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HomeMy WebLinkAboutRes 2018-47 - Increase DW Resident Golf Rate RESOLUTION NO. 2018-47 STAFF REPORT CITY OF PALM DESERT ECONOMIC DEVELOPMENT DEPARTMENT MEETING DATE: June 28, 2018 PREPARED BY: Martin Alvarez, Director of Economic Development REQUEST: Approval of a Resolution Increasing the Desert Willow Resident Golf Rate to $52.00 Based on Consumer Price Index Recommendation By Minute Motion that the City Council: 1. Approve Resolution No. 2018-47 establishing a policy to adjust the Desert Willow resident golf rate annually based on the Consumer Price Index (CPI), March to March for the Los Angeles, Long Beach and Riverside County regions, rounded to the nearest whole dollar; and 2. Approval of an increase to the Desert Willow resident golf rate from $50.00 to $52.00 for Fiscal Year 2018-2019. Strategic Plan The proposed resolution aligns with the City's Envision Palm Desert Strategic Plan, Parks and Recreation Priority 3: Make recreational and exercise opportunities pervasive in all public spaces; and the Tourism and Marketing Priority 1: Improve access to Palm Desert and its attractions to enhance the ease of lifestyle. Executive Summary Approval of the attached resolution establishes a policy authorizing an annual adjustment to the Desert Willow resident golf rate based on the CPI, March to March for the Los Angeles, Long Beach and Riverside County regions and an increase to the Desert Willow resident golf rate from $50.00 to $52.00 for Fiscal Year 2018-2019. Background At the June 14, 2018 City Council meeting, staff was directed to return to the City Council for consideration of increasing the current $50.00 resident golf rate at Desert Willow Golf Resort, based on last year's CPI calculation, rounded to the nearest dollar. The CPI for the Coachella Valley is calculated using the March to March index for the Los Angeles, Long Beach and Riverside County regions. (Note that a new index for the DW Resident Golf Rates - Staff Report June 28, 2018 Page 2 of 3 Riverside-San Bernardino-Ontario area has recently been developed, and will be more appropriate to use in future years.) Upon the opening of the Desert Willow Golf Resort in 1997, the resident golf rate was established by City Council at $45.00 per round. The resident golf rate remained unchanged until 2013 when the City Council adjusted the resident rate from $45.00 to $48.00/round using the CPI and 2010 as a base year. Additional CPI adjustments took place in July 2015 to $49.00 and in 2016 to the current $50.00/round resident rate. The average cost per round over the last five years is summarized below. The average cost per round is established with a formula of adding the golf-related expenses and dividing the average annual rounds played of 85,000 (not including depreciation, capital expenses, interest and management fee). Average Actual Average Cost FY Annual '' Rounds Golf Related Costs Per Round Rounds 2013-14 85,000 89,001 $ 6,143,112 $72.27 2014-15 85,000 87,252 6,019,221 $70.81 2015-16 85,000 80,572 $ 5,951,445 $70.02 2016-17 85,000 79,353 $ 6,180,824 $72.72 2017-18 $ 6,477,770 $76.21 Estimate 85,000 90,008 2018-19 $ 6,630,223 $78.00 Budget 85,000 87,186 Desert Willow Golf Resort averages over 85,000 rounds of golf per year and approximately 20-25% of the rounds come from residents. The rates for non-residents vary depending on the time of the season and the time of play. The resident rate is currently $50.00 year round. Given that approximately 20,000 of all rounds at Desert Willow are resident rounds and the cost per round is $76.21, residents pay $26.21 less than the average cost per round. Discussion Per the direction of the City Council, staff has reviewed and calculated last year's CPI using the March to March CPI for the Los Angeles, Long Beach and Riverside area. (A new index more specific to the Inland Empire, will be more appropriate to use in future years.) The CPI calculation resulted in a 3.79 percent increase, which equals a $1.96 increase to the $50.00 resident rate. Rounding to the nearest dollar, staff is recommending the resident rate increase from $50.00 to $52.00. G\Econ Development\Martin Alvarez\2018\SR\DWResRateCPI 6-28-18 