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10-26-89SpMtg OCTOBER 26, 1989 A Special Meeting of the City Commission of the City of Delray Beach, Florida, was called to order by Mayor Doak S. Campbell in the Commission Chambers at City Hall at 5:30 P.M., Thursday, October 26, 1989. Roll call showed: Present - Commissioner William Andrews Commissioner Patricia Brainerd Commissioner Mary McCarty Commissioner Jimmy Weatherspoon Mayor Doak S. Campbell Absent - None Also present were - Assistant City Manager Robert Barcinski and City Attorney Herbert W.A. Thiele. Mayor Campbell called the meeting to order and announced that this meeting has been called for the purpose of (1) Considering Golf Course Contract. 1. Mayor Campbell reported they have before them a 19 page docu- ment and about seven exhibits. He commended staff and all the people who have been working on it, on both sides, for the time and effort expended. He stated he understood that staff and the applicant have agreed that this is an appropriately proposed document, except there are certain items that staff disagrees with on some of the provisions but there are other provisions in which the Commission needs to make some decisions. Paul Shapiro, attorney for Delray Golf, Inc., commented that the document is essentially the way they wanted it and there is a memo of open items; the exhibits are essentially the way staff wanted them and the applicant has some changes they request. The City Attorney added that there are four items which have not been resolved, as staff requests, which are not incorporated in the contract. Those include the equipment issue, inclusion or exclusion of the equipment from the capital improvements; the question of the payment for the Master Plan for the course; the issue of the indemnification paragraph as it relates to certain items, including as to other bidders; and the bid methodology for the capital improvements. Upon question by Mr. Weatherspoon, the City Attorney advised there were probably a dozen items which were discussed. Some changes were requested by staff which prompted other things to be modified by Delray Golf; similarly, Delray Golf requested a few things be changed which caused staff to request other modifications. For purposes of argument, however, those things which the Commission had generally agreed to at the last meeting are now incorporated into the document. Mr. Shapiro stated there are at least three items that it was his view were resolved at the last meeting; one, the question of whether Delray Golf was to indemnify the City with regard to a potential claim by another bidder - they said they would not do it and he believed the Commission had accepted that. Ms. McCarty advised she did not agree with this premise. She was of the opinion that during discussion at the last meeting when there was a concern on the part of the City Attorney that since the financial framework of the bid had been altered, that without opening it up as an opportunity to the other bidders, it might be a potential problem. At that point, as she remembers, he said "but if you all would like to indemnify; if you're so certain that there's no problem, then indemnify us from that" She thought Mr. Andrews said he could go along with that and everyone nodded. Mr. Shapiro stated he could not have been more certain in saying that under no circumstances did they intend to indemnify the City with regard to actions of other bidders. Secondly, with regard to the Master Plan, Mr. Shapiro commented staff had indicated they had a desire to have this plan done for the golf course; Delray Golf indicated they had no opposition to a plan being performed, but they wanted the $750,000 to go into things on the golf course such as capital improvements, equipment, etc., and did not want their money used for the Master Plan. Thirdly, every list that was present at that meeting with regard to capital improvements included the $75,000 of equipment; that concept had been accepted by the staff because that was special equipment that had a life of far longer than five years. Mr. Shapiro advised he thought all three of these issues had been settled. Ms. Brainerd commented that staff had said a Master Plan was something the City might want to do for themselves for a long range plan; she believes they discussed funding this out of the $400,000 in the current bond. Upon question by Mayor Campbell, the City Attorney advised they have a liquor license at the current facility which they intend to transfer to the new licensee; how and when that will be done is the open contingent. At the moment this is not a decision making item for the Commission. With regard to the resident manager issue, the City Attorney stated the question is whether or not they ought to have the right to not only approve of a liaison (or resident manager) at the course coming in but whether the City should have the right to require the licensee to remove an existing person from that position if the City found them to be unacceptable, for whatever reason. If that authority is desired by the City then the licensee wants the City to indemnify them against any claims that that person might have. Mr. Shapiro advised that the problem they have is that in the section the City Attorney is referring to, and in the dispute section, the