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Home My WebLink About2006-06-21 STAFF REPORTS 2N ppl-M SA ` .c u, n NNOBiEO 439 City Council Staff Report DATE: JUNE 21, 2006 CONSENT CALENDAR SUBJECT: AMENDMENT NUMBER THREE TO AGREEMENT NUMBER 3469 TO ARNOLD PALMER MANAGEMENT LLC, FOR GOLF COURSE MANAGEMENT SERVICES AT TAHOUITZ CREEK GOLF RESORT. FROM: David H. Ready, City Manager BY: Department of Parks and Recreation SUMMARY The current management agreement with Arnold Palmer Management Company for the operations and management of the Tahquitz Creek Golf Resort is scheduled to expire on ,June 30, 2006. Staff has met with Arnold Palmer Management several times over the past few months to negotiate a new management agreement. In April, the City received correspondence from Arnold Palmer Management indicating that they were in the process of selling their ownership interests in both the management agreement and lease of the Legends Course and did not want to make a long-term management commitment to the City until this issue was resolved. The proposed amendment extends the term of the existing agreement for a period of six months, from July 1, 2006 through December 31 , 2006, and allows for one six month extension. All other terms and conditions of the existing agreement remain in full force and effect. RECOMMENDATION: 1. Adopt Minute Order No. approving Amendment Number Three to Agreement 3469 with Arnold Palmer Management, LLC, extending the term of their Management Agreement for a period of six months from July 1, 2006 through December 31, 2006 with one allowable six month extension. STAFF ANALYSIS: On April 25, 2002, City Council approved the Second Amendment to Agreement #3469 with Arnold Palmer Management Company LLC, for golf course management services at Tahquitz Creek Golf Resort. The amendment made several changes to the original agreement, as well as extended the term of the agreement through June 30, 2006. Item No. n . 1 V . City Council Staff Report June 21, 2006 -- Page 2 Third Amendment to Management Agreement with Arnold Palmer Management Staff has met several times with Arnold Palmer Management over the past several months to negotiate a new management agreement. In April, the City was informed that Olympus Real Estate Partners, the majority owner of Arnold Palmer Management Company, was in the process of marketing for sale its interests in both the Management Agreement and their Lease Agreement on the Legends Course. In light of this potential sale, Arnold Palmer Management has submitted correspondence dated April 12, 2006 requesting a time extension of the Management Agreement to permit the sale of their interests in both the Management Agreement and Lease. A copy of this correspondence is attached. Based on this information, staff believes that it would be in the City's best interest to extend the term of the Management Agreement for an additional six months to allow Arnold Palmer Management to complete a sale of their interests. Once the sale is complete, the City can then sit down with their successor-in-interest to negotiate a longer term management agreement. FISCAL IMPACT: Finance Director Review: There is no direct financial impact as a result of the proposed action as it is strictly an extension of time being requested. tt Mikesell, Director Tr LT. ut zla ptant City Manager Department of Parks and Recreatin Adm ive e David H. Ready, City Mpn Attachments: 1. Correspondence from Arnold Palmer Golf Management dated April 12, 2006 2. Minute Order 3. Third Amendment to Management Agreement APR, -12' 06 (WED) 15 : 08 WALDEN P. 002 m GOLF MANAGEMENT April 12, 2006 David H. Ready City Manager City of Palm Springs 3200 E, Tahqultz Canyon Way Palm Springs, CA 92262 Re: Golf Course Management Agreement (Tahquitz Championship Golf Course) dated January 2, 1995 by and between The City of Palm Springs, as owner, and APGM (as successor-in-interest to Arnold Palmer Golf Management Company), as manager, as amended by that certain (1) Amendment No. 1 to Agreement No, 3469 For Golf Course Management Services at Tahquitz Creek Golf Resort dated November 17, 1999, and (ii) Second Amendment to Golf Course Management Agreement dated April 25, 2002 (as so amended, the "Management Agreement"), covering the Tahquitz Creek Resort ("Managed Course") Dear Mr. Ready: As you are aware, Arnold Palmer Golf Management ("APGM") Is the manager of the Managed Course pursuant to the Management Agreement. APGM also is the lessee under the lease ("Lease") covering the adjacent Legends Course. As you also are aware, the Management Agreement