tloc DW Resident Golf Rates - Staff Report June 28, 2018 Page 3 of 3 CPI Year CPI % CPI Actual Resident Rate Proposed Resident Rate Adjustment 2017-2018 3.79 $1.96 $51.96 $52.00 If actual CPI had been implemented annually to the resident rate over the last 20 years, the actual resident rate would be $74.00 today (see attached analysis). The arguments for utilizing CPI to adjust the resident rate allow for a slight modification in the rate from year to year, avoiding large, one time increases, yet allowing the recovery of some increased costs to labor, water, energy, fertilizer, seed, equipment, etc. An additional consideration to justify the increase to the resident rate is that artificially keeping the resident rate far below the cost of golf rounds impacts the private golf clubs' ability to attract new members, especially residents. Fiscal Analysis The proposed CPI increase to the resident rate from $50.00 to $52.00 is estimated to increase golf revenue by approximately $40,000, based on an estimated 20,000 resident rounds projected for FY 2018-19. These funds will assist with offsetting increases in minimum wage labor rates, materials and utilities for next fiscal year. Although Desert Willow is not a current burden on the City's General Fund, without former Redevelopment Agency funds for large capital expenditures, an increase in revenues will also allow the City and the City's golf course operator to build a capital replacement account to maintain and repair the wear and tear to the golf course and facilities. LEGAL REVIEW DEPT. REVIEW FINANCIAL REVIEW CITY MANAGER N/A Robert W. Hargreaves Martin Alvarez net Moore Lauri Aylaian City Attorney Economic Development Director of Finance City Manager Director ATTACHMENTS: Resolution No. 2018-47 CPI Analysis 1997-2018 G\Econ Development\Martn Alvarez\2018\SR\DWResRateCPI 6-28-18 doc RESOLUTION NO. 2018-47 A RESOLUTION OF THE CITY OF PALM DESERT ADJUSTING THE RESIDENT GOLF RATE AT THE DESERT WILLOW GOLF RESORT BASED ON CONSUMER PRICE INDEX WHEREAS, the City of Palm Desert has developed two public golf courses to provide for recreational facilities; and WHEREAS, the City of Palm Desert has certain obligations in accordance with that certain agreement with the Management Company of the Golf Resort to establish and set said green fees; and WHEREAS, the City of Palm Desert desires to provide for reasonable rates to play said golf course for its residents of the City; and WHEREAS, the City of Palm Desert City Council approves the establishment of a policy to adjust the resident golf rate annually based on utilizing the annual Consumer Price Index, March to March, for the Los Angeles, Long Beach and Riverside area (or such other area as may be more geographically appropriate) rounding to nearest whole dollar; and NOW, THEREFORE BE IT RESOLVED, that effective July 1, 2018, the City of Palm Desert hereby adjusts the resident golf rate from $50.00 to $52.00 based on utilizing the annual Consumer Price Index, March to March, for the Los Angeles, Long Beach and Riverside area; PASSES, APPROVED AND ADOPTED the day of June 2018, AYES: NOES: ABSENT: ABSTAIN: SABBY JONATHAN, MAYOR ATTEST: RACHELLE D. KLASSEN, :CITY CLERK CITY OF PALM DESERT, CALIFORNIA G-\Econ Development\Desert Willow\Resident Advisory Committee\SR-RES\Resolution DW Green Fees 2018 docx RESOLUTION NO. 2018-47 City of Palm Desert Desert Willow Analysis of CPI Impact on Resident Rate From 1997 through 2018 Current CPI Adjusted Fiscal Resident Resident Year Rate Rate (CPI) 97-98 $ 45.00 $ 45.45 98-99 $ 45.00 $ 46.46 99-00 $ 45.00 $ 48.06 00-01 $ 45.00 $ 49.61 01-02 $ 45.00 $ 50.99 02-03 $ 45.00 $ 52.99 03-04 $ 45.00 $ 53.92 04-05 $ 45.00 $ 56.09 05-06 $ 45.00 $ 58.71 06-07 $ 45.00 $ 60.96 07-08 $ 45.00 $ 62.96 08-09 $ 45.00 $ 62.33 09-10 $ 45.00 $ 63.49 10-11 $ 45.00 $ 65.39 11-12 $ 45.00 $ 66.71 12-13 $ 48.00 $ 67.57 13-14 $ 48.00 $ 68.27 14-15 $ 49.00 $ 68.62 15-16 $ 50.00 $ 69.79 16-17 $ 50.00 $ 71.66 17-18 $ 50.00 $ 74.37 Klassen, Rachelle From: Tom Walton <twalton@me.com> Sent: Saturday, June 16, 2018 8:17 AM To: Klassen, Rachelle Cc: Kevin Fahey; Neddy Thompson; Lou Gonzalez Subject: Strong Marketing Message Attachments: The Enduring Enigma of Costco's $1.50 Hot Dog and Soda Combo.pdf;ATT00001.txt Rachelle, Please pass this on to all involved in resident decisions at DWGR. 1 CL AdChoices mentai_floss The Enduring Enigma of Costco's $1 .50 Hot Dog and Soda Combo Jake Rossen 6/8/2018 When Costco president W. Craig Jelinek once complained to Costco co- founder and former CEO Jim Sinegal that their monolithic warehouse �IVII'dio, u ,tii o a g business was losing money on their famously cheap $1.50 hot dog and soda package, Sinegal listened, nodded, and then did his best to make his take on the situation perfectly clear. "If you raise [the price of] the effing hot dog, I will kill you," Sinegal said. ©IiStock//Tim Boyle,Getty Images Th e "Figure it out." Enduring Enigma of Costco's$1.50 Hot Dog and Soda Combo Taking his words to heart, Jelinek—who became Sinegal's successor in 2012—has never raised the price on Costco's hot dog. Incredibly, it has sold for the same $1.50 since the retail club first introduced the dogs to customers in 1984. The quarter- pound, all-beef tube and 20-ounce soda combo appears to be inflation-proof and immune to the whims of food distributors. How does Costco do it? Simple. When it comes to hot dogs, Costco doesn't price according to what the market will bear. They price according to their own cost and according to the value the hot dogs can afford them. According to Jelinek, people would pay $1.75, and maybe more, for the deal. But is that extra 25 cents going to be more valuable than the goodwill and foot traffic generated by a combo that's stuck to its price point for nearly 35 years? Probably not. Customers coming in to shop at Costco are amused, satisfied, and fueled by the hot dog meal. If they get it just before leaving the store, they're left with a lasting impression of being treated well. That's worth more than keeping up with inflation. " Ir �€ " I a r " 'l I I tl 17 3 m:hW UN'tw '!" ,�r^. 9I'� --1 m , a nw ,Irre�;s , _}.,w '�wig ,�,.,� �� mm wlrib:lua lill "'W;S�'�+'i ,�'iw I l4�i,� _. �,. .�, ',-.t. �4 a6'�;a� �,s� IV Costco .°.. i rr r: g 1111TRA III ' 'yew .tl � ^� � " ��,1 rc it I+ ' ., w �4ot' M° � !WI - t �M � � � Sl I „ 4' 4 " '.„ x.Mm. M '' � J. r, °'� . D�Id,111 a lit s 1E"✓'I Ifwppl `°; IF' w°wl r MINI + ' II II': , . apll If k u:o,„„11uPulN III1!IrP r „, u,,.yl r '"" b' m I' ©Costco via Facebook Costco via Facebook That means Costco needs to maintain the food court staple with an eye on a steady price. When supply costs threatened to increase in 2009, the company made a major decision: They stopped using Hebrew National, makers of the all-kosher dog that they had used since 1984, and decided to move hot dog production in-house. A Kirkland's Signature hot dog plant was constructed in Los Angeles. When they needed to ramp up production, they built a second plant in Chicago. They've also had to keep costs on the soft drink side in line. When their deal with Coca-Cola was set to increase the price, Costco opted to sign with Pepsi in 2013, ensuring that their trademark $1.50 price sticker would be kept intact. Today, Costco sells over 100 million hot dogs annually, which is more than every MLB stadium combined. And they continue to prove surprisingly adept at anything that could add even a single cent to the deal. When California recently enacted a soft drink tax that would have raised the consumer's cost, Costco locations in the state switched the combo to include Diet Pepsi. (Diet drinks are exempt from the law.) The company's "effing hot dog" will continue to remain a steal for the foreseeable future. Klassen, Rachelle From: Klassen, Rachelle Sent: Friday, June 15, 2018 9:20 AM To: Barbara Johns Cc: Aylaian, Lauri;Alvarez, Martin; Moore,Janet; Hernandez, Anthony; Stanley, Jane Subject: FW: Please forward to City Council re: Desert Willow Dear Ms.Johns: Thank you for your e-mail, which is being forwarded here to City Council (blind copy) and staff. Rachelle Klassen City Clerk Ph: 760.346.0611 Direct: 760.776.6304 rklassen:a cityofpalmdesert.org From: Barbara Johns [mailto:barbjohns@prodigy.net] Sent: Friday,June 15, 2018 7:10 AM To: Klassen, Rachelle <rklassen@cityofpalmdesert.org> Subject: Please forward to City Council re: Desert Willow I appreciate the hours it takes to serve on the City Council of an important resort city. And I thank you all for your time. Coming away from today's Council meeting, I have a few observations I'd like to share: Ms. Weber: "Thank you for reminding Council that Desert Willow is an "amenity". It's a hybrid engine—a combination of economic driver and municipal attraction—that probably makes handling it confusing and contradictory. It certainly seems to be paying off in the economic portion with multiple new timeshares and condominiums. And this added city income has offset... what exactly? Attractive resident rates maybe? (BTW, pickleball is silly, too) Mr. Jonathon: I can see your measured financial analysis on the issue of Desert Willow. But you lost me with your insufferable observation that only "9 people" out of 3500 Resident Card holders "showed up to speak". I might point out that of the 46,500 people who do NOT have resident cards, none at all showed up to speak. Demeaning those who wish to participate is an error on your part, especially from your lofty perch. Ms. l{arnik: The CPI is one idea, but what made the $45 beginning rate the right price? Maybe it should have started at $25. Who can remember? Ms. Kelly: Your calm presence and smooth summations were intelligent and impressive. Ms. Nestande: Thank you from your golfing constituents. I have played golf at DW for 15 years. I have shown the clubhouse to visitors, basked in city pride of ownership, and encouraged would-be residents to make sure they bought in Palm Desert. I have taken lessons there, purchased merchandise, and enjoyed a cold beer and lunch after a round. When Kemper eliminated the Champion's Club several years ago, a good number of my friends left Desert Willow and have never returned. But it's not just their absence that hurts the city—it's also their animosity. What does Council have to gain by fostering more animosity amongst the golfers who remain? Yes, the Champion's Club came back, but it squeezed down the number of athletes who can actually get on the course on a Wednesday morning. And with the dwindling popularity of golf, the laws of supply and demand may come back to bite the City. I do not use the Aquatic Center or the gym, but do I resent the public money spent for those who use it? No, I do not. Perhaps those 46,500 silent residents feel the same way about Desert Willow. I can only guess—they didn't show up today. Barbara Johns Palm Desert 2 Klassen, Rachelle From: Rob Lasorsa <rlasorsa@dc.rr.com> Sent: Friday, June 15, 2018 10:27 AM To: Klassen, Rachelle; CityhallMail Cc: Aylaian, Lauri; Hermann, David; Moore, Janet; Rocha, Grace; dwhite@desertwillow.com; pbucy@desertwillow.com; rszydlowski@desertwillow.com; Larry.Bohannan@DesertSun.com Subject: Re: Desert Willow Resident Rate Increases Thank you and HUGE gratitude to City Council for rejecting the increase fee proposal. Our only concern, however, was that this was not a 5-0 vote. This seems to indicate that two Council Members along with Kemper Sports may try this again in the future. Resident fees should be frozen at the current rates for the indefinite future. We maintain that, if such price increases are considered in the future, our group will continue to "shop" our services to other local clubs. Other clubs would be elated to have year round paying customers. Rob Lasorsa Palm Desert CA On Jun 15, 2018, at 9:17 AM, <rklassen@cityofpalmdesert.org> <rklassenia)cityofpalmdesert.org> wrote: Good morning, Mr. Lasorsa. No, the Minutes won't be ready until they're presented to Council in a future agenda packet. Since we have had several large agendas in succession, we are running behind in transcription. Our plan is to have the June 14 Meeting Minutes on the July 12, 2018, agenda for approval. However, you may go to the video tape of the meeting online at this address: http://www.cityofpalmdesert.org/our-city/mayor-and-city-council-/city-council-meeting- information-center. Scroll to the June 14, 2018, entry, which is right at the top of the list of past meetings, and click on video. Once you're in that mode, you will get a dual window open—one with the video, one with the agenda, scroll down to Section 13— Resolutions, Item A, to hear the proceedings and