After negotiating contractual terms in real time with the attorney and the manager of the Green Lion Cafe during a nearly two-hour segment of the Palm Coast City Council Tuesday evening, the council voted 4-1 to give its administration 30 to 45 days to resolve differences over a new or amended five-year lease with the restaurant at the city-owned Palm Harbor Golf Club.
The city conceded that it has–and continues–to lose money through its current lease, which requires the Green Lion to pay only $600 a month in rent and no utility costs. “Currently the city is at a loss,” Council member John Fanelli said, when utilities are calculated. “We’re actually paying Green Lion to be there.”
The aim of the new lease, in Mayor David Alfin’s words, is to ensure that within 24 months the city will “no longer bear any additional expense in the operation of the Green Lion,” and that the financial arrangement will at least bring the city to a break-even, or “neutral” point.
“We will look at the shared utilities, who will pay for what, and then we will assess a value or percentage of that, and we will try to get to that in their rental amount,” Neysa Borkert, the city attorney, specified. The current negotiated proposal from the city’s side is to charge $1,543 monthly rent starting in September, rising 3 percent a year, to $1,737.
The meeting’s negotiations, which included Green Lion attorney John Ferguson of Cobb Cole, the Daytona Beach law firm, and at one point Christopher Marlow, who manages the family-run restaurant (the family also owns the Golden Lion in Flagler Beach), were amicable but strictly business-like, with a touch of impatience from Marlow and repeated exasperation verging on anger from Council member Eddie Branquinho, who cast the dissenting vote. He remains staunchly opposed to the deal, calling it a money-loser on top of money-losing years. He did not abide two more years before breaking even.
“You agree to lose money for the next two years?” Branquinho said, directing his exasperation at Alfin. “Why not now?”
“Let’s make the people of Palm Coast be proud of us,” he said, “because lately, they’re not too happy with us. And we know it. And if we’re going to add this decision to the decisions we’ve been making in the recent past, then I don’t know if belong here. That’s it.” Later in the discussion he would despondently repeat that he no longer belonged on the council. (Branquinho has opted not to run for re-election.)
“With this new agreement, we’ll be losing far less money than we are today,” Council member Nick Klufas said. Klufas is the only council member who was on the panel in 2017 when the original lease was signed. At the time the Green Lion was given six months’ free rent, then charged $500 a month. Back then, Klufas reminded his colleagues, the club was losing around a quarter million dollars a year, the restaurant was a dilapidated wreck, the city wasn’t sure there’d be a club five years hence, and the Green Lion was the only serious bidder when Palm Coast issued a request for proposal to revive the restaurant space, which occupies a triple-wide trailer on the golf grounds. The club has turned around. It’s not necessarily losing money. But it’s not hemorrhaging it, either, and the Green Lion–the number one restaurant in popularity in palm Coast, according to Trip Advisor–played a role in the turn-around.
Jason DeLorenzo, the city’s development director, had for nearly nine months until February been the point man on renegotiating the overly generous, original lease terms with the Green Lion. The negotiations were nearing a conclusion, with a rent increase considerably steeper than the one the council was considering Tuesday, when three council members–Branquinho, Victor Barbosa, who is no longer on the council, and Ed Danko–threw a wrench in the negotiations by charging that the city’s deal with the restaurant was inadmissible even in its renegotiated form. The term “sweetheart deal” was bandied about, and the council agreed to end its lease and issue a new request for proposal. (See: “Palm Coast Turns Nasty Against Green Lion Café Lease After 5 Successful Years and Turnaround at Palm Harbor Golf.”)
The reaction from the public and the business was so swift and so incensed that within a week the council reversed course and agreed to return to the negotiating table with the Green Lion. Tuesday was the council’s first chance since to look at the results and decide whether, and how, to go forward toward a new lease. While differences remain, many of those, especially regarding utility costs, were worked out then and there.
But there remained some lack of clarity even in crucial matters even as Klufas said that “there’s nothing on my end that I could see being a sticking point that couldn’t be negotiated between both parties, and the rate of rent seems to be fair.”
For example, the city will install a separate electricity meter for the business, will charge for propane use and will charge about half the cost of water usage (as part of the rent, not in addition to rent), which is shared between the restaurant and other city functions in the trailer. But it wasn’t clear whether utility costs would be paid separately or whether they were to be incorporated in the rent charge.
To Marlow, they’re inclusive of rent, costs he equated to roughly $1,750 a month. “By year two, within 13 months, sir, you will be making a profit,” he told Branquinho. In other words, rent would equate to utility costs.