City wants to reserve for itself the right at any time, without cause, to come out and say they want them to get rid of an employee. Delray Golf may not have a legitimate right to fire that person, but if the City insists on having that right, they don't want to get sued by that person; and if they do get sued, they want the City to take care of it. The City Attorney explained this is a provision they have currently with other contracts which they have not needed to exercise. Their thought was if there was an employee who failed to abide by the standards in the agreement, that failure would constitute a breach of the agreement, leaving the City with the recourse of terminating the agreement as opposed to the employee; therefore, they felt they had to exercise that control. Secondly, they have a concern with an indemnification provision in that they cannot legally hold harmless and indemnify anybody because to do so constitutes a pledge of the City's ad valorems. Discussion followed as to the method of firing and cause. The City Attorney stated he felt they should delegate that function to the City Manager for a cause determination. The Commission concurred. Mr. Shapiro stated he would like the right on their part to appeal the City Manager's decision to the Commission. It was the consensus of a majority of the Commission to have that decision appeal- able to the Commission, in lieu of the indemnity, and would apply to all employees. The City Attorney reported they wanted to add a provision that allowed the City the right, because of the bond issue and others, that if they did renovations or remodeling at the course that they would be permitted to close down all or a portion of the facility; and that there would be no commensurate reduction in the license fees. They are thinking primarily about corrections to the utility lines and the $400,000 renovations to the clubhouse. Mr. Shapiro stated the major issue is, for instance, they decide to close down the clubhouse for 6 months; there is no restaurant facility and Delray Golf is paying a license fee to the City for that period, or, perhaps they have to build a temporary bag storage facility. If it is something of that conse- quence that really affects a portion of their business or they have to bear a temporary substantial cost, then they would like some relief from that. The Commission agreed that in an instance such as that they would make an appropriate proration of the license fee. With regard to the section on hazardous waste, the City Attor- ney advised that the City's position is that all environmental issues -2- 10/26/89 and hazardous waste compliance is the responsibility of the licensee; their response was that they only wanted to be responsible for things that transpired after January 1, 1990. The City then said what they needed to do was see if there is any environmental or hazardous waste problem now if it is a concern, and therefore, have an environmental audit done. Delray Golf said fine, but they would only pay half. Mr. Shapiro stated he had suggested that an audit be done if there was concern; the City has a letter of credit from the prior licensee and for $3,600 they ought to find out. Discussion followed. Ms. Brainerd and Ms. McCarty stated they felt there definitely should be an audit. Mr. Weatherspoon did not agree, saying that the City is responsible for anything prior to January 1st and Delray Golf would be responsible for anything subsequent to that date; samples have already been done in the areas of the wellfields out there. The City Attorney commented that the $3,600 is a Phase I - document review, site review, but it does not involve chemical analysis or soil samples. Mr. Shapiro advised they just did an audit for a client, a private golf club about the same size as Delray and within five miles, and it was about $3,500 for the kind of audit he is talking about; incidentally, it did reveal a few problems they did not know about. Mayor Campbell suggested they say "Should the City decide they want an environmental audit, then Delray Golf shall agree to contribute up to $2,000 for the cost of such an audit". The Commission concurred. Ms. McCarty stated that some of the golfers were concerned that there could be an increase in fees with the CPI and clarified that they would be in line with Boca Raton and Boynton Beach. With regard to a cap on long term fee arrangements (prepaids) and the rumor that Delray Golf intended to cap it at some low figure, Mr. Shapiro commented that this is a no-win situation; this is a tension between those people who want to pay for an annual fee and the desire of the City to allow people on the course without requiring them to pay that much money. When they sell annual fees they have to know there's enough time available for those people to regularly get on the course, as they will expect it; on the other hand, there cannot be so many of them that they can't accommodate the other people who want to play and don't want to pay the annual fee. Mr. Shapiro stated they are trying to work something out that is about at the numbers that now exist. Mr. Goldstein advised they expect this course to attract a lot of people; they intend to leave the memberships just about where they are now. They are not out to hurt the City or themselves; however, they have to have