resulting action on this matter. (If you need any further assistance, don't hesitate to telephone me, and I can walk you through getting into the video.) For purposes of expedience,pending full official transcription,the action taken was: Upon a motion by Councilmember Kelly,second by Councilmember Harnik, and 3-2 vote of the City Council (AYES: Harnik, Kelly,and Weber; NOES: Nestande and Jonathan): 1) Rejected both proposals set forth in Resolution No. 2018-33 (Resident Card Policy and Dynamic Pricing); 2) requested staff return to City Council to coincide with consideration of the FY 2018-2019 Budget on June 28, 2018,with a recommendation to adjust the present$50 Resident Rate based on CPI (Consumer Price Index) rate change for the last 12 months in the Southern California-Riverside County Region, rounded to the nearest dollar. Please let me know if I can be of any further assistance. 1 Rachelle Klassen City Clerk Ph: 760.346.0611 Direct: 760.776.6304 rklassen s‘cityofpalmdesert.org From: Rob Lasorsa [mailto:rlasorsa@dc.rr.com] Sent: Friday,June 15, 2018 6:22 AM To: Klassen, Rachelle <rklassen@cityofpalmdesert.org> Subject: Re: Desert Willow Resident Rate Increases l-lello, Are the minutes of yesterday's meeting available yet? Thank you Rob Lasorsa On Jun 14, 2018, at 1:16 PM, <rklassen Ucitvofpalmdesert.org> <rklassen@cityofpalmdesert.org> wrote: It begins at 4:00 p.m.—the regular session. Rachelle Klassen City Clerk Ph: 760.346.0611 Direct: 760.776.6304 rklassen: cityofpalmdesert.org From: Rob Lasorsa [mailto:rlasorsa@dc.rr.com] Sent:Thursday,June 14, 2018 12:03 PM To: Klassen, Rachelle <rklassen@cityofpalmdesert.org> Subject: Re: Desert Willow Resident Rate Increases What time is that meeting today? Sent from my iPhone On Jun 14, 2018, at 11:44 AM, <rklassen a cityofpalmdesert.org> <rklassenacityofpalmdesert.org> wrote: Dear Mr. Lasorsa: Thank you for your e-mail, which is being distributed to City Council in advance of today's meeting. Rachelle Klassen City Clerk Ph: 760.346.0611 Direct: 760.776.6304 rklassen 'cityofpalmdesert.org 2 From:Stanley,Jane Sent:Thursday,June 14, 2018 11:32 AM To: Klassen, Rachelle <rklassen@cityofpalmdesert.org> Subject: FW: Desert Willow Resident Rate Increases Blind copied to the City Council From: Rob Lasorsa [mailto:rlasorsa@dc.rr.com] Sent:Thursday,June 14, 2018 11:27 AM To:CityhallMail <Citvhall@citvofpalmdesert.org> Cc: Information Mail<info@cityofpalmdesert.org>; Larry.Bohannan@DesertSun.com; info@kemperlesnik.com; dwhite@desertwillow.com; bnation@desertwillow.com; bsimpson@kempersports.com; iburns@desertwillow.com; slesnik@kempersports.com; sskinner@kempersports.com; jlesnik@kempersports.com Subject: Desert Willow Resident Rate Increases Dear City Council Members and Others: It has come to our attention that our City/RESIDENT owned Desert Willow Golf Club is considering, through the City, a increase in rates for tax paying residents. We understand that this would be considered "dynamic pricing" and rates would vary according to time of year, t time availability, and other factors. However it is discussed and "disguised", new resident pricing will amount to a significant price increase for residents. We urge City Council to vote against ANY plan that involves resident price increases or any other "dynamic" pricing options. We pay additional tax assessments and fees to our City for all of the benefits for living in this wonderful community, INCLUDING special resident rates at Desert Willow. Reasonable t times for PD residents has become increasingly difficult. In fact, City Council should be acting to help residents with Desert Willow t-time availability. The first four or five t times, especially on weekends, should be solely blocked off for residents only and at the current resident rate. Let me also add 3 Approximately two years ago when Desert Willow came to the City Council to ask for approval of over six hundred thousand dollars for Firecliff renovations it was overwhelmingly approved. I was at that meeting and spoke to voice my support of the renovations and the approval of this "enormous" use of resident taxes. Our groups thoroughly enjoy Desert Willow, what I consider the absolute best set of courses in the Desert as stated on my Yelp Review: A 5 star review of Desert Willow Golf Resort by Rob L. https://www.yelp.com/bizldesert-willow-golf-resort-palm- desert?hrid=O831OSYJloQJe8o 1 Q91-1%vg&utm source=ishare&ut m content=review However, if these price increases go through, we will have to take our business elsewhere. We have already discussed with a number of clubs pricing opportunities for Palm Desert Residents that could be as high 50 golfers that currently play Desert Willow. This will be tremendously detrimental to Desert Willow, especially during the Late Spring, Summer, and Early Fall months when we are greatly needed. Additionally, let me be succinctly clear: I have voted, time and again, AND helped to financially support FOUR of the current five members of City Council. Those votes and financial support will disappear if any increases or"dynamic" pricing changes are made against Palm Desert Residents at Desert Willow Golf One more thing If this is being initiated by Kemper Sports, drop them! Kemper Sports has a history of managing "Goat Tracks" and charging enormous sums of money at their courses (see Bandon Dunes in Oregon and Streamsong Resort in Florida). Don't let them dictate their philosophies to Palm Desert City Residents who OWN Desert Willow Golf Club. Thank you for your time, Rob Lasorsa PO Box 14114 Palm Desert CA 92255 Street Address: 75595 Dempsey Drive Palm Desert CA 92211 (760) 779-9148 rlasorsa@dc.rr.com 4 Klassen, Rachelle From: Tom Walton <twalton@me.com> Sent: Friday, June 22, 2018 4:40 PM To: Klassen, Rachelle Cc: Lou Gonzalez; Kevin Fahey; Neddy Thompson; Cory Stepanek; Dave Patterson; Fred Johns; Nicole Hayden; Larry Bohannan Subject: Proposed Resident Price Increase - Staff Report June 28, 201 Attachments: RESPONSE TO STAFF REPORT 6-28-18 copy PDF.pdf; ATT00001.htm City council members. I am totally opposed to raising the resident rates again, effective July 1, 2018. As you can see from the attached detail, there is no marketing justification to do this again. And, raising the rate to $52 effective July 1, 2018 without any resident summer discount program will continue to drive Palm Desert residents to other more friendly venues here in the CV. Thank you for your consideration. Sincerely, Tom Walton 1 DWGR STATS 2013-14 TO 2017-18 FY ANNUAL ANNtA T TOTAL RESIDENT ROUNDS RESIDENT ROUNDS % GREEN FEE GREEN FEE SOLD ROUNDS OF TOTAL REVENUES REVENUES SOLD SOLD RES. % OF TOTAL REVENUE 2013-14 86,015 2014-15 84,323 2015-16 77,562 2016-17 76,625 2017-18 87,500 Est. 20,139 17,535 17,403 15,211 13,389 23.41 % 20.80% $6,327,491 $6,338,845 22.44% $5,851,299 19.85% $6,084,935 15.30% $6,782,369 $965,208 $844,315 $857,237 $762,692 $670,202 15.3% 13.3% 14.7% 12.5% 9.9 % Staff is proposing raising resident rates again. They are forecasting a $40,000 revenue boost to the resident rack. Last year resident rounds sold represented only 12.5% of the total rounds sold. This fiscal year it will be close to 10%. You will see from the detail below, not included in this staff report, that the resident revenue has been on a severe decline since raising resident rates in perpetuity tied to the CPI was first implemented in 2013-14. Staff has projected $20,000 increases for each whole dollar raised in each of their earlier staff reports - 2013, 2015 & 2016. None of their forecasts for revenue increases has been realized. Whv are we rushina to raise resident rates aoain when this market is in such sharp decline? Raising the resident rate effective July 1, might generate $25K in additional revenues next fiscal year. With gross revenues projected over $11 M next year, that's .2% difference. Hardly worth the effort. If you vote to raise the rate to $52 effective July 1 without any summer discounts, how much good will do you believe you will be generating? Remember the Costco marketing message! END FY JUNE 30 2008 - 2009 2009 - 2010 2010 - 2011 2011 - 2012 2012 - 2013 2013 - 2014 2014 - 2015 2015 - 2016 2016 - 2017 2017 - 2018* RESULTS OF RAISING RESIDENT RATES 2013 - 2018 ROUNDS SOLD RESIDENT REVENUE 22,595 19,685 20,928 21,259 20,195 20,139 17,535 17,403 15,211 13,389 $1,016,757 $885,825 $941,303 $956,453 $908,555 $965,208 ARS AND AMOUNT RESIDENT TE INCREASED AT DWGR $844,315 $857,237 Baseline before any resident raises Raised $3 whole dollars IP $20K/$ Raised $1 more whole dollar $762,692 Raised $1 more whole dollar $669,450 STAFF'S PROJECTED RESIDENT REVENUE INCREASES WITH RAISES $968,555 $988 $1,008,55 $1,008,55 -YEAR CUMULATIVE RESU ACTUAL ANNUAL RESIDENT RESULTS +/- ANNUAL RES. REVENUE FORECAST $965,208 $844,315 $857,237 $762,692 -$3,347 -$124,240 -$131,318 $245,863 -$339,105 1 Klassen, Rachelle From: Tom Walton <twalton@me.com> Sent: Monday, June 25, 2018 10:23 AM To: Klassen, Rachelle Cc: Kevin Fahey; Neddy Thompson; Dori Smith; Barbara Johns; Lou Gonzalez; Dave Patterson; Cory Stepanek; Fred Johns; Nicole Hayden; Larry Bohannan Subject: PALM DESERT RESIDENT PRICE CPI CHRONOLOGY AND RESULTS Attachments: CPI EXHIBIT A PDF.pdf; ATT00001.htm; COSTCO MARKETING PDF.pdf; ATT00002.htm Good morning Rachelle, Pls. distribute to appropriate City officials. Thanks for your help. Tom Walton 1 HOW DID PALM DESERT END UP WITH A PROCESS BY WHICH RESIDENT RATES ARE RAISED IN PERPETUITY, TIED TO THE CPI? Some refer to this City practice as "death by a thousand cuts" It all began with the MAY 10, 2012 Staff Report & Council meeting. Then CM Wohlmuth introduces raising resident rates tied to the CPI — asserting that other rack rates are subsidizing the resident rack * The May 10, 2012 Staff Report — Fiscal Impact Section — cautions that golf rounds are declinina in the Coachella Valley and that golf pricing Is far more competitive today vs five years ago. Further states it would be unwise to lose more play at DW including residents * Council votes NO to raising resident rates in 2012. NOTE: Cleverly, Wohlmuth gets the council to agree setting up the process to raise resident rates in perpetuity tied to the CPI and establishes the CPI baseline back to the 2010 level. While no one challenged Wohlmuth's subsidy assertion at that time, the misrepresentation that the other racks were subsidizina the residents is born — Background Section of the 5/10/2012 Staff Report. This is pure poison. While this false claim demeans the golfing residents, it also Btirs non golfing. residents to question why the City is using their tax money to subsidize the 3.500 aolfina residents? This poison continues to permeate through out the City and Kemper for the next five years. We hear it time and time again from staff, council members and Kemper executives. Staff report after staff report continues to spread this false narrative to the dismay of the golfing residents. The justification Wohlmuth asserts at this time can be found in the May 12, 2012 Staff Report — in the fiscal Impact Section. Basically he is saying that since the RDA funds have dried up this additional revenue, he projects from raising resident rates, will be used to build a capital replacement account to maintain and make continual improvements at DW. Staff recommends raising resident rates again in 2013, 2015 & 2016. These recommendations are approved when new members are added to the City Council. FY end 2009, resident rounds sold were 21,259 (Yr. Wohlmuth hired) FY end 2016, resident rounds sold were 17,403 (Yr. Wohlmuth left) 3,856 fewer annual resident rounds than in 2009 when Wohlmuth was hired as CM. Based on our calculations, this capital fund Wohlmuth's strategy was supposed to build is -$276,672 in the hole. And a lot of golfing residents .are totally frustrated by the continued attacks to limit access. raise prices annually. disenfranchise second home owners and not offer any summer resident pricing for the 3.500 Qolf card holders unless they purchase a VIP card. As we have pointed out to the City, both the 2015 & 2016 staff reports were seriously flawed. They contained Average Cost Per Round tables that were way out of line & misleading. And, they omitted critical information regarding the current depressed state of annual resident rounds and revenues. Last year in the June 9, 2016 staff report, they claimed that the residents were being subsidized $59.15 each round. Absolutely untrue. and council members were mislead as to the real facts. Four staff members signed their names to this Staff Report — Martin Alvarez, Rudy Acosta, Janet Moore and Justin McCarthy. These reports, are suppose to give our council members factual data upon which they can make informed decisions to benefit our residents and City. Our due diligence effort. which began in late 2014. reveals that the council has been fed misleading data in these staff reports since 2012 and it has continued through the June 9. 