“That’s assuming the utility bills remain the same,” the city attorney told Marlow, “over an extended period of time and there’s no increase in the cost of electric or water, which rate changes happen, so I don’t know that we can necessarily say that. But in simple terms, that’s what you meant, right?”
“We’re paying you the increased rent. How you handle the money is up to you,” Marlow said, meaning that some of the money would go toward utilities. He was not offering to split utility costs over and above rent payments. His attorney echoed him, saying the per-square-foot rental cost would have to be adjusted downward if utilities are charged. “So if Green Lion is going to pay utilities, it should be something less than $9 to $10,” he said.
But that wasn’t how the city had written the revised lease, which called for rent based on $10 a foot (the Green Lion is still disputing that formula) plus electricity, propane, internet, phone, and now water. If those costs are now incorporated in the rent, it would be a significant departure from the city’s original approach. On the other hand, a fair market value analysis by Cornelia Manfre, the commercial Realtor, who presented her findings to the council, projected rent costs of $9 to $10 a square foot inclusive of utilities. The city paid Manfre $1,000 for the analysis. (See: “Palm Coast Council Tries Again With Green Lion Café, Almost Tripling Rent, But Differences Remain.”)
Branquinho had issues with water-bill costs and wanted two water meters–one for the water used by the restaurant, the other metering the water used by other functions in the trailer, which are not connected to the restaurant. “Having two separate meters for this would be very expensive to do,” DeLorenzo said–beyond the fact that the restaurant has a shared bathroom with the club. “How do you meter a shared bathroom?”
Other details are less contentious.
The restaurant wants to open two hours later on most days, except on Saturday. The council was divided on that count, with some council members reluctant to impose on the Green Lion specific hours of operation or other procedural ways of running the business, and others wanting the hours to align with when golfers tend to be on the grounds, which means early morning hours.
The lease is for five years, with a five-year renewal. The city was not keen on giving the Green Lion a first right of refusal after the first five years, because it would have the city bidding out the space, potentially only to have the Green Lion resolve differences. That would send a bad message not only to those who may have filed a bid, but to those looking at the way business is done in Palm Coast. The proposed lease gives both sides a “termination for cause” clause, replacing a “termination for convenience” clause, though “cause” has not yet been defined.
The council was fine either with a 3 percent increase per year in rent, or tying the annual increase based on the annual consumer price index. “It’s a candy store at this point. They’re paying us rent. They should be able to run it the way they wish to run it,” Council member Ed Danko said.
“The only way this agreement survives is if there is value for both parties,” Alfin said–both for Palm Coast and for the Green Lion. “I’m of an opinion that I would like to see a conclusion to this discussion at the earliest possible moment,” with direction to the city administration to resolve remaining differences. Those differences, he said, “will not have a significant effect on the income produced or received. That’s a pathway forward.”
Ferguson, the Green Lion’s attorney, concurred with Alfin. “Right now what I see is the city has exactly what it wanted five years ago when it went out to bid: it has a great destination restaurant, number one rated” on Trip Advisor, “and from my client’s perspective they have a contract in place that says they have the right to extent for five more years. It doesn’t say that they have to revise terms, they don’t have to pay more rent, they don’t have to pay propane. But, like you said, mayor, it needs to be good on both sides. So there is no obligation for them to agree to any of this, but they’ve already agreed to pay fair market value.”
In fact, the council was prepared to sever the lease had the Green Lion not agreed to go to fair market value, in essence conceding what the city now sees as its obligation to pay more rent, propane and the rest of it.
Ferguson cited a few remaining “gating issues” to work out: whether the two sides will agree to an amendment or a new contract (Ferguson is pushing for an amendment, calling it “cleaner”), how they will figure in electricity costs, what specific square footage is calculated, and lease terms. The Green Lion wants a five-year term, renewable for another five years.
Recently, the city requested all of the restaurant’s financial documents. Ferguson said those documents have never been turned in previously, and should not, because they would become public record. If the rent was based on a percentage of the revenue, he’d have not objected. But it isn’t, he said, removing the reason for financial records to be turned over. Other issues were not deal-breakers, whether it’s installing a grease collector at the restaurant’s expense or getting the city to provide a dumpster closer to the property.
The city had not calculated a “break-even” point until Alfin asked for it. Alfin agreed with Branquinho in that regard: he did not want a lease that would have the city in perpetual loss mode. “There’s nobody up here that’s going to be OK with putting a burden on the taxpayers for another business to make money. It doesn’t make sense,” Alfin said, in contrast with the way it had been for the past five years, and may yet be for another two depending on the outcome of remaining negotiations.
Watch the Green Lion discussion: