... Ultimate goal: Choosing Mount Hood's management while avoiding a suit
On May 22 the Park Commission met under the direction of Sue Lawson Cann, its chairperson, in an extra session to select legal counsel to help develop the bidding document that will be used in selecting a management company that will operate the Mount Hood Golf Course for the next four years. This law firm will also be expected to offer guidance to the Commission during the selection process itself.
After listening to three applicants, whose firms had been selected for their background in dealing with municipal legal matters, the Commission selected Garrity & Knisely, a Boston law firm. This firm’s experience was especially appropriate; it had served as counsel to other municipalities involved in golf course bidding procedures like the one now facing the Commission.
The bidding process floats on a sea of legal apprehension. In the 2002 bidding one of the losing bidders, citing alleged faults in the process, sued the City when the contract was awarded to a competing bidder. In a settlement involving confidentiality the City was obliged to pay the suing bidder $320,000. The amount was paid out over three years from revenues produced by the golf course.
Chairman Sue Cann.
It is not unusual for unsuccessful bidders to file lawsuits against bid issuers. Some of the law suits have been big ones. The City of Beverly when selecting a management company to operate its municipal golf course ended up paying one of the bidders $400,000 in an out-of-court settlement.
In an effort to eliminate any such eventuality occurring again at Mount Hood, the Commission appointed a sub committee made up of Nick Gove, who works for the City as the Superintendent of Mount Hood and Public Open Space, Mike Interbartolo and attorney Bill Gardiner. The last two, like other members of the Park Commission are unpaid. It was the job of these three to select and contact legal firms who would be considered for the job of legal counsel. The process was concluded on May 22nd with the selection of Garrity & Knisely by the Commission.
Hiring a legal firm points out the critical challenge facing the Commission. It must select a management company capable of producing the revenue necessary to operate the course and do so without getting the City sued in the process.
Parks superintendent Nick Gove.Garrity & Kinsley’s first job will be to work with the Commission to write a document called the Request for Proposal, or RFP, that will be used for the bidding. Bidding is a term that usually implies a system used to attain the lowest price. Price is not the significant issue with the Mount Hood bid. What’s more important is the ability, experience and background of each bidder. Evaluating these issues involve qualitative judgments which are more difficult to form than determining who’s got the lowest price.
The City bids the business by stating in the RFP how much it will pay for the management services that it requires to operate the golf course. In formal presentations, each applicant presents the reasons why he will be the best one to do it. The RFP includes other issues, like incentives for producing higher revenues and expectations for running the food services and pro shop.
According to its Preliminary Schedule issued on April 22, the Commission hopes to make a final selection from the management applicants by November 15. Superintendent Gove said that the Commission is looking for a seamless transfer from the incumbent company to its successor if, in fact, a new management company is selected. The Commission is behind its schedule which cites May 9 as the date for selecting legal counsel.
It would not take a cynic to say that at the heart of the selection process is money, big money. The Mount Hood Golf Course is a multi-million dollar facility. The once circulating notion that Mount Hood is a goofy little, poorly maintained golf course catering to an easily-satisfied eccentric clientele who would tolerate anything to play golf is long outdated.
In a statement issued by the Park Department which notes its numbers are preliminary and unaudited, total revenue produced by the golf course in 2006 was $2,047,236. Of this, $1,378,624 was produced by memberships and fees from golf and golf cart rentals. Another $142,790 was from sales at the Golf (Pro) Shop and $525,822 from Food Service which includes the Snack Bar and meals served in the function hall.
Commisioner Mike Interbartolo.
This $2 million plus revenue is paid entirely to the City into what is called the Enterprise Fund. This fund then pays the management company for its services including Golf Shop and Food Services obligations according to the terms of the RFP.
The portion of the $2 million plus revenue after these commitments are paid is retained in the Enterprise Fund. It includes 10% of Food Service revenues and 8% of Golf Shop revenues. For the 2006 season this amounted to $597,592. This money was used to pay the course’s expenses, repairs, improvements and other costs associated with running the course.
What should be noted is that the total revenues that go into the Enterprise Fund must be adequate to cover course operations. To put it another way, after the City meets is contract obligations, enough must be left over in the Enterprise Fund to pay the City’s other obligations necessary to run the course.
Commissioner Bill Gardiner.Some of these expenses are significant. The 2007 budget cites obligations of bond payments of $165,000 for principal and interest. This includes the bond to repair the damage done to not only the golf course but the adjoining park as a result of the infamous Big Dig landfill dumping fiasco. The City cited the Mount Hood golfers as the ones who would pay for the entire $1.7 million bond necessary to repair the damage to both the park (where most of the damage was done) and the course. The financial pressure was reduced significantly when, last year, Mayor Rob Dolan applied a State grant of $500,000 to the damage bond reducing it to less than $1.2 million. Another thing that helps is that interest payments are calculated on the unpaid balance of the bond. Principal payments steadily reduce the bond obligations which mean that interest payments are calculated on a principal amount that shrinks each year.
A condition contained in the original grant that donated Mount Hood to the City stipulated that any money generated at Mount Hood must stay there. The City cannot arbitrarily take funds from Mount Hood. What it can do, and does do, is to charge the Hood for services it performs such as any special police, legal or financial services performed for the course; money produced at the course are golf revenues, not tax money.
Commissioner Bob Christiansen.
The Commission has achieved a significant objective by hiring a law firm to help with the selection of a management company. The Commission deserves high marks for its judgment to retain legal counsel to help with the selection process. It will be costly but it is money well spent. The millions of dollars now involved in the operation of the golf course shows clearly that the selection process has elevated in its complexity and consequences. It demeans no one to say that it has moved far beyond the background of a City Solicitor and a group of volunteers appointed by the Mayor.
There’s a long way to go before a manager is selected on November 15. Some interesting issues have yet to be settled. For example, how many management companies will apply to be included in the bidding process? What’s up for grabs now is a pristine, well-run golf course that has successively increased revenues every year during the current contract period This situation should produce more applicants than did the damaged, heavily-in-debt Mount Hood Golf Course that was the subject of the bid last time. More candidates should show up…with their lawyers. It’s gonna be interesting. Stay tuned.
IN an UPCOMING ISSUE of the Mirror!… read what happened the last time a management company was selected for Mount Hood. With its back to the wall the Commission makes a choice!