employees was revised to reflect current Kemper organizational positions at Desert Willow Golf Resort. Staff Report Approval of Management Agreement — Kemper Sports Management, Inc. April 13, 2017 Page 2of3 2) Section 3.4.5 Key Employees restriction language was modified. 3) Article V Insurance sections were revised to reflect updated insurance coverage requirements. 4) The new monthly fixed management fee referenced in Section 6.1 will be $20,833.33 for a total annual amount of $250,000. This is a reduction of $50,000 over the previous operations agreement. 5) The City will agree to deposit up to $2,000,000 into the Desert Willow Operating Accounts ($1,500,000 immediately and up to an additional $500,000 provided for in the agreement) to provide projected operating cash flow to fund the day-to-day operations of Desert Willow Golf Resort including the daily operations of the restaurant. 6) The percentage management fee referenced in Section 6.2 is capped at $200,000 with a 2% cap on the annual adjustment. The threshold amount is $6.5 million. To summarize, Kemper will be paid an incentive fee of 5% of all revenues (adjusted per Section 6.3) in excess of $6.5 million in an amount not to exceed $200,000 during the first year. Each subsequent year the cap on the incentive fee will increase by a ceiling amount of 2%. In addition to the changes noted above, the key components of the new agreement remain as exclusive features benefitting Desert Willow. Those key components are: 1) Kemper and its affiliates agree not to manage, own, or operate any other golf course within a 20 mile radius without the City's approval. Kemper exclusively operates and manages Desert Willow. 2) Kemper is no longer required to maintain a reserve. If the City is required to deposit more than $2,000,000 in the operating accounts, depending on the circumstances, it will be grounds for termination of the agreement. 3) The City retains the option to decide whether to continue the Leaming Center (the Academy at Desert Willow). This right allows the City to make a real-time budget decision at Desert Willow without harming Kemper or any other amenity of the golf resort. 4) Corporate administrative costs bome by Kemper remain with Kemper. Kemper does not allocate or pass through the costs of their corporate or regional staff that have oversight responsibility of Desert Willow. 5) Kemper will now be required to provide such IT support as is necessary for their operations, rather than using City resources for this function. Kemper has proven their ability to manage Desert Willow with their expert knowledge and professionalism. Kemper was the operator firm unanimously recommended by the Desert Willow Golf Resort Operator RFQ/RFP selection committee. Kemper manages seven municipal golf courses in southern California. Nationally, their management portfolio includes over 100 golf courses with 35 of those courses municipally owned. Kemper's experience and expert knowledge of the operating cycle at Desert Willow along with Kemper's national knowledge of the golf industry allows them to implement policies and procedures at Desert Willow to maximize the day -today operations, resulting in efficient operations without any assistance from the City's general fund. Staff recommends approval of the management agreement between Kemper, PDRFC, and the City of Palm Desert for the operations at Desert Willow Golf Resort for a firm period of three years with two one-year options. G %ECON DEVELOPMENT)SMY ACOSTA\STAFF REPORTS - 201ASA -APPROVE MGMT AGMT - KEMPERSPORTS 041317WLS_DOCX Staff Report Approval of Management Agreement — Kemper Sports Management, Inc. April 13, 2017 Page 3 of 3 Fiscal Analvsis: The fixed management fee of $20,883.33 ($250,000 a year) will be paid directly from the golf resort operating accounts. As with the prior agreement, there is also a percentage management fee of up to $200,000 in the first year (increased by not more than 2% each year) based on percentage of the Gross Revenues in excess of $6,500,000. By eliminating the $500,000 cash reserve, Kemper is reducing the fixed management fee by $50,000. As a result of the elimination of the cash reserve, staff recommends increasing the loan to Desert Willow from the unobligated General Fund reserves up to an additional $2,000,000 ($1,500,000 immediately and up to an additional $500,000 as provided for in the agreement). In 2010 the City made a loan to Desert Willow in the amount of $500,000 to cover the reduction in revenues during the construction of the kitchen and terrace expansions. This action will authorize the loan to be increased to $2,500,000 in the aggregate. Submitted by: Rudy P. A%osta, Assistant City Manager Jane oore, Finance Director Approval: �aurii Aylaian, City Manager C:WSERS\RMCCORMICIMPPOATAIOCALNMCROSOFRWINDOWSITEMPORARY INTERNET FIL.ES\CONTENT OUTLOOKIR2AUMQIXISR - APPROVE VGMT AOMT - KEMPERSPORTS 041317WLS.DOCX Attachment B Proposed Amendment Contract No. C35730 AMENDMENT OF CONTRACT NO. C35730 Amendment of Contract No. C35730 dated May 23, 2019, is made effective July 1, 2019, by and among the CITY OF PALM DESERT, a charter city, organized and validly existing under the Constitution and laws of the State of California ("CITY"), the PALM DESERT RECREATIONAL FACILITIES CORPORATION, a California nonprofit public benefit corporation ("PDRFC") and KEMPER SPORTS MANAGEMENT, INC., an Illinois corporation ("KEMPER"). RECITALS 1. Effective July 1, 2017, CITY, PDRFC, and KEMPER entered into Contract No. C35730 (AGREEMENT) to operate and manage the Desert Willow Golf Resort. 2. The initial term of the AGREEMENT runs through June 30, 2020. CITY has the option to extend the term of this AGREEMENT for two one (1) year successive extensions at the discretion of the City Council of the City of Palm Desert by giving KEMPER notice as provided in the AGREEMENT. 3. Under the State labor code, all workers employed on eligible projects must be paid prevailing wages determined by the Director of the Department of Industrial Relations (DIR) according to the type of work and location of the project. 4. CITY has determined AGREEMENT is subject to State labor code provisions. AMENDMENT NOW, THEREFORE, CITY, PDRFC, and KEMPER agree, as follows: 1. CITY hereby notifies KEMPER that the City Council of the City of Palm Desert has exercised its option to implement the first one (1) year extension under the AGREEMENT. KEMPER accepts this AMENDMENT as satisfactory notice under the AGREEMENT of the first one (1) year extension and all signatories hereto agree that the AGREEMENT term is extended to June 30, 2021. 2. AGREEMENT provisions, as amended, shall incorporate the State Labor Code requirements, as follows: 2.1 Prevailinq Waqes. KEMPER is aware of the requirements of California Labor Code Section 1720, et seq., and 1770, et seq., as well as California Code of Regulations, Title 8, Section 16000, et seq., ("Prevailing Wage Laws"), which require the payment of prevailing wage rates and the performance of other requirements on "public works" and "maintenance" projects. If the services identified in the AGREEMENT ("Services") are being performed as part of an applicable "public works" or "maintenance" project, as defined by the Prevailing Wage Laws, KEMPER agrees to fully comply with such Prevailing Wage Laws. CITY has obtained a copy of the prevailing rates of per diem wages for each craft, classification, or type of worker needed to perform the Services. These rates are on file with the City Clerk or they may be obtained at htti)://www.dir.ca.qov/OPRUDPreWageDetermination.htm. KEMPER shall make copies of the prevailing rates of per diem wages for each craft, -1- 12812-0001 r2298116V2. doc Contract No. C35730 classification or type of worker needed to execute the Services available to interested parties upon request, and shall post copies at KEMPER's principal place of business and at the project site. Pursuant to the provisions of 1775 of the Labor Code, KEMPER shall forfeit to the CITY, as a penalty, not more than $200.00 for each calendar day, or portion thereof, for each laborer, worker, or mechanic employed, paid less than the stipulated prevailing rates for any work done under this contract, by him or by any subcontractor under him, in violation of the provisions of this AGREEMENT. It is the intent of the parties to effectuate the requirements of Sections 1771, 1774, 1775, 1776, 1777.5, 1813, and 1815 of the Labor Code within the AGREEMENT, and KEMPER shall therefore comply with such Labor Code sections to the fullest extent required by law. KEMPER shall defend, indemnify and hold CITY, its officials, officers, employees, agents, and volunteers free and harmless from any claim or liability arising out of any failure or alleged failure to comply with the Prevailing Wage Laws. 2.2ReQistration/DIR Comoliance. If the Services are being performed on a public works project of over $25,000 when the project is for construction, alteration, demolition, installation, or repair work, or a public works project of over $15,000 when the project is for maintenance work, in addition to the foregoing, then pursuant to Labor Code Sections 1725.5 and 1771.1, KEMPER and all subcontractors must be registered with DIR. KEMPER shall maintain registration for the duration of the project and require the same of any subcontractors. This project may also be subject to compliance monitoring and enforcement by the DIR. It shall be KEMPER's sole responsibility to comply with all applicable registration and labor compliance requirements, including the submission of payroll records directly to the DIR. Any stop orders issued by DIR against KEMPER or any subcontractors that affect KEMPER's performance of Services, including any delay, shall be KEMPER's sole responsibility. Any delay arising out of or resulting from such stop orders shall be considered KEMPER's caused delay and shall not be compensable by CITY. KEMPER shall defend, indemnify and hold CITY, its officials, officers, employees and agents free and harmless from any claim or liability arising out of stop orders issued by DIR against KEMPER or any subcontractor. 2.31-abor Certification. By its signature hereunder, KEMPER certifies that it is aware of the provisions of Section 3700 of the California Labor Code which requires every employer to be insured against liability for Worker's Compensation or to undertake self-insurance in accordance with the provisions of that Code, and agrees to comply with such provisions before commencing the performance of the Services. 3. All other AGREEMENT provisions shall remain the same. [SIGNATURES ON NEXT PAGE] -2- 12812-0001 \2298116V2. d o c CITY: CITY OF PALM DESERT By: Susan Marie Weber, Mayor ATTEST: By: Rachelle D. Klassen, City Clerk PDRFC: Contract No. C35730 KEMPER: KEMPER SPORTS MANAGEMENT, INC. M m Steve Skinner, Chief Executive Officer Tracy Tobin, Executive Assistant PALM DESERT RECREATIONAL FACILITIES CORPORATION By: By: Lauri Aylaian, President Rachelle D. Klassen, Secretary -3- 12812-0001 \2298116v2.doc Attachment C Request for Proposal Timeline and Activities Request for Proposal Timeline and Activities If the City Council does not elect to exercise a one-year extension, City staff recommends authorizing the issuance of a request for proposal (RFP) to operate and manage the Desert Willow Golf Resort. The RFP estimated timeline and activities can be found below. Activitv Begin to develop an RFP, rating criteria, and interested parties list Release RFP Deadline to receive proposals Issue proposals and rating criteria to review committee Complete review by review committee Schedule interviews with the most competitive operators Interview most competitive operators Begin to negotiate an agreement for City Council consideration Recommend operator to City Council Recommend operator to City Council (contingency) Date May 27, 2019 June 17, 2019 August 16, 2019 August 26, 2019 September 27, 2019 October 4, 2019 October 21-25, 2019 October 28, 2019 November 14, 2019 December 12, 2019