a balance, and they would be willing to put in the contract that it won't be any less than it is today and that can be all residents. It was the consensus of the Commission to go with a cap of 350. With regard to disputes, the City Attorney reported that staff has proposed that, as the City does currently, all disputes that involve the agreement, either between the licensee and patrons or the licensee and the City, would be resolved by the City Manager and his decision would be final. The licensee has proposed that we go to court or binding arbitration; the City's position is that this is time consuming and expensive. Mr. Shapiro commented they felt if there was an honest disagreement about some provision in the contract they did not think it appropriate that one party to the agreement decides what is right; that offends the concept of due process. Mr. Weatherspoon requested that if there is a conflict or dispute that the Commission be informed of it; however, he is in favor of the City Manager making the decision. Mr. Shapiro stated the agreement does not say that in the event of a dispute concerning interpretation of the contract whether there is a default or not, that the City Manager is the final arbiter; that is being added under the City Attorney's proposal, so is different than what the present contract says. He has a problem with the concept as it relates to issues that are issues of contract interpretation and he believed that when you come down to a final decision as to what does this contract say, one party should not make that decision; at least they should have the ability to go to court if they disagree with it. Ms. Brainerd stated she does not have a problem with the City Manager decision but thought it was unreasonable for them to deny anyone due process under law to appeal. Mr. Weatherspoon concurred. Mayor -3- 10/26/89 Campbell commented that on behalf of the City he would not really want to become involved in arbitration. The City Attorney added that as a matter of fact they strike that as part of their review of almost every professional service agreement they do. Discussion followed. Mayor Campbell clarified that Delray Golf has a right to appeal, as anyone would, yet it still should be that the City Manager is going to make the decision. The City Attorney advised there are disputes between the patrons and the licensee, there are disputes with regard to the adminis- tration of the contract, i.e., the technical requirements and interpre- tations of the language within the contract. Ms. Brainerd commented that she has heard from Mr. House as to how unfair the contract is that he has had to live under; she believed a lot of the bitterness and problems that they have lived with came out of the fact that he came into this with the City feeling that they were not fair with him. She did not feel the City should repeat that mistake. Mr. Shapiro suggested that if the dispute involves $5,000 or more they have a right to go to court; if it doesn't they will abide by the City Manager's decision. Mr. Andrews, Mr. Brainerd and Mr. Weatherspoon concurred with this. Mr. Shapiro clarified that Exhibit B and disputes between patrons and the licensee would be decided by the City Manager; he would like mentioned that all other items may be appealed. Unless the con- tract makes this clear it is not acceptable to them. Mayor Campbell declared a recess at 7:00 P.M. in order for Mr. Shapiro to get together with the City Attorney on the language. The meeting was reconvened at 7:10 P.M. The City Attorney advised the dispute paragraph would read that the licensee further agrees to refer all disputes between the licensee and patrons of the golf premises and those concerning the standards and requirements set forth in Exhibit B of this agreement, to the City Manager and abide by his decision which shall be final and binding upon all parties. The provisions set forth in the indemnity clause in Section 25.10 of this license agreement shall be applicable to such actions. Mr. Shapiro stated the first sentence is acceptable to them; they feel the indemnity sentence is inappropriate. If a patron sues the City, the City is then asking Delray Golf to pay to defend the City and he does not think they should be responsible for paying the City's legal fees, particularly when the City upheld Delray Golf. Mr. Weatherspoon did not think they should have to pay for the City's mistakes; Ms. Brainerd agreed. Ms. McCarty stated she didn't care for any of it, but she would go along with what the City Attorney has put together. Mr. Shapiro added that they were perfectly happy to have the patron sue them in court and not have the City Manager get in the middle; they would have borne their own legal defense. The fact is the City is insisting on this dispute resolution process, they are not. Upon question, the City Attorney stated his recommendation is that they reference that the entire indemnification paragraph be applicable to those decisions, regardless of which way. There was a consensus of 3 to 2 in favor of the City Attorney's recommendation. The City Attorney reported that under capital improvements, equipment and Master Plan are sort of all in the money expenditure area (Exhibit D). As to the equipment, staff has said the City ought not to include it; Delray Golf would