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On Trumpets

 

The Survey Results.  No doubt comforting to the survey’s designers, the survey’s results have more than vindicated their decision to embrace the Community’s thoughts about Trumpets as well as justifying their raison d'etre, or reason for being. It's unclear whether or how the the restaurant’s ultimate fate will be materially different as a result of the survey. However, I’m continuing to hold out for a fine dining experience but with lower, more reasonable food prices. Click if you have an interest in viewing the survey results.

License Ownership.  When in 2002 the Association ceased operating Trumpets restaurant, the license to operate was subsequently transferred from the Association to the new operator, S&D Café V, LLC. According to the City, and notwithstanding their cessation of operations on 30 Sept. '07, the current holder of the business license to operate a restaurant continues to be S&D Café V, LLC. That fact did not change when they ceased their restaurant and catering operations here.

As the legal owner of the license to operate Trumpets, S&D Café V, LLC. may do one of the following and, according to the City, they should do so within 90 days following the cessation of operations on 30 September: 1) use that operating license at a different location; 2) transfer the license to another entity, preferably back to the Association; or 3) nothing, after which the license falls into a licensing void. For the licensee, the cessation of operations means that they will no longer be obligated to pay the City recurring operating fees every six months: $1,000 for the restaurant/bar; $400 for catering operations; and a fee based on a percent of gross revenue.

The above three options assumes the former lessee is legally entitled to the license following cessation of operations on 30 September. But are they entitled to the license? Whether or not S&D is legally entitled to the license is a matter of law, or more specifically, contract law, which I am told the City would recognize. For example, under one set of circumstances, ownership of the license could have reverted back to the Association in the event the lessee (S&D) was no longer operating a restaurant here. Had that eventuality been anticipated, the original lease agreement could have recognized that possible prospect and the Association would now be the legal owner of the license. However, I am told that since the lease agreement did not contain any such provision, the Association does not have a legal right to the license. Why that might be of some importance, see Consideration below.

Technically, S&D Café V, LLC. holds three City business licenses in their Trumpets operations, one for the restaurant/bar and two for catering operations, one for inside operations and one for outside of the premises. 

Consideration and the Origination Fee.  In order to operate a restaurant, the City requires the payment of what they term an origination fee. For a restaurant, that fee is $30,000. Other, more nominal fees are required to perform catering operations.

Most likely we can assume that those origination fees were subsequently paid by the Developer following the action of the City in 1998 to grant the Developer a conditional use permit to construct the Anthem Center with a restaurant and bar.

In the likely event our former lessee fails to voluntarily transfer their existing restaurant license back to the Association, which would seem an unlikely prospect given present litigious circumstances, the City will require the payment of another $30,000 fee to be paid prior to granting a license to any new operator.

That fee, assuming S&D is not overwhelmed by the season’s spirit of giving, will have to be borne by either the Association or by the new restaurant operator.

The Timetable.  The Trumpets timetable for decision-making is a little tighter than most people realize. The clock started running when the lessee notified the City’s Business License unit that they were no longer operating a restaurant in the Anthem Center, effective 30 September 2007. 

There are two different timetables running concurrently. One affects the license holder (S&D) and the other affects the Association. As alluded to above, the initial timetable runs for 90 days, closing at the end of December, i.e., 90 days from 30 September. Since the Association is not the owner of the license, there is nothing procedurally the Association can or need do. During that 90-day period, the license holder must notify the City’s licensing department of their intentions regarding the future of their license.

The 180-day Deadline.  For the Association, the critical timetable is a 180-day period beginning 30 September, or near the close of March 2008. While technically, there is no timetable for starting a new restaurant operation at Sun City, practically speaking, there is a 180-day mandate built into the City's planning & permitting process. That mandate stems from the conditional use permit the City granted Del Webb in 1998. Click here to read the City's action approving the permitted use. That original 1998 conditional use permit allows the Association to make certain changes within a 180-day timeframe following a precipitating event. That event occurred on 30 September. As a result, the Association may proceed to bring in a new operator under the terms and conditions of the 1998 permit if, and only if, the new operator is actually operating a new restaurant before the lapse of the 180 period.

However, if a new operator has not begun operations within the 180-day period, the terms and conditions of that 1998 permit are no longer in effect. So, what happens if the selected operator of our new restaurant is unable (for any reason) to begin operations by the end of March?  Say, for example, our new operator is unable to start operations before April 12th or June 1st? Or say, our new designated operator (for any reason) changes their mind, reneges on their Agreement, or fails to begin timely performance? In other words, it is not too difficult to envisage a circumstance under which there would be insufficient time for the Association to secure a new replacement operator to begin operations in a timely manner before the end of that 180-day period.

In that unlikely but possible circumstance, since the 180-day period had lapsed, the Association must then go through the entire City planning and approval process anew. While that prospect might not prove formidable, it would be unwise and would raise serious fiduciary questions for the Association for a number of reasons:

  1. A considerable delay would result;

  2. The likely prospect that the process would result in unavoidable and unacceptable costs to comply;

  3. The unavoidable need to comply with an expected array of costly new terms and conditions that were not in effect 10 years earlier when the original permit was granted;

  4. The presumption that a new use conditional use permit would encompass the entire Anthem Center complex rather than merely the restaurant since the existing use permit covers both.

To avoid that unlikely possibility, the earlier the start operations date the better, as opposed to one that is scheduled to start close to end of March and the end of the 180 day period.

When does the RFP go out? If the Board is able to make an early December decision, it will do so this coming week and the RFP will go out soon thereafter, with an anticipated initial response to Phase 1 of the process in January.

Where can I read the draft RFP? The draft proposed RFP is on the SCACAI website, under Documents, Trumpets Working Group, Trumpets - A Request for Proposal - Draft. If you already have access to that website, Click here: http://www.sca-hoa.org/inside_frame.asp

Some Q & A

1.  Can the 180-day period be waived or extended for any reason.

Answer:  A City planning official I met with this past week told me emphatically, “No.”

2.  Assume a new operator is selected and a signed lease Agreement is in place calling for a start date of 28 March, but unspecified and unforeseen circumstances caused a two week delay in beginning restaurant operations. How would that delay affect the City’s decision in implementing the 180-day requirement?

Answer:  I was told that actual operating performance controls the application of the 180-day requirement. If the operator had failed to begin restaurant operations within the 180-day timeframe, the Association would be required to submit a plan and start the planning process anew, necessitating compliance  with new terms and conditions for a new use permit.

3.  What is the likelihood that the partners of S&D will agree to voluntarily transfer their license back to the Association?

Answer:  Slim! While that prospect does not seem likely under existing circumstances, the season of redemption and giving is at hand.

4. Is a "signed lease" within the 180-day timeframe acceptable to the City for compliance with the 180-day mandate for the operator to begin operations?

Answer:   Based on what I was told, NO! Actual restaurant operations must begin within that 180-day period.

5.  How does the proposed RFP address the 180-day timeframe?

Answer:  It doesn't. Only indirectly by alluding to the ability to be able to start operations within so many days (30-45 days) following a selection decision.

6.  How does the proposed RFP address the payment of the $30,000 origination fee the City requires of a new restaurant operator?

Answer:  It doesn't. In being silent on the issue, the RFP allows prospective responders to assume the $30,000 origination fee is not an issue in their bid.

Other Question?

Do you have any other questions? If so, let me know and I will attempt to seek an answer.

Ron Johnson, 2 December 2007