HomeMy WebLinkAboutC-3121 - Sales Tax Revenue Reimbursement AgreementCOUNCIL AGENDA)
NO.
CITY OF NEWPORT BEACH
COMMUNITY AND ECONOMIC DEVELOPMENT
Memorandum
C-3)a.1
TO: Honorable Mayor and City Council
FROM: Sharon Wood, Assistant City Manager it,
OCT 2 8
SUBJECT: Automobile Dealership Sales Tax Incentive Program and Sales Tax
Increment Agreement for Sterling BMW and Land Rover
DATE: October 25, 1996
The Finance Committee reviewed the attached documents at their meeting of October 25,
1995. The committee recommended approval of the Resolution Establishing an
Automobile Sales Tax Incentive Program, and continued the agreement with Sterling
BMW and Land Rover to a future meeting to allow additional time for staff and
Sterling's representative to finalize the terms of that agreement.
The attached Resolution establishing the program includes the minor changes
recommended by the committee, and City Council action on it is recommended. The
draft agreement is included for the Council's information and an opportunity to provide
general direction to staff on the proposal to assist Sterling Motors.
RESOLUTION NO. 96-
A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF NEWPORT
BEACH ESTABLISHING AN AUTOMOBILE DEALERSHIP SALES TAX
INCENTIVE PROGRAM
In adopting this Resolution the City Council makes the following findings
and determinations:
1. FINDINGS:
A. The City has the legal authority to adopt this Resolution and provide
qualified businesses with sales tax incentives by virtue of the laws and constitution
of the State of California and the Charter of the City of Newport Beach.
B. Public entities are, to an ever increasing extent, offering financial
assistance and other incentives to encourage major retailers to locate, relocate or
expand within their jurisdiction.
C. The City of Newport Beach has adopted an aggressive program of
economic development and endorses the concept of granting financial assistance
to qualified businesses to preserve and enhance municipal revenues.
D. Many public entities are able to readily provide financial assistance
through redevelopment agencies, an option not presently available to Newport
Beach.
E. The provision of financial assistance through sales tax rebates will
preserve and enhance municipal revenues in that:
Existing businesses will be encouraged to expand their operations
and increase retail sales;
2. The City may retain existing businesses that would otherwise
relocate to another jurisdiction;
3. The City will attract major sales tax generators that would otherwise
remain in or relocate to, other jurisdictions;
4. Assistance will be provided only to reimburse businesses for project
costs that may make their expansion in or relocation to Newport
Beach feasible.
5. Assistance will only be provided from incremental sales tax
generated by the business expansion or relocation.
6. Covenants and commitments associated with sales tax rebates
require a long term commitment to the community and use of
business practices which maximize sales tax revenue.
NOW, THEREFORE, BE IT RESOLVED that the City Council of the City of
Newport Beach establishes an Automobile Dealership Sales Tax Incentive
Program, as follows:
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A. "Automobile dealership" shall mean the business of selling new
automobiles and /or light trucks pursuant to a franchise, license or similar
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agreement granted by an automobile manufacturer and ancillary uses such as the
sale of previously owned vehicles, the repair of vehicles, the sales of parts and
automotive merchandise, the leasing of new or used vehicles, and automobile
dealership administration.
B. 'Base sales tax" shall mean: (i) that portion of sales taxes received
by the City from the imposition of the Bradley -Burns Uniform Local Sales and Use
Tax Law (commencing with section 7200 of the Revenue and Taxation Code of
the State of California) from the operation of an automobile and /or light truck
dealership on a parcel of land within the City of Newport Beach during the most
recent twelve (12) month period (four quarters) for which sales tax revenue for the
site has been reported to the City; or (ii) a sum established by the City Council
based upon an analysis by staff or consultant of the amount of sales tax revenue
that would be generated by the automobile and/ or light truck dealership in the
absence of enhancements or improvements funded in whole or in part by the sales
tax increment, but in no event less than the amount necessary to satisfy the criteria
for a "qualified business."
C. 'Business" means any organization, individual, association,
corporation, partnership, venture or other entity, its subsidiary or affiliate which
exists for profit making purposes and to otherwise secure economic advantage.
D. "California Sales and Use Tax Law" shall mean the Bradley -Bums
Uniform Local Sales and Use Tax Law (commencing with section 7200 of the
Revenue and Taxation Code of the State of California), or any similar or successor
law.
E. "Commencement date" shall mean the date of a Reimbursement
Agreement as indicated in the introductory paragraph to the Agreement,
irrespective of the date of execution by one or all the parties.
F. "Cost' or "Costs ", as applied to any project assisted pursuant to
this program , means any and all reasonable or necessary costs incurred by or on
behalf of a qualified business to:
(1) Obtain any property right or interest necessary to operate an
automobile dealership from a parcel of land in the City of Newport
Beach (but excluding the monthly lease payments themselves and
any insurance, taxes, and maintenance cost required to be paid by
the qualified business pursuant to the lease or similar agreement);
(ii) The construction, installation, reconstruction, rehabilitation or
improvement of the project, including all costs associated with
feasibility studies, surveys, architectural and engineering services,
and attorney's fees, construction insurance and bonds;
(iii) Interest on any indebtedness incurred to implement the project prior
to, during, and for a reasonable period of time following construction
of the project;
(iv) Reserves for debt service and for repairs, replacements, additions
and improvements to the project; and
(v) Such other costs or expenses as may be specifically provided for in
the Reimbursement Agreement and which are related to the
construction or operation of the project.
G. "Fiscal year" shall mean any twelve (12) month period (four
quarters) for which sales tax information is available from the State Board of
Equalization commencing on the first day of any quarter.
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H. "Governmental approvals" shall mean permits, consents,
authorizations and other entitlements required to be issued by, or obtained from,
any governmental agency having jurisdiction over the project.
I. "Project development schedule" shall mean the schedule for
completion of any Project.
J. The term "Qualified business" shall mean any business which
meets the following criteria:
(i) Is authorized pursuant to an agreement with an automobile
manufacturer to sell new automobiles within all or a portion of the
City of Newport Beach;
(ii) Has received all Governmental Approvals required for the operation
of an automobile dealership within the City of Newport Beach;
(iii) Operates or intends to operate, an automobile dealership whose
primary business is the sale or lease of new motor vehicles.
(iv) Is a major sales tax generator or produces evidence that the
business could become a major sales tax generator.
(v) Owns, leases or otherwise controls a parcel or parcels of land within
the City of Newport Beach zoned for use as an automobile
dealership or establishes, to the satisfaction of the City, that an
ownership or leasehold interest in property zoned for an automobile
dealership will be acquired within a reasonable period of time.
(vi) Demonstrates the financial ability to establish a new, or operate an
expanded, automobile dealership including the financial ability to pay
for project improvements as well as operating expenses from
projected revenue and sales tax reimbursement.
K. The term "quarter" means any one of the three month periods
during a fiscal year commencing July 1, October 1, January 1 and April 1.
L. "Sales tax increment" means, for each fiscal year the amount of
sales and use taxes received by the City from the imposition of the Bradley -Bums
Uniform Local Sales and Use Tax Law from the operation of the dealership(s) by
the qualified business within the City of Newport Beach less the base sales tax
revenue. The term sales tax increment shall not include any of the following:
(i) Any portion of taxes derived by the City from the operation of the
dealership(s) by the qualified business that the City may be required
to pay, transfer, assign or allocate to any other entity or entities by
law (but not by contract or agreement); and
(ii) The State Board of Equalization's administrative and processing fee
attributable to the City's portion of such taxes (calculated at the same
percentage as applied City wide). The sales tax increment shall not
be considered to have been received by the City until the City is able
to confirm receipt of the taxes from the State Board of Equalization.
2. APPLICATIONS:
Any prospective qualified business may apply to the City for a
reimbursement agreement pursuant to this Chapter by filing an application with the
City in such form and setting forth such information as the City may require in
order to enable the City to evaluate the applicant, the project, its proposed costs
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and public benefits. Such information shall include, without limitation, the
following:
A. Information regarding the experience, expertise and financial
capability of the business and its contractors, consultants and agents in completing
and operating similar projects:
B. Basic concept plans for the proposed project;
C. The status of agreements with manufacturers for the sale of new
motor vehicles on the project site; and
D. An economic pro forma detailing the sources and uses of funds,
including, but not limited to, estimated development costs, operating income and
expenses, sources of financing, and economic returns.
A. The City Manager shall, upon receipt of a completed application,
evaluate the proposal and may direct analysis by an independent consultant.
Following the evaluation of the proposal, the matter will be presented to the City
Council. The City Council shall, in its sole discretion, have the authority to reject
the application or approve a reimbursement agreement. The City Council may
indicate its tentative acceptance of an application and direct staff to prepare a
reimbursement agreement to be submitted to City Council for review and approval.
B. The City Council shall, in its sole discretion, have the authority to
approve, disapprove or modify the proposed reimbursement agreement. The
reimbursement agreement shall be consistent with the terms and provisions of this
program and shall: (1) provide for rebates to qualified businesses of a portion of
the sales tax increment, if any; (2) specify that the rebate shall be for the sole
purpose of reimbursing the qualified businesses for costs incurred for a project
necessary to make the project financially feasible; (3) specify that the rebate shall
expire on the earliest of the following dates: (a) ten (10) years from the
commencement of operation of a project; or (b) full reimbursement of the costs
incurred by a qualified business for a project that the City has agreed to reimburse;
(c) such earlier date as may be agreed to by the City and the qualified business; or
(d) the end of the City's then - current fiscal year, unless the City appropriates funds
for the rebate for the following fiscal year; (4) identify the costs incurred or to be
incurred by a qualified business for a project; (5) contain a covenant by the
qualified business to complete the project, to remain and operate the project for a
specified period of time; (6) contain a covenant to maximize the City as the point -
of -sale for goods and services sold as a result of business activities on any portion
of the project site consistent with applicable requirement of law.
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In addition to all other powers specifically enumerated by this Resolution,
the City Council is authorized to contract for and do all things necessary or
convenient to carry out the purposes of this Resolution , provided, however, that
the City shall not have the power to operate a project under this Resolution as a
business.
The City Council may in a reimbursement agreement waive payment of all
or a portion of any fee otherwise required to be paid to the City pursuant to the
Newport Beach Municipal Code.
