NTEC Frequently Asked Questions

The lease with Laulima Kings Beach Event Center LLC was signed on October 5, 2017.  

Public Comments and Questions submitted after the September 12th Board Meeting will not be posted on the District's website.  As this page was intended to document FAQ's related to the lease, it will no longer be updated.  

Comments submitted during one of the public meetings or workshops are included without identifying the individual providing the comment.  Letters and other documents submitted to the District do identify the individuals who provide the comments unless they have requested to remain anonymous.  Please note that the software utilized for the FAQs limits each question to 255 characters so slight modifications may have been necessary to allow for the question to fit into the required parameters.

As a government agency, NTPUD is subject to the California Public Records Act, California Government Code section 6250 et seq.  Information provided to NTPUD through its website and by email is subject to the same disclosure laws as information provided to NTPUD on paper. Therefore, all information collected on or from NTPUD's website may become a public record and subject to inspection by the public, unless exempted by law.  This may include names, email addresses and telephone numbers.  This acknowledgement does not and is not intended to waiver any applicable exemption to the public release of such information as provided by law.

 

September 2017: FAQs - Including Questions from September 7th Workshop

Comments on this page were submitted to the District either by email, comment form, at the public workshop held on September 7th, or at the Regular Board Meeting held on September 12th. Comments submitted during one of the public meetings or workshops are included without identifying the individual providing the comment. Letters and other documents submitted to the District do identify the individuals who provide the comments unless they have requested to remain anonymous. Please note that the software utilized for the FAQs limits each question to 255 characters so slight modifications may have been necessary to allow for the question to fit into the required parameters. As a government agency, NTPUD is subject to the California Public Records Act, California Government Code section 6250 et seq. Information provided to NTPUD through its website and by email is subject to the same disclosure laws as information provided to NTPUD on paper. Therefore, all information collected on or from NTPUD's website may become a public record and subject to inspection by the public, unless exempted by law. This may include names, email addresses and telephone numbers. This acknowledgement does not and is not intended to waiver any applicable exemption to the public release of such information as provided by law. Questions from September 7th were responded to at the meeting. Responses are available on the District's web page by opening the video for September 7th and going to the link entitled "Staff Response to Public Questions". District staff did not want to provide a written response in conflict with the lengthly responses provided at the workshop. If you have any questions, please contact us at www.ntpud.org.

  1. $43,600 NTPUD Attorney’s fees already spent to 8/31/17. How much has been lost had we in entered into a management agreement with Granlibakken or Boulder Bay in Mid 2016? NOTE: Question edited due to space. See full question below in Answer.

    FULL QUESTION: 70 Year proposed lease (30 years plus two 20 year options) of the North Tahoe Events Center to Laulima LLC or any of their many affiliates/managers create huge District liabilities for North Tahoe Public Utility District (NTPUD) rate payers in the following ways:
    $43,600 NTPUD Attorney’s fees already spent to 8/31/17. How much income/expense relief has been lost had we in entered into a management agreement with Granlibakken or Boulder Bay in mid 2016? END OF QUESTION.

    The Proposals received from Granlibakken and Biltmore (Boulder Bay) in response to the District’ Request for Proposals (RFP) differed in how they addressed the payment to the NTPUD.
    a. Granlibakken proposed to take over the personnel costs of the District but did have the District continuing to pay all utilities and maintenance costs. They proposed paying the District 5% of gross revenue as rent or less than $20,000 annually. In the analysis of the proposals, Granlibakken’s proposal resulted in an annual estimated cost to the District of $164,141 which includes the annual deferred maintenance cost which would still be borne by the District. The question asks how much income/expense relief has been lost if we had entered into an agreement with Granlibakken, the District would have lost all gross revenue; would have received approximately $15,000 for rent, continued to pay all utilities and maintenance costs in excess of $198,000 which would have resulted in a deficit in excess of $180,000.
    b. Biltmore proposed to pay the District $100,000 annually for 10 years if no capital improvements were made but would negotiate for an extension should improvements be made to the NTEC. Their proposal wasn’t clear on the status of current employees and whether they would have them become Biltmore employees or not. They also proposed receiving the revenue form the rental of the NTEC. Since their proposal wasn’t clear on the disposition on the NTEC employees their proposal ranged from a possible savings to the District of $9,994 to an increases cost of $300,786. The question asks how much income/expense relief has been lost if we had entered into an agreement with Biltmore, the District would have lost all gross revenue; would have received $100,000 for rent, pooled the rent money into a maintenance account for future repairs and wasn’t clear on the disposition of employees which could have resulted in a deficit in excess of $300,000 or a possible revenue of approximately $10,000.

  2. Long term lease, really a disguised sale will require a legal validation action with the State of California which is estimated at $40-60k additional and there may be appeals that the rate payers will be on the hook for. How much will appeals run?

    To ensure that the Lease is consistent with the deed restriction, NTPUD will file a Validation Action with Placer County Superior Court, not the State of California. Anticipating the cost of an appeal process is difficult due to the complexity of the process. The cost of an appeal could range from $25,000 to $50,000 depending on the appeal.

  3. It may be over two years before rent commences (in two years it begins at 22 cents/sq.ft.-what a deal) and a further unknown amount of legal fees during that period. How much more in legal fees is estimated to be spent separate from the validation?

    The majority of the legal fees incurred in the process have been in the negotiations and preparing the draft final lease agreement. Aside from the Validation Action, legal fees associated with the lease would be minimal.

  4. What about the years of losses due to poor existing NTPUD management and two more years of the same during Laulima’s attempt to develop the Event Center? How much does that amount to?

    The operating loss at the NTEC has averaged approximately $90,000 over the past dozen years. Dependent on Board direction, it is anticipated that the operating loss will be reduced slightly due to implementation of a revised rate structure for rentals during the time the District operates the NTEC.

  5. Laulima or whoever they designate claim they will spend $5.6m on the Events Center. Is Laulima considering adding another story? NOTE: Question edited due to space. See full question below in Answer.

    QUESTION UNEDITED: Laulima or whoever they designate claim they will spend $5.6m on the Events Center. Don’t ask me or the board how as Laulima has not provided a design to review. Is Laulima considering adding another story? Otherwise there is no way they can spend $5.6m on a known or currently unknown design. END OF QUESTION.

    David Bouquillon answered a similar question at the September 7, 2017 facilitated workshop. He mentioned that they would like to open the area known as the Lakeview Suite so that they would not have to rely on access to the California State Parks beach for events. He also stated that they would look to add that square footage to a deck on the rooftop. For accurate comments by Mr. Bouquillon, please see the video of the September 7 workshop.

  6. The NTPUD is not considering the financial responsibility of a California Environmental Quality Analysis which could be required for the traffic impacts alone. How much will that cost the rate payers?

    The NTPUD has reviewed the CEQA impacts of this lease and have determined that pursuant to CEQA Guidelines 15301-Existing Facilities, 15302-Replacement or Reconstruction and 15323-Normal Operations of Facilities for Public gatherings, the lease does not constitute a project under the California Environmental Quality Act (CEQA) and would be categorically exempt from the provisions of CEQA.

  7. Laulima has a number of LLC. It is unclear who Laulima is. Please explain.

    The lessee is Laulima Kings Beach Event Center, LLC. This is an LLC formed by Laulima Partners, LLC (i.e., Laulima Development, LLC and Highway 1 Hospitality, LLC). If the Board approves the lease, an in-depth review of the entity and its finances will occur during the due diligence process.

  8. How will the County calculate property tax for the NTEC?

    If the Board approves the lease, the County will assess tax on Laulima’s possessory interest in the Event Center lease. This is called possessory interest tax and acknowledges that while the NTPUD’s ownership interest is exempt from taxation, Laulima’s leasehold is not. Questions regarding the specific valuation process should be directed to Placer County. However, the process for valuing property for possessory interest purposes is very similar to traditional valuation processes.

  9. Who does BB&K represent?

    Like all public agency general counsels, BB&K represents the NTPUD as a legal entity. It takes legal direction from the governing board of the NTPUD, its Board of Directors.

  10. “Laulima LLC” is also associated with “Laulima Northstar LLC” which begs the question of who will ultimately benefit from the lease, NORTHSTAR or some other unknown principal or subdivision? The question is edited due to space. See full question below.

    QUESTION IN ITS ENTIRETY: “Laulima LLC” is also associated with “Laulima Northstar LLC” which begs the unanswered question of who will ultimately benefit from the lease, NORTHSTAR or some other unknown principal or subdivision? The loss of our lakefront venue is priceless. Why isn’t our legal counsel advising the Board to have Laulima name designated affilitates now?Once the lease is signed before vetting financial capability, experience or design, rate payers are already on the hook for future litigation when the agreement fails to go as promised. END OF QUESTION.

    As explained at the September 7th workshop, it is not advisable to designate all affiliates of the lessee in advance. This is potentially a seventy-year lease, and new entities that qualify as affiliates may be formed during the term of the lease. Additional information regarding the possibility of an unknown principal or subdivision is provided in response to Question 29 from the August 2017 FAQ.

  11. Once the lease is signed before vetting financial capability, experience or design, rate payers are already on the hook for future litigation when the agreement fails to go as promised. How much is estimated for litigation to cancel the lease?

