Response from Ox

Upon request, the City clerk provided the 2003 Jury with the “Agreement for Operation, Maintenance and Management of the River Ridge Golf Club," effective on December 1, 1993 (the “Original Agreement”). Disagree The City Clerk provided the Grand Jury with an incorrect version of the 1993 agreement with High Tide and Green Grass, Inc. (“High Tide”). There was and is only one version of the 1993 agreement that governed the contractual relationship between High Tide and the City. On January 6, 2004, the City Council ratified the version of the agreement that had been utilized by both the City and High Tide in the operation and management of River Ridge Golf Club. The City Council designated such agreement as the official version to be maintained on file with the City Clerk. Thus, the Correct Agreement ratified by the City Council on January 6, 2004, is the same agreement whose provisions have been utilized by both the City and High Tide in the operation and management of River Ridge Golf Club.

The Original Agreement provided by the City clerk was produced from the official archives of the City. Disagree As stated in the City’s response to F-01, the City Clerk provided the Grand Jury with an incorrect version of the 1993 agreement with High Tide and Green Grass, Inc. (“High Tide”). However, on January 6, 2004, the City Council ratified the version of the agreement that had been utilized by both the City and High Tide in the operation and management of River Ridge Golf Club. The City Council designated such agreement as the official version to be maintained on file with the City Clerk. Thus, the Correct Agreement ratified by the City Council on January 6, 2004, is the same agreement whose provisions have been utilized by both the City and High Tide in the operation and management of River Ridge Golf Club.

In the course of litigation in connection with a legal dispute between a former employee of the City and the City, it was discovered that a slightly different version of the Original Agreement (the “Different Agreement”) existed and had been the version used by both the City and High Tide in the management of River Ridge. Disagree As stated in the City’s response to F-01, the City Clerk provided the Grand Jury with an incorrect version of the 1993 agreement with High Tide and Green Grass, Inc. (“High Tide”). However, on January 6, 2004, the City Council ratified the version of the agreement that had been utilized by both the City and High Tide in the operation and management of River Ridge Golf Club. The City Council designated such agreement as the official version to be maintained on file with the City Clerk. Thus, the Correct Agreement ratified by the City Council on January 6, 2004, is the same agreement whose provisions have been utilized by both the City and High Tide in the operation and management of River Ridge Golf Club.

The Different Agreement is said to have been in the possession of the City attorney, the City finance director and High Tide. Disagree The Correct Agreement has been in the possession of the City Attorney, Finance Director and High Tide. As stated in the City’s response to F-01, the Correct Agreement ratified by the City Council on January 6, 2004, is the same agreement whose provisions have been utilized by both the City and High Tide in the operation and management of River Ridge Golf Club.

The difference between the Original Agreement and the Different Agreement is that the Original Agreement required High Tide to submit to the City an annual financial statement showing in reasonably accurate detail the financial activities of High Tide certified by an independent auditor which had to include a statement that the financial statements were completed in compliance with generally accepted accounting principles (GAAP), whereas the Different Agreement had a lesser requirement. Disagree As stated in the City's response to F-01, on January 6, 2004, the City Council ratified the version of the agreement that had been utilized by both the City and High Tide in the operation and management of River Ridge Golf Club. The City Council designated such agreement as the official version to be maintained on file with the City Clerk. Thus, the Correct Agreement ratified by the City Council on January 6, 2004, is the same agreement whose provisions have been utilized by both the City and High Tide in the operation and management of River Ridge Golf Club. Having said that, the "Different Agreement" and original intent of the City and High Tide was to have only the annual revenues audited. While this requirement is different than a full financial audit, it is not necessarily "a lesser requirement." The City does not require a full financial audit because as part of the budget process, the City's Budget Team and the City Council review budget appropriations for River Ridge Golf Club. The Parks and Facilities Superintendent, as the administrator of the agreement, manages, reviews and evaluates expenses on a regular basis. Furthermore, the Finance Department regularly reviews and evaluates expenses of River Ridge Golf Club.

The Different Agreement required that High Tide need only submit to the City an annual financial statement showing, in reasonably accurate detail, the financial activities of High Tide certified by an independent auditor that only the annual revenues are in compliance with GAAP. Disagree As stated in the City's response to F-01, on January 6, 2004, the City Council ratified the version of the agreement that had been utilized by both the City and High Tide in the operation and management of River Ridge Golf Club. The City Council designated such agreement as the official version to be maintained on file with the City Clerk. Thus, the Correct Agreement ratified by the City Council on January 6, 2004, is the same agreement whose provisions have been utilized by both the City and High Tide in the operation and management of River Ridge Golf Club. The City’s intent has always been to have the revenues audited. In addition, as part of the budget process, the City's Budget Team and the City Council review budget appropriations for River Ridge Golf Club. The Parks and Facilities Superintendent, as the administrator of the agreement, manages, reviews and evaluates expenses on a regular basis. Furthermore, the Finance Department regularly reviews and evaluates River Ridge Golf Club expenses.

The difference in these requirements is that under the Original Agreement the audit and certification applied to both High Tide revenues and expenditures, whereas in the Different Agreement the language required the audit and certification of only revenues. Disagree As stated in the City's response to F-01, on January 6, 2004, the City Council ratified the version of the agreement that had been utilized by both the City and High Tide in the operation and management of River Ridge Golf Club. The City Council designated such agreement as the official version to be maintained on file with the City Clerk. Thus, the Correct Agreement ratified by the City Council on January 6, 2004, is the same agreement whose provisions have been utilized by both the City and High Tide in the operation and management of River Ridge Golf Club. As part of the budget process, the City's Budget Team and the City Council review budget appropriations for River Ridge Golf Club. The Parks and Facilities Superintendent, as the administrator of the agreement, manages, reviews and evaluates expenses on a regular basis. Furthermore, the Finance Department regularly reviews and evaluates River Ridge Golf Club expenses.

In practice, the City relies solely on pre-expenditure budget approvals in lieu of audit or review of actual authorized expenditures of City money. There is no requirement for supplying to the City reconciliations of the River Ridge accounts to budget. Disagree Paragraph 21 of the agreement requires High Tide to provide monthly financial statements "for the previous month and the fiscal year to date with a comparison of the results of operations against the budgets and Business Plan." The City provides management review and evaluation of River Ridge Golf Club expenses on an ongoing basis as outlined in the response to F-05.

City officials, in responding publicly to the 2003 Jury report, have repeatedly referred to its right to look deeper into the reconciliation of those accounts, though it has never done so over the entire 11-year history of the agreements to date. Disagree A complete audit of the River Ridge Golf Club for two years covering FY 2001-02 and FY 2002-03 was conducted by Moreland and Associates, Inc. The result of this audit was an unqualified opinion that “the financial statements … present fairly, in all material respects, the financial position of High Tide & Green Grass, Inc … and the results of its operations and cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America.” On a monthly basis, the City reviews and evaluates the expenses of River Ridge Golf Club operations and reconciles expenses to the budget.

The River Ridge golf course management agreement is the only business of High Tide. Concur

The City clerk has stated that the Different Agreement “has been determined by staff to be the correct agreement….” Disagree As stated in the City’s response to F-01, there was only one version of the 1993 agreement that governed the contractual relationship between High Tide and the City. On January 6, 2004, the City Council ratified the version of the agreement that had been utilized by both the City and High Tide in the operation and management of River Ridge Golf Club. The City Council designated such agreement as the official version to be maintained on file with the City Clerk. The agreement whose provisions have been utilized by both the City and High Tide in the operation and management of River Ridge Golf Course and the Correct Agreement ratified by the City Council on January 6, 2004, are one and the same.

The determination that the Different Agreement “has been determined by staff to be the correct agreement…” is reported to have been based on the recollection of the City attorney, the reputed drafter of the Original Agreement. Concur with Comment The City Attorney is the actual drafter of the Correct Agreement. As stated in the City’s response to F-01, there was only one version of the 1993 agreement that governed the contractual relationship between High Tide and the City. On January 6, 2004, the City Council ratified the version of the agreement that had been utilized by both the City and High Tide in the operation and management of River Ridge Golf Club. The City Council designated such agreement as the official version to be maintained on file with the City Clerk.

The drafter of the Original Agreement maintains that the requirement for only a revenue audit was the “original intent.” Concur with Comment As stated in the City’s response to F-01, on January 6, 2004, the City Council ratified the version of the agreement that had been utilized by both the City and High Tide in the operation and management of River Ridge Golf Club. The City Council designated such agreement as the official version to be maintained on file with the City Clerk. The City Attorney, drafter of the Correct Agreement, concurs that a revenue audit was the original intent of the City and High Tide.

The expired Different Agreement, which had been superseded on December 15, 1998, was submitted to City council on January 6, 2004 and approved formally as having been the “correct” agreement. Disagree As stated in the City’s response to F-01, there was only one version of the 1993 agreement that governed the contractual relationship between High Tide and the City. On January 6, 2004, the City Council ratified the version of the agreement that had been utilized by both the City and High Tide in the operation and management of River Ridge Golf Club. The City Council designated such agreement as the official version to be maintained on file with the City Clerk. Thus, the Correct Agreement ratified by the City Council on January 6, 2004, is the same agreement whose provisions have been utilized by both the City and High Tide in the operation and management of River Ridge Golf Club.

Responsible City officials have described the presence of two differing official versions of the River Ridge agreement as “rare,” “curious,” “astonishing” and “quite rare.” No Comment The Grand Jury did not identify the City officials referenced. The City lacks sufficient information to respond to this finding.

The City official responsible for overseeing the contracting process in the High Tide instance attributes the discrepancy to inadvertence, mistake or negligence. Disagree The Parks and Facilities Superintendent is the individual responsible for managing the agreement with High Tide. He does not recall making such comments.

The City manager has stated that the discrepant versions resulted from clerical error. Concur

The comparable audit language in the “Second Agreement for Operation, Maintenance and Management of the River Ridge Golf Club,” effective on December 15, 1998, (the “Second Agreement,” or “Present Agreement”) is identical to that contained in the Original Agreement requiring an audit of the financial statements (revenues and expenditures) of High Tide in accordance with GAAP. Disagree As stated in the City’s response to F-01, there was only one version of the 1993 agreement that governed the contractual relationship between High Tide and the City. On January 6, 2004, the City Council ratified the version of the agreement that had been utilized by both the City and High Tide in the operation and management of River Ridge Golf Club. The City Council designated such agreement as the official version to be maintained on file with the City Clerk. Thus, the Correct Agreement ratified by the City Council on January 6, 2004, is the same agreement whose provisions have been utilized by both the City and High Tide in the operation and management of River Ridge Golf Club.

The language characterized as the “original intent” contained in the Different Agreement did not appear in the subsequent Second Agreement. Disagree As stated in the City’s response to F-01, there was only one version of the 1993 agreement that governed the contractual relationship between High Tide and the City. On January 6, 2004, the City Council ratified the version of the agreement that had been utilized by both the City and High Tide in the operation and management of River Ridge Golf Club. The City Council designated such agreement as the official version to be maintained on file with the City Clerk. Thus, the Correct Agreement ratified by the City Council on January 6, 2004, is the same agreement whose provisions have been utilized by both the City and High Tide in the operation and management of River Ridge Golf Club.

The Second Agreement was amended by the City council by a First Amendment on December 9, 2003. Concur

The Second Agreement was amended to change, inter alia, the requirement for a certified independent GAAP audit of financial statements (revenues and expenditures) as required in the Original Agreement, to the lesser requirement for a certified independent GAAP audit of only the revenues, as reflected in the Different Agreement. Disagree The "Different Agreement" and original intent of the City and High Tide were to have the annual revenues audited (see the City’s responses to F-05 and F-06). While this requirement is different, it is not necessarily a "lesser requirement." As stated in the City's response to F-01, the 1993 agreement whose provisions have been utilized by both the City and High Tide in the operation and management of River Ridge Golf Course and the Correct Agreement ratified by the City Council on January 6, 2004, are one and the same.

In processing the First Amendment to the Second Agreement ambiguous presentations supporting and urging the amendments may have led City Council members to believe erroneously that the proposed amendments were compatible with the recommendations of the 2003 Jury’s report. Disagree The report, which was included on the City Council’s agenda for December 9, 2003, was factual and neither erroneous nor ambiguous. City staff had no intention of misleading the City Council or public.

In the city council hearing on December 9, 2003, presenting Amendment Number One to the High Tide contract for approval, the City’s River Ridge program manager responded “Yes” to a council member’s question, “This is per the Grand Jury recommendations?” Concur

The city council had also been informed in an agenda item memorandum dated 12/09/03 that, “During the process of responding to a recent Grand Jury report relating to the management of [River Ridge], [City] staff identified several provisions of the current agreement…that require update…. Another amendment properly describes the scope of the independent audit of the Operator’s operations as a certified audit of ‘annual revenues as indicated in the financial statement’ and not an audit of the financial statement.” Concur The Account Established Jointly

The language of the Original, the Different and the Second Agreements, before recent amendments, required that, “Operator shall establish in the name of the City and Operator, jointly, such bank accounts as required for the operation, maintenance and management of the Golf Course….” Concur with Comment The language of the Correct Agreement and the Second Agreement state: “Operator shall establish in the name of City and Operator, jointly, such bank accounts as required for the operation, maintenance and management of the Golf Course….”

The language of the Original, the Different and the Second Agreements, before recent amendment, in discussing payment to High Tide used the term “joint account” three times in each agreement. No Comment The agreements speak for themselves with regard to the frequency of usage of the term “joint account.”

The City in its response to the 2003 Jury, quite accurately stated, “There never was a joint account.” Concur with Comment As stated in the City’s response to Item F-32 of the 2003 Grand Jury Report: “There never was a joint account between the City and Operator. The distinction between an ‘account established jointly’ and a ‘joint account’ is significant. A ‘joint account,’ by bank definition, is an account with multiple owners, each owner as signer, and each owner with the ability to transact on the account. An ‘account established jointly’ was intended to be an account with parameters meeting the needs of the City and Operator.”

The 2004 Jury agrees with the 2003 Jury report’s Conclusion 13, that a “joint account” under the circumstances of the River Ridge agreement would have been improper. No Comment

Contrary to the provisions of the Original, the Different and the Second Agreements, High Tide established private corporate accounts and deposited City revenues collected by it into these private corporate accounts. Disagree As stated in the City’s response to F-01, the Correct Agreement ratified by the City Council on January 6, 2004, is the same agreement whose provisions have been utilized by both the City and High Tide in the operation and management of River Ridge Golf Club. As stated in the City’s response to item C-20 of the 2003 Grand Jury Report: “The only bank accounts into which revenues from the operation of the golf course were deposited and expenses for operation of the golf course were paid were in Operator’s name alone.” The City disagrees with the characterization of the River Ridge Golf Club revenues collected by High Tide as “City revenues.” As stated in the City’s response to Items C-11 through C-20 of the 2003 Grand Jury Report: “The agreements provided that Operator did not act as the City’s agent, ‘except as City may specify in writing’ (Original Agreement section 57; Second Agreement section 52). By letter dated February 7, 1994, the City Treasurer notified the Ventura County National Bank, where Operator maintained a golf course bank account, that the City conveyed to Operator ‘the right to act as agent for the River Ridge Golf Club which is owned by the City’ and to accept checks in the name of the golf course; and that the title of the account should be the name of Operator ‘as agent for River Ridge Golf Club or River Ridge Golf Course.’ “Money derived from the operation of the golf course, collected by Operator and deposited in Operator’s golf course bank accounts was not at that point money to which the City was entitled. Section 10 of the agreements required the City to pay Operator for Operator’s services. As the Grand Jury noted (e.g., F-46, F-47 and

Apparently in response to the 2003 Jury’s report, the City staff informed the City council that “staff identified several portions of the current agreement [the Second Agreement]… that require update.” Concur with Comment The agenda report of December 9, 2003, to the City Council states: “ … staff identified several provisions of the current agreement [the Second Agreement] … that require … update.” [emphasis added]

The council was then informed “One amendment concerns properly describing the account with a financial institution for the deposit of Golf Course revenues.” Concur with Comment The agenda report of December 9, 2003, to the City Council states: “One amendment concerns properly describing the account with a financial institution for receipt of Golf Course revenues.” [emphasis added]

To “properly describe” the account for receipt of City golf course revenues, the Second Agreement was amended to read “City and Operator will establish such bank accounts, jointly…” rather than having High Tide establish such accounts “in the name of the City and Operator, jointly….” Concur

Though the language discussed above was substituted in the Second Agreement, the character and operation of these accounts has not changed in any way from the prior operation of these accounts. The accounts remain sole commercial accounts in the name of High Tide. Concur

Paragraph 10a. of the Second Agreement provides that “at the end of each calendar month…, [High Tide] shall pay itself from the account established jointly the minimum monthly payment provided for in…this Section 10, from which [High Tide] shall pay all expenses incurred to operate the Golf Course.” Concur

High Tide does not pay itself the minimum monthly payment from the account established jointly, but pays its operating expenses directly from that account as those expenses arise and become due. Disagree High Tide does pay itself a minimum monthly fee from the account established jointly, consisting of the expenses that arise and become due. Such expenses fluctuate month to month. As stated in the City’s response to F-42 of the 2003 Grand Jury Report: “In practice, Operator submits an annual budget to City Council for approval. Once approved, the City pays Operator the minimum yearly amount contained in the budget. In practice, Operator pays expenses incurred from revenues received and provides a monthly statement to the City’s Project Manager and Finance Director reflecting these expenditures.”

The public money character of the funds deposited in the High Tide River Ridge accounts, that is, public money collected by High Tide as the agent of the City treasurer, does not change until it is withdrawn by High Tide when disbursed for its own purposes to satisfy High Tide’s, not the City’s, obligations. Disagree The City disagrees with the characterization of River Ridge Golf Club revenues collected by High Tide as “public money,” and disagrees with the statement that High Tide collects such revenues as the agent of the City Treasurer. As stated in the City’s response to Items C-11 through C-20 of the 2003 Grand Jury Report: “The agreements provided that Operator did not act as the City’s agent, ‘except as City may specify in writing’ (Original Agreement section 57; Second Agreement section 52). By letter dated February 7, 1994, the City Treasurer notified the Ventura County National Bank, where Operator maintained a golf course bank account, that the City conveyed to Operator ‘the right to act as agent for the River Ridge Golf Club which is owned by the City’ and to accept checks in the name of the golf course; and that the title of the account should be the name of Operator ‘as agent for River Ridge Golf Club or River Ridge Golf Course.’ “Money derived from the operation of the golf course, collected by Operator and deposited in Operator’s golf course bank accounts was not at that point money to which the City was entitled. Section 10 of the agreements required the City to pay Operator for Operator’s services. As the Grand Jury noted (e.g., F-46, F-47 and

The 2003 Jury found that the City treasurer by letter dated February 7, 1994, appointed High Tide an agent for the City for the limited purpose of operating River Ridge. Disagree In its 2003 Report, the Grand Jury did indicate such a finding; however, the City disagreed with that finding. As stated in the City’s response to Items C-11 through C-20 of the 2003 Grand Jury Report: “By letter dated February 7, 1994, the City Treasurer notified the Ventura County National Bank, where Operator maintained a golf course bank account, that the City conveyed to Operator ‘the right to act as agent for the River Ridge Golf Club which is owned by the City’ and to accept checks in the name of the golf course; and that the title of the account should be the name of Operator ‘as agent for River Ridge Golf Club or River Ridge Golf Course.’”

The treasurer’s letter of February 7, 1994, specifically extended the agency appointment to the collection of money in the name of a City-owned facility. Concur with Comment As stated in the City’s response to Items C-11 through C-20 of the 2003 Grand Jury Report: “By letter dated February 7, 1994, the City Treasurer notified the Ventura County National Bank, where Operator maintained a golf course bank account, that the City conveyed to Operator ‘the right to act as agent for the River Ridge Golf Club which is owned by the City’ and to accept checks in the name of the golf course; and that the title of the account should be the name of Operator ‘as agent for River Ridge Golf Club or River Ridge Golf Course.’”

The power granted in the treasurer’s letter of February 7, 1994, has never been revoked or modified. Concur

Paragraph 10a. of the Second Agreement, amended on December 9, 2003, requires High Tide to “collect all revenues from the operation of the Golf Course and deposit such revenues in an account established jointly [as contrasted with a ‘joint account’] by the City and Operator….” Concur

The City treasurer analogizes the collection of City revenues by her fiduciary agent, High Tide, to rents paid by sub-lessees as rent to a lessee of the City. Disagree Appearing before the 2004 Grand Jury, the City Treasurer stated that the arrangement whereby High Tide collects revenues from River Ridge Golf Club operations and pays the City at the end of the fiscal year is not unique. The City Treasurer noted that if the lease of a City- owned building permitted subleasing, the lessee would collect rent from sub-lessees but would owe the City only the rent called for in the lease, which could be more or less than the rent the lessee collected from sub-lessees.

Rents paid by sub-lessees to a lessee are the property of the lessor with whom the sub- lessee contracted, not the property of the prime lessor. No Comment The ownership of rents paid by sub-lessees to a lessee depend on the contractual arrangement among the lessor, the lessee and the sub-lessees.

No lease agreement exists in connection with High Tide’s relationship with the City for the management of River Ridge. Concur

High Tide is not in a tenant-landlord relationship with the City. Concur

Though the City has no power to draw on the High Tide River Ridge accounts, the City treasurer believes the City has merely a possessory right in the nature of a lien to its money in those High Tide accounts. Disagree Appearing before the 2004 Grand Jury, the City Treasurer was asked whether the City has “a possessory right in the nature of a lien” to money in High Tide’s bank accounts. The City Treasurer replied that she would not so characterize the issue.

The 2003 Jury found that High Tide collected money at River Ridge as an agent for the City. Disagree In its 2003 Report, the Grand Jury did indicate such a finding; however, the City disagreed with the finding. As stated in the City’s response to Items C-11 through C-20 of the 2003 Grand Jury Report: “By letter dated February 7, 1994, the City Treasurer notified the Ventura County National Bank, where Operator maintained a golf course bank account, that the City conveyed to Operator ‘the right to act as agent for the River Ridge Golf Club which is owned by the City’ and to accept checks in the name of the golf course; and that the title of the account should be the name of Operator ‘as agent for River Ridge Golf Club or River Ridge Golf Course.’”

The City responded that High Tide was not an agent for the City, but “is an agent for the River Ridge Golf Club, which is owned by the City.” Concur with Comment As stated in the City’s response to the 2003 Grand Jury Report: “Operator is not an agent of the City. Operator is an agent for the River Ridge Golf Club, which is owned by the City.”

The City treasurer’s and the City’s only power with respect to the corporate High Tide River Ridge accounts “established jointly” is that granted by High Tide to the bank by letter dated November 30, 1993, and confirmed to the City by the bank as recently as June 20, 2002. Concur

The power granted to the City by High Tide is to permit the City “complete access to any and all activity involving our corporate accounts…” and “to suspend financial activity on our accounts.” Concur

City money deposited in the River Ridge High Tide corporate accounts remains City money until spent by High Tide directly for operations or is returned to City custody at the end of the fiscal year. Disagree The City disagrees with the characterization of River Ridge Golf Club revenues collected by High Tide as “City money.” As stated in the City’s response to Items C-11 through C-20 of the 2003 Grand Jury Report: “The agreements provided that Operator did not act as the City’s agent, ‘except as City may specify in writing’ (Original Agreement section 57; Second Agreement section 52). By letter dated February 7, 1994, the City Treasurer notified the Ventura County National Bank, where Operator maintained a golf course bank account, that the City conveyed to Operator ‘the right to act as agent for the River Ridge Golf Club which is owned by the City’ and to accept checks in the name of the golf course; and that the title of the account should be the name of Operator ‘as agent for River Ridge Golf Club or River Ridge Golf Course.’ “Money derived from the operation of the golf course, collected by Operator and deposited in Operator’s golf course bank accounts was not at that point money to which the City was entitled. Section 10 of the agreements required the City to pay Operator for Operator’s services. As the Grand Jury noted (e.g., F-46, F-47 and

Interest accruing from the City money in these accounts becomes part of the base revenue amount to be divided between the City and High Tide rather than being segregated as accruing to the City, i.e., the City shares with High Tide the passive interest accruing on its money. Disagree No interest accrues on money in High Tide’s bank accounts. The City disagrees with the characterization of River Ridge Golf Club revenues in High Tide’s bank accounts as “City money.” As stated in the City’s response to Items C-11 through C-20 of the 2003 Grand Jury Report: “The agreements provided that Operator did not act as the City’s agent, ‘except as City may specify in writing’ (Original Agreement section 57; Second Agreement section 52). By letter dated February 7, 1994, the City Treasurer notified the Ventura County National Bank, where Operator maintained a golf course bank account, that the City conveyed to Operator ‘the right to act as agent for the River Ridge Golf Club which is owned by the City’ and to accept checks in the name of the golf course; and that the title of the account should be the name of Operator ‘as agent for River Ridge Golf Club or River Ridge Golf Course.’ “Money derived from the operation of the golf course, collected by Operator and deposited in Operator’s golf course bank accounts was not at that point money to which the City was entitled. Section 10 of the agreements required the City to pay Operator for Operator’s services. As the Grand Jury noted (e.g., F-46, F-47 and

Payment of City money to High Tide for operating, maintaining, and managing River Ridge, as provided for in all iterations of the agreement, is from High Tide to High Tide. Disagree The City disagrees with the characterization of River Ridge Golf Club’s revenues collected by High Tide as “City money.” As stated in the City’s response to Items C-11 through C-20 of the 2003 Grand Jury Report: “The agreements provided that Operator did not act as the City’s agent, ‘except as City may specify in writing’ (Original Agreement section 57; Second Agreement section 52). By letter dated February 7, 1994, the City Treasurer notified the Ventura County National Bank, where Operator maintained a golf course bank account, that the City conveyed to Operator ‘the right to act as agent for the River Ridge Golf Club which is owned by the City’ and to accept checks in the name of the golf course; and that the title of the account should be the name of Operator ‘as agent for River Ridge Golf Club or River Ridge Golf Course.’ “Money derived from the operation of the golf course, collected by Operator and deposited in Operator’s golf course bank accounts was not at that point money to which the City was entitled. Section 10 of the agreements required the City to pay Operator for Operator’s services. As the Grand Jury noted (e.g., F-46, F-47 and

California Government Code sections 41001 through 41007 set forth the detailed duties of the treasurer, which include, inter alia, “receive and safely keep all money coming into his hands as treasurer….” Concur with Comment Money from River Ridge Golf Club operations is not received by the City Treasurer’s Office until High Tide pays the City at the end of each fiscal year.

California Government Code section 53630 et seq., make the treasurer responsible for investing City money. Disagree Government Code section 53630 et seq. impose a variety of duties on a variety of public officers and employees, not just the City Treasurer. Some of the statutes, such as section 53684, concern investment of money. The City Treasurer complies with such statutes.

Several interviewed city and county officials charged with the duties of collection, care and accountability for public money, while expressing no opinion with respect to the lawfulness of circumstances present in this case, uniformly expressed surprise and doubt with respect to the appropriateness of such an arrangement for the custody and accountability of public funds. No Comment The City has been provided insufficient information to comment. Comparative Golf Course Management

Five of the seven publicly owned golf courses in Ventura County examined by the Jury are managed under management agreements leasing the property to the lessee/manager (“Five Public Courses”). No Comment The City has been provided insufficient information to comment.

Management of the Five Public Courses collect revenue for themselves as lessees, pay the public entity lessor monthly or yearly rent, and monthly pay additional income to the public entity lessors as provided for in the contracts. No Comment The City has been provided insufficient information to comment.

One of the Five Public Courses, in addition to collecting revenue for itself as lessee, collects specified revenue for the public entity lessor and daily deposits that revenue into a designated public entity account. No Comment The City has been provided insufficient information to comment.

Of the seven publicly owned golf courses examined, two under a single contract have a management contract without a leasing agreement. No Comment The City has been provided insufficient information to comment.

The management-only golf course agreement provides for the collection of revenue for the public entity owner and deposit into contractor accounts. No Comment The City has been provided insufficient information to comment.

The management-only golf course agreement requires that the manager monthly pay the public entity owner “all net operating income” collected. No Comment The City has been provided insufficient information to comment.

“Net operating income” is defined in the agreement as all revenue received except golf course lessons, if paid directly to manager staff, less “Expenses and Approved Capital Expenditures….” No Comment The City has been provided insufficient information to comment.

The management-only golf course agreement calls for monthly financial statements that include, inter alia, “income statements and bank reconciliations reflecting all financial records including payroll, maintenance and operational expenses and revenues…. Bank statements will be included as source documents to bank reconciliations.” No Comment The City has been provided insufficient information to comment.

The agreements of all seven publicly owned golf courses examined by the Jury required point-of-sale or service accountability to include unlimited access to that data by the public entity concerned. No Comment The City has been provided insufficient information to comment. Contract Provisions

Though High Tide is required to submit budgets and operate within them, with certain provisions for change and review, the Original, the Different and the Second Agreements state that High Tide “shall not be deemed to have made any guarantee, warranty or representation whatsoever in connection with the budgets. City acknowledges that the budgets are intended only to be reasonable estimates.” Concur with Comment As stated in the City response to F-49 in the 2003 Grand Jury report: “… these budgets (as in all budgets prepared in government or the private sector) represent, in the best judgment of the Operator (preparer) and the City (reviewer), a reasonable and considered estimate of expenses and revenues for the future.”

Review of the Second Agreement, as amended, reveals that the recommendations of the 2003 Jury for correction of deficiencies regarding, inter alia, High Tide’s being specifically absolved of accountability for its budget and the question of disposition of under-runs from the budget, the defective disputes article and the lack of a termination for convenience article (considering the lack of capital investment by High Tide in the enterprise) were not implemented. Disagree As stated in the City's response to the 2003 Grand Jury Report under F-53: "Operator recalls stating to the Grand Jury the Operator agreed that under-runs would be treated the same as revenue over the minimum base revenue; that is, the under-runs would become part of the profit share between the City and Operator. The City Finance Director stated to the negotiating team that the approved budget was what would be paid to Operator and that under-runs were Operator's money under the Original Agreement. While not obligated to do so, Operator included under-runs in the profit sharing calculations during the term of the Original Agreement. With the implementation of the Second Agreement, Operator retains the under-runs.” The City disagrees that the dispute resolution procedure is defective or that a termination for convenience article is necessary. As stated in the City’s responses to Items C-24 through C- 27 of the 2003 Grand Jury report: “…. The City decided during the development of the Second Agreement to eliminate the Termination for Convenience provision. In the City’s and Operator’s judgment, a termination for convenience provision was unnecessary. Further, the City has several other provisions in the Second Agreement that would allow the City to terminate the Agreement with Operator for cause. Those provisions protect the City should the City desire to remove Operator for poor performance. “…. The dispute resolution procedure conforms to standard and customary practice in agreements of this kind and adequately protects the City.”

There is no provision in the contract requiring monthly reconciliation of the High Tide corporate bank accounts to include reporting the results of that reconciliation to the City with the reconciliation extending to the actual expenditures related to budget authority and the provision of the bank statements to the City as source documents. Concur with Comments As stated in the City’s response to F-05, the Parks and Facilities Superintendent, as the administrator of the agreement, manages, reviews and evaluates expenses of the River Ridge Golf Club on a regular basis. Furthermore, the Finance Department regularly reviews and evaluates expenses. While actual reconciliation extending to the actual expenses related to budget authority and cross-referenced by bank statements is not required, City maintains the ability to make such reconciliation with 15 days’ notice. To satisfy the 2003 Grand Jury, the City had a complete audit for two years covering FY 2001-02 and FY 2002-03 conducted by Moreland and Associates, Inc. The result of this audit was an unqualified opinion that “the financial statements … present fairly, in all material respects, the financial position of High Tide & Green Grass, Inc … and the results of its operations and cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America.” Recommendations: Contract Confusion