like to include it. Mr. Shapiro stated it was his understanding that they and staff had a disagreement as to whether the Commission understood that in the prior list presented it had been included (two tractors at $75,000 to be included as part of the $750,000). He reviewed the background of this and stated that some time ago it was agreed between staff and Mr. Goldstein's representative that in general equipment would be out of the capital program but there were a couple of items (two tractors) that had a life which was estimated as long as 15 years. It was the understanding they would be bought by Delray Golf, put in the name of the City, maintained by them and turned over to the City at the end of five years. Mr. Andrews stated he would have a problem with five years worth of equipment, whether it is 10 or 15 years; if it is 15 year equipment, he would have a problem with -4- 10/26/89 $25,000 of this item as they need that to maintain the golf course. Discussion followed. The consensus was 3 to 2 in favor of Mr. Andrew's position ($50,000 left in). With regard to the payment of Master Plan, the City Attorney stated the question is where the funding is to come from. It was the consensus of the Commission that the City will pay for it and deal with the funding source later if the Bond does not pass. Mr. Barcinski reported that they had asked, as a 90 day im- provement, that the clubhouse, considering its current condition, be cleaned and painted; they were looking at this as a maintenance item, although it could be viewed a a capital improvement. Mr. Shapiro suggested doing it with the $25,000 they just picked up on. There was discussion as to the cost of the painting. Mr. Shapiro commented there is a standard in the present contract that requires the present licensee to maintain and paint the premises; he did not believe they would allow Delray Golf five years from now to end the contract with the clubhouse looking the way it does now. He stated they know they are going to have to paint during the life of the contract; however, they feel they are being asked to do it one extra time and believed that the present licensee ought to do it. It was the consensus of the Commission to get the current licensee to paint the clubhouse. Mr. Shapiro stated they would agree to have it done at least once. The City Attorney reported that in order to provide a value of the capital improvements they had proposed that the licensee was to get no less than three bids and that if they did the work themselves, it would be their cost plus 10% overhead. Delray Golf wants to get two bids, on course maintenance only, plus 15%; anything relating to the buildings will get three bids. Ms. Brainerd suggested that they try for three and if they cannot get three, they can go with two, with some proof that they did a solicitation. With regard to the overhead of 15%, the Commission agreed to go with that figure. The City Attorney advised they proposed in the indemnification paragraph a clause which also indemnified the City against claims by any of the other bidders; it is still the City Attorney's opinion that this ought to be included. Also, in that paragraph Delray Golf indemnifies the City against all claims whatsoever, except if there is an act by an employee or agent of the City; the City Attorney had proposed only an exclusion if it was an employee of the City, agents being designated representatives or contractors. Commission direction is requested. Mr. Shapiro disagreed and gave an example that the City hires a contractor to do sewer work on the golf course; that contractor injures a golfer and if they get sued it is their problem. However, if the City gets sued they want Delray Golf to hold them harmless and Delray Golf did not even hire this person. Discussion followed. The City Attorney added that his initial recommendation was blanket with no exceptions, even if a City employee did it. It was the consensus of the Commission to agree to Delray Golf's proposal that it is not their obligation to defend the City on something the City did. The City Attorney questioned why Delray Golf had deleted the ownership word from the paragraph. Mr. Shapiro stated they are not the owner and the question is why would they be responsible for issues that relate to the City being sued in the position as owner. The City Attorney stated he is concerned about things such as negligent hiring. Mr. Shapiro commented that he believed anything where the City gets sued as owner due to operation, maintenance or use would be indemnified by Delray Golf. If the City wants to say that they are sued as owner due to the maintenance, operation or use, that is fine with him. The City Attorney stated that the other issue is whether to include or exclude the provision of indemnification against the other bidders. It is clear to staff that Mr. Shapiro has said no; however, it is not clear what the Commission's position is. Mr. Andrews stated if we are going to be sued and lose money because of this process or a challenge to the validity of the agreement, then the values that they have all worked for will all come tumbling down if they lose; he does not want to put at risk any amounts of money they have worked hard to get in this contract. Ms. McCarty commented that the City Attorney had -5- 10/26/89 stated he