    The draft lease contains language allowing NTPUD to terminate the lease if it is not satisfied with Laulima’s financial capability or experience. If the NTPUD terminates the lease for these reasons, it is anticipated that litigation would not be required. If Laulima files an action, the NTPUD is confident it would prevail. However, it can be very difficult to project legal fees given the multiple ways that litigation could arise. For the design, the NTPUD has the ability to provide comments and reasonably approve the design. We do not anticipate that litigation will result from this process. If it does, it is very difficult to project legal fees without understanding the nature of the dispute.

  12. Rate payers may have to finish an unfinished project or pay off mechanic’s liens. A 110% performance bond won’t cover the penalties & interest from a bankrupt LLC and an unfinished closed structure. How much would fighting the Lessee’s bankruptcy cost?

    As the NTPUD will have a letter of credit or performance bond securing Laulima’s obligation, we do not anticipate that substantial legal costs will be required to protect the District’s interest. Of course, it is very difficult to project legal fees without understanding the nature of the dispute.

  13. A legal opinion of the District’s liability and potential financial legal obligations regarding the Event Center today and once the Board approves and signs the Lease with Laulima.

    The NTPUD will receive an opinion regarding the financial capability of Laulima from a financial consultant experienced in reviewing these types of deals during the due diligence process.

  14. The affiliates, members and managers of Laulima’s associated 9 LLCs today are disclosed, including: Question edited due to space. See question in its entirety below.

    QUESTION: The affiliates, members and managers of Laulima’s associated 9 LLCs today are disclosed, including:
    1 Laulima Northstar LLC
    2 Highway 1 Hospitality LLC,
    3 23240 Highway 1 LLC
    4 LLC Contrada Sf, LLC,
    5 Laulima Partners, LLC,
    6 Laulima Kings Beach LLC,
    7 H1H Propco LLC,
    8 LKKB Management LLC,
    9 Laulima KB Events Center, LLC
    10.One Atlantic END OF QUESTION

    This list of LLCs are not automatically affiliates, members and managers of Laulima. The definition of an “affiliate” is included in the draft lease. In basic terms, it is a member or manager of Laulima Kings Beach Event Center, LLC or an entity controlled by a member or manager. While some of these entities may qualify as affiliated under this language, some may not. One must review the individual members and managers of each LLC.

  15. Who are the responsible parties that will be vetted and automatically allowed to assume or sublet the new lease without Board approval?

    The draft lease allows Laulima to assign the lease to an “affiliate.” See the answer to question 29 in the August 2017 FAQ for more information.

  16. The Board must disclose what they consider adequate experience in the First Class Event Center business and what responsible party meets that qualification?

    The current draft lease allows the Board to not move forward in its sole and absolute discretion if the lessee does not have the financial qualifications to move forward. This is a very broad standard. For experience, any non-affiliate assignee must have the same or better experience as the lessee and its members (Laulima Development LLC and Highway 1 Hospitality).

  17. A second story deck addition may trigger a discretionary approval which triggers CEQA. Where is this handled in the lease?

    NTPUD staff believes that approving the lease and remodeling the Event Center is exempt from CEQA under a number of categorical exemptions. Laulima is responsible for obtaining any permits and approvals necessary its remodel.

  18. PUBLIC COMMENTS AND QUESTIONS FROM SEPTEMBER 7, 2017 REGARDING THE DRAFT FINAL LEASE FOR O&M OF THE NTEC See below for the location of the responses to the 32 questions asked and the video link to 9/7/17 Workshop.

    The responses to 32 questions asked at the September 7, 2017 Workshop were answered by Staff, Counsel, and some by David Boquillon of Laulima. Please go to the video for the meeting and click on the Bookmark entitled: "Staff Response to Public Questions" which begins at minute 47 in the video of 9/7. You can scroll to a specific minute as indicated below. Please let us know if you have any trouble doing so. (NOTE: Staff is continuing to input the questions and responses - All will be completed by the close of business on Friday, September 15th.)

    A link to the video is supplied on our home page www.ntpud.org. Thank you for your interest.

  19. How are you going to spend $5.6 million on this structure and will there be a second story?

    This response was provided by David Boquillon of Laulima and begins at minute 48 of the video of 9/7.

  20. How does this project benefit the local community and taxpayers?

    This response was provided by staff beginning at minute 54 of the video of 9/7. It was similar to a question asked which is answered in #11 of the previous workshop FAQ's from August 23rd.

  21. How can a 100 room hotel support the event center? If it does not, what happens to the normal public and district obligations?

    This response was provided by David Boquillon of Laulima and begins at minute 50 of the video. Additional information and response was added by Counsel at approximately minute 53 of the video of 9/7.

  22. How will we avoid more privatization of the beach?

    This response was provided by Staff and begins at minute 56 of the video of 9/7.

  23. What is the parking impact? Where will they park?

    This response was provided by David Boquillon of Laulima and begins at minute 58 of the video of 9/7.

  24. Has NTPUD considered a plan B if this doesn't go through? If so, what is it?

    This response was provided by Staff and begins at minute 60 (1:00) of the video of 9/7.

  25. Has the Board read the lease contract?

    The Board and Counsel responded to this question and advised that they have read the lease. Response begins at minute 1:02 of the video of 9/7.

  26. Has the Laulima "affiliates clause" been evaluated by the attorneys?

    This response was provided by Counsel and begins at minute 1:04 of the video of 9/7.

  27. What is the likelihood that this lease will diminish use by the community?

    This response was provided by Staff and begins at minute 1:08 of the video of 9/7.

  28. Why is there no percentage rent in the lease?

    This response was provided by Staff and begins at minute 1:11 of the video of 9/7.

  29. Do people know that the current subsidy is $17 per year plus deferred maintenance?

    This response was provided by Staff and begins at minute 1:15 of the video of 9/7.

  30. How will the lessee calculate fair rent?

    This response was provided by Staff and begins at minute 1:12 of the video of 9/7.

  31. Can there be a clause to protect the community from an environmental liability?

    This response was provided by Counsel and begins at minute 1:18 of the video of 9/7.

  32. How long will the building be inaccessible during transition/remodel?

    This response was provided by Counsel and begins at minute 1:21 of the video of 9/7.

  33. What is the backup plan during the remodel for local groups who use the facility?

    This response was provided by Staff and begins at minute 1:21 of the video. of 9/7

  34. What is the backup plan if the lessee fails to complete the renovation?

    This response was provided by Counsel and begins at minute 1:22 of the video of 9/7.

  35. Has an alternate evacuation location been identified during the lease?

    This response was provided by Staff and begins at minute 1:24 of the video of 9/7.

  36. What examples of properties has Laulima held long term?

    This response was provided by David Boquillon of Laulima and begins at minute 1:26 of the video of 9/7.

  37. What is the connection between Laulima Partners and One Atlantic?

    This response was provided by David Boquillon of Laulima and begins at minute 1:28 of the video. of 9/7

  38. What is the extent of Highway One Hospitality's experience?

    This response was provided by David Boquillon of Laulima and begins at minute 1:28 of the video of 9/7.

  39. What is the timing and connection between the phases of all the Laulima Kings Beach projects?

    This response was provided by David Boquillon of Laulima and begins at minute 1:29 of the video of 9/7.

  40. What are the time and third party costs to date?

    This response was provided by Staff and begins at minute 1:31 of the video of 9/7.

  41. Why does the Board not retain approval over subletters?

    This response was provided by Counsel and begins at minute 1:33 of the video of 9/7.

  42. Will a parking demand study be required for this project and the other Laulima projects?

    This response was provided by David Boquillon of Laulima and begins at minute 1:36 of the video of 9/7.

  43. How and where will the District invest the money it saves and receives from this project?

    This response was provided by Staff and begins at minute 1:37 of the video of 9/7.

  44. Can those funds be redirected to affordable housing by the District?

    This response was provided by Staff and begins at minute 1:38 of the video of 9/7.

  45. How did the rent negotiation go down from $200k to $50k in the first year?

    This response was provided by Staff and begins at minute 1:39 of the video of 9/7.

  46. Does the developer have previous experience with public private partnerships?

    This response was provided by David Boquillon of Laulima and begins at minute 1:40 of the video of 9/7.

  47. What is the threshold to support a tax increase relative to the survey (showing 40%)?

    This response was provided by Staff at minute 1:45 of the video of 9/7.

  48. Will the Board hold public hearings to discuss advice from the committee?

    This response was provided by Staff at minute 1:45 of the video of 9/7.

  49. Parking has not been addressed. Where is parking across the street? Where will people park?

    This question was asked previously. and answered by David Boquillon of Laulima. The response can be found at minute 58 of the video of 9/7. In addition to parking at the State Park (KBSRA), parking is available at a lot provided by Placer County on Brook Avenue.

  50. Who will make the determination of financial viability? How are the LLC's tied together? Who is Dena Grunt? Can the attorney tell us what the lease taxes will be?

    This response can be found previously answered in FAQ #36 of 8/23 questions. An independent forensic accountant will review all documents submitted during the 60-day time period to determine the tenant's financial ability and will provide a determination to the board; The LLC's are identified (tied together) in the Organizational Chart that will be posted on the page (www.ntpud.org/ntec) on 9/15/17. and was answered in FAQ #29 from the 8/23/17 FAQs.

