Agenda Item No. 2b Agenda Report DATE: MARCH 6, 2012 TO: FROM: CITY COUNCIL ARTS, RECREATION AND COMMUNITY SERVICES DEPARTMENT SUBJECT: BOUNDARY OAK GOLF COURSE ELECTRIC GOLF CART LEASE STATEMENT OF ISSUE: The Boundary Oak Golf Course maintains a fleet of electric golf carts for daily fee and tournament play. Boundary Oak s existing golf cart lease is expiring and a new lease needs to be executed. RECOMMENDED ACTION: Authorize the City Manager to enter into a three-year operating lease for $229,874 with Yamaha Corporation to provide a fleet of electric golf carts for the Boundary Oak Golf Course. DISCUSSION: The Boundary Oak Golf Course maintains a fleet of electric golf carts which are rented for daily fee and tournament play. CourseCo Inc. assumed full responsibility for Boundary Oak Golf Course operations under a management contract on July 1, 2009. The management contract with CourseCo has a five year term which expires on June 30, 2014. Prior to the transition to the management contract business model, the Boundary Oak golf operator retained responsibility for pro shop operations including leasing of golf carts. CourseCo (dba: Walnut Creek Golf) assumed responsibility for the existing golf cart lease with E-Z-GO, which was in existence at the time of the operator transition. The E-Z-GO golf cart lease was initiated by the prior golf operator; however, the term of this agreement extended beyond the end of the prior operator s contract with the City. The existing golf cart lease with E-Z-GO is set to expire and a new golf cart lease needs to be executed. CourseCo has obtained price proposals from three firms (Club Car, E-Z-GO, and Yamaha) for a fleet of 75 electric golf carts with comparable features and accessories (Attachment 1). CourseCo and City staff recommend entering into a three-year (36 month) operating lease with Yamaha who was the second lowest responsive bidder. The proposed new lease will run from March 2012 through February 2015. The proposed agreement is an operating
City Council Agenda Report Boundary Oak Golf Cart Lease March 6, 2012 Page 2 lease, as it provides the option to return the carts to Yamaha at the end of the term, which is a standard industry practice. The City qualifies for Yamaha s municipal financing rate which is more favorable than their commercial financing rate. The total three year cost for the Yamaha lease is $752 higher than the lowest bidder. However, the Yamaha lease offers a quality product, a competitive price, excellent warranty support and provisions at the end of the lease which are more favorable, and therefore valuable, to the City. Yamaha supplies electric golf carts for several other CourseComanaged properties. Leasing of electric golf carts is a standard industry practice which provides the ability to replace equipment at the end of its useful life. Three years is the preferred term length since the cost of cart maintenance and repairs tends to increase as the equipment ages. ALTERNATIVE ACTION: The City Council may choose to direct staff to enter a lease with one of the other two vendors, to purchase golf carts instead of leasing, or to have the golf operator (CourseCo) enter into the lease agreement. Purchasing the golf cart fleet would require a substantial one-time cash expenditure that would have an adverse impact on BOGC operations cash flow and on the Golf Enterprise Fund working capital balance. The cost of the lease will be higher if CourseCo is the lessee since they would have to pay the commercial financing rate. The lease would also have to be assignable to the City since its term will extend several months beyond the end of CourseCo s existing contract with the City. FINANCIAL IMPACTS: The annual cost of the proposed lease is $76,625. The full cost of the lease for the three year term is $229,874. Funds for golf cart lease payments are included in the annual Boundary Oak golf operations budget. Boundary Oak golf operating revenues, which include golf cart rental fees, fund the cost of golf operations. There is no impact to the General Fund. DOCUMENTS: Attachment 1: Boundary Oak Golf Course Electric Golf Cart Lease Proposal Comparison Attachment 2: Yamaha Municipal Master Lease for Boundary Oak Electric Golf Carts COUNCIL ACTION RECOMMENDED: Move to authorize the City Manager to enter into a three year operating lease totaling $229,874 with the Yamaha Corporation to lease a fleet of electric golf carts for the Boundary Oak Golf Course. STAFF CONTACT: Barry Gordon, Arts, Recreation and Community Services Director (925) 943-5850 bgordon@walnut-creek.org
ATTACHMENT 1 City of Walnut Creek Boundary Oak Golf Course Electric Golf Cart Lease Proposal Comparison Equipment Rental Cost Manufacturer Model # of Carts Battery Monthly Annual 3 Years Club Car Precedent i2 75 6 8v $8,111 $97,335 $292,005 E Z GO TXT 48 75 6 8v $6,365 $76,374 $229,122 Yamaha The Drive 75 6 8v $6,385 $76,625 $229,874 All carts include a charger, roof, standard hubcabs, two sand/seed bottle with holders, 4 cup drink holder, split windshield, battery fill system, message holder(s), sweater basket, and ball washer. Includes sales tax and freight.