Scrutinize Every Detail — Part One
The sad part about Joe Felz’ retirement is that running over a tree, while likely under the influence of alcohol, might have actually improved his legacy as City Manager. How is that possible? Easy. The tree incident is a convenient distraction at an optimal time. Except for the anonymous letter penned by City employees a couple weeks ago, few people are talking about his actual job performance which deserves just as much scrutiny.
One of his biggest failures is that he not only tolerated, but actively participated in deceiving the public through various means, be it omission, obfuscation, or just outright lying to people. He wasn’t crafty about concealing it either – agenda letters and staff reports sent to the City Council and others were chock full of half-truths, non-truths, and other nonsense designed to mislead the public.
I think we ought to be forgiving in the case of legitimate mistakes or typos. None of us are perfect, so transposed digits, or maybe a missing word here or there, isn’t the end of the world provided it doesn’t materially influence a decision. The point where it ceases to be a “mistake” or “typo” and, thus, becomes completely unacceptable, is when people offering up this information stick to their guns and defiantly defend such errors as being gospel.
In case you missed the last installment of the Brea Dam fiasco, one point of contention concerning the golf course was converting the Lease to a Management Agreement with American Golf.
Parks and Recreation Administrative Manager Alice Loya went before the City Council in November 2010 and said American Golf would receive a $500,000 “Management Fee” with 1% annual increases. Minus payment to a couple American Golf managers, this constitutes guaranteed profit to American Golf, a perk they never enjoyed in the past.
Ms. Loya offered the following Powerpoint slide which affirmed the $500,000 figure:
Guess what? The Management Fee actually began at $670,000 – not $500,000 – as depicted by the signed agreement, below:
Surely they will admit to their mistakes and set the record straight, right?
When I first went public with the problems at the Brea Dam, the Fullerton Observer tossed some softballs at Parks and Rec Director Hugo Curiel, who offered up this response:
Hugo Curiel conceded I was correct without saying it. $58,000 multiplied by 12 months is $696,000 – very close to the real amount paid out in FY 14-15. Since there were numerous unresolved issues, the Parks and Recreation Commission took up the Brea Dam matter a bit further.
Two months after the Fullerton Observer article was published (above), a presentation was prepared by Hugo Curiel / Alice Loya for the January 11, 2016 Parks and Rec meeting that reverted back to the incorrect $500K figure. No joke – you can’t make this stuff up!
In the very next slide, they changed their mind again and said the AGC Management Fee “Payment” was $587,000 in FY 2014-15.
Hugo and Alice came back at the March 14, 2016 Parks and Rec meeting with yet another version in the staff report. This time, the management fee was $500K with the American Golf management salaries ($170K) being a separate item. Strange how that distinction is not noted anywhere else!
By the way, the City’s accounting ledger for the Brea Dam Fund showed a total Management Fee pay out of $694,328.40 in FY 2014-15.
For anybody keeping track, Parks and Rec claimed the actual amount was $500,000 three different times, $587,000 another time, $500,000 plus $170,000 in salaries a different time, and approx $696,000 ($58,000 monthly) circa 2015 just once.
That’s six answers and only the last one had any semblance of truth to it.
No matter what you call this, be it misrepresentation, dishonesty, outright lying, or whatever you want, the City is on the hook for an additional $2.7 million in guaranteed payments over the course of the 15 year agreement.
Facts are never their friends, and they will go to great efforts to defeat them.
To be continued…
Mr. Curlee, thanks for all your research on this. A couple of questions.
Are you saying that the management contract was needed to do the bond?
Was any of this the result of Joe Felz diverting revenue out of the Brea Dam “enterprise fund” and into the General Fund? Was this the result of trying obfuscate that activity?
Please elaborate.
The City made that claim AFTER getting approval for the bonds.
Money does leave the Brea Dam Fund and gets funnelled into other funds where it doesn’t belong. The Army is strict about revenue generated on their land being spent exclusively on their land, not other places throughout the City.
Felz & Co. seemed to believe that requirement was optional.
And the city doesn’t have pay anything to the Army Corps for the use of the land?
Correct.
Is revenue by city still 20% of AGC’s total gross revenue? Out of curiosity, do you know AGC’s net revenue from last quarter/year?
The City is no longer entitled to 20% of the golf and 8% concessions revenue. Felz replaced that requirement by doing just the opposite — guaranteeing American Golf $670,000/year regardless. The City gets whatever is left over, generally far less.
David,
Yes, you are right. I read the agreement. City pays for everything and get what is left, so is not a %. Very easy to understand. $670,000 is what AGC receives for the know-how management, which they have systematized because have long term experience from this one court and many others. AGC’s deal is better than before 2010. Gross receipts have increased since 2009-10 by $340,000, yet city’s profit has gone up only $104,000. The management fee ($670,000) is greater than city’s profit ($494,000). AGC knows its business very well and saw that the golf course profitability hardly could be greater than the set management fee and that they are protected from upcoming economic downturns.
If anyone knows the info above,please let us know. All of it in regards only to AGC”s Fullerton-not their other managed courses
These AGC dudes used to pay in the early 2000’s for utilities like water, electricity. Is city paying for all that now under the operating costs we see there? Is the bond money the”infrastructure ” money?
Yes, the City is on the hook for every expense American Golf once paid. Water, electricity, employee wages and benefits, insurance, golf carts, food, clothing and apparel inventory, tools, you name it.
OK, so Curiel and Loya are either incompetent or purposefully misleading about the payments.
If it was intentional, the question is “WHY?”
Was Felz just making a long term bet that the golf course business was going to boom? Because it’s really gone into the shitter since he made that call. https://www.bloomberg.com/news/features/2016-08-15/america-s-golf-courses-are-burning
Or was this just a way to borrow and move money around to cover up a shortcoming somewhere else? That seems very plausible. Please keep digging.
If city is getting 20% of gross renenue, total gross revenue is $12.6M, which means over $10M + yearly gross revenue goes to AGC. Need to see what else they’ve got on their side
City pays two employees and 1,260,000 operating expenses
Partly because the bonds forbid the type of lease American Golf had with the City.
Felz was likely drooling over the extra cash flow though. Alice Loya told the City Council the Management Agreement was a better deal. That was patently false from the get go, but gives you a glimpse into their mindset. It’s all about extra cash flow. Long-term damage to the City never registers on their radar, that’s the kind of thing Felz would dismiss as ‘negative energy’.
Maybe we will never know the “why” of it, but people do things for a reason, even if the reason is bad, stupid, etc. Was it control? Was it about hiding money, or diverting attention from missing money?
At the very least this facility needs a complete audit.
Yes. But there was not need for bond money because the venture was profitable. The big winner from the agreement was AGC
I believe the answer to one of your questions is Curiel and Loya are both incompetent.
Can the entire agreement be found online? If the amount received from the city is not 20% of revenues anymore, it should be based on something. So far it sounds like a very sweet deal for AGC at the taxpayer expense. They don’t pay rent, operating expenses , infrastructure has been paid in the last years at least partially by the city.
The complete management agreement with American Golf can be seen here:
http://breadam.org/wp-content/uploads/Fullerton-Management-Agreement-12-01-10-FULLY-EXECUTED.pdf
thanks
Someone told me the municipal bond interest rate was 7% . Is that correct?
I think the bond yield was 7%
FYI, AGC ‘s parent company is Goldman Sach. Felz made their dreams come true, to wit, a new long term contract with 0 risk and a guaranteed generous fee, which by all estimates will remain about equal or above city’s net earnings from such a large real estate
I doubt Joe Felz looked at other companies before accepting the new agreement. AGC wrote it and the city signed it
General Manager gets paid when there’s need for him at the course.
The poor bastard, just had too much to drink< All these attacks on him and other issues do not serve any good purpose!!!!!!! Get a girlfriend or a hobby or both!!!!!!!!!!!!!!!!!!!!!!! Fullerton is A LOST CAUSE!