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Documents provided to the City by any prospective qualified business, or
pursuant to a reimbursement agreement, and which are deemed proprietary in
nature shall be considered confidential and shall not be disclosed unless required
by law.
This program shall not be interpreted, construed or applied to conflict with
any provision of State law which preempts local regulation of the subject matter.
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DRAFT
SALES TAX INCREMENT REIMBURSEMENT AGREEMENT
This SALES TAX INCREMENT REIMBURSEMENT AGREEMENT (the
"Agreement "), dated this day of 1996 for purposes of
identification, between the CITY OF NEWPORT BEACH ( "City ") and STERLING
MOTORS INC. is made with reference to the following:
A. Sterling has, for many years, operated a BMW dealership on the
property located at 1540 Jamboree Road in the City of Newport Beach.
B. Sterling has operated a BMW dealership in Newport Beach. Sterling
has the right to operate a Land Rover dealership within the City of Newport Beach
pursuant to a letter of intent which requires Sterling to construct facilities to Land
Rover specifications. To comply with its obligations to BMW and Land Rover,
Sterling is required to sell Land Rover and BMW automobiles from different
locations. To comply with the Franchise, Sterling has obtained a second
dealership site at 3000 West Coast Highway in Newport Beach. Sterling intends to
sell /lease BMW automobiles from the West Coast Highway Site and to sell /lease
Land Rover automobiles from the Jamboree Road Site.
C. Sterling will be required to remodel and upgrade the facilities at each
location so that each facility becomes an attractive, efficient and productive
automobile dealership. In the absence of the physical separation of the two
dealership sites and the requisite upgrades of the showrooms and related facilities,
Sterling's franchise rights and the resulting benefits to the City could be
jeopardized.
D. The City Council has adopted a Resolution establishing an
Automobile Dealer Sales Tax Incentive Program ( "Program') which authorizes the
rebate of a sales tax increment to qualified businesses.
E. Sterling has requested assistance from the City in the form of a
rebate of sales tax increment and City has retained Keyser Marston to analyze
Sterling's request. Keyser Marston has concluded that Sterling's project will result
in an increase in sales tax revenue over time, that Sterling's Land Rover
dealership would provide extremely marginal returns absent sales tax rebates from
the City and that the sales tax incentive payments called for by this Agreement are
necessary to make the project economically feasible.
F. Sterling has submitted to City an application for reimbursement
agreement which contains all required information, agreements and undertakings
pursuant to the Program; and the City Council has determined that:
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(i) Sterling is a qualified business within the meaning of the
Program;
(ii) The application should be approved to the extent it requests
reimbursement for certain costs incurred or to be incurred by Sterling
as shown on Exhibit "A ";
(iii) That sales tax incentive payments will, in the long term,
increase sales tax revenue received by the City of Newport Beach,
sustain the City's ability to provide high levels of municipal services
and contribute to the maintenance, growth and expansion of the
economic base of Newport Beach;
(iv) That reimbursement of costs constitutes a valid exercise of
the police powers of the City and serves a public purpose in which
the City has a peculiar and unique interest; and
(v) The subject matter of this Agreement substantially relates to
"municipal affairs" as that term has been defined in statutory and
decisional law.
1. DEFINITIONS:
For the purposes this Agreement, terms that are defined in the Program
shall have the same meaning in this Agreement. In addition, these terms shall
have the following definitions:
A. "Commencement date' shall mean the date of this Agreement as
specked on page one.
B. "Base Sales Tax' shall mean the Keyser Marston projections shown
as Exhibit "B ".
C. "Force majeure" means, without limitation, acts and events such as
strikes, acts of God, governmental restrictions, moratoriums, insurrection.
malicious mischief, fire, flood, earthquake, or other natural disaster or similar act or
event beyond the control of Sterling and which materially affects Sterling's ability to
perform its obligations pursuant to this Agreement.
D. "Jamboree Road Site" shall mean the real property and
improvements located at 1540 Jamboree Road in the City of Newport Beach.
E. "West Coast Highway Site" shall mean the real property and
improvements located at 3000 West Coast Highway in Newport Beach.
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F. "Project" means the acquisition and improvement of the West Coast
Highway Site to satisfy BMW requirements and improvement of the Jamboree
Road Site to satisfy Land Rover requirement as more specifically described and
depicted on the Improvement Plans attached to this Agreement as Exhibit(s) "C ".
G. "Project Development Schedule" shall mean the schedule for
completion of the project as described in Exhibit "D ".
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The term of this Agreement shall run from the commencement date to the
date of expiration, unless earlier terminated pursuant to paragraph _ The date of
expiration shall be the earliest of the following:
A. December 1, 2001, provided, however, this date shall be extended
for a period of twelve (12) months for each fiscal year during which the City
Council fails to appropriate in the annual budget for that fiscal year, a sum equal
to, or greater than the sales tax incentive payments contemplated by this
Agreement; or
B. The date on which the City has made the sales tax incentive
payments specified in Section 6, or made sales tax incentive payments in the sum
of $910,500.00 (which sum equals all project costs to which Sterling is entitled
pursuant to this Agreement), whichever comes first.
