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07-03-90SpMtg JULY 3, 1990 A Special Meeting of the City Commission of the City of Delray Beach, Florida, was called to order by Mayor Thomas E. Lynch in the Commission Chambers at City Hall at 6:00 P.M., Tuesday, July 3, 1990. Roll call showed: Present - Commissioner Jay Alperin Commissioner William Andrews Commissioner Mary McCarty Commissioner David Randolph Mayor Thomas E. Lynch Absent - None Also present were - City Manager David T. Harden and City Attorney Jeffrey S. Kurtz Mayor Lynch called the meeting to order and announced that this meeting has been called for the purpose of (1) Further Changes on the Golf Course License Termination Agreement. The City Manager presented his review of the basic agreement. He stated it is understood that there will be no license payment made for the month of July. Delray Golf, Inc.'s position is that they are incurring operational losses in June and July. They also feel they should not be paying a license fee for the month of July as the City will be taking the course on July 10th. The sales tax section has been completely reworked. The license agreement required the licensee to purchase tractors to be owned by the City. In the event sales tax was due, the licensee would pay. The licensee is to place, in escrow, funds to cover the sales tax which may be due upon a ruling by the State. In reply to Dr. Alperin, the City Attorney advised, with a lease, the City is legally responsible to collect and transfer the taxes to the State. The City is adequately protected in this arrangement as $14,000, which is the maximum that the State can assess, will be es- crowed. If it is determined that those amounts are due, Mr. Shapiro will release them to the State of Florida. It is not the City's respon- sibility to collect for the equipment. The City Manager stated that the final changes regarding indemnification clarifies that the indemnity in the basic license agreement shall remain in effect for any claim arising during the licensee's operation or use of the golf premises from January 1, 1990 through July 10, 1990. Upon question by Mayor Lynch, the City Attorney advised that Delray Golf, Inc. is the licensee operating company. Delray Golf Equipment is the seller and owner of the golf course. Mr. Paul Shapiro, attorney for Mr. Goldstein, advised that the license is with Delray Golf, Inc.; the equipment, which is covered by a separate agreement, is with a company called Florida Golf Equipment, Inc. He advised the City presently has the indemnity from Delray Golf, Inc. Mayor Lynch stated they are not asking for Mr. Goldstein's personal indemnification; however, he would like to see both corpor- ations named in the agreement for indemnification. The City Manager reviewed the changes in the Installment Sale Agreement and stated because of the timing, the August 1, 1990 payment would be an interest payment only for the period from July 11, 1990 through July 31, 1990. If the City makes late payments more than three times in one year, there will be a late penalty charge of 5%. The first three notices of late payment have to be written, thereafter they do not. Transfer of the note is limited to qualified financial institu- tions or credited investors; any other transferees would have to be approved by the City. There will be a default only if the City fails to make a payment within fifteen (15) days of receiving written notice. Upon question by Mr. Randolph, the City Attorney advised notices are to be hand delivered, mailed by registered or certified mail, postage prepaid, dispatched by overnight carrier or transmitted by telecopy or similar means of telecommunication. The only way to guaran- tee notices, if there is a requirement that the notice be acknowledged upon receipt, would be to have written confirmation that they had received it. The City Attorney advised the only two material changes are with respect to paragraph #4 of the basic agreement itself. Half the paragraph was stricken; those provisions really related to protection for Delray Golf, Inc. and didn't affect the City's interest. They were deleted because a third party was involved, which could possibly interfere with the closing if the third party was unavailable. The City has no objection to the deletion. The other change is dealing with the increase in security from $8,000 to $14,000 as far as the escrowed amounts on the tax situation and in addition, upon the release of the escrowed funds the City is to be notified in writing, and in the event there is a determination or opinion issued by the Department of Revenue the City is to get a copy of that. The potential situations are: 1. They pay the money to the Department of Revenue without seeking an opinion; 2. They seek an opinion and find it not to be due, in which case there is the opinion to rely on; or, 3. They receive an opinion which is a determination to be due and have the option of pursuing their further administrative remedies or paying the monies. In any event, the City would receive notice of whatever transpires in order to close the files on that matter. The City Attorney further advised prepayment was not acceptable to Mr. Goldstein. -2- 7/3/90 Vi Hinchliffe, Delray Beach, presented a petition signed by the golfers to inform the City that they are very pleased with the present employees, and desire they be retained in their present position. She expressed her opinion that since Mr. Gerecter and Mr. Dubin were cheated out of the lease contract by a vote that should have been invalidated, it is only fair they be given first consideration on the management contract. Upon question by Mayor Lynch, the City Manager stated he feels comfortable about putting a management company in place by July 11, 1990, and