Title
Report on the Event Center and Food and Beverage Services at Corica Park
Body
To: Honorable Chair and Members of the Golf Commission
EXECUTIVE SUMMARY
Corica Park is a 45-hole golf complex, owned by the City of Alameda (City) with two onsite operators. Greenway Golf (Greenway) is the golf operator and Jim’s on the Course (Jim’s) is the food and beverage concessionaire. Jim’s was responsible to construct an event center on-site and was unable to complete this requirement due to complications arising from Alameda County Environmental Health Department and Federal Emergency Management Agency (FEMA) flood maps. After Greenway filed a claim with the City seeking financial damages based on the lack of an event center, Greenway, Jim’s and the City reached agreement on a settlement that changes the food and beverage services so that Jim’s no longer retains exclusivity for those services. The proposed Amendments detail the changes in food and beverages services in addition to changes to rent paid by each operator. This item is being heard by City Council on July 6, 2021.
BACKGROUND
Overview of Existing Agreements
The City entered into a lease agreement with Greenway Golf in August 2012. In March 2018, the City Council approved the First Amendment to the Lease Agreement to: require more extensive North Course improvements by Greenway;, require the City to repave the parking lot; and adjust the rent structure and lease term.
In 2016, the City entered into a Concession Agreement with Jim’s on the Course that included a requirement for Jim’s to construct an enclosed patio adjacent to, and wrapping around, the existing restaurant. This enclosed patio was intended to provide sufficient space for golf tournament banquets as well as additional seating for the restaurant. The City’s Golf Commission reviewed the extended patio more than once and recommended the final design. Greenway Golf also participated in the design and discussions. Greenway later determined that an event center would better serve the golf operations and after the Jim’s Concession Agreement approval, Jim’s, Greenway and City staff began discussions regarding an event center location and conceptual design. The Golf Commission recommended the construction of an event center. In December 2017, the City Council approved the First Amendment to the Jim’s on the Course Concession Agreement, which required Jim’s to construct an event center. A Second Amendment to the Concession Agreement was approved in April 2019 to extend the deadline for completion of the Event Center. The event center has not yet been constructed.
Event Center - Administrative and Regulatory Hurdles
In July 2018, Jim’s submitted its event center design to the City’s Permit Center and was issued a permit in December 2018. By April 2019, Jim’s had purchased the event center and was ready to construct it. That month, the Alameda County Department of Environmental Health (ACDEH) conducted its regular quarterly site visit to Corica Park to check its existing monitoring wells. While on-site, ACDEH staff noticed a poster of the proposed site layout that included the proposal for a new event center. ACDEH staff contacted Jim’s and the City and stated that an ACDEH permit was required for any building constructed within 1,000 feet of a landfill site. This permit requirement had been reviewed by the City Building Official. The Building Official determined that the ACDEH permit requirement would not apply because the landfill has been closed for 60 years and the actual determined edge of the landfill is more than 1,000 feet from the proposed event center location. City staff, including the Building Official and Assistant City Attorney met numerous times with ACDEH, contending that the permit was not required but ultimately did not prevail. Jim’s made changes to the event center design per ACDEH requirements and spent several months in design review. Ultimately, the requirements, including extensive soils work, from ACDEH were determined by Jim’s to be cost prohibitive. In addition, FEMA had issued new flood maps that included Corica Park in the flood plain. Per FEMA, any construction permits secured prior to December 2018 were required to begin construction within six months of permit issuance. During the ACDEH permit review, this deadline passed for Jim’s event center permit and compliance with FEMA flood maps required raising the entire event center at least eight feet above existing grade. When combined with Americans with Disabilities Act (ADA) access, raising the structure in the required fashion was considered infeasible for the location.
Greenway Claim
On October 13, 2020, Greenway filed a claim against the City stating that it had been injured and damaged by the revenue lost due to the event center not being constructed. The City rejected the claim. Going forward, Greenway has stated that it would file a lawsuit against the City and Jim’s on the Course so all three parties entered into discussions to find a solution amenable to all parties.
DISCUSSION
The Settlement Agreement (Exhibit 1) between Greenway, Jim’s, and the City changes the food and beverage exclusivity at Corica Park. These changes are detailed in the Settlement Agreement, and will be reflected in Third Amendments to both the Greenway Lease Agreement and the Jim’s Concession Agreement.
Two versions of the Third Amendment to the Greenway Lease Agreement and the Third Amendment Concession Agreement are being presented for the City Council’s consideration. The Settlement Agreement included, as exhibits, a Third Amendment to the Greenway lease agreement and a Third Amendment to the Jim’s Concession Agreement. The original versions of the Third Amendments are referred to herein as Option A.
Since the time that the Settlement Agreement was approved by the City Council, both operators requested additional changes to their respective Third Amendments. Staff recommends these revised Third Amendments as they are both considered more beneficial to all parties. The revised Third Amendments are attached as Exhibit 2 (Third Amendment to the Greenway Lease Agreement) and Exhibit 3 (Third Amendment to the Jim’s Concession Agreement) and are referred to herein as Option B.
Staff is presenting multiple options to City Council: to approve both Third Amendments as attached to the Settlement Agreement (Option A); to approve the revised Third Amendments (Option B); or to approve a combination thereof.
Greenway Amendment - Differences between Option A and Option B
Both Option A and Option B stipulate that Greenway may provide full food and beverage services anywhere except outside of Jim’s restaurant or within a line of sight from the restaurant, meaning that Greenway may provide cart service and snack shacks on the golf course, special events, and other areas of the golf complex, such as the driving range. Greenway may use the patio for special events outside of those business hours or when Jim’s is closed.
Both Option A and B also stipulate that Greenway’s food and beverage service may be provided by Greenway or an outside caterer with either seated or take out services but does not allow for food trucks. In addition, after the third anniversary of the effective date of this settlement, Greenway may, subject to City approvals, develop and operate a restaurant or other food and beverage facilities providing dine-in, sit-down table service, as long as it is not within the established sight line of Jim’s.
Option B adds a rent structure for food and beverages services provided directly by Greenway, in the amount of 7.5% of gross revenues. This matches the highest rent structure in the existing Jim’s Concession Agreement. All revenue generated from food and beverages services provided by a sublease to an outside business will be included in Greenway’s existing rent structure of 8% of gross revenues up to $4,000,000 and 12% of gross revenues exceeding $4,000,000.
Option B also provides that Greenway shall advertise Jim’s food and beverage services on the Greenway website.
Jim’s Amendment - Differences between Option A and Option B
The existing Concession Agreement with Jim’s includes full food and beverage exclusivity on the entire golf complex. Option A and Option B both provide that Jim’s retains food and beverage service exclusivity within the restaurant and a line of sight from the restaurant front door as shown in the settlement. Both options also release Jim’s of any obligations to build an event center.
Rent
Option A does not change the existing rent structure, which includes:
Years 1 - 6 5.0%
Years 7 - 25 7.5%
Plus two years of no rent once the event center construction is complete.
Option B changes the rent structure to:
Years 1 - 6 5.0%
Years 7 - 10 2.5%
Years 11 - 15 5%
Years 16 - 25 7.5%
The difference of the total net revenue the City receives over the full agreement term between Option A and Option B is $315,000 less over the 25 year term. This estimate is based on pre-pandemic average annual rent received. This is intended to offset the $330,000 loss incurred by Jim’s from the purchase, design and fees for the Event Center. In addition, Option B removes the Capital Improvements Payments in the amount of 0.5% of gross revenues. The revenue from this is too small (averaging $6,000 annually) to fund any meaningful infrastructure at Corica Park and the Jim’s Concession Agreement is triple-net which makes the Concessionaire responsible for all building maintenance.
FINANCIAL IMPACT
The pre-pandemic revenues that the City receives from Jim’s food and beverage services average $96,000 per year. Staff anticipates either minimal impact or a slight increase to overall City revenues from the approval of either Option A or B of the Greenway Amendment and Jim’s Amendment. Any food and beverage revenues from existing services will be received by the City from Jim’s and Greenway. If Greenway chooses to expand its food and beverage services and special events, it will then increase revenues to the City. If the Jim’s Amendment Option B is approved, there would be an estimated reduction in City revenue in the amount of $315,000 over the 25-year term.
RECOMMENDATION
Receive report and provide comment on the Event Center and Food and Beverage Services at Corica Park.
Respectfully submitted,
Amy Wooldridge, Recreation and Parks Director
Exhibits:
1. Settlement Agreement
2. Greenway Golf Third Amendment (Option B)
3. Jim’s on the Course Third Amendment (Option B)
4. Original Greenway Lease
5. Original Jim’s Concession Agreement