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1. Kalispell Golf Association - Annual Lease Payment Waiver RequestCharles A. Harball Office of City Attorney City Attorney 201 First Avenue East P.O. Box 1997 Kalispell, MT 59903-1997 TO: Mayor Tammi Fisher and Kalispell City Council FROM: Charles Ilarball, Interim City Manager Tel 406.758.7709 Fax 406.758.7771 charball@kalispell.com SUBJECT: Motion to Consider the Request of Kalispell Golf Association to Naive Annual Rent MEETING ) 1Regular Council Meeting BACKGROUND: On November 16, 2009 the City entered into a twenty year lease with the Kalispell Golf Association [KGA] for that property commonly known as the Buffalo Bills Golf Course. Pursuant to the terms of the lease the KGA has presented the City with its annual financial report (submitted herewith) which indicates the rent due according with the formula provided in the lease. Given the capital outlay that the KGA has been making on its capital improvement plan, it is specifically seeking to have the City Council consider the contributions it has made to that plan as full and adequate payment of the rent due. Over the last several years, and particularly last year, the Stillwater River caused significant erosion to the riverbank along the golf course, damaging and threatening the improvements of the course. The City applied to and received from FEMA a grant to implement a riverbank stabilization project along this portion of the river. This project is completed and the FEMA grant funds paid 75% of the costs. The State of Montana made contributions as well and the City and KGA were allowed to make significant "in -kind" contributions. The City has also made significant cash contributions. The sum of approximately $16,000 remains to be paid. RECOMMENDATION: That the Council apply the KGA rent due to the cash contributions remaining to be made on the Stillwater Riverbank Stabilization Project. FISCAL IMPACTS: As stated. Respectfully submitted, f Charles H all, Interim City Manager FVTIu SUBJECT MEETING DATE: Planning Department 201 V Avenue East Kalispell, MT 59901 Phone: (406) 758-7940 Fax: (406) 758-7739 www.kalispell.com/planning Kalispell Mayor and City Council PJ Sorensen, Kalispell Planning Dept Charles Harball, Interim City Manager Stillwater River/Buffalo Hills Golf Course Bank Stabilization Project May 21, 2012 BACKGROUND: As a result of flooding damage in the spring of 2011, the City of Kalispell became eligible for federal funding through FEMA to repair damage to Buffalo Hills Golf Course. The funding anticipated a total project cost of $424,969.77. FEMA would cover 75% of the total cost, with the remainder met through local and state matches. The City Council provided authority to proceed at its November 21, 2011, meeting. LHC was subsequently awarded the bid for the project, and they have substantially completed the repair work at six specific sites along the river bank. We have calculated preliminary final costs pending final submittals from the golf course and LHC (utilizing an estimated final invoice). At this point, the preliminary final accounting is as follows: Total cost FEMA share State share City share 2011 emergency work $ 9,599.10 $ 7,199.33 $ 2,399.77 2012 small project (bridge) $ 2,232.00 $ 966.50 $ 1,265.50 2012 large projects $ 416,656.58 $ 312,492.44 $ 28,797.86 $ 75,366.28 Total $ 428,487.68 $ 320,658.27 $ 28,797.86 $ 79,031.55 The city share has been met in part with in -kind contributions and previous expenditures ($2,399.78 from May 2011) totaling $32,962.22. The estimated remaining $46,069.33 will need to be covered through other sources. Respectfully submitted, 1-7 /` ,' PJ Sorensen Kalispell Planning Dept Report compiled: May 10, 2012 c: Theresa White, Kalispell City Clerk Charles Harb 11 Interim City Manager FEMA GOLF COURSE GRANT BREAKDOWN OF LOCAL MATCH Required match Less: In kind match provided with salaries and equipment Remaining match to be provided Less: RLK invoice paid by General Fund Facilities budget-ck 164134 Less: RLK invoice paid by General Fund Facilities budget-ck 164529 Less: RLK invoice paid by General Fund Facilities budget-ck 165100 Less: RLK invoice paid by General Fund Facilities budget-ck 165279 Less: Storm Water contribution 79,032.55 32,962.22 46,069.33 2,508.75 6,932.50 6,830.53 4,796.25 9,450.55 Remaining match to be provided: 15,550.75 Ci tern too Clay Clerk P.O. Box 1997 Kalispell, MT 59903 II�lI 11�fIif111E111111�lill fi�lllll�llll[ llllllllll1�111111E111f11� 11�i11111�11111 d of 1418 Page Fees:$98.00 Paula Robinson, Flathead County MT by HW 12/3/2009 2:58 PM I ISPELL CITY GOLD` COURSE LEASE THISLEASE, made and entered into as of the l day of 2009, by and between the City of Kalispell, Montana, a Municipal Corporation, hereinafter referred to as LESSOR, and the Kalispell Golf Association, a Montana Corporation, hereinafter referred to as LESSEE, WITNESSETH: For and in consideration of the mutual covenants and promises hereinafter set forth, the parties hereto agree as follows: L PROPERTY: LESSOR hereby leases to LESSEE and LESSEE hereby leases and hires from LESSOR those certain premises and all appurtenances thereto situated in Kalispell, Flathead County, Montana, as follows: All of that property owned by LESSOR and commonly known, referred to and utilized as the Kalispell City Golf Course. Attached as Exhibit "A" is a map with the subject premises outlined. Attached is Exhibit "B" which identifies the boundary and fence line between the golf course and the north portion of the old Lawrence Parr. The total area consists of approximately 240 acres. 