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SR-062408-1H~~ City of Santa Monica City Council Report City Council Meeting: June 10, 2008 Agenda Item: ~'_' ,~' To: Mayor and City Council From: Barbara Stinchfield, Community and Cultural Services Director Subject: Concession Agreement for Annenberg Community Beach House Recommended Action Staff recommends that City Council authorize the City Manager to negotiate and execute a Concession Agreement with Fred Deni and James Christel for the food. service and beach equipment. rental concession at the Annenberg Community Beach House at Santa Monica State Beach. Executive Summary As part of the new Annenberg Community Beach House project, a new ten-year contract to operate the food services (including cafe and take-out service) and new beach equipment rental concession was bid under terms previously approved by City Council. A Request for Proposals (RFP) was issued on March 17, 2008 requiring a minimum annual rental bid of $100,000 and percentage of gross sales bid of at least 10%, five years of comparable experience, and the capacity to fund improvements and operations. A total of three proposals were received by the deadline of May 5,.2008 and each was evaluated based on the minimum requirements and the criteria previously approved by City Council. Based on the proposer's extensive experience, responsiveness to and compatibility with the City's goals for the site, commitment to affordable pricing, and the capital improvements proposed, staff recommends Fred Deni and James Christel be awarded the concession contract. The proposed rent equals the minimum requirements of the RFP. During the first year of operation, the percentage rent only will be charged. Based on conservative revenue estimates, the contract is expected to generate approximately $93,499 in revenue in FY 08/09 and $138,537 in FY 09/10 consistent with the FY 2008-09 Budget. Background The concession services to be provided at the new Annenberg Community Beach House include operation of new beach equipment rentals as well as the cafe and take- out food service. The City's Management Agreement with the current operator of the cafe, Fred Deni, expired in 1991, and operation has continued on a month-to-month 1 basis. The existing contract requires a minimum monthly rent of $4,000 or 10% of gross receipts, whichever is greater. As part of the adaptive reuse of the entire site, on J~ 24, 2007 the City Council approved a new, ten year concession agreement, including the beach equipment rentals and food service, to be offered at a minimum annual rent of $100,000 or 10% of gross receipts, whichever is greater. On November 9, 2007, the State approved the minimum terms of the new proposed agreement in accordahce with Public Resources Code 5080.20. On November 27. 2007, Council approved the criteria to be used to evaluate proposals received in response to the City's Request for Proposals for the Beach Cafe and Equipment Rental Concession (RFP) that was the issued on March 17, 2008. The following criteria, not necessarily listed in order of importance, were used to evaluate proposals. The City reserved the right to weigh the evaluation criteria in any manner it deemed appropriate. • The scope, extent, applicability, and quality of proposer's experience, particularly with regard to the development, management, and operation of comparable food service facilities. Preference will be granted to high-performing, incumbent concessionaires. • The extent, appropriateness, and quality of proposed improvements. Proposed improvements will be evaluated based on the extent to which they address required health codes, contribute to the desired visitor experience and are consistent with the other physical and operational aspects of the site. • Financial resources, history, and references of the proposers) and the financial feasibility of the operation as proposed. Preference will be given to Small Businesses as defined by California's Small Business Certification program. Compatibility of the proposed operation with the site and the proposer's demonstrated understanding of and commitment to the City's goals for the site. • Quality and feasibility of proposer's food service plan and commitment to healthy food standards. Competitiveness, appropriateness, and feasibility of proposer's rental bid. Bids will be weighed against the quality of services and capital improvements proposed. Thus, the rental bid of those proposers who commit to the highest standards of food 2 quality and/or facility improvement will be weighted when compared to proposers who offer only moderate standards. Notices of the RFP opportunity were placed in the Los Angeles Business Journal, the Santa Monica Daily Press, and on surfsantamonica.com. A direct mailing of notices was sent to approximately ten individuals or companies that had expressed an interest in the concession opportunity during the planning process. State Parks also distributed the notice to their prospective concessionaire mailing list of several hundred interested parties. The City issued a press release to all regional media and posted it on the City's Open Space Management and Annenberg Community Beach House web pages. The RFP, Sample Concession Contract, and all supplementary information were available to the public for free on the City's website. A total of 12 interested parties representing approximately four potential proposers attended a Bidder's Walk-Through on April 17, 2008. Proposals were due on May 5, 2008. Discussion In response to the RFP, the City received three proposals. An Evaluation Committee consisting of managing staff from Housing and Economic Development, Community and Cultural Services, and Community Maintenance evaluated each proposal based on the minimum requirements and the criteria approved by Council. One proposal was found by the Evaluation Committee to be non-responsive to the RFP as no financial terms or minimum bid were included. The remaining two proposers met the minimum requirements specified in the RFP and were evaluated based on the extent to which the proposals addressed the specified review criteria The proposal submitted by Mr. Deni and Mr. Christel is being recommended by the Evaluation Committee due to his 19 years of experience as a high-performing incumbent on the site; the commitment to fund necessary capital improvements to the facility; the ability to fund the operation; and the demonstrated and clear understanding of the City's goals for the site including provision of amenities for a wide segment of the public at affordable prices. In particular, the proposal committed to maintaining the 3 casual ambiance highly valued by the public in this location while still making upgrades to the kitchen and menu. The rental bid submitted by Mr. Deni and Mr. Christel met the minimum financial requirements of the RFP. Terms and Conditions The annual rent proposed by Mr. Deni and Mr. Christel for this concession contract is $100,000 or 10% of gross receipts, whichever is greater. The minimum flat rent of $100,000 is based on the assumption that the concessionaire will be able to operate during normal business hours throughout a contract year. Due to the on-going construction of the Beach House and because the beach equipment rental portion of the concession will not be open until three-quarters of the way through the first contract year, staff recommends that the minimum annual rent not apply during the first year of the contract and instead, only the percentage rent based on gross receipts be required. By requiring the percentage rent only, the City retains the ability to close portions of the site as necessary for construction throughout the first year of contract term without negatively impacting the selected concessionaire. In addition to the rental bid, the proposers have committed to completing $200,000 in capital improvements. Financial Impacts & Budget Actions The proposed FY2008-09 City Budget includes projected revenue of $93,499. Gross receipt projections for the cafe ($905,533) were calculated using an average of the gross receipts for last three years, minus anticipated closure time due to continued construction at the site, plus an anticipated 15% increase in gross receipts following opening of the Beach House in Spring 2009. In addition, three months of projected gross receipts from the beach equipment rental portion of the concession ($29,054), were estimated based on the gross receipts from other beach equipment rental concessions on Santa Monica State Beach. The budget estimate was based on the minimum required bid of ten percent of gross receipts. With full opening of the Beach House anticipated in April 2009, estimated revenue in FY 2009-10 was calculated at 4 $140,248. Based on the 10% rent proposed by Mr. Deni and Mr. Christel, the estimated revenue for FY 2008-09 and FY 2009-10 remain unchanged. Prepared by: Callie Hurd, Open Space Manager Approved: Barbara Stinchfield Director, Community and Cultural Services Department Forwarde to Council: P. mont well Ci Manager 5 Reference Contract No. 8940 (CCS).