HomeMy WebLinkAbout0005_1_OB Staff Report Fifth Amend to Interim Stadium Management Agreement 012918Page 1 of 3
REPORT TO OVERSIGHT BOARD TO THE
SUCCESSOR AGENCY OF THE REDEVELOPMENT
AGENCY OF THE CITY OF LAKE ELSINORE
To:Chairperson Kelley and Members of the Oversight Board
From:Barbara Leibold, Successor Agency Counsel
Date:January 29, 2018
Subject:Fifth Amendment to Stadium Interim Management Agreement
Recommendation
Adopt A RESOLUTION OF THE OVERSIGHT BOARD TO THE SUCCESSOR AGENCY OF
THE REDEVELOPMENT AGENCY OF THE CITY OF LAKE ELSINORE, CALIFORNIA,
APPROVING THE FIFTH AMENDMENT 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,
Fifth Amendment to Interim Stadium Management Agreement
January 29, 2018
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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, a Third Amendment was approved in September
2015, and a Fourth Amendment was approved in September 2016. 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, Third and Fourth Amendments have
been successfully implemented to provide for efficient and cost effective management,
maintenance and operation of the Diamond Stadium. However, the Fourth Amendment expires
on June 30, 2018 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, 2018 through June 30,
2019 (the “ROPS 18-19”) 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.
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 Fifth 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 an initial two-year term commencing July 1, 2018 and renewing automatically
unless terminated by either party for up to three two-year Renewal Terms and one six-month
Extension Term expiring concurrent with the Stadium Operations Contracts on December 31,
2026.
Successor Agency staff believes that approval of the attached Fifth Amendment 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
in accordance with the Stadium Operations Contracts. 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 Fifth Amendment incorporates the obligations under the Stadium Operations
Contracts and provides for a Capital Improvement Schedule.
During the 2018-2019 term of the Fifth 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 2018-2019 term, estimated at $34,000 annually; and
Fifth Amendment to Interim Stadium Management Agreement
January 29, 2018
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(b)Waiver of License Fee. Successor Agency waives Successor Agency’s
right to payment of the License Fee in the amount of $522,473 for the period July 1, 2018
through June 30, 2019 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 $243,912 for the period July 1, 2018 through June 30, 2019;
and.
(d)Payment of Additional Interim Management Fee. Successor Agency
shall pay to Storm $468,147 for the period July 1, 2018 through June 30, 2019, 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 $712,059 for the period July 1, 2018
through June 30, 2019 as consideration for services provided under the Stadium Operations
Contracts and the Interim Agreement, which aggregate amount shall be payable in equal
monthly installments of $59,338.25 for the period July 1, 2018 through June 30, 2019.
The License Fee, the Annual Maintenance Fee and the Additional Interim Management Fee will
increase 2.5 percent annually over the prior year throughout the term of the Interim Agreement.
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 2018-2019, as included in the Fifth Amendment, reflect that
the Stadium is twenty-four (24) years old and include, 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 Fifth Amendment provides for proposed 2018-2019 Capital Repairs of approximately
$1,689,950. The Fifth Amendment includes a Capital Repair schedule, which will be updated
annually or, if necessary, semi-annually in accordance with future ROPS.
The Fifth Amendment was approved by the Successor Agency on January 23, 2018 and is
subject to the approval of the Oversight Board and DOF. Following approval by Oversight
Board, the Fifth Amendment will be submitted to the Department of Finance (DOF).
Fiscal Impact
The ROPS 18-19 for the period of July 1, 2018 through June 30, 2019 reflects an allocation of
Real Property Tax Trust Funds to cover all Successor Agency enforceable obligations, including
obligations relating to the Lake Elsinore Diamond Stadium pursuant to the Fifth Amendment.
Prepared by:Barbara Leibold, Successor Agency Counsel
Attachments:Fifth Amendment to Stadium Interim Management Agreement