3. STERLING'S REPRESENTATIONS
As a material inducement to City's commitment to approve this Agreement,
Sterling represents and warrants to City that:
A. Sterling is a California corporation, validly existing under the laws of
the State of California. Sterling has all requisite authority, licenses, permits and
approvals to conduct an automobile dealership on the Jamboree Site and the
West Coast Highway Site, and is qualified and in good standing in every
jurisdiction in which the nature of its business makes qualification necessary or
where the failure to qualify could have a material adverse impact on Sterling's
financial condition or the performance of Sterling's obligations pursuant to this
Agreement;
B. Sterling has not been notified that it has failed to comply, in all
material respects, with any law applicable to its business including all permits,
licenses, approvals, authorizations, registrations and qualifications with any
governmental agency necessary for the operation of an automobile dealership
from the West Coast Highway Site or the Jamboree Site;
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C. That all financial information furnished to City with respect to this
Agreement is complete and correct in all material respects as of the date of
preparation, accurately represents the financial condition of Sterling, and has been
prepared in accordance with generally accepted accounting principles consistently
applied;
D. There has been no material adverse change in the condition,
financial or otherwise, of Sterling since the date of preparation of the latest
financial statements furnished to City and the commencement date of this
Agreement and, since those dates, Sterling has not entered into any transaction
material to City's decision to approve this Agreement.
4. STERLING'S OBLIGATIONS
As a condition precedent to any of City's obligations pursuant to this
Agreement, Sterling shall:
A. Possess or acquire, as of the commencement date and throughout
the term of this Agreement, an ownership or leasehold interest in the Jamboree
Site and the West Coast Highway Site which specifically authorizes the
operation of an automobile dealership and the performance of Sterling's
obligations pursuant to this Agreement. In the event Sterling possesses or
acquires a leasehold interest in either site, the lease shall authorize Sterling to
operate an automobile dealership and conduct other business consistent
with the terms of this Agreement. In the event Sterling possesses a leasehold
interest in either dealership site of a duration less than the term of this Agreement,
Sterling shall acquire an additional term sufficient to satisfy the lease or exercise
any option necessary to extend the term of the lease consistent with this
Agreement. or commit to exercising an option necessary to extend the term of the
lease.
B. Project completion - Commence and complete construction of the
project within the time specified in the project development schedule. Sterling
shall be entitled to an extension of time to complete construction to the extent that
delays are attributable to force majeure. Sterling's performance shall be extended
only for the period of the delay due to force majeure.
C. Operate a BMW automobile dealership from the West Coast
Highway Site for a period of twenty (20) years from the commencement date
except to the extent that operation is impaired or prevented due to project
construction activities and any delay in construction occasioned by force majeure.
D. Operate a Land Rover automobile dealership from the Jamboree
Road Site, from the commencement date to and including December 31, 2003 and
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use its best efforts to renew the Jamboree Road Site lease for an additional ten
(10) year period from the current date of expiration.
E. Maintain and repair the improvements and landscaping on the
Jamboree Site and the West Coast Highway Site in first class order, condition and
repair and in accordance with all final development and building plans and permits
approved by the City.
F. Maximize Sales Tax Revenue to the City by among other things,
(i) Operating each automobile dealership during all commercially
reasonable hours of the day and days of the week with inventory and
sales personnel sufficient to satisfy and respond to all customer
demand;
(ii) Using its commercially reasonable efforts, consistent with
the requirements of law, to cause the West Coast Highway Site
and /or Jamboree Site to be the place of sale or use for any
transaction or activity by Sterling which is the subject of the
California Sales and Use Tax Law;
(iii) Using its best efforts to obtain the sales tax "up front' on all
new and used motor vehicle leases;
(iv) Adopting business and accounting practices consistent with
self accrual of sales and use tax;
(v) Not open or operate a new or used automobile sales
dealership within a ten (10) mile radius of the West Coast Highway
Site or the Jamboree Road Site, without the express written consent
of the City .
G. Not oppose the formation of a new or amended redevelopment
project area, business improvement district, assessment district or similar vehicle
for financing public improvements.
H. Participate in the Mariner's Mile Business Association.
J.
K.
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5.
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City shall have no obligation to make sales tax incentive payments unless
the following conditions are satisfied:
A. City has confirmed that sales tax has been received by City for any
quarter in an amount equal to, or greater than, the sales tax increment. City, shall
in its sole discretion, determine when the receipt of sales tax is confirmed. City
may confirm that the sales tax increment has been received based upon receipt of
the quarterly Board of Equalization Reports and the other records Sterling is
required to provide pursuant to this Agreement together with any additional
documents (such as copies of canceled checks or proof of payment of sales tax)
reasonably requested by the City. In the alternative, City may rely upon the Board
of Equalization Report which follows payment to the City specifying the sources of
City's portion of the sales tax, provided, however, this alternative shall only be
available if Sterling has a separate Board of Equalization Tax Identification
Number for reporting sales tax generated by its business on the Jamboree Road
Site and the West Coast Highway Site only. Finally, Sterling may offer
confirmation that the sales tax increment has been received by City through other
means satisfactory to City in City's sole discretion.
B. There has been no event of default on the part of Sterling during the
period preceding the payment of the sales tax incentive and the date of the
previous payment (or the commencement date in the event no previous payment
has been made by City).