2. TERM: TO HAVE AND TO HOLD the above rented premises during the full term of twenty (20) years, which term shall begin upon the date above written or the date on which the agreement is approved by the electors and shall terminate upon the expiration of said full twenty year term, unless terminated sooner as hereinafter provided. 3. GROSS RECEIPTS: For purposes of this Lease, "Gross Receipts" shall be defined as all gross receipts obtained by LESSEE from the operation of the driving range (golf ball rentals), membership fees (season passes), the sale of green fee punch cards and other green fees. All other receipts shall not be defined as gross receipts under the provisions of this lease and shall be and remain the sole income of LESSEE. 4. RENT: LESSEE shall pay to LESSOR, as rent, a sum to be determined annually as herein provided, payable for the preceding year, on or before the 30th day of June, commencing with June 30, 2010 and continuing on the 30th day of June throughout the term of this Lease. The annual rent for the full term of this lease shall be based upon Gross Receipts, as defined in Section 3, hereof, and be calculated as set forth in "Exhibit C", attached hereto and for purposes of this Agreement made a part hereof. Said rent payment shall be mailed or delivered to LESSOR at the Kalispell City Hall. All prior rents due by LESSEE to LESSOR under that certain lease dated April 1, 1997 are hereby deemed and agreed to be paid in full and let it be known and agreed that upon approval of this agreement as provided in section 2, hereof, this lease shall supersede any and all Leases between the Kalispell Golf Association and the City of Kalispell. 5. USE OF LEASED PREMISES: LESSEE shall use the leased premises for the primary purpose of operating a municipal golf course. In addition, on March 6, 2006, the City of Kalispell City Council passed a motion to approve a Multiple -Use Policy for Buffalo Hill Golf Course, attached hereto as Exhibit "E", which Policy is hereby fully incorporated herein by this reference. LESSEE agrees to observe all Federal, State and municipal laws and regulations including those related to human and equal rights and in particular Bureau of Outdoor Recreation, or its successors, regulations. LESSEE shall not sublease or assign any portion of the leased premises without prior written permission of the LESSOR. LESSOR shall not agree to any such sublease or use agreement unless such lease or use is accessory to the management of a typical golf course. For example, a restaurant or golf cart concession would be considered such a typical accessory use. 6. MAINTENANCE AND REPAIR OF PREMISES: LESSEE agrees to maintain the above described premises in as good a condition as the same are in at this time, or as good as they may be put by LESSOR during the term hereof in case of a casualty loss causing repair or reconstruction by LESSOR; and to return said property to LESSOR at the expiration of said lease in said condition, reasonable wear and tear and damage by the elements alone excepted. In the event LESSEE refuses or neglects to keep the above -mentioned premises in such order and condition hereinabove mentioned, LESSOR shall have, after first giving ninety (90) days written notice to repair, the right to declare this lease null and void and of no further force and effect. In this case the annual payments of rent shall terminate and LESSEE shall not in any way be responsible for any future rent payments. LESSEE agrees to maintain and keep in repair all water lines and pumps on said golf course, and to attend to the shutting off of the water supply and draining of all pipe lines in the fall, and to turn the water in to said system in the spring. a). Stormwater Regulations: The City of Kalispell, the LESSOR, is mandated by the federal and state governments to monitor and enforce the Stormwater MS4 Standards within the city limits of Kalispell. Because of the topography, watercourses and frequent, somewhat extensive landscaping projects on the Kalispell City Golf Course, it is essential that the KGA 200900033418 Page: 2 Of 14 Paula Robinson, Flathead County MT by NW Fees: $98.00 12/3/2oa8 2:58 pM Superintendent or his designee closely cooperate with the Kalispell Public Works Department to assure that the MS4 Standards are maintained. For this reason the KGA Superintendent or his representative shall meet with a representative of the Kalispell Public Works Department for a training session on an annual basis so that compliance may be maintained. The KGA shall submit its project stormwater compliance plans to the Kalispell Public Works Department prior to commencement of such projects. The KGA agrees to remain in full compliance with the MS4 Storm water standards. b.) Representatives from the KGA and the City's Parks Department and Department of Public Works shall meet prior to December 31, 2009 to draft a capital protection program for the property covered by this lease. Items of deferred maintenance shall be identified as well as any other assets suffering or threatened with damage or devaluation. Estimated costs, revenue sources and priori -ties will be developed as a part of a plan to protect and preserve the assets. In the event that the KGA determines to expend its funds for infrastructure improvements that are on the capital protection program prior to that time scheduled and that are otherwise scheduled to be funded by the City of Kalispell, it may apply for a credit of those funds against its lease payments. 