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HomeMy WebLinkAbout2011-12-06; City Council; 20752; APPROVAL GOLF COURSE 2012 BUDGET PLAYERS LOUNGECITY OF CARLSBAD CITY COUNCIL AND CARLSBAD PUBLIC FINANCING AUTHORITY - AGENDA BILL 15 20,752AB# MTG. " DEPT. FIN 12/6/2011 APPROVAL OF THE CROSSINGS AT CARLSBAD GOLF COURSE BUDGET FOR 2012 AND APPROPRIATION OF FUNDS FOR A PLAYER'S LOUNGE DEPT. HEAD CITY ATTY. CITY MGR.u/-— RECOMMENDED ACTION: It is recommended that the Board of Directors of the Carlsbad Public Financing Authority (Authority) adopt Resolution No. 57 approving the 2012 Operating and Capital Budget for The Crossings at Carlsbad Golf Course (The Crossings), and appropriate funds for a Player's Lounge. It is recommended that the City Council of the City of Carlsbad (City) adopt Resolution No. 2011-278 approving a transfer from the General Fund for operations of The Crossings municipal golf course. ITEM EXPLANATION: The Authority is the joint powers entity formed by the City of Carlsbad and Carlsbad Municipal Water District to be responsible for the finance, construction, operation and maintenance of The Crossings at Carlsbad Golf Course on behalf of the City of Carlsbad, which is the owner of the property. On May 2, 2006, the Authority retained Kemper Sports Management, Inc. (KSM) to manage and operate the golf course and associated improvements. The Crossings opened to the public August 2007. For the Authority's consideration, KSM has prepared a 2012 calendar year operating and capital budget for The Crossings. This Operating Budget for 2012 is an estimate based on actual operating performance for calendar year 2011 and the experience of KSM with other similar golf courses. In addition, the 2012 operating budget includes the anticipated additional revenues and expenditures associated with the addition of a player's lounge, to be located in part of the space currently occupied by the pro shop. In previous years, the golf industry as a whole, including The Crossings at Carlsbad, suffered the effects of a sluggish economy. Players demanded fewer golf rounds and courses decreased fees in an attempt to attract a diminishing population of golfers. While The Crossings sold over 50,000 rounds of golf in calendar year 2008, rounds declined in 2009 and 2010 to 44,343 and 41,569, respectively. Despite a continued decline in the golf industry as a whole, rounds at The Crossings for the current calendar year (CY 2011) are expected to reach about 46,000, an 11 percent increase from 2010. The increase is due to greater sales of The DEPARTMENT CONTACT: Chuck McBride 760-602-2430 chuck.mcbride@carlsbadca.gov FOR CITY CLERKS USE ONLY. COUNCIL ACTION: APPROVED DENIED CONTINUED WITHDRAWN AMENDED D D D CONTINUED TO DATE SPECIFIC CONTINUED TO DATE UNKNOWN RETURNED TO STAFF OTHER -SEE MINUTES D D D D Page 2 Crossings Club loyalty program memberships (974 versus 744 members, or an increase of 27 percent) in addition to successful marketing efforts. Operating results for the current year (2011) are expected to come in about $170,000 better than originally anticipated. KSM has considered these trends in developing the proposed budget for The Crossings for CY 2012. Although the economic challenges continue, the gains from the prior year are encouraging and are expected to continue, with a moderate 2 percent growth in total rounds anticipated in CY 2012. The CY 2012 budget estimates that The Crossings will generate total operating revenues of approximately $6.4 million, which is a 7 percent increase over the 2011 projections. Income from course operations is expected to increase almost $195,000 in 2012 and income from food and beverage sales are expected increase over $210,000, with only a slight increase in expenses. Expenses, including debt service and capital reserves, which are set aside to address capital maintenance of facilities, are estimated at $7.3 million in 2012, a