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HomeMy WebLinkAboutItem No. 9CITY Or ,� LADE 9 LSINORE -�� DREA� arnnE REPORT TO CITY COUNCIL TO: HONORABLE MAYOR AND MEMBERS OF THE CITY COUNCIL FROM: THOMAS P. EVANS INTERIM CITY MANAGER DATE: AUGUST 28, 2012 SUBJECT: DEDICATION OF SUMMERLY GOLF COURSE Recommendation 1. Authorize the Interim City Manager to reject the dedication of the Summerly Golf Course. This action will keep the golf course in private ownership on an ongoing basis. 2. Authorize the Interim City Manager to execute the attached Declaration of Covenants, Conditions and Restrictions ( "CCR's ") related to the Summerly Golf Course, subject to any minor modifications approved by the City Attorney. Background The City has a one time option to accept dedication of the golf course and could operate it as a municipal enterprise. Thus the operations of the Summerly Golf Course was evaluated as a potential municipal enterprise. The evaluation was performed by Mr. Michael Donovan of Donovan Bros. Golf LLC. Mr. Donovan's company operates the General Old golf course for the March JPA as well as others in southern California. Discussion Mr. Donovan reviewed financial records provided by McMillin Land Development who currently own and operate Summerly Golf Course. Mr. Brian Milich of AGENDA ITEM NO. 9 Page 1 of 12 Dedication of Summerly Golf Course August 28, 2012 Page 2 McMillin Land Development gave permission for Mr. Donovan to visit the course and discuss its operation with onsite personnel. He also met with Mr. Pat Kilroy to understand the unique role of the lake in flood control and flood water detention. Mr. Donovan concludes that the course is well run and the costs are reasonable with respect to the current operation. He discussed this with Thomas P. Evans on August 6, 2012. As well as his impression of the course as a municipal enterprise, there are various pros and cons to ownership of the golf course. Pros - Control of the operations as a municipal amenity - Potential profit to support general fund activities - City would control fees - City gets property free of debt Cons - Need to hire operations employees or need to contract for operator - Potential profit exceeded by operational risk and inability to predict when revenue would exceed cost - Creates new liability for the City - Establishment of fees may be subject to prop 218 - CCR's covering private developer insures control of fees and public access Based on the review and consideration of these pros and cons, it is recommended that the golf course stay in private hands. The Summerly Golf Course is a public amenity that needs to be retained. A new Covenants, Conditions and Restrictions ( "CCR's ") has been prepared by the City Attorney and agreed to by the developer is attached for your review. The parties finalized this document with the goal to provide assurances that the golf course would continue to be operated, professionally managed and open to the public. McMillin Land Development is, in fact, actively marketing the golf course and believes that they have a viable buyer. The updated CCR's would apply to the new owner, as well as the current owner. Prepared and Approved by: Thomas P. Evan `` Interim City Man Attachment: Declaration of Covenants, Conditions and Restrictions Page 2 of 12 RECORDING REQUESTED BY AND WHEN RECORDED MAIL TO: City of Lake Elsinore 130 S. Main Street Lake Elsinore, California 92530 Attention: City Clerk Project: Links at Summerly (Golf Course) pace above for Recorder's Use Only) This document is exempt from recording fees pursuant to Government Code Section 27383 DECLARATION OF COVENANTS CONDITIONS AND RESTRICTIONS THIS DECLARATION OF COVENANTS, CONDITIONS AND RESTRICTIONS (the "Declaration "), dated as of August 28, 2012, is entered by and between the McMILLIN SUMMERLY, LLC, a Delaware limited liability company, ( "Owner ") and the CITY OF LAKE ELSINORE, California municipal corporation ( "City "). RECITALS A. Owner owns certain real property located in the City of Lake Elsinore, County of Riverside and legally described in Exhibit "A" attached hereto (the "Golf Course Property "). B. The Golf Course Property is improved with an 18 -hole, links- style, regulation golf course, driving range, practice facility, club house and related amenities, commonly known as the Links at Summerly (the "Golf Course "). C. City owns certain real property located in the City of Lake Elsinore, County of Riverside commonly known as the Lake Elsinore Recreation Area and legally described in Exhibit `B" attached hereto (the "City Property "). D. Pursuant to that certain First Amended and Restated Development Agreement between the City of Lake Elsinore and Laing -CP Lake Elsinore LLC, dated August 24, 2004 and recorded with the Riverside County Recorder's Office on December 17, 2004 as Instrument No. 2004 - 1001282 (the "Development Agreement "), Section 1.19 thereto, the Golf Course, as defined therein, must be offered for dedication to the City. E. Owner is the successor in interest to Laing -CP Lake Elsinore LLC's interests and to the rights and obligations under the Development Agreement which rights and obligations were clarified