  51. Who is responsible? (Question edited to clarify: Who are the responsible parties within Laulima?)

    As far as who is responsible, this was answered in FAQ #29 answered on 8/23, and #7, #10, #14, and #15 answered on 9/7.

  52. What does next year's operations look like for the Event Center? Is the District planning to run it "as is"? What does the future hold until the changeover?

    The operation of the North Tahoe Event Center (NTEC) between the time of lease execution and beginning of remodel has not been decided yet by the board. It could be status quo or at a reduced level. Once the board has taken action on the lease, the immediate future of the NTEC operations can be discussed and determined.

August 23, 2017: FAQs

Thank you for the outstanding response to the District's Facilitated Public Workshop requesting input regarding the Draft Final Lease with Laulima Kings Beach Event Center, LLC., for the Operation and Management of the North Tahoe Event Center. We have responded to all questions, and want to remind you that the District encourages you to submit your questions by clicking on the "COMMENT NOW" button on this page, www.ntpud.org/ntec. In addition to the questions, "Comments and Concerns" expressed by interested parties at the August 23rd Workshop or submitted to the District by email since that date are published on the page "PUBLIC COMMENT" and are available by clicking on the link to the right on this page, www.ntpud.org/ntec.

  1. Has the district planned what they will do with the new-found recreation and parks money? What is the potential for NTPUD building a new community center or venue with the proceeds? Do we have a contingency plan if the lease is not executed?

    • While one major reason for this public-private partnership is to address the financial solvency of the Recreation Department, the Board of Directors will ultimately decide the disposition on any new revenue.
    • Again, use of these new revenues is a Board decision. Constructing a new facility/venue is in their purview.
    • Should the lease not occur, the District must continue to pursue ways to balance budgets in the recreation department. Cutting costs and/or finding new revenue will be necessary to assure financial solvency. The staff, Recreation Commission and ultimately the Board of Directors will have final authority. Safe facilities professionally managed and maintained are paramount in the adopted strategic plan. An example of new revenue is this kind of public/private partnership (similar to the Treetop Ropes Course concession the the Regional Park and kayak rentals at TVRA). Since the Recreation Department is operating on a basic funding level now, additional cuts would likely mean reduced hours or closures of certain facilities or programs.

  2. How can we ensure public access without knowing the rental costs?

    The Lease gives the Tenant the flexibility to set the rates at a level that will allow the NTEC to be a viable facility. The District currently grants a 25% discount for use of the facility and we are requiring the tenant to allow for public use consistent with that requirement. Given the term of the Lease, the tenant was not willing to lock in specific rental rates for the facility, because they will need flexibility to ensure long term viability of the facility. District staff agreed this was a reasonable request by the tenant.

  3. Who will be in charge of getting the response from Laulima?

    The General Manager will assemble all questions best answered by Laulima and forward them. Mr. Bouquillon has agreed to fully participate in the responses to the FAQs.

  4. How much time has administration spend negotiating with Laulima? How much has been spent on attorneys fees since Feb 2016. How much do we propose to spend in the future scenarios and default scenarios?

    Staff time has been allocated as needed. Payments for legal counsel related to negotiations for the NTEC agreement have totaled $43,611 to date (8/31/17).

  5. Who will the community committee be ; how will they be selected, organized? What kind of power will they have?

    The Citizen Advisory Committee will be made up of three (3) members, two appointed by the NTPUD Board and one appointed by the Tenant (Paragraph 5.7). How will they be selected, organized? The Landlord and Tenant will select and appoint their respective representatives. The caveat being that members of the committee shall not be members, managers, partners, officers, employees, or board members of Landlord or Tenant (Paragraph 5.7). The Citizen’s Advisory Committee is intended to review issues related to the facility, and provide advice to the District and the Tenant related to its operations. The language in the Lease is intended to make clear that this body does not have independent authority to provide direction to the Tenant related to the operation of the facility. That authority is with the District board, and is governed by the terms of the Lease (Paragraph 5.7).

  6. Why haven't the public's questions been answered over the last 18 months, and when will they be?

    As of November, the District went into confidential real estate negotiations with Laulima. Per Counsel's advice, we did not disclose the results of the Closed Session discussion or progress made toward reaching an agreement until the Draft Final Lease was released. We are receiving and answering all questions possible at this time.

  7. Why not hire an operator instead of utilizing this long term lease?

    The NTPUD Board solicited Proposals for the operation and management of the NTEC with the express desire to eliminate an on-going operating loss at the event center. Over the course of the past years, various business plans were trialed at the NTEC with minimal success. In fact, the average operating loss at the NTEC for the last dozen years is $90,177. Couple that average annual operating loss with the average annual District support of the NTEC by renting rooms for District use ($37,485) and support of non-profit use ($13,452) and the District supports the NTEC $141,114 annually on average over the past dozen plus years or the equivalent of $27.00 per household.

  8. Will there be a building permit taken out during this construction? Who will do the building inspection?

    Per County Building Code, the renovation of the NT Event Center will require a building permit pulled by the LLC. The Building Department will charge the LLC for inspections to assure code compliance.

  9. Why did Laulima choose not to be here? How does the Board feel about Laulima not being at this workshop? Where is a representative from Laulima tonight?

    Mr. Bouquillon was approached with the upcoming dates for the workshop sessions. While they had conflicts on August 23 and were unable to attend, they are able to make the following two workshops. They are also participating in the responses to the FAQs.
    The Board may choose to respond to the second part of the question

  10. What is the evac plan? Has FD been consulted? Have we talked to OES and FEMA and do we plan to?

    • The final draft lease discusses the historical use of the Event Center as a Shelter upon request by Placer County Office of Emergency Services and the Fire District. Laulima has agreed to continue this community service including working with the emergency services agencies should funding be found for an emergency generator. The trigger is a declared disaster and the use can occur up to 2 weeks at a time. Laulima does ask that groups that are booked be allowed to continue but recognizing the nature of a declared disaster, the parties involved see no conflict. This item was brought forward by the NTPUD and the LLC was completely supportive.
    • The fire district and Placer OES are in support of the NTEC being an emergency shelter, especially if funding can be found for the generator.

  11. How does this lease benefit the community 20 years from now?

    The benefit to the community includes access to an improved facility that would be “state of the art”, elimination of an on-going operating deficit and financial support that currently totals in excess of $140,000 annually and provides for rental revenue of $165,000 by Year 10. The net benefit to the District would be in excess of $300,000 annually after just 10 years. This The revenue and costs savings could be used, if directed by the Board, for enhancements to the Regional Park, TVRA Boat Launch or recreation programs

  12. How do we ensure that the community is not stuck with an environmental mess? What level of environmental review is required for the process?

    The tenant improvements constitute the renovation of an existing building. It is not a new use and does not expand the footprint of the existing building. These improvements should not give rise to an environmental mess. CEQA includes an exemption for the “operation, repair, maintenance, permitting, leasing, licensing or minor alteration of existing public or private structures.” (CEQA Guidelines Sec. 15301.) The District is simply leasing an existing facility to the Tenant. There is not going to be any change in the use or the footprint of the facility—only a change in the operator. This action is therefore exempt from CEQA.

  13. What is the level of property tax currently subsidizing the event center? How much would a CFD increase be, if this doesn’t happen, and how much would it cost to run the Event Center as it ought and should be?

    The annual operating loss is approximately $90,177 over the past dozen years. Additionally, the District supports the Event Center operation by renting rooms for meetings as well as subsidizing non-profit use of the facility by an annual average of $50,937 over the same period resulting in a total support of $141,114 average annually. The District covers this loss by transferring funds from other sources of district revenue. How much would a CFD increase be, To eliminate the current level of District support as well as provide funding to address the depreciation and deferred maintenance it is estimated that the CFD would need to increase a minimum of $34.00. The current staffing of the Event Center is minimal with little marketing or outreach budget. Staff is able to perform set-up, take-down for events; enter reservations and perform general maintenance. A recent analysis of what it’d take to staff and operate the Event Center as it “ought and should be” has not been performed.

  14. $27 is the loss per household in the District. When did the District ask its constituents if they are willing to cover that by way of an assessment? If it doesn’t happen, how will the District cut expenses for the facility?

    In the fall of 2016 the NTPUD sent out a Needs Assessment survey which also included a question asking if the public would support either a $35 or $45 increase in the CFD to continue operation and management of the Event center. Both versions of the questions polled at approximately 40% support. The District’s main expenses at the Event Center are staffing and utilities; both would have to be reviewed to see what a cut in either area would look like and what the consequences would be. It would be highly likely that a reduced operation and availability of the Event Center would be a result of reduced expenses.

  15. Why is there no design concept available? Why don’t we have it now? Why would we approve this without the design?

    Laulima’s response to the RFP stated their interest in a community design charrette once the lease is executed. Per Laulima, honoring this promise means they had to delay the ultimate proposed design. Everyone is anxious to see what can come from the public process

  16. Why do we think rates won't drastically increase?

    The proposed Lease terms do not restrict the rates that the Tenant can charge for its private events. The District agreed that it was not appropriate to limit these costs, given that the Tenant is making significant Tenant Improvements to the facility, and the District will benefit from those through its public access to the facility. The rates will presumably be increased based on what the market will bear, and the amount needed for the Tenant to receive an appropriate return on its investment. We cannot definitively predict what those increases will be.

  17. Why jump right to the lease instead of executing a letter of intent before the lease?

    The District entered into an Agreement to Negotiate Exclusively with Laulima Development LLC (one of the members of Tenant) in September 2016, and District staff has been negotiating terms of the Lease with Tenant since that point. Now that terms have been fully negotiated between the District staff and the Tenant, staff believes it is an appropriate time for the District to consider the Lease.

  18. Why are there so many typos and incorrect provisions in the draft lease?

    The draft document was released to the public as soon as the draft was available. Every effort is being made to correct all references prior to execution.

  19. What is the timeline for the lease execution and end date?

    An interested party prepared a timeline that represents the timing for certain steps set forth in the Lease, assuming that these steps take the maximum amount of time allowed under the Lease. He asked whether it is accurate. The timeline prepared by the commenter is as follows:

    9/15/2017 Lease sign date

    10/15/2017 Initial Design Concept

    1/13/2018 Schematic plans

    6/1/2019 Outside Date- Conditions Precedent to Tenant Possession of Premises

    6/10/2019 Early Possession Period (10 days from above)

    3/6/2020 Rent Commencement Date (at worst 270 days from Early Possession Period)

    This is intended to show the outside dates by which certain steps must be completed. If the Lease is approved and effective on September 15, 2017, then this timeline does reflect the outside dates by which certain activities must be completed, with a few caveats.

    First, the District is going to initiate a validation action to confirm that the Lease is consistent with the requirements of the deed restriction recorded against the property. The Tenant will have 180 days from the date when the validation judgment is final to obtain the approvals necessary to commence construction. So, in the event that the validation judgment is received before December 31, 2018, the deadline for commencement of the Early Possession Period will be earlier than assumed in the above timeline.

    Second, in the event that the validation judgment is not resolved by December 31, 2018, the Outside Date for the Tenant to meet the Conditions Precedent to taking possession of the Premises will be extended to 180 days after the validation judgment is final. If the validation judgment still is not final by December 31, 2019, then either party can terminate the Lease at their discretion.

    Due to the fact that the timeframe for the validation action is outside of either parties’ control, it is difficult to provide a definitive timeline for when the Tenant will take possession of the Property, and when the Rent will commence. However, the timeline prepared by the interested party with the outside dates by which these steps must occur is accurate, subject to extensions if the validation action extends beyond December 31, 2018.

  20. What is the rent going to be? Total Revenue? What is the check to be written each year? When does rent start coming in? What is the most recent time about when they will begin to pay?

    The rent begins at $50,000/year and escalates to $165,000/yr at Year 10. Total revenue? Total revenue of the lease at Year 30, the initial term, could total $5,210,247 based on annual CPI after Year 10. What is the check to be written each year. Please see the spreadsheet in the list of documents accompanying this FAQs section. The rent increases from Year 1 – Year 10 and then adjusts annually based on the annual CPI although it will not increase or decrease more than 2%. When does rent start coming in? The earlier of (i) the date on which Tenant secures an Occupancy Permit following completion of TI, or (ii) 270 days from the date of commencement of the Early Possession Period (see Section 2)

  21. Is this negotiation legal? Is it acceptable to have a different party sign the lease than approved by Board action and subsequently negotiated with?

    It is legal and very common for a development entity to set up a separate single purpose entity, such as an LLC, to enter into a lease and/or operate a business operation. The District staff has negotiated throughout this process with representatives of Laulima Development LLC, one of the members of the Tenant entity. The parties that District staff negotiated with are some of the key people behind the Tenant entity, so it was legal and appropriate for District staff to negotiate with these individuals.

  22. Can the public influence change in the final lease?

    Yes. The Board of Directors has asked for input. It is recognized that both parties must approve changes to the Draft Final Lease.

  23. How are we protected from negotiation costs with the State, Placer County, etc.?

    The District is not required to negotiate with the State or Placer County in connection with this Lease. There is a condition included in the Grant Deed conveying the property from the State that requires the District to use the NTEC property only for park purposes. If the Lease is approved, the District will initiate a validation action to confirm that the terms of the Lease are consistent with the condition in the Grant Deed. The judgment in the validation action will confirm that the Lease is consistent with the conditions placed on the NTEC by the State.

  24. How will existing events be allocated time in the new building?

    Existing community events will go through the same process they currently do; contacting the Event Center to verify that there is availability of the date(s) desired. Then a reservation will be made. The lease provides for public and non-profit events and district recreational programs in Paragraph 5.6.

  25. Is there a housing element required as part of the lease agreement?

    There is not a housing element required as part of the Lease.

  26. What happens if Laulima wants to walk away, sell, or divest?

    If the Tenant walks away and fails to fulfil its obligations under the Lease, the District can declare the Tenant in default and terminate the Lease. If this happens before the Tenant takes possession of the NTEC, then the Landlord will simply maintain possession and continue to operate the facility. If Tenant were to walk away during construction, the District could terminate and take possession, and would have access to the security provided by Tenant (in the form of bonds, cash or a letter of credit) to complete the improvements. If Tenant were to walk away after the Tenant Improvements were complete, the Landlord could terminate the Lease, and would get the benefit of an improved building.

    If the Tenant no longer wants to or is able to operate the facility, it has the ability to assign the Lease to an unrelated third party, subject to review and reasonable approval by the District Board. The assignee who assumes responsibility under the Lease must have at least the same level of experience operating equivalent facilities as the Tenant’s members.

  27. Is an LLC an acceptable entity to sign the lease?

    Yes. It is very typical for LLCs to enter into leases and similar contractual documents.

  28. In Section 6 of the lease (iii.iii), why would the District choose to waive the contingency?

    This refers to the Board’s ability, at its discretion, to waive the obligation that the Tenant provide documentation to the City’s financial consultant that demonstrates Tenant’s financial ability to complete the Tenant Improvements. This option simply gives the Board the option to waive this condition, if they seek to do so, in its discretion. Presumably, it would only waive this contingency if the Board was otherwise satisfied that the Tenant has the ability to complete the Tenant Improvements, but this a decision that must be made at the Board’s discretion.

  29. Does the deed restriction allow for total demolition or just renovation?

    The deed restriction only states that the property must be used only for park purposes. It does not speak to the use of the building, or whether the building must be preserved

  30. Is the deed restriction going to expire? How do we ensure it stays in place?

    The deed restriction does not have an expiration date. It will remain in place unless and until the District and the State of California both agree to remove it, and record a new document against the property that removes that restriction from the grant deed.

  31. What are, "then published rates"?

    This refers to the rates for use of the facility that the Tenant charges to private users for use of the facility. A local public agency or non-profit organization that wishes to use the facility will receive a 25% discount from the rate that Tenant advertises as its standard rate at the time that the local user desires to rent the facility.

  32. Is the security enough to cover a mechanics lien?

    The Tenant is required to provide security in an amount equal to 110% of the costs of the Tenant Improvements. This should be sufficient to cover a mechanic’s lien if filed during the construction process.

  33. Is there enough protection in the performance bond?

    The bonds, letter of credit or escrow agreement will give the District access to the funds necessary to complete the Tenant Improvements, should the Tenant fail to do so within the required timelines. This gives the District the protection it needs to ensure that the required work is completed.

  34. When will Laulima show financial capability?

    They are required to provide evidence of their ability to complete the required work to the District’s financial consultant within 60 days following the effective date of the Lease. The Board will then have 30 days to decide whether or not the Tenant has provided sufficient evidence of their ability to complete the required work.

  35. What are the consequences of noncompliance and the process for enforcing noncompliance?

    This depends on the nature of the non-compliance. In general, if the Tenant is in default under the Lease, and fails to cure that default within the time periods allowed in the lease, the District will have the ability to terminate the Lease. The District also has the ability to seek damages in the event of a default. The Lease does, however, provide the Tenant time to cure any default under the Lease, and the District will presumably work with the Tenant to ensure that the terms of the Lease are complied with by both parties. Ultimately, if the Tenant fails to comply with the terms of the Lease, the District may need to resort to litigation to enforce its rights.

  36. Can Laulima sell this lease? Who will profit if they sell the lease?

    Technically, the Tenant cannot sell the Lease, but it can assign it, subject to approval by the District. If there is financial compensation provided to Laulima during this process by the assignee, it would remain with Laulima. However, the District would receive all benefits it is entitled to under the Lease (i.e., rent, public use of the facility).

  37. How are we protected from this becoming a venue for an alternative development like Northstar?

    The Lease limits the use of the NTEC to the uses set forth in Paragraphs 5.4 and 5.6 of the Lease. This allows the NTEC to be used for recreational, public and community activities, and for private events such as weddings, receptions, meetings, concerts, fundraisers and civic events, and other events consistent with the character of a first-class event facility. The Lease, and the deed restriction, prohibit the facility from being used for any other purpose.

  38. What is the period of time in which the investment of $5.6 million must be made?

    The Tenant is required to spend not less than $5.6 million on the design and construction of the Tenant Improvements. Therefore, the full investment would be spent by the time the Tenant Improvements are complete.

  39. What progress is being made on the other local Laulima projects? (Note: Response was provided by a representative of Laulima.)

    Since purchasing the properties Laulima continues to operate the Crown as a year round hospitality business. Laulima's Phase I Lakeside development application was submitted to TRPA and the County of Placer in November 2016, and their Phase II submittal was submitted last month (July 2017) to TRPA and the County of Placer. We continue to work with the County on the Kings Beach Center site as a potential relocation for a new, larger Rite Aid store which they desire.

  40. Who is Laulima Kings Beach LLC specifically? (Note: Response was provided by a representative of Laulima.)

    Laulima Kings Beach LLC is an SPE (Special Purpose Entity) setup to own and operate Laulima Partners LLC's real estate holdings in Kings Beach.

  41. What is Laulima's role in managing the Atlantic City conference center? (Note: Response was provided by a representative of Laulima.)

    As included in the May 2016 response to NTPUD’s RFP, Laulima's partner H1H, LLC is an owner and provides operational oversight for One Atlantic Event Center.

  42. Does Laulima have plans to build a parking structure? (Note: Response was provided by a representative of Laulima.)

    Not at this time. For the Event Center renovation, Laulima will work with the State for use of the KBSRA parking lot. Laulima's future development meets the required parking requirements which are all surfaced stalls. Laulima has discussed construction a future parking deck on our site if the KBSRA lot became unavailable.

  43. Why does Laulima want to do this? (Note: Response was provided by a representative of Laulima.)

    With the acquisition of the Ferrari Crown real estate portfolio and Laulima's commitment to include hospitality in its new development plan they strongly believe this is an opportunity to partner with the community to update and improve the existing building to a state of the art event center while maintaining its use for the public in keeping with the deed restriction including community uses. The rent from the Event Center project will provide funding to the NTPUD for increased financial support to the community’s parks & recreation programs on an annual basis. Laulima plans to be a benefit to and a supporter of the community over the long term.

  44. What background does Laulima have running this type of business? (Note: Response was provided by a representative of Laulima.)

    Laulima Partners LLC affiliated partner H1H Management Group is the emergent parent company of a number of spectacular hotels and dining properties with a solid, respected brand with a portfolio of properties that includes event center, wineries, restaurants, and hospitality properties. Laulima is deeply passionate about each business they manage, offering guests a memorable experience while offering investors above average returns on their investment. Our Highway 1 Hospitality team is dedicated to excellence, and we work with a diverse group of distinguished designers, architects, contractors, hospitality professionals and financial institutions.
    Operational oversight of our hotels, restaurants, event centers Includes:
    § Financial oversight - capital budget monitoring and development
    § Operations and property management – Guest satisfaction and Quality assurance
    § Winery development and vineyard management
    § Food & Beverage – Culinary development, operational oversight, guest experience
    § Human resources - recruitment, selection, training and retention
    § Marketing, branding, digital marketing, public relations and communications
    § Sales – Corporate sales support
    § Guidance on environmentally-friendly operations

  45. Does Laulima Kings Beach LLC qualify under the vetting standard in 23.1 2.

    The vetting standard set forth in Paragraph 23.1 for prospective assignees of the Lease is based on a determination that the prospective assignees is at least as experienced as Laulima Kings Beach LLC and its members. Since the current Tenant is the benchmark for that review, it does meet that standard. Additionally, District staff has reviewed the experience level of the Tenant and its members, and is comfortable that Tenant has the experience necessary to operate the facility.

  46. Does Laulima know how they are going to make this profitable; i.e. what is their business plan?

    The District has retained a consultant to review the Tenant’s financial information, including its business plan, in order to ensure that it has sufficient funding to construct the Tenant Improvements and meet its obligations under the Lease. The Tenant does not want to make this information, including its business plan, publicly available and therefore available to business competitors. In its review, the District will focus on the Tenant’s ability to complete its obligations under the Lease and ensure that the District’s interests are protected.

  47. What is the source of funding of 5.6 million to invest in the building?

    The District will review the source of funding for the $5.6 million as part of the review that will occur if the Lease is approved and executed by the District and Tenant.

  48. Section 23 Assignment and Subletting – Have all the affiliates been vetted?

    The term “affiliate” is defined in Section 23.1 of the Lease. In general terms, it includes separate legal entities that are controlled by the members of the Tenant. Since we have vetted the members of the Tenant, District staff believes it is appropriate to allow the Tenant to assign the Lease to other entities that are controlled by those same members. However, some affiliates may not exist yet, but it would be allowable for the Tenant to assign to a newly created affiliate, provided that it is controlled by the members of the Tenant.

  49. What is the timeline for the lease execution and end date?

    If the Lease is approved by the Board, it will likely be executed within a day or two following the approval. The Lease will expire 30 years from the effective date. However, the Tenant has two 20 year options to extend the Lease. The Lease could there for last a total of 70 years from the effective date.

  50. What is the rent going to be?

    The Tenant will commence to pay rent at the earlier of the date when it receives a certificate of occupancy for the building after the tenant improvements, or 270 days after it takes possession of the building. In the first year, the rent will be $50,000, and will increase gradually to $165,000 in the tenth year. Starting in year 11, the rent will increase each year by a percentage based on the Consumer Price Index (CPI), provided that it will not increase or decrease by more than 2%.

  51. Total revenue?

    The District staff cannot definitively state the total revenue generated by the Lease, because it is dependent on the amount of the CPI increases starting in year 11. However, District staff has estimated that the total revenue of the lease at Year 30, the initial term, could total $5,210,247 based on annual CPI after Year 10.

  52. What is the check to be written each year?

    Please see the spreadsheet in the list of documents accompanying this FAQs section. The rent increases from Year 1 – Year 10 and then adjusts annually based on the annual CPI although it will not increase or decrease more than 2%.

  53. When does rent start coming in?

    The Tenant will commence to pay rent at the earlier of (i) the date on which Tenant secures an Occupancy Permit following completion of the Tenant Improvements, or (ii) 270 days from the date of commencement of the Early Possession Period (this is the date that the Tenant will take possession of the Property).

  54. What is the most recent time about when they will begin to pay?

    We cannot definitively state the most recent time that they will beginning to pay rent, because it is dependent on a number of factors, including the completion of the validation action, and the Tenant’s securing of approvals from TRPA and Placer County. Once those steps are complete, and the Tenant satisfies the other conditions to taking possession of the Lease (listed in Paragraph 2.2 of the Lease), then the Tenant will take possession of the property. At that point, the Tenant will begin to pay rent at the earlier of the date when the Tenant Improvements are complete and it receives an Occupancy Permit, or within 270 days from when the Tenant takes possession.

  55. In terms of the vetting, I would like to see all the resulting paperwork. I assume this should all be public domain material.

    This response in its entirety can be reviewed on the page: www.ntpud.org/ntec and is entitled "NTPUD - Memo re NTEC Lease Due Diligence Review.pdf"

August 2017: FAQs

  1. How and what methodology was used to vet Laulima?  I am interested in both generally (leadership, history, etc.) and financially and I will want to see the resulting vetting data.

    While there are various public records or dealings in other communities by Laulima, the NTPUD Attorney and its financial consultant performed an industry standard due diligence review and found nothing that would preclude moving forward with this lease agreement at this time should the Board so decide. Further financial review will be conducted before the lease takes effect as noted below.

  2. Who is putting up the money?

    Laulima Kings Beach Event Center LLC is the responsible party.  Their financial ability to complete the proposed improvements and operate the facility has been partially reviewed by a third party financial consultant. (see Base Lease Information on responsible party). Further review of financial ability will occur within sixty (60) days of lease execution.

    The draft final lease specifies that Laulima shall submit the balance of the required financial information to the District’s financial consultant for review and approval within sixty (60) days of lease execution. Should the required and appropriate financial information not be submitted or is determined to be insufficient, the Landlord can terminate the lease (see paragraph 6 of the draft final lease).

  3. How exactly is Laulima securing the deal financial?  For instance, I assume you have them putting dollars, a %, etc. into an escrow account the second they sign the agreement.  How much is that? 

    A requirement of the proposed lease requires Laulima Kings Beach Event Center LLC to expend not less than $5.6 million on facility improvements on third party hard and soft costs and expenses on the design and construction of tenant improvements. They are also required to deposit this into a construction draw or escrow account an amount not less than the minimum TI costs and sufficient to pay all costs identified in the construction budget or deliver to the NTPUD payment and performance bonds in an amount not less than 110% of the minimum TI costs (see paragraphs 2.2D and 5.2 of the draft final lease). This will provide protection in the event that Laulima experiences any difficulties during construction.

  4. What kind of legal recourse do we have if they fail to perform?  Collateral?

    Should Laulima fail to perform, the proposed lease specifies that the NTPUD would take back the NTEC (see paragraphs 28.1, 28.1A – 28.1H, 28.2A – 28.2D, and 28.3 of the draft final lease).  Staff has recommended to the Board that the $5.6 million in TI is sufficient collateral. Essentially, NTPUD and the community would receive a new event center.

  5. Assuming they are going to build or modify the event center, we will want to see the plans and drawings that show exactly what they are going to do.

    The proposed lease specifies that no more than 30 days after the date the lease is signed (effective date), tenant shall submit an initial design concept to the Landlord.  Within 30 days from submittal of the initial design concept, the NTPUD shall hold a public meeting to receive public comments (see paragraph 5.1 of the draft final lease).

  6. How long the construction will take and whether the event center will be open during this period.

    The proposed timeline in the draft final lease provides for a series of dates for action to be completed including (see sections 2, 4, 5 and 6 of the draft final lease);

    • within 30 days of effective date a validation action is to be filed by the NTPUD.  It is anticipated this action could take 6-9 months.

    • should a final judgement on the validation action not be completed by 12/31/18, the outside date shall be extended by 180 days.

    • no more than 30 days after effective date, Laulima must submit an initial design to NTPUD.  NTPUD then has 30 days to hold a public meeting to receive public input.

    • Within 60 days of the effective date of the lease, Laulima must submit for review and approval, all required and appropriate financial documents to NTPUD’s financial consultant.

    • not more than 120 days after execution of lease (effective date) Laulima must deliver a set of schematic plans to NTPUD for review and approval.

    • not later than 180 days following date of final judgement of Validation Action, Laulima Kings Beach Event Center LLC must begin construction.

    • completion of TI shall occur no more than 300 days after commencing construction.

    • Laulima Kings Beach Event Center LLC will take possession by June 2019 (outside date).  If Laulima Kings Beach Event Center LLC has not taken possession by June 2019, NTPUD may terminate the lease.

    The Event Center will remain open and available for use, dependent upon Board direction, until construction begins (see paragraph 5.3 of the draft final lease).

  7. What the resulting public and specifically local access to the event center looks like.  What is pricing and what controls are put in place on pricing?  What is the discount for the community as opposed to the commercial side?

    The proposed lease specifies that public use and availability shall be consistent with current usage.  An exhibit listing the current public uses and the amount of time the rentals is included in the draft final lease. (see paragraph 5.6).

    Pricing for public and non-profit is specified in the proposed lease and includes a 25% discount from then-current published rates for residents, public and non-profits with primary addresses within the jurisdictional boundaries of the district. This discount is consistent with current pricing policy (see paragraph 5.6A of the draft final lease).

  8. I assume you will be designating a certain amount of rentals/time guaranteed to the community, when is that?  What does that look like?

    The proposed lease specifies that the district may reserve up to 2,000 square feet for up to 75 hours annually as no charge district events.  These available dates are to be held on Monday - Thursday which is consistent with current rental policy (see paragraphs 5.6A and 5.6B of the draft final lease).

  9. What recreation activities will take place in the new event center and how will the "Laulima Event Center" fit into the deed restrictions?

    Specific recreation activities are not addressed in the proposed lease but a provision is included that specifies that tenant shall make available not less than 2,000 square feet for recreation activities consistent with current uses which will be identified in Exhibit C in the final lease document (see paragraph 5.6C of the draft final lease).

    The Deed restriction is addressed in the Validation Action as well as numerous paragraphs in the proposed lease see Section 4 and paragraph 5.4 of the draft final lease).

  10. Is the parking problem addressed in the agreement?

    Unfortunately, the adjacent parking lot is located on State of California property at the Kings Beach State Recreation Area.  Currently there is an access agreement between the district and state parks which provides for public access to the parking lot in exchange for plowing the snow from the lot during the winter.  This is a 5-year lease and is negotiated for renewal at the end of each term. Laulima will be responsible for providing sufficient parking for its purposes.

  11. Has the state or whoever is required to approve of this sale/lease been consulted yet? Would be good to have a written verification of the acceptance of the proposal to lease or sell the Events Center before we get any further into negotiations.

    To ensure that the Lease is consistent with the deed restriction, NTPUD will file a Validation Action with Placer County Superior Court. At the conclusion of Validation Action, the Court will issue a judgment clarifying that the lease is consistent with the deed restriction. This would ensure that NTPUD’s ownership interest is protected for the duration of the lease. In addition, if for some reason the Court decides that the lease is not consistent with the deed restriction, the Court’s decision would terminate the lease. NTPUD would still retain the Event Center.

  12. The Tenant is called Laulima Kings Beach Event Center, LLC. An LLC is only liable for the assets of the LLC. The LLC's only asset is a lease with the NTPUD on the community's free and clear asset-the Events Center. Why aren't there further financial gua

    Until the Tenant has received all required approvals, pulled building permits and is ready to commence construction, NTPUD will retain possession of the NTEC and will not have given up any assets. Once construction commences, NTPUD will require that the Tenant provide security (in the form of cash, bonds or a letter of credit) to ensure that the tenant improvements are made. After construction is complete, the NTPUD will have the benefit of the improvements, and in the event NTPUD is forced to terminate at that point, it will have an improved building.

  13. Why does the NTPUD consider this a good deal for the public? How much has the NTPUD spent on the Laulima deal to date and how much more is expected to be spent during this lengthy commitment? Consider lost revenue under another operator such as Granliba

    The NTPUD has spent money on negotiating this transaction and will continue to do so to bring it to completion. While the District works toward completion of the process, the District will continue to operate the NTEC as it has in the past.

  14. Comparing Laulima to current operating procedure fails to consider the solution of a better business plan.

    The NTPUD Board solicited Proposals for the operation and management of the NTEC with the express desire to eliminate an on-going operating loss at the event center. Over the course of the past years, various business plans were trialed at the NTEC with minimal success. In fact, the average operating loss at the NTEC for the last 12 years is $90,177. Couple that average annual operating loss with the average annual District support of the NTEC by renting rooms for District use ($37,485) and support of non-profit use ($13,452) and the District supports the NTEC $141,114 annually on average over the past dozen plus years or the equivalent of $27.00 per household.

  15. Has the NTPUD board been provided with evidence of Laulima's current financial status and ability to obtain $5.6m?

    The District is utilizing a third party forensic accountant to review all financial records in order to preserve any and all intellectual and financial properties.

  16. What is the justification for obtaining this information AFTER signing the lease?

    As frequently happens in large real estate ventures, partners are reluctant to release financial information until there is truly a valid lease agreement. Providing the investors 60 days after the execution of the lease affords them the confidence they need to provide their financial information.

  17. What does the NTPUD consider a reasonably acceptable letter of credit?

    A letter of credit is a commitment issued by a bank granting the party to whom it is issued (in this case the District) to draw upon the funds held by that bank in the event that the Tenant fails to meet its obligations under an agreement (in this case the Lease). The District will have legal counsel review the letter of credit to confirm that the letter of credit is consistent with the legal requirements and customary practices to ensure that the letter of credit provides immediately available funds.

  18. Has the NTPUD board seen design schematics? Why is the NTPUD waiting until after signing the lease to see the plans. Laulima has had nearly 1.5 years to develop their plan.

    The NTPUD Board has not seen schematic drawings yet. The Tenant shall submit drawings no more than 30 days after the effective date. While Laulima Kings Beach Event Center LLC has had time to prepare preliminary drawings, releasing them before a lease is approved is counterproductive to completing a working lease agreement.

  19. Regarding the validation with the State-won't a 70-year lease be considered a disguised sale by the State?

    The Initial Term for the lease is for thirty (30) years with two (2) twenty (20) year options.

  20. Why not? How much will the validation (six months?) and potential for appeals which per the lease are the responsibility of the NTPUD cost? Wouldn't it be better to really bring in a new operator-rather than try a disguised sale?

    The document that will be reviewed during a Validation Action is a lease, not a contract for sale. The District is budgeting $20,000 to $40,000 for this action. The NTPUD Board has directed staff to negotiate a lease with Laulima Kings Beach Event Center LLC. Until the determination of the lease is decided one way or another the direction is to continue negotiations with the current operator.

  21. In the case of a default, can the tenant file bankruptcy and tie up the property in litigation for years? In the case of mechanic’s liens, if the tenant fails to pay the contractors won't the NTPUD be responsible? Will the contractors all file lien

    A voluntary bankruptcy by the Tenant is a default under the Agreement. If, however, the Lease does come under the jurisdiction of a bankruptcy court, the tenant or bankruptcy trustee will still be required to comply with the terms of the lease. In the case of mechanic’s liens, if the tenant fails to pay the contractors and a mechanic’s lien is filed and not addressed by tenant, then tenant will be in default under the Lease. See Section 29. If the tenant does not pay the mechanics lien and NTPUD is forced to terminate the lease, NTPUD will be required to pay the contractor, but it will have access to the security posted by the Tenant to do so

  22. Is the NTPUD responsible for the events center roof? It isn't mentioned in the lease.

    The draft final lease is for operation, maintenance and management of the entire North Tahoe Event Center (Building) located at 8218 North Lake Blvd. The roof, as well as the walls, kitchen, restrooms and other specific items of the building, is not mentioned individually in the lease.

  23. If Laulima fails to complete the project, couldn't the community be left with an incomplete site that would then be the responsibility of the NTPUD?

    Paragraph 5.2 specifies that the Tenant is to expend not less than $5.6 million on Tenant Improvements. It also states that the Tenant shall either (a) deposit into a construction draw or escrow account an amount not less than the Minimum TI costs, and sufficient to pay all costs for construction of the TI as set forth in the Construction Budget, or (b) deliver to Landlord payment bonds and performance bonds, issued by a reputable bonding company licensed to do business in California, in an amount not less than 110% of the Minimum TI Costs, including labor, material and equipment used in the work of improvement. Should the Tenant fail to complete the project, the District would utilize the funds or bonds to complete the project.

  24. How does a lease claiming to create a "First Class Event Facility" and a $5.6m financial commitment where rates to the community are decided by the tenant's "good faith business judgement" equate to reasonable rates to the community even with a 25% discou

    The Lease give the Tenant the flexibility to set the rates at a level that will allow the NTEC to be a viable facility. The District currently grants a 25% discount for use of the facility and we are requiring the tenant to allow for public use consistent with that requirement. Given the term of the Lease, the tenant was not willing to lock in specific rental rates for the facility, because they will need flexibility to ensure long term viability of the facility. District staff agreed this was a reasonable request by the tenant.

  25. Why did the NTPUD agree to allow Laulima to keep the public from using the facility in a state of emergency if it conflicted with a previously scheduled event?

    The District wants to have the facility available to provide an emergency shelter, should the need arise. However, those emergency situations could vary widely, and the District did not want to force the tenant to cancel already scheduled events, when that may not be necessary. In the case of a severe emergency, it is unlikely that the facility will be in use, and no events will have to be cancelled. In the case of an emergency that does not directly affect the NTEC, the District may be able to use a portion of the facility as shelter, without affecting previously scheduled events. However, we want to ensure that the facility is viable for the benefit of the Tenant and the District, and therefore want to provide them assurance that the District will not force them to cancel events.

  26. Why does the NTPUD think Laulima would take "advice, not directives" from the Citizen's Advisory Committee?

    The Citizen’s Advisory Committee is intended to review issues related to the facility, and provide advice to the District and the Tenant related to its operations. The language in the Lease is intended to make clear that this body does not have independent authority to provide direction to the Tenant related to the operation of the facility. That authority is with the District board, and is governed by the terms of the Lease.

  27. Assignment or subletting is allowed to an Affiliate of the Tenant. Give examples of an "affiliate of the Tenant"? The lease could be assigned to a manager of the tenant?

    Affiliate is a defined term in the Lease. It includes “i) any member or manager of the Tenant; (ii) any entity in which the Tenant or any member or manager of the Tenant is the manager; or (iii) any entity that directly or indirectly controls, is controlled by or is under common control with the Tenant or any member or manager of the Tenant.” So, it could be assigned to a member of the tenant LLC (which includes Laulima Development, LLC and Highway 1 Commercial LLC), or a separate LLC established by those entities. The District is primarily concerned with the continued involvement of the current members of the LLC, and is not requiring the same level of review for transitions to new entities that they may set up for business purposes. For assignments to non-affiliates, the Tenant will pay a review fee of $5,000 (escalating by CPI in future years) that may be used to review the competency of future assignees. The future assignee will be required to have at least equal financial competency and experience as the current tenant and its members.

  28. Who actually wrote the lease documentation? Did the PUD Attorney read [sic] (write?) Draft and who is that?

    The lease was written by the District's General Counsel Joshua Nelson and Special Counsel Ethan Walsh, both of Best Best and Krieger (BBK).

  29. An LLC is only liable for the assets of the LLC. The LLC's only asset is a lease with the NTPUD on the community's free and clear asset-the Events Center. Why aren't there further financial guarantees to protect the public's interests?

    Until the Tenant has received all required approvals, pulled building permits and is ready to comment construction, NTPUD will retain possession of the NTEC and will not have given up any assets. Once construction commences, NTPUD will require that the Tenant provide security (in the form of cash, bonds or a letter of credit) to ensure that the tenant improvements are made. After construction is complete, the NTPUD will have the benefit of the improvements, and in the event NTPUD is forced to terminate at that point, it will have an improved building.

  30. How much has the NTPUD spent on the Laulima deal to date and how much more is expected to be spent during this lengthy commitment? Consider lost revenue under Granlibakken, cost of validation, maintenance, salaries, legal fees.

    NTPUD has spent money on negotiating this transaction and will continue to do so to bring it to completion. While the District works toward completion of the process, the District will continue to operate the NTEC as it has in the past.

  31. Comparing Laulima to current operating procedure fails to consider the solution of a better business plan.

    The NTPUD Board solicited Proposals for the operation and management of the NTEC with the express desire to eliminate an on-going operating loss at the event center. Over the course of the past years, various business plans were trialed at the NTEC with minimal success. In fact, the average operating loss at the NTEC for the last 12 years is $90,177. Couple that average annual operating loss with the average annual District support of the NTEC by renting rooms for District use ($37,485) and support of non-profit use ($13,452) and the District supports the NTEC $141,114 annually on average over the past dozen plus years.

  32. Has the NTPUD board been provided with evidence of Laulima's current financial status and ability to obtain $5.6m?

    The District is utilizing a third party forensic accountant to review all financial records in order to preserve any and all intellectual and financial properties.

  33. What is the justification for obtaining this information AFTER signing the lease?

    As frequently happens in large real estate ventures, partners are reluctant to release financial information until there is truly a valid lease agreement. Providing the investors 60 days after the execution of the lease affords them the confidence they need to provide their financial information.

  34. What does the NTPUD consider a reasonably acceptable letter of credit?

    A letter of credit is a commitment issued by a bank granting the party to whom it is issued (in this case the District) to draw upon the funds held by that bank in the event that the Tenant fails to meet its obligations under an agreement (in this case the Lease). The District will have legal counsel review the letter of credit to confirm that the letter of credit is consistent with the legal requirements and customary practices to ensure that the letter of credit provides immediately available funds.

  35. Has the NTPUD board seen design schematics? Why is the NTPUD waiting until after signing the lease to see the plans. Laulima has had nearly 1.5 years to develop their plan.

    The NTPUD Board has not seen schematic drawings yet. The Tenant shall submit drawings no more than 30 days after the effective date. While Laulima Kings Beach Event Center LLC has had time to prepare preliminary drawings, releasing them before a lease is approved is counterproductive to completing a working lease agreement.

  36. Regarding the validation with the State-won't a 70-year lease be considered a disguised sale by the State? Wouldn't it be better to really bring in a new operator-rather than try a disguised sale?

    The Initial Term for the lease is for thirty (30) years with two (2) twenty (20) year options. The NTPUD Board has directed staff to negotiate a lease with Laulima Kings Beach Event Center LLC. Until the determination of the lease is decided one way or another the direction is to continue negotiations with the current operator.

  37. In the case of a default, can the tenant file bankruptcy and tie up the property in litigation for years? In the case of mechanic’s liens, will the NTPUD be responsible? Will the contractors file lien releases with the NTPUD?

    A voluntary bankruptcy by the Tenant is a default under the Agreement. If, however, the Lease does come under the jurisdiction of a bankruptcy court, the tenant or bankruptcy trustee will still be required to comply with the terms of the lease. In the case of mechanic’s liens, if the tenant fails to pay the contractors and a mechanic’s lien is filed and not addressed by tenant, then tenant will be in default under the Lease. See Section 29. If the tenant does not pay the mechanics lien and NTPUD is forced to terminate the lease, NTPUD will be required to pay the contractor, but it will have access to the security posted by the Tenant to do so.

  38. Is the NTPUD responsible for the events center roof? It isn't mentioned in the lease.

    The draft final lease is for operation, maintenance and management of the entire North Tahoe Event Center (Building) located at 8218 North Lake Blvd. The roof, as well as the walls, kitchen, restrooms and other specific items of the building, is not mentioned individually in the lease.

  39. If Laulima fails to complete the project, couldn't the community be left with an incomplete site that would then be the responsibility of the NTPUD?

    Paragraph 5.2 specifies that the Tenant is to expend not less than $5.2 million on Tenant Improvements. It also states that the Tenant shall either (a) deposit into a construction draw or escrow account an amount not less than the Minimum TI costs, and sufficient to pay all costs for construction of the TI as set forth in the Construction Budget, or (b) deliver to Landlord payment bonds and performance bonds, issued by a reputable bonding company licensed to do business in California, in an amount not less than 110% of the Minimum TI Costs, including labor, material and equipment used in the work of improvement. Should the Tenant fail to complete the project, the District would utilize the funds or bonds to complete the project.

  40. How does a lease claiming to create a "First Class Event Facility" and a $5.6m commitment where rates to the community are decided by the tenant's "good faith business judgement" equate to reasonable rates to the community even with a 25% discount.

    The Lease give the Tenant the flexibility to set the rates at a level that will allow the NTEC to be a viable facility. The District currently grants a 25% discount for use of the facility and we are requiring the tenant to allow for public use consistent with that requirement. Given the term of the Lease, the tenant was not willing to lock in specific rental rates for the facility, because they will need flexibility to ensure long term viability of the facility. District staff agreed this was a reasonable request by the tenant.

  41. Why did the NTPUD agree to allow Laulima to keep the public from using the facility in a state of emergency if it conflicted with a previously scheduled event?

    The District wants to have the facility available to provide an emergency shelter, should the need arise. However, those emergency situations could vary widely, and the District did not want to force the tenant to cancel already scheduled events, when that may not be necessary. In the case of a severe emergency, it is unlikely that the facility will be in use, and no events will have to be cancelled. In the case of an emergency that does not directly affect the NTEC, the District may be able to use a portion of the facility as shelter, without affecting previously scheduled events. However, we want to ensure thath the facility is viable for the benefit of the Tenant and the District, and therefore want to provide them assurance that the District will not force them to cancel events.

  42. Why does the NTPUD think Laulima would take "advice, not directives" from the Citizen's Advisory Committee?

    The Citizen’s Advisory Committee is intended to review issues related to the facility, and provide advice to the District and the Tenant related to its operations. The language in the Lease is intended to make clear that this body does not have independent authority to provide direction to the Tenant related to the operation of the facility. That authority is with the District board, and is governed by the terms of the Lease.

  43. Assignment or subletting is allowed to an Affiliate of the Tenant. Give examples of an "affiliate of the Tenant"? The lease could be assigned to a manager of the tenant?

    Affiliate is a defined term in the Lease. It includes “i) any member or manager of the Tenant; (ii) any entity in which the Tenant or any member or manager of the Tenant is the manager; or (iii) any entity that directly or indirectly controls, is controlled by or is under common control with the Tenant or any member or manager of the Tenant.” So, it could be assigned to a member of the tenant LLC (which includes Laulima Development, LLC and Highway 1 Commercial LLC), or a separate LLC established by those entities. The District is primarily concerned with the continued involvement of the current members of the LLC, and is not requiring the same level of review for transitions to new entities that they may set up for business purposes. For assignments to non-affiliates, the Tenant will pay a review fee of $5,000 (escalating by CPI in future years) that may be used to review the competency of future assignees. The future assignee will be required to have at least equal financial competency and experience as the current tenant and its members.

  44. When did we hire an event professional to run the center?

    The District first hired a professional event manager in the late 1980’s named Samantha Graf. She was the first real event planner following the renovation of the facility with TOT funds aimed at getting “heads on beds”, thus increasing TOT revenues for the local area. While her efforts attracted many groups, some continuing as repeat customers, the revenues were largely offset by the cost of providing the service. This was also the time when professional catering was introduced to the Event Center. Catering was a desired service that also generated a percentage commission for the District. Samantha moved away in the late-1990’s due to health reasons. She was replaced by current staff who had trained under her. Trade shows, wedding journals and resort marketing and advertising were constantly explored to find the right combination to entice groups to the Event Center. At that time, no solution was discovered that provided stable revenue sufficient to fund operations and capital asset replacement.

    In 2006 the District commissioned the SMG Study (7 primary recommendations are summarized below) for advice on how to turn the Event Center into a profitable enterprise. During this time the District also employed an experienced event planner who lasted about a year. The outcome of these efforts isn’t clear to me. There was also talk of commissioned sales people but apparently that never happened.

  45. What impact did the hiring of a professional have on the center? Was it measurable?

    You can see the spreadsheet online which shows that the NTEC did not increase its bottom line revenue using this business model (2006-07). Anecdotal stories have pointed to the challenge of adequate lodging nearby or the competition by properties with both lodging and event space on-site together.

  46. What other efforts and changes were made in managing the Center over the last 20 years or so?

    In the Summer of 2006, the District hired Strategic Marketing Group (SMG) to perform a study regarding the NTEC and received the following overview and recommendations:
    • In a typical scenario the convention/conference facility would be funded by a number of revenue sources including Transient Occupancy Tax (TOT), municipal subsidy, and funds accrued from running the facility. These funds are invested with the assumption that generating use of the facility will provide a positive Return on Investment through sales tax, TOT and direct economic impact which generates employment and additional resulting taxes.
    • Typically, a conference center is operated by the visitors and convention bureau that realizes some portion of increased TOT generated by the facility. In the case of the North Tahoe Conference Center (now NTEC) there is significant operational difference in that the Center must operate solely on the basis of fees accrued from running the facility.

    Recommendations based on the situation in 2006:
    1. The facility be run and operated as a conference facility eliminating the community services portion
    2. In the short run, the community services portion should be phased out as use of the conference center increases.
    3. The facility should be aggressively run in an effort to maximize revenues and close the gap in terms of financial losses. This would mean that the local community uses should be subject to capacity control, i.e. moved to lower demand periods. If this cannot be done, it is recommended that the Board of Directors determine the highest and best use of the facility and the land.
    4. Appropriate rates should be set.
    5. Spending should be focused on sales and marketing.
    6. The district should hire professional staff.
    7. A sales partnership with the North Lake Tahoe Resort Association is considered.

    In 2006-2007, the District obtained TOT funds to reach out to target markets.
    In 2008-2009, the District approached Placer County for maintenance and operations funding and indicated to the public and Placer County that it could not continue to tolerate the deficits being experienced and the required transfers from the sewer department to support the Event Center. I believe in response to this effort, TOT funds were provided by Placer County for marketing purposes and possibly for facility upgrades starting at $75k annually but by design, reducing down to zero within a few years. At this point the decision was made to cut expenses, mostly via full-time salaries, and become more of a generic event center with less amenities but for less rent. The facility remains this way today with a “bare bones” budget and very dedicated staff offering a great product to the community we serve.

March 8, 2016: FAQs

Questions received during the March 8, 2016 Board of Directors meeting regarding the proposed public-private partnership.

  1. What is the definition of affordable?

    This is a term that is going to be difficult to quantify as it is different from person to person. While some people say the Event Center’s current price structure is affordable, others tell us very clearly that it’s not. The Event Center has lost business because people said it wasn’t affordable.

    Community input on this ranges from “free” being the only affordable rate to 50% off the highest non-resident wedding/party rate. The answer lies with the type of group.

  2. Has Laulima approached Tahoe Regional Planning Agency (TRPA) and the California Tahoe Conservancy (CTC) with plans? If so, what are their positions on this proposal?

    The District is only concerned with plans for the North Tahoe Event Center. Because we have not yet received a proposal, we are uncertain if they have submitted anything to TRPA or CTC.

  3. What is the size of the building?

    The building is approximately 16,000 sq ft with 10,000 sq ft of actual meeting space.

  4. Why doesn’t the District take ideas from the public and do what we can as an agency?

    The District has taken many ideas from the public over the years. At this point there is no additional funding available for marketing positions and infrastructure upgrades. Without new dollars, the NTPUD unfortunately faces the continued decline in service levels.

  5. Can plans of the building be provided to a structural engineer who could create pro bono plans for building improvements?

    As-built plans are available by filling out a public information request. The District only has plans for the building in paper form so these electronic plans would be in PDF, not CAD. Any plans drawn up should be completed to bring the building to current code and TRPA rules as would be expected of any construction permit. Any estimates must show labor costs at prevailing wage per government code.

February 25, 2016: FAQs

Questions asked by the public at a joint meeting of the North Tahoe Public Utility District Board of Directors and the Recreation and Parks Commission on February 25, 2016.

  1. Who is Laulima Development LLC?

    NTPUD has reviewed numerous websites. Upon receipt of a proposal the Board chooses to pursue, a more thorough vetting process will occur.

  2. Who is the real buyer?

    No agreement would result in the District selling the building. The building and the property will continue to be owned by the District.

  3. How long can we expect before there will be a decision?

    The timeline will be decided by the Board of Directors. A written proposal from Laulima Development LLC is expected in late March and will be discussed at the April 12 Board of Directors meeting.

  4. What happens if they put money in, stay here for a certain amount of time and then they leave?

    This scenario will be addressed as a negotiating point in the legal agreement.

  5. Do we need/want to make a profit?

    Public service is different from pure profit based business models. The NTEC falls somewhere in between. Fees for community use are subsidized creating a shortfall too great to be covered with profitable events, i.e. weddings. These losses at the NTEC must be covered by reserves which are now depleted. This is impacting our ability to operate and maintain our other Park facilities.

  6. Maybe we should we lose money?

    If the District did choose to lose money, funds still needs to be available to cover the loss and pay bills, employees, etc. Funds to cover those losses would have to be accomplished by a tax increase at this point in time.

  7. Were weddings, catering and such eliminated because they are no longer reflected in the budget?

    No. Weddings and a percentage to the District for catering have continued, but the way they are reflected in the budget has changed over the years. Wedding are our most profitable event.

  8. If there was different structure for operating maybe it could be successful?

    The District has tried numerous operating structures over the years; from a fully staffed sales and marketing department to bare bones staffing. The amount of the losses may have differed slightly, but there were mostly losses in each configuration. The District must finally decide between a formal partnership such as proposed by Laulima or asking for a vote by the public to increase taxes. A combination of the two may be an option as well. Affordability and community access are the benchmark for NTPUD and realizing a profit for the private side of the partnership being theirs.

  9. Do people know that the Event Center is in this problem?

    This is an issue the District has been talking about for many years. In 2006 a study funded by the North Lake Tahoe Resort Association was done with findings provided to residents via the District’s newsletter and discussions at the Board meeting. These challenges were also addressed during the Recreation and Parks Master Plan and the survey that was completed in 2009. The problems are publicly discussed during each budget cycle. Monthly financial reports show the financial status of the Event Center, Parks Department and all the departments as part of our Board packet available on our website, www.ntpud.org Public forums over opportunities such as proposed by Laulima also present a chance for the NTPUD to discuss recreation shortfalls.

  10. What if it loses for more than a year?

    This is a risk for the developer and not the District. This risk would be addressed as a negotiating point in the legal agreement.

  11. Is there a pool of money that can help keep this afloat?

    This is a business decision of the developer. There would not be a pool of public dollars used to keep the Center open. Failure of the operator would eventually lead to the public taking back the Event Center that is full refurbished.