7. (a) City of Kalispell's AccesstoGolf Course: For the purpose of maintaining public utilities, the City of Kalispell may from time to time require access to the golf course. In the event such maintenance is required, the City of Kalispell shall provide adequate written notice to Kalispell Golf Association by providing the KGA- with the bid documents upon advertisement. In no event shall this information be provided less than 60 days prior to scheduled work. The written notice shall outline the nature, purpose, access dates, and areas affected on the golf course. In the, event that emergency maintenance is required for the purpose of providing city utilities, the City of Kalispell shall, upon discovery of need for access/maintenance, provide immediate written and verbal notice to the Kalispell Golf Association. Upon notice thereof, Kalispell Golf Association will grant access for emergency maintenance as requested. S. ALTERATIONS AND IMPROVEMENTS: LESSEE shall not make any alterations or improvements to the premises or the appurtenances located thereon in excess of Twenty -Five Thousand Dollars ($25,000.00) at any one time without having first received approval from the LESSOR of the intended alteration or improvement. LESSEE shall report to LESSOR annually on alterations and improvements costing less than $25,000.00. 9. UTILITIES: During the entire term of this lease LESSEE shall pay when due for required utilities serving the leased premises, including but not limited to, electrical, gas, telephone, water, sewer and garbage services. LESSEE shall also be entitled to continue use of LESSOR's appropriated water right of the Stillwater River adjacent to the golf course premises without charge. LESSEE in using the water from the Stillwater River under said water rights shall operate and maintain the system and pump for such purposes. 10. PERSONAL PROPERTY AND FIXTURES:.Adi personal property hereinbefore or hereinafter obtained in connection with the operation and maintenance of the Kalispell City Golf Course shall be the property of LESSEE; provided, however, that all fixtures that have been 200900033418 Page: 3 of14 Fees: $98-00 Paula Robinson, Flathead County MT by NW 12/3/2009 2:58 PIA or may be installed on the premises and attached thereto have or will become part of the premises and are the property of LESSOR. 11. COST OF OPERATION: All costs of operation including the cost or providing supplies, equipment, tools, labor and other such items and the entire cost of maintaining and operating the golf course, the club house and other appurtenances shall be the sole responsibility of LESSEE. 12. USE OF CLUBHOUSE BY LESSOR: Although LESSEE shall have the exclusive use and supervision of all buildings on said premises including that structure known as the clubhouse, it is agreed that LESSOR shall be entitled to use of the clubhouse at any convenient time to LESSEE upon adequate notice with LESSOR reimbursing LESSEE for all actual expenses incurred by LESSEE for the reason of any such use by LESSOR. 13. GOLF COURSE FEES: A schedule of membership fees (season passes), green fees punch cards and other green fees shall be presented by LESSEE to LESSOR prior to the first day of April of each year of this Lease. The schedule for such fees for the 2009 golfing season is attached hereto as Exhibit D, and by this reference made a part hereof. LESSEE, at its discretion, mayfromyear to year, during the term of this Lease, increase or decrease its Schedule of Fees, then in effect, up to ten percent (10%) without prior approval of such an increase from LESSOR. LESSOR shall not unreasonably withhold its approval of any proposed Fee Schedule for which its approval may be required under this !-,-ease. 14. LESSEE'S FINANCIAL REPORTS: Annually, on or before the 30th day of June, in conjunction with the payment of the annual rent, LESSEE shall present to LESSOR for review a copy of LESSEE's annual financial report completed in accordance with generally accepted accounting principles. The Association's financial records will be subject to an audit conducted by, and at the option of, the City (internal staff or contract auditor). The cost of such audit shall be paid by the City. 15. LESSEE'S LIABILITY INSURANCE: LESSEE shall obtain and keep in full force and effect during the term of this lease, full general liability insurance in the amount of One Million, Five Hundred Thousand Dollars ($1,500,000.00) with a company licensed to do business in the State of Montana; and said policy of insurance shall name LESSOR as additional named insured. In the event the Montana legislature increases the limitations on government liability for damages in tort LESSEE agrees to increase its liability coverage appropriately. LESSOR shall be furnished with a certificate that such insurance is in force and the same shall provide for reasonable notification to LESSOR prior to the same being canceled. LESSEE agrees to hold LESSOR harmless from any and all liability of any nature, whatsoever, arising -from or out of LESSEE's possession, use, maintenance, improvement or occupancy of the property herein described; LESSEE further agrees to defend, at LESSEE's expense, any action brought against LESSOR arising out of LESSEE's possession, use, maintenance, improvement or occupancy of said property. 1 200900033418 Page: 4 of 14 Fees: $98-00 Paula Robinson, Flathead County MT by NW 12/3/2009 2:58 PM 16. FIRE INSURANCE: During the full term of this lease, LESSOR shall maintain its own fire insurance adequate to cover replacement costs on the improvements on said premises. Should the premises during the term of this lease suffer damages which are covered by said fire insurance policy, LESSOR agrees to utilize all insurance reimbursements therefore, toward rebuilding or repairing the damaged premises, or toward providing adequate replacement facilities. The contents of buildings and fixtures located on the premises shall be insured by LESSEE and shall be in such amounts as to assure replacement. The parties mutually agree as to waiver of subrogation rights each with the other. 