by that certain First Operating Memorandum of Understanding dated November 23, 2010 by and between the City and the Owner. CCRs Tanks at su,n nery Final Page 1 Page 3 of 12 F. As required by Section 1.19 of the Development Agreement, Owner has offered to dedicate the Golf Course to the City. G. In lieu of acceptance of the offer of dedication, the City and the Owner have agreed to subject the Golf Course Property to certain conditions, covenants and restrictions as set forth in this Declaration, which such conditions, covenants and restrictions are for the benefit of the City Property and the City's residents, business owners, property owners and visitors. H. The covenants, conditions and restrictions specified herein, and the fulfillment generally of this Declaration, are in the best interest of the City and the health, safety, and welfare of its residents, and in accord with the public purposes of the Development Agreement under which the Golf Course was offered for dedication to the City. I. The Recitals are a substantive part of this Agreement. AGREEMENT NOW, THEREFORE, the parties hereto agree and covenant as follows: ARTICLE I USE MANAGEMENT AND MAINTENANCE OF GOLF COURSE PROPERTY Section 1. Use and Operation. Owner shall use and operate the Golf Course Property as follows: a. Unless otherwise approved by the City pursuant to applicable land use regulations, the Golf Course Property shall be used solely as a golf course with related amenities, open to the general public while in operation, and consistent with its flood storage functions and this Declaration. No use of all or any portion of the Golf Course Property in a manner inconsistent with this Declaration shall be permitted unless otherwise approved in writing by the City following a noticed public hearing of the City Council to consider such alternative use or modification of this Declaration. Nothing in this Declaration is intended to imply, nor shall it be interpreted or construed to require, that Owner must engage in or continue the operation of a golf course on the Golf Course Property if, in Owner's sole discretion, Owner deems it financially infeasible to operate a golf course on the Golf Course Property. b. The Golf Course shall be used and operated in a manner consistent with the fact that the Golf Course Property serves primarily as flood storage capacity for the surrounding properties, including the City Property, in accordance with the Lake Elsinore Lake Management Plan and secondarily as a golf course. Accordingly, for example, the Golf Course Property is subject to periodic flooding which will affect the days of operation, landscape quality and playability in ways that another golf course, not subject to periodic flooding, would not experience. Nothing contained in this Declaration shall be interpreted or construed to require Owner to operate the Golf Course during times of flooding. C. No use or operation shall be made, conducted or permitted on or with respect to all or any part of the Golf Course Property that violates any local, state or federal law, regulation or standard or that poses an unreasonable safety hazard, health risk or public nuisance. CCRs Links at Summerly Final Page 2 Page 4 of 12 d. Owner shall have the right to adopt rules and regulations governing the operation of the Golf Course, including days and hours of operation, consistent with the regulations and customs common in the industry for similar public golf courses in and around Riverside County and that do not conflict with the provisions of this Declaration. Section 2. Management. a. The Golf Course shall be operated, managed and maintained by a professional golf course manager ( "Manager ") consistent with sound management and business practices. Owner has contracted with CSC to manage the operations of the Golf Course. Owner may, in its discretion, transfer the management and operation of the Golf Course, subject to the prior written approval of the proposed transferee's qualifications by the City Manager of the City, which approval will not be unreasonably withheld, conditioned or delayed. If the proposed transferee possesses qualifications comparable or superior to those of CSC then approval of the proposed transferee may not be withheld. b. Management of the Golf Course may include, but is not limited to, (i) executing and maintaining contracts appropriate for the ongoing management, maintenance and operation of the Golf Course; (ii) retaining and managing consultants and other professionals and personnel appropriate for the maintenance and operation of the Golf Course; and (iii) purchasing, repairing and maintaining equipment and supplies for the Golf Course. C. Management of the Golf Course Property shall include, without limitation, operation of the current 18 -hole "links- style" golf course, as well as the driving range, practice facility, club house, golf pro -shop and accessory structures and improvements. Owner may, in its discretion, engage one or more managers to manage the Golf Course and the Golf Course Property. Owner shall maintain at all times all necessary permits, business, health and liquor licenses or other licenses, which may be required for the operation of the Golf Course. The Golf Course shall be open to the general public and operated in accordance with all applicable laws and regulations, but may be reserved for private functions and special events as determined by Owner subject to all applicable requirements of the Lake Elsinore Municipal Code. The pro - shop shall also be open to the general public and shall offer for retail sale or rental golf merchandise, supplies and equipment appropriate to the operation of a public golf pro -shop, all in varieties and quantities sufficient to meet the reasonable requirements of the public as determined by the Owner. Section 3. Maintenance. a. The Golf Course shall be professionally kept and maintained in good condition and state of repair and consistent with the standards and customs common in the industry for similar public golf courses in and around Riverside County. i. The course, including the greens, tees, fairways, rough, and bunkers shall be maintained and prepared daily to provide quality playing conditions consistent with its "links- style" design and taking into consideration weather and/or flooding limitations. CCRs Links at Summerly Final Page 3 Page 5 of 12 ii. The exterior and interior of the club house, including the restaurant, bar, pro -shop, and restrooms and other structures, facilities and equipment on the Golf Course Property shall be maintained in a clean, sanitary and orderly condition and in a good state of repair subject to and consistent with all applicable laws and regulations. All surface areas of the parking lots, sidewalks and walkways shall be maintained in a good state of repair. iii. Subject to the above requirements, the manner and method of maintenance of the Golf Course Property shall be determined in the professional and reasonable discretion of Owner and Manager. Section 4. Nondiscrimination. Owner by and for itself and any successors in interest shall not discriminate against or segregate any person or group of persons on account of race, color, creed, religion, sex, marital status, handicap, national origin or ancestry in the sale, rental, license, lease, sublease, transfer, use, occupancy, tenure or enjoyment of the Golf Course, nor shall Owner itself or any person claiming under or through it, including tenants, subtenants, vendees, concessionaires, contractors or consultants, establish or permit any such practice or practices of discrimination or segregation. All leases, subleases, licenses and contracts concerning the Golf Course shall contain or be subject to the nondiscrimination provisions of this Section 4. Section 5. Ownership Rights. a. Except as otherwise expressly provided in this Declaration, Owner hereby reserves the right to control each and every incident of the ownership of the Golf Course Property ( "Ownership Rights "). The Ownership Rights include, but are not limited to, discretion and control over the following: (i) the design and redesign, development, construction, maintenance, modification, alteration, demolition, removal, refurbishment, reconstruction and replacement of all improvements and facilities, and layout thereof, on the Golf Course Property, (ii) the design, redesign, development, construction installation and layout of additional improvements and facilities on the Golf Course Property; (iii) the management, operation and use of the Golf Course Property; (iv) the availability of goods and /or services (including liquor) at the Golf Course; (v) the fees charged for the use of the Golf Course and the charges for any goods and /or services available at the Golf Course, provided, however, that such charges shall be commercially reasonable; (vi) the manner and methods and level of maintenance of the Golf Course; (vii) the establishment of rules and regulations regulating the use of and other activities at the Golf Course; (viii) the availability of the Golf Course Property for special events subject to the special event permit requirements of the Lake Elsinore Municipal Code, including, without limitation, wedding receptions and other public or private meetings and events; (ix) the existence, use and purpose of the Golf Course Property including, without limitation, the operation of the Summerly Information Center; and (x) the availability of the Golf Course for professional and/or other tournament play and access by the public to observe such tournament play. Nothing in this Declaration is intended and it shall not be interpreted or construed to restrict the full development, use, operation and enjoyment of the Golf Course Property by Owner, provided however, that the foregoing Ownership Rights shall be subject to all applicable local, state and federal laws and the exercise of the City's police powers, including but not CCRs Links at Summerly Final Page 4 Page 6 of 12 limited to zoning and land use regulations, permits and approvals and imposition of building requirements. b. The Ownership Rights specifically include the right to sell, grant, transfer, lease, sublease, encumber, hypothecate or otherwise convey ownership of the Golf Course Property to any person or entity on such terms and conditions as Owner, in its discretion, deems appropriate; provided however, that any transfer by Owner shall be subject to this Declaration and shall require consent by the City Manager of the City, which consent shall not be unreasonably withheld, conditioned or delayed. If the proposed transferee (or its proposed managing agent) possesses qualifications comparable or superior to those of CSC as set forth in Section2 above, approval may not be withheld. Section 6. Perpetual Covenants. All of the covenants, conditions and restrictions shall run with the Golf Course Property in perpetuity and shall be binding upon all parties having or acquiring any right, title or interest in the Golf Course Property. ARTICLE II CITY PROPERTY Section 1. Burdened Property and Benefited Propert y. For purposes of the use, management and maintenance restrictions set forth in Article I, the Golf Course Property shall be the burdened property and the City Property shall be the benefitted property. ARTICLE III Section 1. Remedies. Breach of the covenants contained in this Declaration may be enjoined, abated or remedied by appropriate legal proceeding, including an action seeking specific performance and /or other equitable relief. Section 2. Rights of Owner. As a party to this Declaration, Owner has the right, but not the obligation, to enforce all of the provisions of this Declaration. Section 3. Rights of City. As a party to this Declaration, City has the right, but not the obligation, to enforce all of the provisions of this Declaration. This Declaration does not in any way infringe on the right or duties of the City to enforce any of the provisions of its Municipal Code. Section 4. Cumulative Remedies. The remedies herein provided for breach of the covenants contained in this Declaration shall be deemed cumulative, and none of such remedies shall be deemed exclusive. Section 5. Failure to Enforce. The failure to enforce any of the covenants contained in this Declaration shall not constitute a waiver of the right to enforce the same thereafter. CCRs Links at summedy Final Page 5 Page 7 of 12 ARTICLE IV GENERAL PROVISIONS Section 1. Severability. Invalidation of any one of these covenants or restrictions by judgment or court order shall in no way affect any other provisions which shall remain in all force and effect. Section 2. Construction. The laws of the State of California shall govern the interpretation and enforcement of this Declaration. Except as otherwise provided herein, the provisions of this Declaration shall be liberally construed. The article and section headings have been inserted for convenience only, and shall not be considered or referred to in resolving questions of interpretation or construction. Section 3. Amendments. This Declaration may not be waived, modified or rescinded, in whole or in part, except by written instrument duly recorded in the Office of the County Recorder of Riverside County, after first being duly signed and acknowledged by Owner and City. Section 4. No Subordination. This Declaration shall not be subordinate to any deed of trust or other lien recorded against the Golf Course Property following the recordation hereof. Section 5. Notices. Any notice permitted or required to be delivered as provided herein from one party to another shall be in writing and may be delivered either personally or by registered or certified mail, return receipt requested as follows: If to City: City of Lake Elsinore 130 S. Main Street Lake Elsinore, CA 92530 -4163 Attn: City Manager With Copy To: Leibold McClendon & Mann, P.C. 23422 Mill Creek Drive Suite 105 Laguna Hills, CA 92653 Attn: Barbara Z. Leibold, Esq. Barbara @CEQA.com If To Owner: McMillin Summerly LLC c/o The Corky McMillin Companies 2750 Womble Road San Diego, CA 92106 Attn: Brian Milich BMilich @McMillin.com CCRs Links at summerly Final Page 6 Page 8 of 12 With Copy To: Friedman Stroffe & Gerard, P.C. 19800 MacArthur Blvd., Suite 1100 Irvine, CA 92612 -2425 Attn: James D. Stroffe, Esq. JStroffe @FSGLawyers.com Section 6. No Third Party Rights. The provisions of this Declaration are for the exclusive benefit of the Owner and the City and not for the benefit of any other person, nor shall this Declaration be deemed to have conferred any rights, express or implied, upon any other person. [Signatures on next page] CCRs Links at Summerly Final page 7 Page 9 of 12 IN WITNESS WHEREOF, the Owner and City have caused this instrument to be executed on their behalf by their respective officers thereunto duly authorized, as of the date first written above. "OWNER" MCMILLIN SUMMERLY LLC, a Delaware limited liability company By: McMillin Growth Summerly, LLC, a Delaware limited liability company Its: Managing Member By: Acorn Grand Investor, L.P., a Delaware limited partnership Its: Managing Member By: Its: "CITY" CITY OF LAKE ELSINORE, a California municipal corporation By: Thomas P. Evans, Interim City Manager ATTEST: City Clerk APPROVED AS TO FORM: LEIBOLD McCLENDON & MANN, P.C. City Attorney CCRs Links at Summerly Final page 8 Page 10 of 12 EXHIBIT "A" LEGAL DESCRIPTION OF GOLF COURSE PROPERTY [to be inserted] Page 11 of 12 EXHIBIT "B" LEGAL DESCRIPTION OF CITY PROPERTY [to be inserted] Page 12 of 12