ENCINITAS — Questions raised over financial practices and an operating contract at the Encinitas Ranch Golf Course were reviewed on Monday.
An Encinitas City Council subcommittee held its first meeting to gather information about the golf course. Eventually, the subcommittee will report back to the rest of the council members with potential recommendations for managing the course.
ERGA (Encinitas Ranch Golf Authority) governs the 18-hole course. The golf authority is an independent board established in 1998 by the city and the development company Carltas.
Located off of Quail Gardens Drive, the course is operated by JC Resorts. Echoing a concern brought up at a City Council meeting in October, Deputy Mayor Lisa Shaffer, a subcommittee member, asked why ERGA awarded a second 10-year contract to JC Resorts without seeking competitive bids.
ERGA Chairman Bill Dean said the golf course was struggling financially when the contract was up for renegotiation in 2011. To help reduce the course’s costs, JC Resorts agreed to cut its management fee below previous levels for the first three years of the new contract, he said.
“It was based on that kind of premise that we then went for the longer contract knowing they were discounting it,” Dean said.
“Upon the fourth year of the contract, their rates would then go back up to where they had been at the termination of the (previous) contract,” he added.
According to ERGA accounting documents, JC Resorts received a flat fee of $165,000 for the 2011-12 fiscal year, the first year of the second contract. Additionally, JC Resorts was paid 1 percent of course revenues, which amounted to $39,090.
The percentage fee remains 1 percent throughout the contract, while the flat fee is set to increase this year to $213,500. After that, the flat fee increases by 4 percent annually, provided JC Resorts meet certain terms.
ERGA’s earlier contracts with JC Resorts weren’t available by press time.
Because ERGA was pleased with JC Resorts, it didn’t consider other companies, Dean said.
“There was no mechanism that would have us second guess the quality of work that was being done,” Dean said.
City Attorney Glenn Sabine said that government code demands a request for proposals for projects that revamp or build facilities, but added that professional services like golf course management didn’t require a competitive bid request.
The subcommittee agreed to continue reviewing JC Resorts’ contract at a future subcommittee meeting. For comparison, the subcommittee will also examine contracts JC Resorts has with other golf courses, depending on if the contracts are public.
Although ERGA’s five-member board includes the Encinitas city manager and two city employees, the city council doesn’t have a direct say over ERGA.
Councilman Tony Kranz, who serves on the two-person subcommittee with Shaffer, said he recognizes the board arrangement was designed to “inoculate” the members from politics. However, since the golf course is a city asset, further oversight by the council is necessary, he said.
The subcommittee also addressed a controversial contingency fund ERGA created several years ago to pay for major repairs during tough economic times.
The contingency fund meant ERGA allocated less money to a CFD (Community Facility District) bond payment. This resulted in some 1,000 homeowners living in Encinitas Ranch having to shoulder more of the CFD bond payment, increasing their property taxes.
Kranz said he understands the rationale behind the contingency fund, but Encinitas Ranch homeowners might see it as coming out of their own pocket.
But Chris Calkins, president of Carltas, said the contingency fund provides for a better golf course over the long term. This ultimately means more rounds and more revenue to pay into the various funds, including the CFD bond payment, he said.
The subcommittee mulled over additional points related to financing. Those inquires, along with other questions raised by the public, will be taken up at another subcommittee meeting at an undetermined date.
Some residents have stated ERGA hasn’t provided enough rationale for its decision-making.
“There’s nothing accusatory that I’m suggesting has been wrong or improperly done,” resident James Greco said at the start of the meeting. “I just think that we’ve been frustrated, from my perspective, when we’ve asked these questions and they’ve either been ignored or we’ve been given half-answers or less than half-answers.”
Rounds played increased at the golf course by 5.5 percent from 2011 through 2013, a city staff report in October noted.