A portion of the staff report presented to Council and approved on 4.13.09 follows…

1. Background: “The City contracted with Bully’s for the operation of the concessions for the 2008 season. The tenant improvements for the upstairs restaurant have not been completed, so the concessions were operated from the smaller downstairs concession area. Bully’s submitted a plan for future concessions that included remodeling the entire ground floor of the building to accommodate the restaurant for future years. It is their opinion that the tenant improvements were cost prohibitive in the area designed for the restaurant on the upper level. It is staff’s desire to operate the concessions on the upper level and keep the other building amenities in place on the lower level. The RFP was distributed in an effort to determine interest from other potential contractors to operate the concessions on both the upper and lower levels.”

2. Analysis: “Requests for proposal, RFP# 09/09-022, were sent to numerous businesses and also advertised locally. The bid opening was held on March 4, 2009 and two responses were received. The other response was from Bully’s Sports Bar, Inc., who is the current concessionaire at Golden Eagle Regional Park. Bully’s performed well during 2008 but their bid was less than half of what SES Nevada, LLC bid. SES is willing to invest in the tenant improvements to the upstairs of the building to turn it into the restaurant that the building was intended for. SES has committed to a $100,000 annual lease and Bully’s offered $2,000 during the off season and $4,000 during the heavily programmed months. SES will operate the downstairs concession until the upstairs tenant improvements can be completed. The lease amount will be in lieu of City of Sparks’ business license fees.”

Upon assigning the current concession agreement in 2009, SES Nevada, LLC was in the process of a name change and is now SBAL, LLC. Per item 5 TERM OF AGREEMENT: …..Contractor shall provide written notice to City at least 120 days prior to the end of Term or first option period, as applicable, of its exercise of this option to extend. SBAL, LLC representative, Jack Sterling submitted a written request dated February 28, 2014 to modify the Agreement for Golden Eagle Regional Park Concession Services (#A-3762). This request was received within the 120 day window specified above. SBAL, LLC agrees to exercise their right to extend the existing agreement from the initial five year term into the first option of an additional five years with the proposed financial change in the last bullet point in the analysis below.

• Red’s Golden Eagle Grille is not a typical restaurant business model with its location being in the center of a regional sports complex.

• Per the written proposal from SBAL dated 2.28.14 (attached for your reference)

1. Decrease monthly rent from $8,333 to $4,000 ($99,996 to $48,000 annually)

2. Increase from 6% to 8% of annual sales in excess of natural breakpoint

• Per the phone conversation with Jack Sterling on 5.8.14

1. Proposal includes a relative decrease in the natural breakpoint from $1,666,667 to $600,000.

• Initial decrease of $52,000.00 annual rental revenue to the City of Sparks.

• SBAL Gross Sales review based on filed tax returns

1. 2010 $207,037 Not a complete year, Certificate of Occupancy was issued for the restaurant in March, 2011

2. 2011 $415,874 $208,837 increase, restaurant opened in April, 2011

3. 2012 $454,881 $39,007 increase

4. 2013 $552,000 $97,119 increase based on estimated sales given at meeting on 4.21.14 (2013 tax return extension request filed)

• SBAL does not pay for utilities, commons or exterior maintenance.

• City pays approximately $24,000.00 per year for utilities (electricity/gas/water)

• City of Sparks has never received the 6% of annual sales due to SBAL’s inability to reach a natural breakpoint of $1,666,666 as spelled out in the initial concession agreement.

• $2/SF is the going rate if the tenant is paying for utilities, commons & exterior maintenance.

• Current rental rate of $8,333/3,600 SF = $2.31/SF

• Proposed rental rate of $4,000/3,600 SF = $1.11/SF

To summarize, it is anticipated that the Red’s Golden Eagle Grille at the Golden Eagle Regional Park will reach its newly adjusted natural breakpoint in the next year or two. The concession agreement can expire in July with no tenant to move in or it can continue in a more realistic business model with the proposed financial amendments.

1. Council may accept proposal

2. Council may deny proposal

3. Council may suggest a counter offer to proposal

4. Council could seek any of the alternatives above or direct staff to reopen the process and solicit new responses. If the latter were to occur, the current lease would expire on 7.12.14 and the building would sit devoid of an operator and equipment until a new operator is secured through an RFP process. This would be bad timing in the middle of the tournament season.