was very uncomfortable with the fact that they changed the financial framework of this bid; to her that says that the City is probably going to have litigation with regard to this and they will be on shaky legal ground. She is not prepared to go forward into something knowing that and put the City at risk. Mr. Weatherspoon commented that as they decided to take the risk to go forward at that time, likewise, they have to be willing to take the risk to go forward on the contract; they should not make the licensee liable. Ms. McCarty asked if the City would have the right to at least review who the sub-leasee of the restaurant would be. The City Attorney stated he was not too concerned with this; it is analogous, perhaps, to the liaison or resident manager which they have the approval going in. Discussion followed with regard to the indemnification language (page 16 of the agreement). The City Attorney reiterated that the language they had proposed was that Delray Golf would indemnify the City for all of those things previously discussed and they added the phrase "including but not limited to the bidding and negotiation process which resulted in the award of this agreement to Delray Golf Inc., and the validity of the agreement". He stated their position is that if this award of the agreement were challenged by one of the other unsuccessful proposers in the agreement that the City ought to be held harmless, indemnified and defended against all those challenges. Mayor Campbell commented he does not know who the plaintiffs are except for technically all seven people who theoretically came to the table. The City Attorney added that he believed this was an accurate statement and does not constitute all proposers. As proposed now if the City gets sued it will be the City's expense and the City's potential damages to pay. If the Commission gets sued the City would have to hire them outside counsel to defend their personal interest. The City Attorney stated that he has a serious concern with the process in which they allowed this particular proposer to modify their bid without allowing that same opportunity to the other people. He would say that as to the Commission he believed they would not have a very serious risk, if any, of personal liability. Mr. Shapiro stated his position is that they do not think it appropriate or obligated to indemnify the City on this point. Ms. Brainerd moved to approve the license agreement as written, with the modifications agreed to, on an item by item basis this evening, on each of those issues with the exception of the clause in the indem- nification paragraph dealing with indemnification as against other bidder's claims and challenges to the agreement by them, in which case they want it to be whatever Commission decision was as of the meeting of October 3, 1989, seconded by Mr. Weatherspoon. Upon roll call the Commission voted as follows: Mr. Andrews - No; Ms. Brainerd - Yes; Ms. McCarty - No; Mr. Weatherspoon - Yes; Mayor Campbell - Yes. Said motion passed with a 3 to 2 vote. Mr. Weatherspoon made a motion to amend the previous motion to approve the agreement subject to the modifications agreed to this evening; as to the indemnification provision to not have a clause in it related to indemnification for bidder challenges, seconded by Ms. Brainerd. Upon roll call the Commission voted as follows: Mr. Andrews - No; Ms. Brainerd - Yes; Ms. McCarty - No; Mr. Weatherspoon - Yes; Mayor Campbell - Yes. Said motion passed with a 3 to 2 vote. Before roll call the following discussion was had: Mayor Campbell stated he still has some concern about the issue on who is going to bear the expenses with regard to the litigation and not the damages. He felt they would really run into a potential problem if they have to start back all over again from a very early process and not so sure they would be able to meet the deadline of January 1st. He would rather go to a contract rather than sit here and continue this on and on. Upon question, the City Attorney clarified this motion is to amend the previous motion and restate the entire thing which they would be approving by voting in the affirmative on this motion, to approve the license agreement as written this evening with the paragraph by para- graph modifications that were discussed and decided upon tonight (with 6 10/26/89 the exception of resolving the liquor license which has been left to staff to review and resolve) and specifically as to the 3rd portion of the previous motion as to the indemnification paragraph in 25.10, to not include a phrase which would require indemnification and hold harmless as to costs, expenses and damages incurred by the City in defending claims by unsuccessful bidders challenging the negotiations and the contract validity. Ms. McCarty commented that she disputes the assumption that this is going to drag out until spring unless someone intentionally tries to orchestrate it that way and felt it could be done relatively quickly. At this point the roll was called to the motion. Mayor Campbell declared the meeting adjourned at 8:25 P.M. 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 October 26, 1989, which minutes were formally approved and adopted by the City Commission on ~/~j~ ~ /~ . /~/C i t~ 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. -7- 10/26/89