2016 report. While there has been substantial turnover in the council members over these years, many of the staff who are signing their names to these reports still remain. Here we sit, five years later, with a staff & council locked into raising resident rates in perpetuity tied to the CPI because a CM got it all wrong in 2012, and current staff members continue to ignore these facts even though we have provided detailed information confirming the misrepresentation and the losses to the resident revenues at DW the past three years. Why should we all continue to suffer the negative results of raising resident rates in perpetuity tied to the CPI? When Costco president W. Craig Jelinek once complained to Costco co- founder and former CEO Jim Sinegal that their monolithic warehouse business was losing money on their famously cheap $1.50 hot dog and soda package, Sinegal listened, nodded, and then did his best to make his take on the situation perfectly clear. "If you raise [the price of] the effing hot dog, I will kill you," Sinegal said. "Figure it out." Taking his words to heart, Jelinek—who became Sinegal's successor in 2012—has never raised the price on Costco's hot dog. Incredibly, it has sold for the same $1.50 since the retail club first introduced the dogs to customers in 1984. The quarter- pound, all -beef tube and 20-ounce soda combo appears to be inflation -proof and immune to the whims of food distributors. How does Costco do it? Simple. When it comes to hot dogs, Costco doesn't price according to what the market will bear. They price according to their own cost and according to the value the hot dogs can afford them According to Jelinek, people would pay $1.75, and maybe more, for the deal. But is that extra 25 cents going to be more valuable than the goodwill and foot traffic generated by a combo that's stuck to its price point for nearly 35 years? Probably not. Customers coming in to shop at Costco are amused, satisfied, and fueled by the hot dog meal. If they get it just before leaving the store, they're left with a lasting impression of being treated well. That's worth more than keeping up with inflation. Klassen, Rachelle From: Fred Johns <nevadajohns@prodigy.net> Sent: Monday, June 25, 2018 11:06 AM To: Klassen, Rachelle Subject: 'CPI & Desert Willow Financials Ms. Klassen: Please forward to the City Council. Thank you, Fred Johns Using the Riverside CPI or any CPI as a basis for increasing golf rates is flawed. Any economist will tell you that prices are always based on the competition of specific products, not a " basketful" of products. The actual golf fees in the Coachella Valley have increased minimally since the inception of Desert Willow. An all -encompassing financial review of Desert Willow has never been presented to the City Council or Palm Desert residents. The additional revenue from developments around Desert Willow and annual fees levied on houses and businesses should be included in the financials.. While it has been stated that those revenues are for capital improvements, residents have never seen the numbers. Additional revenue is also received by the city from TOT. It has been stated in the past that some of that revenue is because of Desert Willow attracting tourists to the city, but none of the revenue is ever included in the financial analysis of DW. Shouldn't at least a portion be included? Desert Willow is very profitable today when all the numbers are included! Klassen, Rachelle From: Fred Johns <nevadajohns@prodigy.net> Sent: Wednesday, June 27, 2018 1:12 PM To: Klassen, Rachelle Subject: Desert Willow Golf Rates Increases vs the CPI Attachments: DWGR vs CPI.xlsx Ms. Klassen: Please forward to City Council. Thank you, Fred Johns Attached is a comparative worksheet comparing the actual Desert Willow golf rate increase for 12 years to the CPI for the same 12 year period. 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