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HomeMy WebLinkAboutIR 8036 ~ INFORMAL REPORT TO CITY COUNCIL MEMBERS No. 80366 OOST To the Mayor and Members of the City Council November 5, 1996 Subject: Page I of 5 1873 CONTRACT RENEWAL RECOMMENDATIONS FOR OPERATION OF Z-BOAZ AND ROCKWOOD GOLF COURSES Introduction In February of 1990, the City approved license agreements under which the American Golf Corporation (AGC) and International Golf of Texas, Inc. (IGT) assumed full responsibility for the operation and maintenance of Z-Boaz and Rockwood golf courses, respectively. The primary term of these agreements was for eight (8) years with two (2) additional two (2) year options. The primary term for both of these contracts will end during the 1997-98 budget year (May 31, 1998 for Z-Boaz and July 31, 1998 for Rockwood). Although neither contractor has formally approached Parks Department staff with a request to renew their contract, the staff has taken the initiative to inform the contractors of the staff s recommendation for each contract. In the case of Z-Boaz Golf Course, the Parks Department staff has extended an offer to AGC to recommend to City Council a renewal of their contract for the first two (2) year option under the current terms of the contract. Their recommendation was based upon the satisfactory performance of AGC to date. In the case of Rockwood Golf Course, it is the Parks Department staffs recommendation that IGT be removed as the concessionaire at Rockwood Golf Course at the end of the primary term and that the City resume control of the golf course. Their recommendation was based upon the poor performance of IGT to date. Ddring the first six (6) years a number of contract breaches have been committed by IGT (summarized in Attachment A) and management of the facility has been plagued with continuing problems. As a result, on February 7, 1995 the City Council approved M&C C-14692 authorizing the City Manager to administratively terminate the contract should future contract defaults occur. Since leasing two (2) of the City golf courses in 1990, staff has twice reviewed the possibility of leasing one (1) or all three (3) remaining golf courses operated by the City. Both times the recommendation by staff and the direction of the City Council has been that no additional leasing of the golf courses occur. Rgc_kwood !Qolf Course In February 1990, the City approved a license agreement (M&C C-12195) under which International Golf of Texas, Inc. (IGT) assumed full responsibility for the management, operation and maintenance of Rockwood Golf Course. Because IGT had not been incorporated in Texas for three (3) years, they were not able to obtain a license from the Texas Alcoholic Beverage Commission to sell beer. It was therefore necessary that the City contract with Link Catering, Inc. for beer sales at the golf course (M&C C-12433). Both agreements, have a primary term of eight 0�wl (8) years with two (2) additional two year options. The contractor forinally took control of operations at the golf course on August 1, 1990. ....... I CIAL-i-Ec "111-111 ISSUED BY THE CITY MANAGER " INFORMAL REPORT TO CITY COUNCIL MEMBERS No. Ao-w November 5, 1996 *eTo the Mayor and Members of the City Council Page 2 of 5 x► Subject: 1873 CONTRACT RENEWAL RECOMMENDATIONS FOR OPERATION OF Z-BOAZ AND ROCKWOOD GOLF COURSES The contractor's proposal, which was received through a competitive request for proposals process, made the commitment to pay to the City an escalating guaranteed minimum per year totaling $2.475 million during the initial term. The initial contract required the contractor to conduct capital improvements within a Regular Capital Improvement Program category on a four (4) year schedule totaling $550,000. In addition, the construction of an additional new 9 holes, a new clubhouse, and a new driving range were included as part of a Special Capital Improvement Program, valued at over $1 million dollars. The contract specified that the contractor would retain 25% of the total gross receipts to reimburse the contractor for debt assumed on these improvements. However, during the first year of the contract, flood damage at the golf course delayed the Regular Capital Improvement Program. In response to IGT's appeals, negotiations were conducted which postponed capital improvement work until a resolution could be achieved on whether to provide credit to the contractor for flood repair work. Eventually, a total of$47,075.19 was credited to the flood damage repairs, thus lessening the capital improvements promised by the contractor in his proposal. However, the overall required expenditure of$550,000 within the Regular Capital Improvement Program was not adjusted. In addition, the first year audit, conducted by the City's Internal Auditor, determined that the contractor failed to supply adequate insurance coverage and performance security, while four monthly rent payments were received late and one returned insufficient funds. During the second year, IGT continued to experience problems with five monthly rent payments being received late, no capital improvements were accomplished and IGT again failing to provide adequate insurance or sufficient evidence of financial security. Again, during the third contract year, staff continued to pursue resolution of issues related to both the Regular and Special Capital Improvement Program and ongoing insurance and bonding concerns. This resulted in the City approving an amendment to the license agreement in November 1993 (M&C C-14072), in which the Regular Capital Improvement Program was restructured and extended (at the request of the contractor), and all Special Capital Improvements outlined in the original contract(including the construction of the new 9 holes, clubhouse and driving range) were deleted from the contract agreement, resulting in $1 million dollars of unrealized improvements to the golf course. The amended contract retained the original annual guaranteed minimum-fees and required the contractor to spend the remaining Regular Capital Improvement Program funds (balance left on the original $550,000) in the amount of $240,146.74 for capital improvements. The amendment specified that continuous cart trails on the Red and White nines during contract year four (4) should be constructed, and that any-remaining balance would be spent on improvements during contract year six (6). The amendment also included a series of incentives to the contractor which were targeted at increasing the chances for success by the contractor given the poor performance record of the contractor during the first three (3) years of the contract (see Attachment A). In addition, the amended contract required IGT to make a $25,000 gift to the City on December 15, 1993 and ISSUED BY THE CITY,MANAGER FORT WORTH,TEXAS INFORMAL REPORT TO CITY COUNCIL MEMBERS No. 8036 NI T November 5, 1996 Eh'�D To the Mayor and Members of the City Council Page 3 of 5 Subject: CONTRACT RENEWAL RECOMMENDATIONS FOR OPERATION OF Z-BOAZ AND ROCKWOOD GOLF COURSES again on December 15, 1994 to be expended on ballfield improvements in Rockwood Park. Third year audit findings determined that there was a lapse in certain insurance coverage, monthly sales reports were inadequate and no capital improvements were completed during the year. Staff continued to express concerns about contractor performance during the fourth (4) year of the contract when IGT was again in breach of contract for failing to provide documentation of required insurance coverage and bonding, failing to pay a $25,000 payment due on December 15, 1994, and by causing alien on City property with City equipment being withheld by repair vendors for non-payment. In addition to these items, a Fort Worth construction company pursued legal action against IGT and enjoined the City to collect an outstanding debt of$42,164.45 for cart trail construction completed in the summer of 1994. As a result of continuing issues of non- performance, on February 7, 1995 (M&C C-14692) the City Council issued its authorization to allow the City Manager to administratively terminate the contract with IGT should conditions of non-compliance continue. Currently into the seventh (7) year of the contract, IGT has completed all programmed capital improvements. However, due to a lapse in performance security bonding for a period of 414 days, the contractor has been notified effective October 15, 1996 that $41,400 in penalty fees are due to the City by November 18, 1996. In the event that this payment is not made on or before this date, a late charge of 24%can be assessed or staff can recommend immediate termination of the contract. Because IGT has had an extensive history of poor performance related to contract compliance issues, it is the Parks Department staff's recommendation that IGT be removed as the concessionaire at Rockwood Golf Course (i.e. contract option to renew not be exercised) and that the City resume control of the golf course. The Parks Department staff's position is based on: 1) the history of poor performance related to contract compliance issues and maintenance conditions, and 2) the level of return which historically was realized by the City operating the facility prior to leasing versus what contract management has generated (see Attachment B). Thus the Parks Department staff has determined that the citizens of Fort Worth could be bett -served,''by-ldle-Q, reestablishing control of this facility. OFFICIAL 11 CITY SECRETARY Z-Boaz Golf Course FT. WORTH In February 1990, the City approved a license agreement under which AGCassurned responsibility for the operation and maintenance of Z-Boaz Golf Course. The primary term of the agreement was for eight(8) years with two(2) additional two (2) year options. The contractor was required to pay to the City an escalating guaranteed minimum per year totaling $1.450 million during the initial term. Required capital improvements during the first two (2) years totaled $231,800. In addition, in contract years 2 through 8, AGC was to contribute 5% of gross green fee revenues (approximately $25,000/year) into a special capital improvement account for improvements to the golf course. ISSUED BY THE CITY MANAGER FORT WORTH,TEXAS INFORMAL REPORT TO CITY COUNCIL MEMBERS No. 8036 40 November 5, 1996 01*.� To the Mayor and Members of the City Council XA Subject: CONTRACT RENEWAL RECOMMENDATIONS FOR OPERATION OF Z-BOAZ AND ROCKWOOD GOLF COURSES However, citing concerns of being unable to operate at a profit at Z-Boaz because of the downturn in the local economy and increased competition from the newly opened to the public Carswell Golf Course, in July 1994, AGC submitted a proposal to continue operation of Z-Boaz under a revised capital program and reducing the original guaranteed minimums to the City. On April 27, 1995 (M&C C-14786) the City Council approved an amendment to AGC's contract that retained the original guaranteed minimums, however, refunded all 5% CIP monies totaling $70,130.38, releasing AGC from future CIP commitments totaling approximately $100,000 and allowing AGC to occupy the City's Westside Service Center. Over the first six (6) years of this contract, AGC has complied with the major terms of their contract and due to the projected returns at Z-Boaz(see Attachment B), Parks Department staff had recommend continuing contract management at this facility. CONCLUSIONS AND RECOMMENDATIONS Both the Parks and Community Services Advisory Board at its regularly scheduled meeting on September 17, 1996 and the Department's Golf Advisory Committee at their September 11, 1996 meeting, endorsed the staff s recommendation concerning this issue (the GAC was to originally discuss this issue on August 14, 1996, however, IGT requested and received a delay until their next regularly scheduled meeting on September 11, 1996). On October 15, 1996 the Council's Facilities and Infrastructure Committee (FIC) reviewed the staffs recomm ndation and a motion was passed to not renew either contract. In addition, it was stressed by the FIC that in the event IGT defaults in any way prior to the end of the primary term of their contract, staff was to proceed immediately with termination of their contract. As mentioned earlier, since leasing two (2) of the City golf courses in 1990, staff has twice reviewed the possibility of leasing one or all three remaining golf courses operated by the City. Both times the recommendation by staff and the direction of the City Council has been that no additional leasing of the golf courses should occur. However, there are other options available that the City may want to consider for operation of these facilities. These options include 1) the City resuming control of one or both facilities, 2) requesting proposals for full operation (similar to what is occurring now), or 3) the City maintaining the infrastructure and contracting concessions (pro shop/food and beverage operations). ISSUED BY THE CITY MANAGER FORT WORTH,TEXAS ^ INFORMAL REPORT TO CITY COUNCIL MEMBERS No. 8036 G�pRTEq November 5, 1996 To the Mayor and Members of the City Council Page 5 of 5 x Subject: 1873 CONTRACT RENEWAL RECOMMENDATIONS FOR OPERATION OF Z-BOAZ AND ROCKWOOD GOLF COURSES It is the City Manager's recommendation that the City follow the FIC's directive to cancel both contracts for the operations at Z-Boaz and Rockwood Golf Courses at the conclusion of the primary term of the contracts. In addition, the City Manager recommends that the City assume control of operations at both golf courses. ob Terre rr City Terre City Attachments 2, WTICIAI. RICIFID CITY SECRETARY FT. WORTH, E . �01 — ISSUED BY THE CITY MANAGER FORT WORTH, TEXAS ATTACHMENT A INTERNATIONAL GOLF OF TEXAS, INC. CHRONOLOGY OF AUDIT ISSUES AS REPORTED BY THE CITY AUDITOR February 1990 (M&C C-12195): City Council approves for City Manager to enter into license agreement with IGT to manage Rockwood Golf Course. 8 year primary term contract with 2, 2 year options by mutual consent. Original contract called for guaranteed minimum of$2.475,million with$550,000 in CIP, plus new 9 holes, clubhouse and driving range. July 24, 1990 (M&C C-12433) City Council approves contract with Links Catering, Inc. for sale of alcoholic beverages at Rockwood Golf Course. Contract Year I (August 1, 1990 - July 31, 1991) Four of twelve monthly rent payments received from IGT were late and one insufficient check was written. One of twelve payments received from Links was late. Monthly sales reports were not submitted in a timely manner. Insufficient insurance coverage and unsatisfactory performance security as required by contract. CIP were not completed as specified by contract. Contract Year 2 (August 1, 1991 - July 31, 1992) Five of twelve monthly rent payments received from IGT were late. One of twelve payments received from Links was late Capital projects were not completed during Year 2 except for carryover of expenditures on work completed during Year 1. IGT did not furnish the City with satisfactory evidence of financial stability. Workers Compensation Insurance was lacking subrogation as to the City. Fire and Extended insurance coverage inadequate. Contract Year 3 (August 1, 1992 -July 31, 1993) November 1993(M&C C-14072):City Council approves amendment to delete 9 holes, clubhouse and driving range resulting in$1 million of unrealized improvements to facility; amendment specified completion of cart trails in contract year four (4) and strengthened various compliance requirements. June 5, 1993 to August 11, 1993: Lapse in Workers Insurance Compensation Monthly sales reports for beer, food and beverage not being submitted or incomplete. No CIP completed during Year 3. Contract Year 4 (August 1, 1993 - July 31, 1994) One of twelve monthly rent payments received from IGT returned insufficient funds. IGT failed to provide Liquor Liability, Auto Liability, Garage Keepers insurance coverage and Performance bonding. Lien on City equipment held for cost of repairs by vendor. City enjoined in lawsuit by construction contractor for non-payment of work performed in Year 4. Monthly sales reports fail to include driving range revenues or beer sales. Reported revenues decline 15 - 20%from previous year. Contract Year 5 (August 1, 1994 - July 31, 1995) Seven out of twelve monthly rent payments by IGT were received late and four insufficient checks were written. February 4, 1995 - May 1, 1995: IGT fails to provide Workers Compensation Insurance. February 7, 1995 (M&C C-142692): City Council authorized the City Manager to terminate the contract with IGT in the event that any breaches of contractual issues are not cured as specified by the contract. Action due to contractors continued poor performance. April 20, 1995 - May 2, 1995: Cancellation of bonding for CIP. Driving range CIP was being poorly maintained and this capital improvement ($113,446) was removed at the direction of the City and is currently being maintained as a rough area, ""ORD CIS 'Y F. ISUP1,111:TARY WOR1111 Contract Year 6 (August 1, 1995 - July 31, 1996) Two out of twelve payments by Links were received late. August 1995: Insufficient performance security bonding as required by contract. May 1996: Insufficient insurance coverage as required by contract. Contract Year 7 (August 1, 1996 - July 31, 1997) Contractor notified of failure to provide performance security bonding(414 days). Demand for $41,400 in penalty fees made to contractor on October 15, 1996. Fees due to City by November 18, 1996. _,—�..,„..owe.xwwirvrnw.wwiwwwimms�YMMIXMdXPo�M MXmMCMLLNMMFMN,�MflNNMAMMMMM M ATTACHMENT B REVENUE HISTORY PRIOR TO LEASING ROCKWOOD GOLF COURSE (CITY OPERATED) FY 1986 - 87 FY 1987 - 88 FY 1988 - 89 AVERAGE REVENUES $904,773 $999,005 $993,440 $965,739 EXPENDITURES $583,464 $604020 $701,676 $629,720 NET $321,309 $394,985 $291,764 $336,019 ROCKWOOD GOLF COURSE (CONTRACT - 8 YEAR AVERAGE) - $309,375 Z-BOAZ GOLF COURSE (CITY OPERATED) FY 1986 - 87 FY 1987 - 88 FY 1988 - 89 AVERAGE REVENUES $513,694 $620,489 $622,697 $585,627 EXPENDITURES $429,953 $495,901 $612,915 $512,923 NET $83,741 $124,588 $9,782 $721704 Z-BOAZ GOLF COURSE (CONTRACT - 8 YEAR AVERAGE) - $181,250 OFFICIAL RECORD CITY SECRETARY FT. WORTH, TEX.