6. CITY'S OBLIGATIONS
City's obligations as specified in this section are contingent upon Sterling's
satisfaction of all conditions precedent and concurrent to City's obligations as
specified in Sections 4 and 5 . Assuming Sterling has satisfied all conditions
precedent and concurrent to City's obligations, and is not in default pursuant to this
Agreement, City shall:
A. Pay Sterling sales tax incentive payments in accordance with the
following:
(i) During the first twelve months of this Agreement, a sum equal
to seventy five (75) percent of the sales tax increment, but in no
event more than $145,500.
(ii) During the first twelve month period of this
Agreement, a sum equal to seventy five (75) percent of the sales tax
increment, but in no event more than $214,500.
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(iii) During the third twelve month period of this Agreement, a sum
equal to fifty (50) percent of the sales tax increment, but in no event
more than the sales tax revenue generated by the Jamboree Road
Site.
(iv) During the fourth twelve month period of this Agreement, a
sum equal to fifty (50) percent of the sales tax increment but in no
event more than the sales tax revenue generated by the Jamboree
Road Site.
(v) During the fifth twelve month period of this
Agreement, a sum equal to forty (40) percent of the sales tax
increment but in no event more than the sales tax revenue
generated by the Jamboree Road Site.
City's obligation to make any sales tax incentive payment is contingent
upon, and subject to, City's annual appropriation of sums sufficient to make the
sales tax incentive payments required by this Agreement. Sterling acknowledges
that City has no obligation to include such appropriations in the budget and
Sterling also acknowledges that the determination of annual budgetary
appropriations is within the sole discretion of the City Council of the City of
Newport Beach.
B. Expedite processing of all permits, licenses and approvals required
to be issued by City in conjunction with construction of the project or operation of
the automobile dealerships.
7. DEFAULTS AND REMEDIES
A. The occurrence of any of the following shall constitute an event of
default:
(i) Sterling fails to perform any of the obligations described in
Sections 4 and 5;
(ii) Sterling is in default under any agreement pursuant to which
Sterling has obtained rights to possession of the Jamboree Road
Site or West Coast Highway Site;
(iii) Any representation or warranty in this Agreement was
incorrect in any material respect when made or
becomes incorrect at any time during the term of this Agreement;
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(iv) Sterling is enjoined or otherwise prohibited from occupying
the Jamboree Road Site or the West Coast Highway Site and the
injunction or prohibition continues unstayed for thirty (30) days or
more;
(v) Sterling is dissolved, liquidated, or substantially all of
Sterling's assets are sold or otherwise transferred to a third party
without City's prior written consent;
(vi) Sterling institutes or consents to any bankruptcy, insolvency,
reorganization, arrangement, readjustment or debt, dissolution,
custodianship, conservatorship, liquidation, rehabilitation or
similar proceeding relating to it or any portion of its property or any
similar proceeding as instituted without the consent of Sterling and
continues undismissed or unstayed for ninety (90) days;
(vii) Any judgment, writ, warrant of attachment or execution or
similar process is issued or levied against any personal or real
property of Sterling and not released, vacated or fully bonded within
ninety (90) days after the issue date of the levy;
(viii) Sterling admits its inability to pay its debts as they mature,
makes an assignment for the benefit of creditors or applies for or
consents to the appointment of any receiver, trustee, custodian,
conservator, liquidator, rehabilitator or similar officer for Sterling or
any portion of its property or any similar officer is appointed without
the application or consent of Sterling and the appointment continues
undischarged or unstayed for ninety (90) days.
B. City's Remedies Upon Default - Upon the occurrence of any event of
default and thirty (30) days written notice of default, or a reasonable opportunity to
cure the default in the event thirty (30) days is insufficient, City may, at its option do
any or all of the following:
(i) Terminate this Agreement including any City obligation to
make sales tax incentive payments and recover from Sterling all
sales tax incentive payments made prior to the date of default
together with interest at the maximum allowable rate; and
(ii) Exercise any of its rights pursuant to this Agreement as well
as any rights provided by law.
C. Sterling's Remedies - Upon a breach by City of any of its duties
pursuant to this Agreement and after thirty (30) days written notice of default and a
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reasonable opportunity to cure the default, Sterling may, at its option, exercise any
of its rights under this Agreement and any rights provided by law.
D. Cumulative Remedies - The rights and remedies of City and Sterling
pursuant to this Agreement are cumulative and in addition to all rights and
remedies provided by law from time to time. The exercise by either party of any
right or remedy shall not constitute a cure or waiver of any default or invalidate any
notice of default or any act done pursuant to the notice or prejudice that party in
the exercise of any other right or remedy. No waiver of any default shall be implied
from any omission by either party to take action on account of the default if the
default persists or is repeated. No waiver of any provision of this Agreement shall
be construed as a waiver of any subsequent breach of the same provisions. Either
parties' acceptance of the later performance of any obligation shall not constitute a
waiver by that party of the right to require timely performance of all further
obligations. Finally, a party's acceptance of partial performance shall not
constitute a waiver by the party of any rights relating to the unfulfilled portion of the
applicable obligation.
8. GENERAL PROVISIONS
A. Sterling shall pay all of the following:
(i) All general and special real property taxes and assessments
imposed on either Site;
(ii) Any tax, assessment, or charge of any kind that is assessed
upon the Site and which may create a lien upon the Site, or upon
any personal property or fixtures used in connection with an
automobile dealership on either Site;
(iii) All sales and use taxes; and
(iv) All license fees, taxes and assessments imposed on Sterling.
Sterling may pay any tax, charge or assessment in installments if
permitted by law.
B. Indemnification - City shall bear no responsibility for possession,
maintenance, or operation of either Site. Sterling shall defend, release, indemnify
and hold harmless City and its officers, employees, agents and representatives
from and against any liability, loss, damage, claim, cost or expense (including
attorney's fees and court costs), imposed upon, incurred by or asserted against
City or either Site by reason of:
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(i) The injury to any person or property occurring on or about any
Site or resulting from the operation of an automobile
dealership;
(ii) Any failure on the part of Sterling to perform pursuant to or
comply with, the terms and conditions of this Agreement; and
(iii) Any negligence or tortuous act on the part of Sterling or any
of its employees, agents, contractors, tenants, licensees or invitees.
In addition, Sterling shall defend, indemnify release and hold City harmless
from any loss, claim, damage, liability, cost or expense (including attorney's fees
and court costs) arising out of or in any way connected, with the development or
redevelopment of either Site by Sterling, or the condition of either Site while
Sterling is a tenant of either Site, including, but not limited to, the existence of any
hazardous and /or toxic substance(s) or other kinds of soil or water contamination,
or pollutants of any kind located on or within either Site whether the condition,
liability, loss, damage, costs or expense is accrued or discovered before or after
expiration or termination of this Agreement. Sterling's obligations in this
subsection do not extend any liability, loss, damage, cost or expense arising out of
the sole negligence, willful misconduct or fraud of the City or its officers,
employees, or agents. In the event any actions, suit or proceeding is filed against
the City , or its officers, employees or agents, relative to matter within the scope of
Sterling's obligations pursuant to this paragraph, Sterling shall, upon City's request
defend the action, suit or proceeding with counsel acceptable to City.
C. Sterling shall provide City with copies of quarterly reports Sterling
submits to the Board of Equalization as well as monthly sales and lease records
and annual audits. In addition, Sterling shall provide City with copies of all
documents requested by City which are reasonably related to Sterling's
performance of obligations pursuant to this Agreement within ten (10) days after
City has served Sterling with a written notice requesting the documents,
D. City shall have the right, during normal business hours, to inspect the
Jamboree Road Site, or West Coast Highway Site to determine if Sterling is
performing its obligations pursuant to this Agreement.
E. Sterling shall provide evidence satisfactory to City, prior to the
commencement date, of the following insurance coverage:
(i) "All risk" property insurance including builder's risk protection
during the course of construction of the project covering the full
replacement value of all improvements on the Jamboree Road Site
and the West Coast Highway Site as well as full replacement value
of all merchandise and personal property on either Site. The policy
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0
of insurance shall include coverage for damage caused by
earthquake if coverage is available from responsible carriers at a
reasonable cost;
(ii) Business interruption insurance or similar coverage protecting
Sterling in the event of any interruption in operations resulting from
fire, flood, or other casualty;
(iii) Other insurance coverage in such amount as may, from time
to time, be reasonably required by City to insure Sterling performs it
obligations pursuant to this Agreement;
(iv) Sterling shall diligently proceed to repair, replace or
reconstruct any structure, damaged in whole or in part, on the
Jamboree Road Site or West Coast Highway Site. Sterling shall,
upon receipt, apply proceeds of insurance to repair, reconstruct or
rebuild damaged structures or replace damaged merchandise or
personal property.
F. Sterling shall give written notice to City, within ten (10) days of
discovery, of any occurrence which is, or with the passage of time would become,
an event of default pursuant to this Agreement or any material adverse change in
the financial condition of Sterling. Sterling shall maintain all accounts and records
that are relevant to City's determination of the amount of sales tax generated by
the Jamboree Road Site or West Coast Highway Site. These records shall be
made available to City or any authorized representative of City for audit purposes.
G. Severability - If any one or more of the provisions of this Agreement
is declared to be invalid, illegal or unenforceable in any respect, the remainder of
the Agreement shall continue in full force and effect unless the determination
affects the substantial rights of a party or defeats the purpose of this Agreement.
H. The terms and conditions of this Agreement shall, in all cases, be
construed as a whole according to their fair meaning and in accordance with the
law of the State of California.
1. The parties agree that nothing in this Agreement shall be deemed or
construed as creating a partnership, joint venture or associations between City and
Sterling or cause City or Sterling to be responsible in any way for the debts or
obligations of the other. The parties stipulate that this Agreement creates nothing
more than a contractual relationship.
J. Any notice, approval, demand or other communication required or
desired to be given pursuant to this Agreement shall be in writing and shall be
personally served or, in lieu of personal service, deposited in the United States
-11-
mail, postage prepaid, certified or registered mail, return receipt requested, or by
U.P.S., Federal Express, or similar reputable overnight delivery service and shall
be addressed as follow:
If to City - City Manager
3300 Newport Boulevard.
P.O. Box 1768
Newport Beach, California 92658 -8915
If to Sterling - Sterling Motors
West Coast Highway Site
Notice conforming with this section shall be deemed given upon deposit.