17. DEFAULT AND BANKRUPTCY: In the event that: (a) LESSEE shall default in the payment of any installment of rent or other sum herein specified and such default shall continue, for thirty (30) days after written notice thereof, or (b) LESSEE shall default in the observance or performance of any other of LESSEE's covenants, agreements, or obligations hereunder and such default shall not be corrected within ninety (90) days after written notice thereof-, or (c) LESSEE shall be declared bankrupt or insolvent according to law, or, if any assignment shall be made of LESSEE's property for the benefit of creditors; LESSOR shall have the right thereafter, when such default continues, to re-enter and take complete possession of the !eased premises, according to law, and to declare the term of this lease ended, and to remove LESSEE's effects, without prejudice. In doing so no additional rent payments may be collected from LESSEE; however, if LESSEE shall default, after reasonable notice thereof, in observance or performance of any conditions or covenants on LESSEE's part to be, observed or performed by virtue of any of the provisions in any article of this lease, LESSOR, without being under any obligation to do so and without thereby waiving such default, may remedy such default for the account and at the expense of LESSEE. 18. NOTICE: No notice from LESSOR to LESSEE relating to the leased premises or the occupancy thereof, shall be deemed duly served unless personally served upon or mailed to LESSEE, registered or certified mail, return receipt requested, postage prepaid, and addressed to LESSEE at its address as follows: Manager, Kalispell City Golf Course Post Office Box 1116 Kalispell, Montana 59903 Any notice from LESSEE to LESSOR relating to the leased premises or the occupancy thereof, shall be deemed duly served, if personally served upon or if mailed to LESSOR by registered or certified mail, return receipt requested, postage, prepaid, and addressed to LESSOR at the address as follows: 200900033418 Page: 5 of 14 Fees: $98.00 Paula Robinson, Flathead County MT by NW 12/312009 2:58 PM II I �i l�lllli ll�ll lll[fll 111I!Nll[ 111i l I R Page: 6 o3 14_a Fees: $98.00 Manager Paula Robinson, Flathead Count- MT by INRA! 12/3/2009 2:56 Phi City of Kalispell 201 First Avenue East Kalispell, Montana 59903-1997 19. EXISTING LEASE: It is mutually understood and agreed between the parties hereto that no actions taken or not taken by either party in the negotiation or execution of this agreement shall constitute a waiver of any rights that either party may now have or hereafter have relating to or arising out of the existing Lease between the City of Kalispell and the Kalispell Golf Association dated April 1, 1997; and, and each party specifically reserves the right to present any claim or defense to any claim relating to or arising out of said Lease. 20. TIME 4E ESSENCE AND BINDING EFFECT: It is mutually agreed by and between the parties hereto that the time of payment shall be an essential part of this lease agreement, and that all of the covenants and agreements herein contained shall extend to and be binding upon the parties hereto, and their successors and assigns. IN WITNESS WHEREOF, the parties have executed this lease as of the date first above written. ATTEST: Theresa White City Clerk ATTEST: 'err 1 liams Association Secretary CITY OF ICALISPELL ,,-ane Flowington City Manager KAL ISPELL GGI..E ASSOCIATION Doug Kaurfman� President II�II@II i��I��IIIIII��4I�III�IIIIIipiiiiiiiiI€I gE(S6II III II�fel S3LI P-'egs 4' 8.00 ryr ` Paula Robinson, FlatheEd County VT by Nk"I 121'�/2009 2:53 PP4 ,� � A � IJ OF FOI�ITA�f� j sS. County of Flathead ) On this i ':r vi day of fl,,, yo ,;&-),.v 2009, before nee, a Notary Public for the Mate of Montana, personally appeared Jane M. Howington and Theresa White, respectively, proved to me to be the persons whose names are subscribed to the within instrument, and acknowledged to me that they each executed the same in their respective authorized capacities as City Manager and City Clerk of the City of Kalispell. IN W TNESS WHEREOF, I have hereunto set my hand and affixed my official seal the day and year hereinabove first written. I O T�. STA'1rE OF C IA ss. County of Flathead Printed Name:: t,, C NOTARY PUBLIC for the Mate of Fontana Residing at: tLo_� t ,r> 6 , `r- i Icy Commission expires: 4 On this- day of }?�, 2009, before me, a Notary Public for the Mate of Fontana, personally appeared Doug Kauffman- and Terry Williams and proved to me to be the persons whose names are subscribed to the within instrument, and acknowledged to me that they each executed the sazne in their respective authorized capacities as President and Secretary of the Kalispell Golf Association, a Fontana not for profit corporation. I1V WITPIESS WHEREOr-, I have hereunto set my hand and affixed my official seal the day and-year..hereinabove first written. µ 3Q r . B' r 7-.a E , Printed Name: n Gi NOTARY PUBLIC for the State of Montana Residing at: 0-t }mow u.� -4:�L- - f My Commission expires:_ 0(''2- i - zo 1 o Em -" ff 699 MAP WITH TILM SUB-KECT Pp,77MjsES oUT:yjBqr, D� P ARU i \ I 1111111111 Jill 111111111111111111111111111111 Jill 200900033418 Page; 8 of 14 Fees: $98.00 Paula Robinson, Flathead County MT by I'M 12/3/2009 2:58 PIA NORITHPORTIOIL OF TI-Mi OLD LA-17TRENCE, PARK a Ut.'S xh—Uspr, Z611F �COUR92 CovmeneFna *z tho $34 corncz of the flater Dopea watenanea SuIldirg Im Lavroacv F-Rrha khanco H W 0: 56 feat to two gig rg"G p-jener 69 Ow Vats? Dept. site b Lawrence Park, Dheace v 68, YO on and along tE a existing fence line 50 fete to a polaga gkame N 10' E ea aid along tPo avlating Unto line 243 fa�og to the point of beginning of the faftea lim, rclocstfon' ebance along the f4xo�LIng coursco. 1� 20" 9� 290 fact* ifJ, W, 190 feoe3 N 88, U� A? fact, n 29' tfp 203 feet: co a polv1 on the Lou Vata� Linn of the sttllvatar luver, &aid point on Cho Law vatoo Liao or the Stillvater Klvee 5afup' C210 end Of the Bence line Low Vatoz. Lino 09 0 NMg A.0 bearing-- L—.ra obtained through th,, usa De a Nisid toa!pass, A-11 infomatioa heg'eO2 vas obtained Ga Rove2�bcL is, 1987, Point Of Beglnnfng' Of Fence T'Ina palocatIOR z seetian Of Pence Be RSooved pf.ze Fence Comer fatat 50 FT'-& Vapka Site In Lavretice Part-, Point On Fenno W-no, t, s Corner patee Dept, 17 r nain"nance BU31dIng'Ut 1 1--umlea pzzt: w 200900033418 Page: 9 of 14 Fees: $98.00 Paula Robinson, Flathead county MT by NW 12/3/2009 2:58 PM ZXMIBIT 46C99 Formula for Calculating Annual Lease Payments I In determining lease payments the parties shall utilize a rolling average of "Gross Receipts" over the previous three years in calculating the lease payment for a particular year. 2. A minimum base lease payment $13,000 shall be payable so long as the rolling average of "Gross Receipts" as defined under section 3 of the Agreement do not exceed $750,000.00. 3T. in the event the rolling average of "Gross Receipts" exceed $750,000.00 but do not exceed $850,000.00, the Lease Payment shall be two percent (2%) of said "Gross Rcceiipts". 4. In the event the rolling average of "Gross Receipts' exceeds $850,000.00 the Lease Payment shall be two and one-half percent (2 1/2%) of said "Gross Receipts". Example: Rolling Average Level I Level 2 Level 3 Gross Re, -venue Base Lease $0 — $750,000 $13,000 $750,001 — $850,000 $850,000 - 2% 2.5% 200900033418 111111111 IN I III Page; 10 of 14 Fees: $98.00 Paula Robinson, Flathead County MT by NW 12/3/2009 2:58 PM W Exhibit "D" Buffalo Hill Golf Course 2009 Schedule of Fees *Membership (Season Pass) 2009 2008 Adult — All 27 holes $659 $599 Adult — Cameron 91 $499 N/A Student (Full -Time College) $225 $225 Junior (High school Senior and below) $150 $140 * * Green Fees 18 Hole Championship Course $ 53 $50 9 Hole Cameron Course $22 $20 *Above adult season pass rates reflect "regular season" -prices. An "early bird" discount rate was offered in 2008 of $499, and $549 in 2009. In addition, a separate "capital fee" of $125 was assessed to each adult member **Above Green fees reflect peak season rates. Discounted rates offered to allow for non -peak conditions, promotions, and package rates. In addition, (not reflected in the fees above) a $5 capital fee is charged for each 18 hole green fee on the Championship 18, and a $3 capital fee is charged for each 9 hole green fee. 200900033418 Paqe:1101`14 Paula Robinson, Flathead COuntV MT by f,,w Fees: $9s.00 12/3/2009 2:5s pfj 11 page: 12 of 14 i h tlNd �2f3/2009 2:58 PM Rasta obinsat r riati County Y Ex—hibnt fiGE" Kalispell Golf Course multiple Use policy The Kalispell Golf Association! (KGA) leases the golf course from the City of Kalispell for the purpose of providing the best possible golfing conditions for its paying members and guests. As a result, the KGA and the City of Kalispell must be responsible for controlling access to the golf course for both golfers and non -golfers. Personal safety is highest priority. Golfer Access: I. Golfers are allowed on the course only during "open tee time" periods as posted in the Clubhouse Rational: There are predictable periods of time when the course is closed for maintenance; consequently, there are no "open tee times" during these periods of time. 2. Golfers are allowed on the course when the course is safe and ready to play as determined by the Golf Course Maintenance Staff. Rational: There are environmental conditions that occasionally occur that result in the closure of the course. For example, heavy rains can cause dangerous soil conditions for golfers and traffic during saturated soil conditions, resulting in soil compaction, which is detrimental to the playability of the turf. Frost covered turf con die if traffic is allowed; consequently, the course is closed until the frost melts. Nigh winds can result in dangerous debris and hazardous trees on the course; consequently, the course maybe closed until the dangerous conditions have been corrected. The Goff Course Maintenance Staff is responsible for making the course playable, and as a -result, making the determination when the course is safe to play, 3. Golfers are net allowed on the course w1•nen lightning is in the area, as determined by the Pro Shop Staff. Rational: Lightning kills golfers every year. The Pro Shop Staff will do it best to close and clear the golf course when lightning is threatening. The Pro Shop Staff will also determine when the lightning appears to have left the area, and then re -open the golf course for play. 4. Golfers are not allowed on the course during the nighttime hours when the course is It open for the season." Rational. The golf course is irrigated during the nighttime hours. The golf course irrigations system operates at high pressure (up to 120 PSI). Anyone hit by this high-pressure. High -velocity water can sustain significant injury and possibly even death, consequently, the course is closed to non -golfers during the nighttime hours when the course is "open for the season. " Buffalo dill Golf Course has significant elevation changes throughout its grounds, and the limited light during the nighttime hours can impair one's ability to accurately judge the terrain, consequently, the course is closed to non -golfers during the nighttime hours and when the course is "open for the season. " 12 S. Golfers s are not allowed aiii the course when the course Is "closed for the sealsan" as deter n -a ni ed by the General Manager. Rational: Once the course is "closed for the season," other non -golfer activities begin such as jogging, sledding and skiing. These non -golfers are not aware of the risks golf balls pose and will not be prepared to look -out for flying golf balls; consequently, when the course is closed for ehe season, golfers may not play on the course. 