this will be discussed later on in the agenda. Dr. Alperin questioned whether the maintenance is continued up to now and will be continued through July 11. The City Manager replied that according to the reports they have received, the maintenance will be continued. They have stopped making capital improvements pending the outcome of these negotiations but the ongoing maintenance is being taken care of. In reply to Dr. Alperin, the City Attorney advised the way the deal was structured, there was a sub-license agreement entered into between Delray Golf, Inc. and Delray Golf Restaurant. Delray Golf Restaurant entered into a Management Agreement with BLS Services, Inc. Pursuant to this agreement the City will take over Delray Golf's responsibility and Delray Golf Restaurant's responsibility with respect to the restaurant agreement so the City will be in direct contract through an assignment with BLS Services Inc. The Pro's contract will be handled in the same way. It is a two year contract, and the restaurant runs the length of the agreement, which is five (5) years. Dr. Alperin stated there was an estimate of $350,00 potential profit by returning the management to the City. He questioned if that was correct. In reply to Dr. Alperin, the City Manager stated that was over and above what there would be under the current agreement. Manage- ment fees are not taken into account, but it does include the mainten- ance costs for running the golf course, legal fees, and insurance. Ms. McCarty stated she did not see an accounting for the locker rental and bag storage fees that have been collected and questioned if they are paid on a yearly basis or if there would be any money back from them. The City Manager replied that this had not been discussed. Ms. McCarty stated it should be in the contract. The City Attorney stated as presently structured in the con- tract they would be entitled to keep whatever fees they have collected. Ms. McCarty stated the prize money the Golf Association puts with the lessee to hold for their annual tournament should be returned to the City. She questioned if the tractors are being bought at the original sale price or at a depreciated price. The City Attorney replied that they are being bought at cost plus shipping. There is no depreciation on any of the equipment. Upon question by Mr. Randolph, the City Attorney advised he is not sure of the status of where the liquor license is. It is still in the process of being put in BLS's name. -3- 7/3/90 Mr. Norman Briggs, BLS Services, Inc., stated the inspection by the Liquor Commission was done last week. There has to be seating for 201 people and the tables, chairs and dishes have to be set up. The tables are broken down for different meetings and parties, but instantly after the party it has to be set up in the proper manner again. Upon question by Mr. Randolph, the City Manager stated the equipment and inventory would be checked to make sure everything listed is there, and that it is in working order. The City staff, including the Parks and Recreation Department staff, where appropriate, and the Finance Department staff will be conducting this inventory. The City Attorney stated the City is taking over all equipment in the premises, in "as is" condition, and Delray Golf, Inc. is making no warranties with respect to the condition of the premises or the equipment. He stated he never felt comfortable with the indemnification, but it was represented that that was the best there was available. He stated to the extent that there is an insurance policy in place is comforting, although insurance policies contain exclusions. He is not comfortable with the idea that Delray Golf, Inc. will be available to provide us with any indemnification whatsoever. He stated the corporation does not have a function beyond this particular agreement and the director and shareholder liability would have to be looked at. With respect to the indemnification every particular situation will not be covered. Dr. Alperin stated that since the negotiations began, there has been an incredible amount of discrepancies and disagreements. Depreci- ation has not been considered whatsoever. The City Attorney should be writing the offer that the City wants, and if it is not acceptable, then there can be negotiations. Mr. Andrews stated the City will get a better golf course by running it themselves; he feels the the City should sign the contract and end the turmoil. Ms. McCarty stated she had been under the assumption that the equipment was going to be depreciated, and she feels the bottom line has to be a fair parting of ways. She does not want to pay for new equip- ment that is already six months old. Mr. Randolph stated the City should either go for the contract or close the doors on negotiation and wait. Mr. Andrews moved approval of the contract as written, seconded by Mr. Randolph. Upon roll call the Commission voted as follows: Ms. McCarty - No; Dr. Alperin - No; Mr. Andrews - Yes; Mr. Randolph - Yes; Mayor Lynch - Yes. Said motion passed with a 3 to 2 vote. Mayor Lynch declared the meeting adjourned at 6:50 P.M. -4- 7/3/90 City Clerk~ / ATTEST: The undersigned is the City Clerk of the City of Delray Beach and that the information provided herein is the minutes of the meeting of said City Commission of July 3, 1990, which minutes were formally approved and adopted by the City Commission on Qt~ ~l ~7~ /~. · City Clerk NOTE TO READER: If the minutes that you have received are not completed as indicated above, then this means that these are not the official minutes of City Commission. They will become the official minutes only after they have been reviewed and approved which may involve some amendments, additions, or deletions to the minutes as set forth above. -5- 7/3/90