Date
Date
Approved as to Form:
Date
fACat\crislagfttedirlg.doc
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cA1 G -24 -96
Sterling Motors, Inc.
City of Newport Beach
By
Kevin Murphy, City Manager
By
City Attorney
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RESOLUTION NO. 96-88
A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF NEWPORT
BEACH ESTABLISHING AN AUTOMOBILE DEALERSHIP SALES TAX
INCENTIVE PROGRAM
In adopting this Resolution the City Council makes the following findings
and determinations:
1. FINDINGS:
A. The City has the legal authority to adopt this Resolution and provide
qualified businesses with sales tax incentives by virtue of the laws and constitution
of the State of California and the Charter of the City of Newport Beach.
B. Public entities are, to an ever increasing extent, offering financial
assistance and other incentives to encourage major retailers to locate, relocate or
expand within their jurisdiction.
C. The City of Newport Beach has adopted an aggressive program of
economic development and endorses the concept of granting financial assistance
to qualified businesses to preserve and enhance municipal revenues.
D. Many public entities are able to readily provide financial assistance
through redevelopment agencies, an option not presently available to Newport
Beach.
E. The provision of financial assistance through sales tax rebates will
preserve and enhance municipal revenues in that:
1. Existing businesses will be encouraged to expand their operations
and increase retail sales;
2. The City may retain existing businesses that would otherwise
relocate to another jurisdiction;
3. The City will attract major sales tax generators that would otherwise
remain in or relocate to, other jurisdictions;
4. Assistance will be provided only to reimburse businesses for project
costs that may make their expansion in or relocation to Newport
Beach feasible.
5. Assistance will only be provided from incremental sales tax
generated by the business expansion or relocation.
6. Covenants and commitments associated with sales tax rebates
require a long term commitment to the community and use of
business practices which maximize sales tax revenue.
NOW, THEREFORE, BE IT RESOLVED that the City Council of the City of
Newport Beach establishes an Automobile Dealership Sales Tax Incentive
Program, as follows:
1.
A. "Automobile dealership" shall mean the business of selling new
automobiles and /or light trucks pursuant to a franchise, license or similar
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Res. 96 -88
agreement granted by an automobile manufacturer and ancillary uses such as the
sale of previously owned vehicles, the repair of vehicles, the sales of parts and
automotive merchandise, the leasing of new or used vehicles, and automobile
dealership administration.
B. "Base sales tax" shall mean: (i) that portion of sales taxes received
by the City from the imposition of the Bradley -Burns Uniform Local Sales and Use
Tax Law (commencing with section 7200 of the Revenue and Taxation Code of
the State of California) from the operation of an automobile and /or light truck
dealership on a parcel of land within the City of Newport Beach during the most
recent twelve (12) month period (four quarters) for which sales tax revenue for the
site has been reported to the City; or (ii) a sum established by the City Council
based upon an analysis by staff or consultant of the amount of sales tax revenue
that would be generated by the automobile and/ or light truck dealership in the
absence of enhancements or improvements funded in whole or in part by the sales
tax increment, but in no event less than the amount necessary to satisfy the criteria
for a "qualified business."
C. "Business" means any organization, individual, association,
corporation, partnership, venture or other entity, its subsidiary or affiliate which
exists for profit making purposes and to otherwise secure economic advantage.
D. "California Sales and Use Tax Law" shall mean the Bradley -Burns
Uniform Local Sales and Use Tax Law (commencing with section 7200 of the
Revenue and Taxation Code of the State of California), or any similar or successor
law.
E. "Commencement date" shall mean the date of a Reimbursement
Agreement as indicated in the introductory paragraph to the Agreement,
irrespective of the date of execution by one or all the parties.
F. "Cost" or "Costs ", as applied to any project assisted pursuant to
this program , means any and all reasonable or necessary costs incurred by or on
behalf of a qualified business to:
(i) Obtain any property right or interest necessary to operate an
automobile dealership from a parcel of land in the City of Newport
Beach (but excluding the monthly lease payments themselves and
any insurance, taxes, and maintenance cost required to be paid by
the qualified business pursuant to the lease or similar agreement);
(ii) The construction, installation, reconstruction, rehabilitation or
improvement of the project, including all costs associated with
feasibility studies, surveys, architectural and engineering services,
and attorney's fees, construction insurance and bonds;
(iii) Interest on any indebtedness incurred to implement the project prior
to, during, and for a reasonable period of time following construction
of the project;
(iv) Reserves for debt service and for repairs, replacements, additions
and improvements to the project; and
(v) Such other costs or expenses as may be specifically provided for in
the Reimbursement Agreement and which are related to the
construction or operation of the project.
G. "Fiscal year" shall mean any twelve (12) month period (four
quarters) for which sales tax information is available from the State Board of
Equalization commencing on the first day of any quarter.
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Res. 96 -88
H. "Governmental approvals" shall mean permits, consents,
authorizations and other entitlements required to be issued by, or obtained from,
any governmental agency having jurisdiction over the project.
I. "Project development schedule" shall mean the schedule for
completion of any Project.