1. Non -Golfers activities such as jogging and glldn course is "cussed for the season,," subject to hours governing city parks, generally open at 6e00 a.m. and cussed at 11.00 p.m. Rational: Mon -golf ng activities such as walking and jogging are encouraged when the golf course is closed for the season, and during hours consistent with other City of K_olispell parks, 2. Skiing and sledding is encouraged when adequate snow cover exists as determined by the Golf Course Maintenance Staff. 3. Non -Golfers are not allowed on the course during the daylight hours whDen^># the course is "open for the season. Rational.- Golf balls have been clocked at over 150 mph, and typically land with a velocity of over 50 mph, consequently, flying golf balls pose a significant danger to non -golfers who may stray into landing zones. 4. No n-Golfers are not allowed on the course during the nighttinne Fours when the course is "aspen for the season." zational: The golf course is irrigated during the nighttime hours. The golf course irrigations system operates at high pressure (up to 120 PSI). Anyone hit by this high pressure, high -velocity water can sustain significant injury and possibly even death; consequently, the course is closed to non -golfers during the nighttime hours when the course is "open for the season. "Buffalo Hill Golf Course has significant elevation changes throughout its grounds, and the limited light during the nighttime hours can impair ones ability to accurately judge the terrain, consequently, the course is closed to non -golfers during the nighttime Hours and when the course is "open for the season, " 5. Non—GolfersNon-Golfers :re not allowed on the course when frost coveredconditions even when the course o o . Rational: Frost covered turf con die if traffic is allowed; consequently, the grounds are closed to all traffic until the jrost melts as determined by the Golf Course Maintenance Staff. Rational: Skiing and sledding can cause damage to the turf when there is inadequate snow cover, consequently, the course will be closed to skiing and sledding during periods of limited snow cover as determined by the Golf Course Maintenance Staff. 4411 11 ((tt 13 gg III t��Ii Ill 1111111111I 200000033418 Ill I +++ Paula Robinson, Flathead Coup Paees: ge: 13 �93.014 tX l�`iT b� Ni^J F06 12/3/2009 2:58 PM e Consistent vfth othker pubUle gaff courses 'n area, dogs are not al°wwed oin th-e Rro nds at 7 time whether with oIifers .rational: For purposes of liability and safety of pedestrians, dogs are not allowed on the golf course at any time, additionally, fecal deposits pose significant health -risks to skiers and sledders as well as for the Golf Course Maintenance Staff during the turf maintenance seasons, Damage to turf is also a. common result of dog waste. Finally, like a baseball field or football field, golf course turf is intended for a specific use, as such, dogs and their waste do not belong on the golf course because both can negatively impact the competition. This policy is for the benefit and welfare of both the goring and non -goring community. Violations are subject to public ordinance, which may result in fines or other penalties. I I I III II Il 11191111 111 1111111 111 111 11111111111111111 f111 f i141Mi 111 200904834148 Paula Robinson, Flathead County MT by KIW 12/3/2009 2:58 Pt 4 N N @ I C? 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OM tO <i•h (fl U') (D O(OM TN () >>>'p• 'a'o G MM M(O M M CD CD 0) 4) 'O .,'9 U- LL LL rn U) U) U) O d' �- --t 0) -ItU) O .- �- — c- LO h E N 'o N U ca 6) i O E U 0 U) E c 2 rn E U m N UU ®i co, (J O OO OON N a) �OOONNO V O O U a) NN�MMMM p) CNN _ NNE O �� NNN��N Q (�Nm cG tz E tz tz iz N- C N U rN E C Q t)i\�-Mif) aN� O M 0) M — (S5 (� ;� Ln LO LO Ln In cv Y' a) (n -t 4 rr -t r Lo O M G o c a- U E< a Z o a �) C( to -0 E a m o s w a`) c E ro t6 o a(Z °6 U) U) Q W CL U O C> (D C\j Cl)ELo i (4 (i5 (CS C6 (2 � y (n N (n N W rr N U N C N N U N CL E E E E 0 E O 0 O O U E O a) 7 0 M M M M M M O M N J 0 0 0 0 �® 0 { O r co O O _� -Fa _� _ N U N _ N _ N _ N _ N _ N 0 ro (6 N N N O M ro M ro M ro M ro M ro coCD N N O N In O N O in O Lt) O cm, a) O mmLO m(DCD(D(D P? Colo mmm m mmmmmo] Cn(D ®! F- � FINANCIAL STATEMENTS AND INDEPENDENT AUDITORS' REPORT KALISPELL GOLF ASSOCIATION DECEMBER 31, 2011 AND 2010 Certified Public Accountants and. Business Advisors PAGE INDEPENDENT AUDITORS' REPORT....................................................................... 1 Statements of Financial Position................................................................................ 2 Statements of Activities.............................................................................................. 3 Statements of Cash Flows........................................................................................... 