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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: •, A. "Automobile dealership" shall mean the business of selling new automobiles and /or light trucks pursuant to a franchise, license or similar -1- 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. -2- 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 -3- 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. �iU7�Ii�L•79a��1•P�rI��� 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. -4- Ol • 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. f QhtaVR8On nCM.dOC tle119 -1 &98 WO-23 -5- 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: -1- 0 0 (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. -2- 0 • 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 ". :u 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; -3- • 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 !I 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. -5- 5. i 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. U 0 0 (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; -7- r 0 (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 M 0 0 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: M (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 -10- 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 de11a19 -9e cA1 G -24 -96 Sterling Motors, Inc. City of Newport Beach By Kevin Murphy, City Manager By City Attorney -12- 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 -1- 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. -2- 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 -3- - • • 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. -4- 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 f: cat\cris\resonktazncntdoc de \10.18 -96 cf\16 -23 i� F'f � � Y1 :Z -5- �t C1 p MAYOR