decrease of almost 3 percent compared to the 2011 projections. Most of this decrease is due to the transfer of habitat mitigation activities from KSM to the City's Parks and Recreation department. KSM was responsible for the oversight during the critical grow-in period for the habitat areas. As a result of the increasing revenues and decreasing expenses, operating income is expected to increase by $453,000. The amount that will need to be funded by the General Fund is $944,592, $640,000 less than the amount funded by the General Fund in 2011. Of that $640,000 reduction, about $205,000 is due to the removal of the habitat budget and $146,000 is due to a reduction in legal fees. The remaining reduction to the General Fund Transfer ($289,000) is due to increased revenues. The following chart summarizes the proposed 2012 budget for The Crossings and compares it to the 2011 projections. Page 3 Green Fees Food and Beverage Other Projected Revenues Cost of Sales Payroll Other Expenses Minor Capital Outlay Projected Expenses Operating lncome/(Loss) Less: Capital Reserve Less: Payments on Debt Less: Habitat Costs Net Cash Flow (General Fund Contribution) Paid Rounds Average Fee per Paid Round 2012 Budget $ 2,857,973 $ 2,887,927 $ 609,510 $ 6,355,410 $ 997,525 $ 2,398,813 $ 2,716,255 $ 11,000 $ 6,123,593 $ 231,817 $ 57,159 $ 1,119,250 $ $ (944,592) 46,812 $ 57.66 2011 Projections $ 2,663,015 $ 2,675,294 $ 602,053 $ 5,940,362 $ 942,964 $ 2,424,633 $ 2,747,866 $ 46,413 $ 6,161,876 $ (221,514) $ 53,260 $ 1,104,000 $ 205,554 $(1,584,328) 45,998 $ 55.42 $ Change $ 194,958 $ 212,633 $ 7,457 $ 415,048 $ 54,561 $ (25,820) $ (31,611) $ (35,413) $ (38,283) $ 453,331 $ 3,899 $ 15,250 $ (205,554) $ 639,736 814 $ 2.24 % Change 7.3% 7.9% 1.2% 7.0% 5.8% -1.1% -1.2% -76.3% -0.6% -204.7% 7.3% 1.4% -100.0% -40.4% 1.8% 4.0% (*) The projections for 2011 include $145,950 for legal fees. Revenues - The majority of the revenues are generated from golf play rates and the food and beverage operations. The golf revenue assumes that there will be approximately 46,800 rounds of golf played, an average of 3,900 per month. Expenditures - The expenditures include the golf course, carts, pro shop, driving range, food and beverage, marketing and administrative expenses. In addition, expenditures include KSM's management fee and performance incentive fee. The management fee for 2012 is $156,891 and the incentive fee is estimated at $92,500. Compared to CY 2011, payroll expenses decrease slightly, as KSM continues to look for ways to reduce expenses despite continuing revenue growth. Capital Reserve - Two percent of greens fee revenues will be set aside for a capital reserve. The capital reserve contribution for 2012 is estimated to be approximately $57,159. Payments on Debt - The Authority issued $18.5 million of tax exempt bonds to help finance the construction of the golf course. The budget for debt service payments for 2012 is $1,119,250. Habitat Costs - The City of Carlsbad Parks and Recreation department has assumed the ongoing responsibility for the habitat maintenance, thereby eliminating the budget for this activity as a part of Golf Course operations. 2012 Capital Outlay - The KSM budget includes $11,000 for pavement maintenance of the parking lot. Page 4 Player's Lounge - At a workshop conducted on October 18, 2011, the City Council received a report which outlined options for improving revenues and golfer customer satisfaction at The Crossings. Councilmembers at the workshop supported the option which would locate a player's lounge in a portion of the area currently occupied by the pro shop. This option has a one-time cost of $127,000 with an expected payback of 4 to 5 years. If authorized, funding will be appropriated from the Capital Reserve, thereby requiring no additional subsidy from the General Fund of the city. FISCAL IMPACT: The proposed budget for CY 2012 projects an overall deficit of $945,000, a decrease of approximately $640,000 compared to the prior year. This deficit is attributed to the debt service ($1,119,250). If approved, the deficit will be paid by the General Fund of the City in the form of a transfer made from the General Fund balance. The proposed budget does not contemplate more than a modest increase in demand for golf course play or food and beverage sales. An increase in demand beyond what is projected would result in greater revenues and a corresponding increase in expenses. Once again, staff recommends that the Authority authorize the Executive Director the discretion to approve additional expenditures above the 2012 Operating Budget, if there are additional revenues generated. For example, if revenues are 105 percent of the budget, then the Executive Director would have the discretion to approve additional expenditures up to the amount of the additional revenue generated. In addition, due to the demand for food and beverage services, which are generally independent from golf course operations, it is recommended that the Authority authorize the Executive Director the discretion to approve additional expenditures with the 2012 Food and Beverage Operation, if there are additional revenues generated above the Food and Beverage Operation revenue budget to cover the additional expenditures. For this purpose, the Food and Beverage Operation will be considered separate from other golf course operations. This will be especially needed if there is more demand for catered events than originally budgeted. ENVIRONMENTAL IMPACT: On June 7, 2000 the Planning Commission adopted Resolution No. 4772 certifying the Environmental Impact Report for the Carlsbad Municipal Golf Project, and the operation of the golf course and maintenance and monitoring of habitat areas are within the scope of the EIR. The operation, repair, maintenance, and leasing or minor alterations of existing facilities falls within the categorical exemption specified in CEQA guidelines Section 15301, Class 1 and has been determined not to have a significant effect on the environment and exempt from the provisions of CEQA. EXHIBITS: 1. Resolution No. 57 approving the 2012 Budget for The Crossings at Carlsbad and Appropriation of Funds for a Player's Lounge. 2. Resolution No. ?nn-278 approving a transfer from the General Fund for operations of The Crossings municipal golf course. 3. 2012 Summary Budget for The Crossings. Exhibit 1 1 RESOLUTION NO. 57 2 A RESOLUTION OF THE BOARD OF DIRECTORS OF THE CARLSBAD PUBLIC FINANCING AUTHORITY 3 APPROVING THE 2012 BUDGET FOR THE CROSSINGS AT CARLSBAD AND APPROPRIATION OF FUNDS FOR A PLAYER'S LOUNGE 5 6 WHEREAS, the Carlsbad Public Financing Authority, hereafter the "Authority," has 7 previously entered into a contract with Kemper Sports Management Incorporated for the 8 operation and maintenance of the Carlsbad City Golf Course, The Crossings at Carlsbad Golf 9 Course, hereafter referred to as "The Crossings;" 10 WHEREAS, Kemper Sports Management has developed a proposed 2012 Operating 11 and Capital Budget for The Crossings; and, 12 WHEREAS, at a workshop conducted on October 18, 2011, the Authority received a 13 report which outlined options for improving revenues and golfer customer satisfaction at The 14 Crossings by adding a player's lounge; and, 15 WHEREAS, the Authority directed staff to proceed with the option which would locate a 16 player's lounge in a portion of the area currently occupied by the pro shop, at a one-time cost of $127,000 to be funded with Golf Course Capital Reserve funds; 18 NOW, THEREFORE, BE IT RESOLVED by the Board of Directors of the Carlsbad Public Financing Authority (CPFA) of the City of Carlsbad, California, as follows: 20 1. That the above recitations are true and correct. 21 2. That the proposed 2012 Operating and Capital Budget for The Crossings is 22 approved as set forth in Exhibit 3. 23 3. That the Authority does hereby authorize the Finance Director to appropriate 24 $127,000 from the Golf Course Capital Reserve account, to pay for costs associated with the 25 addition of a Player's Lounge. 26 4. That the CPFA Executive Director at his/her discretion is authorized to approve expenditures above the 2012 Operating Budget provided there are sufficient revenues Zo 1 generated above the 2012 Operating Budget to cover these additional expenditures. In 2 addition, if the Food and Beverage Operation revenue is higher than the 2012 Food and 3 Beverage Budget, the CPFA Executive Director is authorized to approve expenditures 4 within the Food and Beverage Program up to that additional revenue generated over the 5 2012 Budget estimate. 6 7 8 9 /// 10 /// 11 /// 12 /// 13 /// 14 /// 15 16 17 18 19 '" 20 '" 21 /// 22 /// 23 /// 24 /// 25 /// 26 27 28 (f 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 PASSED, APPROVED AND ADOPTED at a Joint Special Meeting of the Carlsbad Public Financing Authority and the Carlsbad City Council, held on the 6th day of December 2011, by the following vote: AYES: Board Members Hall, Kulchin, Blackburn, Douglas, Packard. NOES: None. ABSENT: None. MAT/T HALL, Chairman of the Board ATTEST: fRRAINE^M. WOOD, Secretary (SEAL) Exhibit 2 RESOLUTION NO. 2011-278 2 A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF CARLSBAD, CALIFORNIA, AUTHORIZING A 3 TRANSFER OF FUNDS FOR THE OPERATIONS OF THE 4 CROSSINGS MUNICIPAL GOLF COURSE 5 WHEREAS, the City Council of the City of Carlsbad, California has reviewed the 6 proposed final Budget for The Crossings municipal golf course operations for the 7 calendar year 2012 and approved the expenditures as set forth in Exhibit 3.8 9 NOW, THEREFORE, BE IT RESOLVED by the City Council of the City of Carlsbad, California, as follows: 11 1. That the above recitations are true and correct. 2. That the City Council authorizes the transfer of funds necessary to 1 ^ subsidize the operations of The Crossings municipal golf course for calendar year 2012 14 forward, without the necessity for repayment, since the accumulated advances with 15 interest from the General Fund to date have no realistic possibility of repayment in the 16 foreseeable future. 3. That the Finance Director is authorized to transfer $944,592 from the General 19 Fund balance to subsidize The Crossings. 20 /// 21 /// 22 /// 23 /// 24 25 26 27 28 1 PASSED, APPROVED AND ADOPTED at a Joint Special Meeting of the 2 Carlsbad City Council and Public Financing Authority, held on the 6th day of December 2011, by the following vote to wit: 4 5 AYES: Council Members Hall, Kulchin, Blackburn, Douglas, Packard. 6 NOES: None. 7 ABSENT: None.8 9 10 —!«.- - -7MAft HALL, Ivlayor 11 ATTEST: 12" 13 14 v tdRRAINE M. WOOD, City Clerk 15 (SEAL) 16 17 18 ''''!** "A- * ^' 19 '''imn»»*v 20 21 22 23 24 25 26 27 28 EXHIBIT 3 Proposed Operating Budget January 1, 2012 through December 31, 2012 REVENUES: COURSE AND GROUNDS $ 2,857,973 CARTS $ 9,027 PRO SHOP $ 219,833 PRACTICE CENTER $ 2,887,927 FOOD & BEVERAGE $ 380,357 GENERAL AND ADMINISTRATIVE $ 293 TOTAL REVENUES $ 6,355,410 COST OF SALES: PRO SHOP $ 214,506 FOOD & BEVERAGE _$ 783,019 TOTAL COST OF SALES $ 997,525 MERCHANDISE COGS % 65% F & B COGS % 30% PAYROLL COURSE AND GROUNDS $ 534,241 CARTS $ 114,297 PRO SHOP $ 162,641 FOOD & BEVERAGE $ 747,643 MARKETING $ 177,304 GENERAL AND ADMINISTRATIVE $ 228,462 PAYROLL TAXES & BENEFITS _$ 434,225 TOTAL PAYROLL EXPENSE $ 2,398,813 OTHER EXPENSES: COURSE AND GROUNDS $ 1,234,414 CARTS $ 234,764 PRO SHOP $ 53,314 PRACTICE CENTER $ 26,474 FOOD & BEVERAGE $ 286,098 MARKETING $ 110,966 GENERAL AND ADMINISTRATIVE $ 770,225 CAPITAL OUTLAY _$ 11,000 TOTAL OTHER EXPENSES $ 2,727,255 TOTAL EXPENSES $ 6,123,593 REVENUES LESS EXPENSES _$ 231,817 CAPITAL RESERVE $ 57,159 PAYMENTS ON DEBT $ 1,119,250 NET CASH FLOW $ (944,592) BUDGETED ROUNDS - TOTAL 46,812 ID Agenda Item #_ r* Am