4 Notes to Financial Statements................................................................................... 5-9 SUPPLEMENTARY INFORMATION Statements of Activities by Department .............................. s4r, ys _4 Junkermier • Clark Campanella • Stevens • P.C. Certified Public Accountants and Business Advisors INDEPENDENT AUDITORS' REPORT To the Board of Directors Kalispell Golf Association Kalispell, Montana 44 2nd Ave. West P.O. Box 518 Kalispell, Montana 59903 ph: (406) 755-3681 fx: (406) 755-6661 www.jccscpa.com We have audited the accompanying statements of financial position of Kalispell Golf Association, a Montana nonprofit corporation, as of December 31, 2011 and 2010, and the related statements of activities and cash flows for the years then ended. These financial statements are the responsibility of the Association's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Kalispell Golf Association as of December 31, 2011 and 2010, and the changes in its net assets and its cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America. Our audits were performed for the purpose of forming an opinion on the basic financial statements of Kalispell Golf Association taken as a whole. The statements of activities by department are presented as supplementary information for the purpose of additional analysis and are not a required part of the basic financial statements. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, is fairly stated in all material respects to the basic financial statements taken as a whole. Junkermier, Clark, Campanella, Stevens, P.C. March 21, 2012 1 Bozeman • Great Falls • Hamilton • Helena • Kalispell • Missoula • Whitefish ASSETS CURRENT ASSETS Cash Accounts receivable Inventories Prepaid expenses PROPERTY AND EQUIPMENT, NET OTHER ASSETS Deferred compensation account TOTAL ASSETS LIABILITIES AND NET ASSETS CURRENT LIABILITIES Current maturities of long-term debt Accounts payable - trade Accrued expenses: Property taxes Other City lease Salaries and wages Deferred compensation payable Gift certificates Deferred revenue LONG-TERM DEBT, LESS CURRENT MATURITIES NET ASSETS TOTAL LIABILITIES AND NET ASSETS See Notes to Financial Statements 2 2011 $ 329,203 127,634 49,948 4,243 511,028 2,223,183 9,000 $ 2,743,211 $ 27,231 27,816 5,374 1,462 16,780 41,045 9,000 47,757 214,909 391,374 548,355 1,803,482 $ 2,743,211 2010 $ 154,781 41,640 52,425 1,290 250,136 1,912,600 9,000 $ 2,171,736 $ 23,242 11,884 2,790 287 23,157 487 9,000 40,126 100.783 211,756 1,959,980 $ 2,171,736 REVENUE, GAINS, AND OTHER SUPPORT Revenue Interest income Gain (loss) on disposal of assets COST OF SALES GROSS PROFIT EXPENSES Association Pro shop Restaurant Bar Driving range Grounds CHANGE IN NET ASSETS NET ASSETS - ENDING See Notes to Financial Statements 3 2011 2010 $ 1,835,495 $ 1,909,524 689 3,081 500 1,500 1,836,684 1,914,105 302,814 312,803 1,533,870 1,601,302 709,344 667,659 55,831 53,022 194,617 188,183 91,389 89,354 23,898 6,041 615,289 602,719 1,690 368 1,606.978 (156,498) (5,676) 1,959,980 1,965,656 $ 1,803,482 $ 1,959,980 2011 2010 CASH FLOWS FROM OPERATING ACTIVITIES Receipts from members, customers, others, and all sales, income, and support $ 1,871,947 $ 1,887,467 Merchandise purchased (300,337) (298,643) Interest (12,375) (4,168) Labor costs (783,966) (739,872) Operating expenses (567,306) (622,264) NET CASH PROVIDED BY OPERATING ACTIVITIES 207,963 222320 CASH FLOWS FROM INVESTING ACTIVITIES Purchase of property and equipment (586,385) (242,973) Proceeds from sale of property and equipment 500 1,500 NET CASH (USED) BY INVESTING ACTIVITIES (585,885) (24L473) CASH FLOWS FROM FINANCING ACTIVITIES Principal debt payments (32,020) Proceeds from borrowing 584,364 NET CASH PROVIDED (USED) BY FINANCING ACTIVITIES 552,344 NET INCREASE (DECREASE) IN CASH CASH - BEGINNING OF PERIOD CASH - END OF PERIOD CASH FLOWS FROM OPERATING ACTIVITIES Change in net assets Adjustments to reconcile change in net assets to net cash provided (used) by operating activities Depreciation (Gain) loss on disposal of property and equipment (Increase) or decrease in: Accounts receivable Inventories Prepaid expenses Increase or (decrease)in: Accounts payable Accrued expenses Gift certificates Deferred revenue NET CASH PROVIDED BY OPERATING ACTIVITIES See Notes to Financial Statements 4 174,422 154,781 $ 329,203 $ (156,498) 275,803 (500) (85,994) 2,477 (2,953) (63,006) (63,006) (81,959) 236,740 $ 154,781 $ (5,676) 257,203 (1,500) 56,677 14,160 5,958 15,932 (19,498) 37,939 (2,989) 7,631 3,051 114,126 (84,866) $ 207,963 $ 222,520 NOTE 1 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Organization The Kalispell Golf Association (the Association or KGA) is a Montana nonprofit corporation formed to operate and manage the Buffalo Hill Golf Course in the City of Kalispell, Montana. The Association is governed by a board of directors elected by the members. It is recognized by the IRS as a Section 501(c)(4) organization. The Association is supported by member dues and fees paid by approximately 1,000 members and their guests. Revenue is also derived from the operation of a restaurant and bar, golf pro shop, rental of carts, and green fees paid by non-member players. Basis of Accounting The financial statements are prepared using the accrual basis of accounting. Use of Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that effect certain reported amounts and disclosures. Accordingly, actual results could differ from those estimates. Cash Equivalents For purposes of reporting cash flows, the Association considers all highly liquid instruments with original maturities of three months or less, not subject to withdrawal restrictions or early redemption penalties to be cash equivalents. As of December 31, 2011 and 2010, the Association had no cash equivalents. Accounts Receivable All accounts receivable are considered fully collectable as of December 31, 2011 and 2010. Therefore, there is no allowance for doubtful accounts. Inventories Restaurant and bar inventories are stated at cost utilizing the first -in, first -out method. Pro Shop inventory is valued at the average cost of each item on hand. Deferred Revenue The Kalispell Golf Association provides discounts for prepayment of annual membership fees. Prepaid membership and cart fees collected for the future year are recorded as deferred revenues. Uninsured Cash Balances The Kalispell Golf Association maintains cash balances at Glacier Bank FSB, Kalispell, which are federally insured up to $250,000. At certain times of the year, the insurance limits may be exceeded. 5 NOTE 1 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Tnenme Taxes Kalispell Golf Association has been approved as a tax exempt organization under Internal Revenue Code Section 501(c)(4). Accordingly, no provision for income taxes is made in the financial statements. However, the Association can be taxed on certain unrelated business income. The Association has net operating loss carryforwards totaling approximately $71,454 to offset future federal taxable income. Portions of these carryforwards will expire annually through the year 2028 for federal purposes. Realization of deferred tax assets is dependent on future earnings, if any, the timing and amount of which is uncertain. Accordingly, a valuation allowance, in an amount equal to the net deferred tax assets as of December 31, 2011, has been established to reflect these uncertainties. The deferred tax asset before valuation allowance is approximately $10,718 for federal purposes. Effective January 1, 2009, the Company implemented the new accounting guidance associated with accounting for uncertainties in income taxes. The income tax years of 2008 to 2010 remain open to examination by the federal and state taxing authorities. Property and Equipment The cost of property and equipment is depreciated over the estimated useful life of the related asset. Depreciation is computed by the straight-line method. Maintenance and repairs are charged to operations when incurred. Betterments and renewals are capitalized. NOTE 2 -- LONG-TERM DEBT On August 16, 2011, KGA executed a note with First Interstate Bank for capital improvements to the golf course in the amount of $584,364. Annual payments of $55,470, including interest at 5%, are to be made beginning September 16, 2011, with a maturity date of August 16, 2026. The note is secured by the equipment owned by the Association. C9 NOTE 2 -- LONG-TERM DEBT (CONTINUED) Future principal payments on the note are as follows: 2012 $ 27,231 2013 28,706 2014 30,174 2015 31,718 2016 33,276 Remainder 424,481 Total $ 575,586 NOTE 3 -- LEASE PAYABLE A lease with the City of Kalispell was executed December 2, 2009, covering the land and other property owned by the City for a term of 20 years. KGA shall pay, to the City of Kalispell, annual rents based upon "Gross Receipts". Gross receipts include: a) Operation of the driving range b) Membership fees (season passes) c) Green fee punch cards and other green fees The parties shall utilize a rolling average of "Gross Receipts" over the previous three years in calculating the lease payment for a particular year. A minimum of $13,000 is stipulated. For the years ended December 31, 2010 and 2009, KGA's lease percentage was 2.5%. The lease percentage is as follows: $0 - $750,000 $750,000 - $850,000 $850,000+ Rolling Average Gross Receipts Rolling Average Gross Receipts Rolling Average Gross Receipts 7 $13,000 2.0% 2.5% 1. � . ✓F � �� F c � z 4 4 �_let NOTE 4 -- PROPERTY AND EQUIPMENT The additions and disposals of property and equipment during the years ended December 31, 2011 and 2010, are as follows: Furniture and fixtures Machinery and equipment Leasehold improvements: Buildings Golf course Total Property and Equipment Accumulated depreciation Net Property and Equipment Furniture and fixtures Machinery and equipment Leasehold improvements: Buildings Golf course Total Property and Equipment Accumulated depreciation Net Property and Equipment NOTE 5 -- RETIREMENT PLAN Balance Balance 1/1/2011 Additions Disposals 12/31/2011 $ 78,730 $ 4,533 $ (1,527) $ 81,736 1,473,859 55,738 (40,607) 1,488,990 542,699 - (1,703) 540,996 3.138,767 526,114 - 3,664,881 5,234,055 5,776,603 (3,321,455) (275,803) 43,838 3 553 420) $ L911600 $ 2,223,183 Balance Balance 1/1/2010 Additions Disposals 12/31/2010 $ 84,966 $ - $ (6,236) $ 78,730 1,409,541 109,116 (44,798) 1,473,859 519,781 22,918 - 542,699 3,027.827 110,940 - 3,138,767 5,042,115 5,234,055 (3,115,286) (257,203) 51,034 3 321A55) $ 1,926,829 $ 1,912,600 In the year ending March 31, 1999, KGA established a non -qualified deferred compensation plan for the club manager. The plan assets are owned by KGA and held for the benefit of the enrolled employee. In order to avoid current income taxation on the deferred compensation, the manager has no rights in the plan assets other than those of a general creditor. No contributions to the plan were made for the years ended December 31, 2011 and 2010. E1 al WIX AffiffWK413 gi ; R F m:;: 3�►�Ijilm i7►%Ilj[I NOTE 6 -- BOARD RESTRICTED NET ASSETS Unrestricted net assets include amounts that have been designated for cart shed repairs and capital improvements by the Board of Directors. 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