J. The term "Qualified business" shall mean any business which
meets the following criteria:
(i) Is authorized pursuant to an agreement with an automobile
manufacturer to sell new automobiles within all or a portion of the
City of Newport Beach;
(ii) Has received all Governmental Approvals required for the operation
of an automobile dealership within the City of Newport Beach;
(iii) Operates or intends to operate, an automobile dealership whose
primary business is the sale or lease of new motor vehicles.
(iv) Is a major sales tax generator or produces evidence that the
business could become a major sales tax generator.
(v) Owns, leases or otherwise controls a parcel or parcels of land within
the City of Newport Beach zoned for use as an automobile
dealership or establishes, to the satisfaction of the City, that an
ownership or leasehold interest in property zoned for an automobile
dealership will be acquired within a reasonable period of time.
(vi) Demonstrates the financial ability to establish a new, or operate an
expanded, automobile dealership including the financial ability to pay
for project improvements as well as operating expenses from
projected revenue and sales tax reimbursement.
K. The term "quarter" means any one of the three month periods
during a fiscal year commencing July 1, October 1, January 1 and April 1.
L. "Sales tax increment" means, for each fiscal year the amount of
sales and use taxes received by the City from the imposition of the Bradley -Burns
Uniform Local Sales and Use Tax Law from the operation of the dealership(s) by
the qualified business within the City of Newport Beach less the base sales tax
revenue. The term sales tax increment shall not include any of the following:
(i) Any portion of taxes derived by the City from the operation of the
dealership(s) by the qualified business that the City may be required
to pay, transfer, assign or allocate to any other entity or entities by
law (but not by contract or agreement); and
(ii) The State Board of Equalization's administrative and processing fee
attributable to the City's portion of such taxes (calculated at the same
percentage as applied City wide). The sales tax increment shall not
be considered to have been received by the City until the City is able
to confirm receipt of the taxes from the State Board of Equalization.
�i120 L•J3��Ii!`�
Any prospective qualified business may apply to the City for a
reimbursement agreement pursuant to this Chapter by filing an application with the
City in such form and setting forth such information as the City may require in
order to enable the City to evaluate the applicant, the project, its proposed costs
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- • • Res. 96 -88
and public benefits. Such information shall include, without limitation, the
following:
A. Information regarding the experience, expertise and financial
capability of the business and its contractors, consultants and agents in completing
and operating similar projects;
B. Basic concept plans for the proposed project;
C. The status of agreements with manufacturers for the sale of new
motor vehicles on the project site; and
D. An economic pro forma detailing the sources and uses of funds,
including, but not limited to, estimated development costs, operating income and
expenses, sources of financing, and economic returns.
3. PROCESSING AND ACCEPTANCE OF APPLICATIONS/
REIMBURSEMENT AGREEMENT:
A. The City Manager shall, upon receipt of a completed application,
evaluate the proposal and may direct analysis by an independent consultant.
Following the evaluation of the proposal, the matter will be presented to the City
Council. The City Council shall, in its sole discretion, have the authority to reject
the application or approve a reimbursement agreement. The City Council may
indicate its tentative acceptance of an application and direct staff to prepare a
reimbursement agreement to be submitted to City Council for review and approval.
B. The City Council shall, in its sole discretion, have the authority to
approve, disapprove or modify the proposed reimbursement agreement. The
reimbursement agreement shall be consistent with the terms and provisions of this
program and shall: (1) provide for rebates to qualified businesses of a portion of
the sales tax increment, if any; (2) specify that the rebate shall be for the sole
purpose of reimbursing the qualified businesses for costs incurred for a project
necessary to make the project financially feasible; (3) specify that the rebate shall
expire on the earliest of the following dates: (a) ten (10) years from the
commencement of operation of a project; or (b) full reimbursement of the costs
incurred by a qualified business for a project that the City has agreed to reimburse;
(c) such earlier date as may be agreed to by the City and the qualified business; or
(d) the end of the City's then - current fiscal year, unless the City appropriates funds
for the rebate for the following fiscal year; (4) identify the costs incurred or to be
incurred by a qualified business for a project; (5) contain a covenant by the
qualified business to complete the project, to remain and operate the project for a
specified period of time; (6) contain a covenant to maximize the City as the point -
of -sale for goods and services sold as a result of business activities on any portion
of the project site consistent with applicable requirement of law.
4. ADDITIONAL POWERS:
In addition to all other powers specifically enumerated by this Resolution,
the City Council is authorized to contract for and do all things necessary or
convenient to carry out the purposes of this Resolution , provided, however, that
the City shall not have the power to operate a project under this Resolution as a
business.
5. ADDITIONAL INCENTIVES:
The City Council may in a reimbursement agreement waive payment of all
or a portion of any fee otherwise required to be paid to the City pursuant to the
Newport Beach Municipal Code.
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Res. 96 -88
Documents provided to the City by any prospective qualified business, or
pursuant to a reimbursement agreement, and which are deemed proprietary in
nature shall be considered confidential and shall not be disclosed unless required
by law.
7.
This program shall not be interpreted, construed or applied to conflict with
any provision of State law which preempts local regulation of the subject matter.
ADOPTED, this 28th day of October , 1996.
ATTEST:
CITY CLERK
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