CD A n* For the members of the:CARLSBAD CITYCOUNCIL Memorandum Date^j^Cfty ManagerJ December 5, 2011 To: Lisa Hildabrand, City Manager From: Chuck McBride, Finance Director '"^ Re: Correction to Exhibit 3 of Agenda Item for Carlsbad Public Financing Authority Please distribute the attached "Exhibit 3" replacement page to the Carlsbad Public Financing Authority proposed budget for calendar year 2012 agenda item, scheduled for the December 6th, 2011 Council Meeting. Two amounts in the "Revenue" section of the Proposed Operating Budget were reversed - the amount shown for the Practice Center should be $380,357 and the amount shown for the Food and Beverage should be $2,887,927. hs Finance Department 1635FaradayAve. i Carlsbad, CA 92008 I 760-602-2430 I 760-602-8553 fax I www.carlsbadca.gov EXHIBIT 3 OsAT CARLSBAD Proposed Operating Budget January 1, 2012 through December 31, 2012 REVENUES: COURSE AND GROUNDS $ 2,857,973 CARTS $ 9,027 PRO SHOP $ 219,833 PRACTICE CENTER $ 380,357 FOOD & BEVERAGE $ 2,887,927 GENERAL AND ADMINISTRATIVE $ 293 TOTAL REVENUES $ 6,355,410 COST OF SALES: PRO SHOP $ 214,506 FOOD & BEVERAGE _$ 783,019 TOTAL COST OF SALES $ 997,525 MERCHANDISE COGS % 65% F & B COGS % 30% PAYROLL COURSE AND GROUNDS $ 534,241 CARTS $ 114,297 PRO SHOP $ 162,641 FOOD & BEVERAGE $ 747,643 MARKETING $ 177,304 GENERAL AND ADMINISTRATIVE $ 228,462 PAYROLL TAXES & BENEFITS _$ 434,225 TOTAL PAYROLL EXPENSE $ 2,398,813 OTHER EXPENSES: COURSE AND GROUNDS $ 1,234,414 CARTS $ 234,764 PRO SHOP $ 53,314 PRACTICE CENTER $ 26,474 FOOD & BEVERAGE $ 286,098 MARKETING $ 110,966 GENERAL AND ADMINISTRATIVE $ 770,225 CAPITAL OUTLAY _$ 11,000 TOTAL OTHER EXPENSES $ 2,727,255 TOTAL EXPENSES $ 6,123,593 REVENUES LESS EXPENSES _$ 231,817 CAPITAL RESERVE $ 57,159 PAYMENTS ON DEBT $ 1,119,250 NET CASH FLOW _$ (944,592) BUDGETED ROUNDS - TOTAL 46,812 Proposed 2012Operating BudgetDecember 6, 2011 2011 AccomplishmentsThe golf course itself continues to mature and improve Named as a Top 100 Public Access Golf CourseHosted 2011 U.S. Putting Tour National ChampionshipCreated and hosted Wine Down Series 2011 AccomplishmentsGroup / Event Highlights63 Weddings in 2011 (up from 57 in 2010)27 Weddings currently booked in 2012Sales Focus & Growth: Business/Corporate meetings and eventsExpanded Holiday Brunch Programs• Easter Brunch• Mother’s & Father’s Day Brunch• Halloween Brunch with Costume Contest• Thanksgiving Brunch• Brunch with Santa• New Year’s Brunch 2011 AccomplishmentsGolf HighlightsRegional GolfSan Diego County golf rounds up 2% YTD in 2011The Crossings at Carlsbad golf rounds up 9% YTD in 2011Tournament Rounds Increased by 920 rounds vs. 2010 (9%)Tournament RevenueIncreased by $52,000 vs. 2010 (9%)The Crossings Club loyalty program grew by230 members (30%) Spending by Members is up $76K 2011 AccomplishmentsChampionship Golf EventsCarlsbad City Amateur ChampionshipCrossings Club ChampionshipSocial & Fun Golf Tournaments:Golf PartnershipsGet Golf Readywith the PGA of AmericaCity Parks & Recreation Junior Golf CampsHost Carlsbad High School Golf TeamParticipated in PGA’s Tee It ForwardProgram•Super Bowl of Golf•March Madness•Hot Golf / Cool Drinks•The Pumpkin Proposed Budget2012 will build on 2011 fiscal performanceGolf rounds will gain in 2012Golf Revenues will grow in 2012Food & Beverage operations will continue to show revenue growth 2012 Capital ProjectsPlayers Lounge – modification to pro shop Estimated completion: March, 2012Funded with existing capital reserve Resealing of the parking lot Estimated completion: Spring, 2012Remodeling of the 18thGreenEstimated completion: May, 2012Previously funded 2012 Budget Summary Recommended ActionsThe Board of Directors for the Carlsbad Public Finance Authority (CPFA)• Approve the Operating and Capital Budget for CY2012• Appropriate $127,000 for the addition of a Player’s LoungeThe City Council• Authorize a transfer of $944,592 from the General Fund