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HomeMy WebLinkAbout0007_1_SA Staff Report Fourth Amend to Interim Stadium Management Agreement 092716 REPORT TO SUCCESSOR AGENCY To: Honorable Chair and Members of the Agency From: Grant Yates, Executive Director Prepared By: Barbara Leibold, Successor Agency Counsel Date: September 27, 2016 Subject: Fourth Amendment (2017-2018) to Stadium Interim Management Agreement Recommendation Adopt A RESOLUTION OF THE SUCCESSOR AGENCY OF THE REDEVELOPMENT AGENCY OF THE CITY OF LAKE ELSINORE, CALIFORNIA, APPROVING THE FOURTH AMENDMENT (2017-2018) TO THE STADIUM INTERIM MANAGEMENT AGREEMENT BETWEEN THE SUCCESSOR AGENCY OF THE REDEVELOPMENT AGENCY OF THE CITY OF LAKE ELSINORE AND THE LAKE ELSINORE STORM LP Background In 2001 and 2002, the Redevelopment Agency entered into certain agreements involving the operation and maintenance of the Lake Elsinore Diamond Stadium, including a License Agreement, a Stadium Field And Maintenance Agreement, and a Concession License Agreement (collectively, the “Stadium Operations Contracts”). Pursuant to the Stadium Operations Contracts, the Storm licensed and maintained the Stadium for baseball games and other Storm events. An affiliate of the Storm, Golden State Concessions and Catering, Inc. (“Golden State”), operated the concessions at the Stadium. Under the Stadium Operations Contracts, the Agency’s management, operation and maintenance costs were significant and the Stadium operated at a loss. In 2005, the Agency commenced negotiations with Diamond Stadium Group (DSG) to undertake all of the Stadium operations, maintenance and management responsibilities. Storm LP, Golden State and DSG share common controlling ownership. Negotiations between the Agency and DSG resulted in June 2007 amendments to the Stadium Operations Contracts and a new Stadium License, Lease and Management Agreement (the “2007 Management Agreement”). DSG fulfilled all aspects of the 2007 Management Agreement which reduced the Agency’s Stadium-related costs. However, DSG reported annual losses under the 2007 Management Agreement and in June 2011 chose to exercise its right to terminate the 2007 Management Agreement effective December 31, 2012. Upon termination of the 2007 Management Agreement, the rights and responsibilities for Stadium management, operations and maintenance were again divided in accordance with the Stadium Operations Contracts; however, at that time, the Successor Agency did not have the resources to satisfactorily perform its obligations. On December 11, 2012, the Successor Agency approved the Stadium Interim Management Agreement (“Interim Agreement”) to provide for the efficient and cost effective management, maintenance and operation of the Stadium by the Storm through 2013. A First Amendment to the Interim Agreement was approved in September 2013. A Second Amendment to the Interim Agreement was approved in September 2014, and a Third Amendment was approved in September 2015. The State Department of Finance has approved the allocation of Real Property Tax Trust Funds for Stadium obligations in accordance with the Successor Agency Recognized Obligations Payment Schedules (ROPS). The Interim Agreement and the First, Second and Third Amendments have been successfully implemented to provide for efficient and cost effective management, maintenance and operation of the Diamond Stadium. However, the Third Amendment expires on December 31, 2016 at which time the burden of maintaining, managing and operating Diamond Stadium under the Stadium Operations Contracts would fall onto the Successor Agency. Discussion Pursuant to the Dissolution Act and provisions of AB 1484, the Successor Agency has prepared a Recognized Obligation Payment Schedule for the period from July 1, 2016 through June 30, 2017 (the “ROPS 16-17”) which lists, among other things, as enforceable obligations of the Successor Agency, the obligations related to the (i) License Agreement; (ii) Maintenance Agreement; (iii) Concession Agreement; (iv) Stadium operations and maintenance obligations, and (v) the Interim Agreement. The Successor Agency will prepare a Recognized Obligation Schedule for the period from July 1, 2017 through June 30, 2018 (“ROPS 17-18”) in January 2017. Consistent with the legislative authorization contained in AB 1484 allowing successor agencies to enter into enforceable obligations for the purpose of maintaining the assets of the former Redevelopment Agency, a Fourth Amendment to the Interim Agreement has been prepared to provide for the continued, efficient and cost effective management, maintenance and operation of the Stadium for the eighteen (18) months ended June 30, 2018. The change from a twelve month, calendar year Interim Management Agreement to an Interim Management Agreement that ends on the same date as the end of the fiscal year and the annual ROPS period will allow staff to more efficiently allocate funds over the annual ROPS period and avoid future mid-ROPS period amendments. Successor Agency staff believes that approval of the attached Fourth Amendment (2017-2018) to the Stadium Interim Management Agreement will ensure that the “Lake Elsinore Storm” can continue to play its home baseball games at the Stadium consistent with the Stadium Operations Contracts and that the Stadium will be maintained and managed in a first class condition on a continual basis throughout the 2017 calendar year and fiscal 2017-2018 year. The Storm continues to possess the experience, capabilities and qualifications to best carry out these obligations. Interim Management Agreement - The Interim Stadium Management Agreement as amended by the proposed Fourth Amendment incorporates the obligations under the Stadium Operations Contracts and provides for a Capital Improvement Schedule. During the 2017-2018 term of the Fourth Amendment, compensation to the Storm for the performance of the maintenance, management and operations services shall be as follows: (a) Assignment of GRCS Concession Fee. Successor Agency assigns Successor Agency’s right to payment of the GRCS Concession Fee under the Concession Agreement to the Storm during the 2017-2018 term, estimated at $34,000 annually; and (b) Waiver of License Fee. Successor Agency waives Successor Agency’s right to payment of the License Fee in the amount of $509,729 for calendar year 2017, and $261,237 for the period January 1, 2018 through June 30, 2018 under the License Agreement as an offset against the payments due by the Successor Agency to the Storm; and (c) Payment of Maintenance Fee. Successor Agency shall pay the Annual Maintenance Fee in the amount of $237,963 for calendar year 2017, and $121,956 for the period January 1, 2018 through June 30, 2018; and. (d) Payment of Additional Interim Management Fee. Successor Agency shall pay to Storm $456,729 for calendar year 2017, and $243,074 for the six months ended June 30, 2018, payable in equal monthly installments (“Additional Interim Management Fee”). The Maintenance Fee along with the Additional Interim Management Fee will result total cash payment from the Successor Agency to the Storm of $694,692 for calendar year 2017 and $356,030 for the period January 1, 2018 through June 30, 2018 as consideration for services provided under the Stadium Operations Contracts and this Interim Agreement, which aggregate amount shall be payable in equal monthly installments of $57,891 for calendar year 2017 and $59,338 for the period January 1, 2018 through June 30, 2018. The Successor Agency continues to be responsible for all Capital Repairs and alterations consistent with the Stadium Operations Contracts, which are expected to be significant over the next few years. Capital repairs for 2017-2018, as included in the Fourth Amendment, reflect that the Stadium is twenty three (23) years old and include, without limitation, including, without limitation, capital repairs necessary to comply with ADA and energy and water efficiency requirements, roof repair/replacement, plumbing and drain repair and equipment replacement. The Fourth Amendment provides for proposed 2017-2018 Capital Repairs of approximately $3,268,180. The Fourth Amendment includes a Capital Repair schedule, which will be updated annually or, if necessary, semi-annually in accordance with future ROPS. Capital Repairs for the ROPS 16-17B period (January 1, 2017 through June 30, 2017) are estimated to be $1,661,500. Capital Repairs for the ROPS 17-18, which estimated to be $1,606,680.