expires on or about June 30, 2006, Several circumstances currently exist that may impact the terms of an extension of the Management Agreement: 1, APGM currently is marketing for sale Its interest in both the Management Agreement and the Lease, As a result, APGM Is not motivated to participate In discussions regarding longer term capital needs or other terms that the City may want to address in connection with its longer term objectives for the Management Agreement, 2. The pending litigation with the Desert Water Agency creates significant ambiguity as to the status of both Courses going forward. Although we understand that the City is currently in settlement negotiations with the DWA to resolve this litigation, the uncertainty as to when this may be resolved APR. -12' 061WE0) 15 08 WALDEN P 003 City of Palm springs April 12,2006 Page 2 raises concern over the long term viability of the both Courses. 3. Construction of a hotel adjacent to the Courses creates certain operational concerns regarding short term loss of income from a possible temporary closure of the driving range, the possible temporary relocation of the clubhouse, and the possible relocation of the mechanical facility and other operationally challenging issues. In light of these circumstances, APGM hereby proposes an extension of the existing Management Agreement for a period of six (6) months from the current expiration date, with an option to extend for an additional six (6) month period in the event that the aforementioned issues have not been resolved. A short term extension should permit resolution of at least the pending litigation and APGM's sale of Its interest, thereby permitting the City to address longer term issues with the longer term holder of the interests in both the Management Agreement and the Lease. Please contact me at your convenience should you have any questions with respect to the foregoing. NOLD P LME OLF MANAGEMENT LLC o K. Mini,k Vice resident cc: Troy Butalaff Scott Mikesell Jim Hinckley Jeff Levine Josh Smith MINUTE ORDER NO. APPROVING AMENDMENT NUMBER THREE TO AGREEMENT 3469 WITH ARNOLD PALMER MANAGEMENT, LLC EXTENDING THE TERM OF THE MANAGEMENT AGREEMENT FOR A PERIOD OF SIX MONTHS FROM JULY 1, 2006 THROUGH DECEMBER 31, 2006 WITH ONE ALLOWABLE SIX MONTH EXTENSION. I, James Thompson, City Clerk of the City of Palm Springs, hereby certify that this Minute Order approving Amendment Number Three to Agreement 3469 with Arnold Palmer Management, LLC, extending the term of their Management Agreement for a period of six months, from July 1, 2006 through December 31, 2006, with one allowable six month extension was adopted by the City Council of the City of Palm Springs, California, in a meeting thereof held on the 215Y day of June, 2006. James Thompson, City Clerk AMENDMENT NO. 3 TO AGREEMENT NO. 3469 FOR GOLF COURSE MANAGEMENT SERVICES AT TAHQUITZ CREEK GOLF COURSE This Third Amendment to the Golf Course Management Agreement (the 'Third Amendment') is made and entered into on the 21 s� day of June, 2006, by the City of Palm Springs ("City"), a California charter city, and Arnold Palmer Management LLC ("Manager"), an Ohio limited liability company. Recitals A. On or about January 2, 1995, the City and the Manager entered into that certain Golf Course Management Agreement ("Agreement') for the provision by Manager to City of certain services for the management and operation of the real property and related amenities for use as a municipal golf facility. B. The Parties have subsequently amended the Agreement on two occasions and have extended the term of the Agreement to July 1, 2006. C. It is the desire of the Parties to extend the term of the Agreement for an additional period of time. Agreement 1. Section 2.3 of the Agreement is amended to read: 2.3 Term. The term of this Agreement shall be extended to the close of business on December 31, 2006. Notwithstanding the preceding sentence, the City Manager may in his sole discretion and with the consent of Manager, extend the Agreement until the close of business on June 30, 2007. 2. Except as specifically provided in this Amendment No. 3, all other terms and conditions of the Agreement, as amended by previously approved amendments, shall remain in full force and effect. In Witness Whereof, the parties have executed and entered into this Third Amendment as of the date stated above. ATTEST: "City" CITY OF PALM SPRINGS, a California charter City Hall City Clerk City Manager APPROVED AS TO FORM: City Attorney "Manager" ARNOLD PALMER MANAGEMENT LLC an Ohio limited liability company Title: Title: