PURPOSE:

The purpose of this report is to request City Council approval to enter into a new five (5) year agreement with Scott Scozzola, S.S. Golf Inc.�s, for golf professional management and operation services at the DeBell Municipal Golf Course.

BACKGROUND:

In 2000, a Request for Proposal for golf professional management and operation services was distributed.  The selection process included interviews with each applicant.  After spending a significant amount of time discussing the strengths and weaknesses of each applicant, it was the consensus of the Review Committee that Mr. Scott Scozzola provided the best combination of skills and program balance. 

On June 1, 2001, the City entered in to a golf professional management and operation services agreement with Scott Scozzola, S.S. Golf, Inc.   There were several changes in the new contract that differed substantially from the outgoing golf professional�s agreement.  Mr. Scott Scozzola�s agreement included annual goals and objectives, performance measures, revenue and expenditure accountability, proposed capital improvements, program enhancements, and reporting requirements.  The basic services provided by the Golf Professional include providing operator services, merchandise, golf instruction, junior golf program, starter services, golf tournaments, marshalling, restroom custodial services, and other related duties.  Changes in the monthly compensation formulas and rental payment from operations were notably different from the outgoing golf professional.   

The existing five year contract expired on May 31, 2006.  Per the existing agreement, Mr. Scott Scozzola notified the City in writing of his intention to renew his contract.  The agreement allows both parties to extend the term of this Agreement upon the mutual consent of both parties.  In the interim, Mr. Scozzola has been continuing his on-going daily operations at the DeBell Municipal Golf Course on a month to month basis while staff has been negotiating the new management and operation services contract.

The Greens Committee unanimously supported Mr. Scott Scozzola, S.S. Golf, Inc. continuing as the golf professional, responsible for the operational services at the DeBell Municipal Golf Course.  The Greens Committee is comprised of one representative from each of the four established golf clubs including a liaison from the Park, Recreation, and Community Services Board, Deputy Director/Park Services, the Greens Superintendent and the Food & Beverage Concessionaire.  During the July 13, 2006 Park, Recreation and Community Services Board meeting, the Board supported Mr. Scozzola and the manner in which he has operated the golf course. The Board has been extremely complimentary of his management of the golf course operation, and are supportive of his expanded youth programs.  The Board was unable to approve the agreement as it had not been finalized.  They were made aware that there were changes to the agreement, some directly related to the anticipated construction of the new clubhouse.  The Board will be reviewing the final agreement during its September 14, 2006 meeting. 

ANALYSIS:

The monthly compensation to the golf professional is comprised on the following six items; management fee, cart rentals, greens fees, pro shop sales, lessons and driving range.  The compensation is based on a percentage of each of these items, with the exception of the management fee, which is a flat monthly amount.

Changes in the monthly compensation formulas were negotiated with Mr. Scott Scozzola for the basic services listed above.  The proposed agreement will compensate the golf professional monthly by the City via the Golf Fund.

Management Fee

The existing monthly Management Fee of $7,900 partially offsets the Golf Professional�s expenses including his staffing cost to provide starter services, marshalling services, and operating overhead essential to meeting the terms and conditions of his current contract.  Mr. Scott Scozzola currently employees 28 employees (10 of which are full time).  His annual operation expenses have been as high as $612,674 in 03/04 and dropped to $526,629 in 04/05.  This drop was due to a decrease in rounds played which is consistent with almost all courses and inclement weather which closed the course for 31 days.  Based upon other similar golf operations, a new clubhouse will generate new enthusiasm and a substantial increase in play.

It is staff�s desire to increase services offered by Mr. Scozzola to enhance the golf experience at the DeBell Golf Course.  Over the past five (5) years many new golf courses have been constructed in Southern California.  The number of golfers have either stayed flat or in some areas decreased.  Unlike many services that the City provides, golfers have choices and the quality of their experience impacts their choice.  Our goal is to upgrade the quality of the experience; not to a level of a country club, but that of a quality public golfing experience.  In summary, there is competition for a player�s dollars and there is a cost to providing these desired services which attract golfers, thus we need to spend more to retain or expand our earnings.

The proposed Management Fee of $12,000 is an increase of $4,100 per month.  The increase will reflect a higher level of customer service.  It is staff�s desire to ensure that the services are commensurate to the new clubhouse. Under the new contract, the golf professional will be obligated to enhance his current level of service by providing additional outside service staff members.  These individuals are responsible for the welcoming of customers upon their arrival to the golf course�s pro shop and organizing play leaving from the first tee box,  Also, all golf staff members will be required to wear uniformed shirts and name tags.  Furthermore, the quality of the driving range balls will be notably enhanced.  Replacement of old balls with new ones will be accelerated at double the current rate (total approximate costs of improvements $32,000 annually).  The commitment to golf is a joint effort by the City and S.S. Golf Inc. to provide an enhanced experience for our golf patrons when utilizing our facility and programs.  S.S. Golf Inc. is going to offer their expertise and staff support to assure that customer satisfaction is recognized as a vital tool for the ultimate growth of the golf course.

S.S. Golf Inc. will continue to host numerous major golf tournaments annually, which also have a positive impact on the City.  Our community�s golfers are part of Burbank�s social fabric and the special events not only challenge our patrons as players, but provide them with opportunities to interact.  Public Golf courses are a wonderful way to bring the sport to people of all ages and ethnicities.  Staff acknowledges that people have a choice on where they can play golf and we want to ensure that DeBell Golf Course meets and exceed their expectations.

The Management Fee increase is also intended to assist in baselining Mr. Scozzola�s revenue stream to meet S.S. Golf Inc.�s monthly expenditures and is not tied directly to the number of rounds played. The drop in play is a trend that is prevalent at similar public golf facilities throughout the country.   It has become increasingly more difficult for the golf professional to remain financially viable without reducing service levels as his revenue continues to decline. To compare, rounds of golf for DeBell Golf Course in Fiscal Year 2001-2002 exceeded 75,000.  By contrast, Fiscal Year 2005-2006 rounds of golf had declined to approximately 61,000 rounds.  However, during this past year, 41 days were lost due to the fire and the flood.  This equates to approximately 7,800 rounds. Thus, one could expect approximately 68,000 rounds during a normal year.  This would exclude the days totally lost due to the fire and flood and the subsequent days which the course was undergoing major repairs.  It should be noted that a significant percentage of his operational costs remain even if the course is closed.

Additionally, the driving range at the beginning of the existing contract was a primary source of revenue for the golf professional.  However, with the reduction in rounds of golf played, the driving range has also experienced a decline in use. To compare fiscal years, Fiscal Year 2001-2002 gross revenues from the driving range exceeded $320,000.  Fiscal Year 2005-2006 with the loss of 41 days, the gross revenues from the driving range decreased to approximately $245,000. 

Cart Rental

The distribution of cart rental fees will remain at 10% which offsets the golf professional�s role in collecting the monies for the use of the golf carts and providing the day-to-day non-mechanical maintenance of said golf mobiles.

Greens Fees

The golf professional currently receives 5% of all green fees collected and this fee will remain at the same percentage.  The golf professional is also required to manage the Par 3 golf facility.  Typically, the Par 3 Golf Course has become more of a community service facility for young and old over the years, as opposed to a revenue generating facility.  It is the City�s desire to keep the fee low to allow all that are interested a chance to play.  During the week the cost to seniors is $1.50 and Burbank juniors are free.  The normal fee to play at the Par 3 is $3.00. The cost of managing this facility, with our desired low green fees, exceeds the revenue he receives from his agreement.  The Golf Professional is also financially responsible for 50 percent of the entire golf course�s General Liability Insurance premium and one hundred percent responsible for the payment of credit card transaction fees taken for both green fees and cart rental fees.  This credit card obligation of 2�% - 3% equates to about $18,000 annually.  This is a significant increase from the 2001/02 fee which was $12,300.

Pro Shop

The percentage from the Pro Shop that the golf professional keeps will initially remain the same at 95%.   This revenue is a form of rent and is generated from the rental, repair and sale of golf equipment, clothing and supplies. During the demolition and construction phases of the DeBell Clubhouse project, the golf professional�s financial obligation to the City of 5% will be waived in this category.

Lessons

Currently, the golf professional pays 5% to the City from golf instructional lessons, and retains 95%.  With the implementation of the new contract, this obligation will be eliminated to encourage more lessons by qualified golf professionals.  This is another effort to improve the quality of services and encourage more participation.

Driving Range

Under the current agreement, the golf professional retained 65% of the revenue.  The Driving Range rent currently paid to the City is 25% of monthly gross receipts.  In addition, ten percent (10%) of gross revenues from the driving range are paid to the City and used as a Capital Improvement Contribution.  These percentages will remain the same under the new contract until the demolition/construction phases of the DeBell Clubhouse project commences.  At that time, the ten percent (10%) Capital Improvement Fund will be eliminated for the duration of the entire contract and the 25% of monthly gross receipts will remain the same.  Thus the golf professional will receive 75% of the revenue.  The previous 2000/01 agreement gave 100% of the driving range revenues to the golf professionals.

Monthly Compensation Comparison

The following two tables provide a comparison of the previous Golf Professional, Mr. Scott Scozzola�s current agreement and the proposed compensation for the new agreement.

Table I

*sliding scale was based upon rounds played (the more rounds, the lower the percentage)

Table II

Annual comparison based on actual revenue received in FY 2005-06.

Based on the actual revenue for Fiscal Year 2005-06, the new agreement is $51,450 or 8.8% above the current agreement, however this does not take into consideration that value of additional services that Mr. Scozzola will be required to provide.  If one were to include that amount valued at $32,000, the new agreement would only be $19,450 or 3.3% above the current agreement.  Similarly, using the actual revenue receive in 2005-06, the new agreement is $93,242 or 14.7% lower than the previous golf professional�s agreement.    

Staff surveyed other publicly owned golf courses that have agreements with golf professionals.  However, it was difficult to compare the agreements as each was structured differently.

FISCAL IMPACT:

The compensation to the Golf Professional is incorporated into the annual budget process with all funding provided by the Golf Enterprise Fund.  The operational cost, like all others related to the golf course, is totally offset by the revenues generated by the facility.  The cost to the City of Burbank will be approximately a 8.8% increase from Mr. Scott Scozzola�s current lease agreement.  His operational costs, based upon the City�s desired improved services, will be $32,000.  There will be an annual adjustment dictated by the amount of the C.P.I. effective July 1 of each year.  Otherwise, as previously stated, the terms and conditions of monthly compensation remain the same. The Financial Services Department has examined the deal points of this new agreement and has approved it based upon the golf fund projections.  It should be noted that although similar golf course operations have seen a significant increase in play once a new facility has been built, in an effort to forecast revenues conservatively, Burbank projections do not reflect an increase in play after construction.

RECOMMENDATION:

It is, therefore, staff�s recommendation that the City Council adopt a resolution of the Council of the City of Burbank approving the golf professional agreement between the City of Burbank and Scott Scozzola, S.S. Golf Inc. for golf professional services.

Attachment

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