1993-0316_J & W FARMS_G4a_Agenda ReportAGENDA ITEM
TO:
FROM:
SUBJECT:
0
George Scarborough, City Manager
Ronald c. Sievers, Director
Public Lands and Facilities
March 16, 1993
Agreement for Operation of Kinoshita Farms
(J & W Farms)
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RECOMMENDATION
By motion, approve the agreement between the city of San Juan
Capistrano, the San Juan Capistrano Community Redevelopment Agency
and J & W Farms for the management of the Kinoshita. Farms property.
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SITUATION
Background -In March of 1991, the C.ity of San Juan Capistrano and
the San Juan Capistrano Redevelopment Agency purchased a parcel of
land known as Kinoshita Farms. This 56.45 acre parcel .of land,
located at the corner of Camino Del Avion and Alipaz street, was
the first acquisition made by the city with proceeds from the
Measure "D" bond issue. Measure "D" was approved by the citizen$
of 9an Juan Capistrano in April of 1990 to purchase open space and
agricultural lands and to design and· construct recreational
facilities on some of those lands.
Prior to the purchase by the City, Kinoshita Farms had been a
family owned and operated agricultural farm. The farm was
purchased by the Kinoshita family in the 1950 's and had been
continuously operated by the Kinoshita's since that time.
Over the years, the farm has been used to produce a variety of
crops including corn, strawberries, peppers, beans, tomatoes and
other vegetables. These crops have been ·sold primarily through
wholesale distributors and also at the roadside stand located on
the farm.
When the City acquired the farm in 1991, it was-not known what the
ultimate use would be for the land. Until the future use could be
determined, the city decided to continue the farm operation in a
"status quo" mode. An agreement was entered into between the City,
the City Redevelopment Agency and Kinoshita Farms, Inc. to provide
for the management of the farm. This agreement·' retained the
FOR CITY COUNCIL AGEN~
.Agenda · Item
March 16, 1993
Page 2
0
services of Shig and Bobby Kinoshita, representing Kinoshita Farms,
Inc. , to continue the traditional farming operation. This
agreement provided Kinosh:i,.ta Farms, lnc with a $100,000 per year
management fe~ to oversee the operation of the farm.
Since tbe time "that the City purchased the Kinoshita Farm in March
of 1991, ther.e have been several significant events which have
occurred, requiring substant;ial financial assistance by the City to
keep the farm in operation. Unusually -wet weather, a poor produce
market, rapidly increasing water costs and other factors have
contributed to the economic problems. As a result, the city has
contributed approximately · $290, 000 from tbe Agricultural
Preservation Fund into the farm operation from March 1, 1991
through January 31, 1993. This money was part of the 1992-93 City
budget approved by the City Council.
Proposal -Several al teimati ves have been explored to reduce the
cost to the City for continuing the operation of :I<inoshita Farms.
These alternatives have included discussions with the Cal-Poly
School System, private _individuals and existing farming operations.
Due to the current economic difficulties state wide, most
alternatives have not proven to be feasible.
The Cal-Poly School System, is suffering extreme financial
constraints and cannot work with the City at this time. We will
continue to work with Cal-Poly on possible future involvement. The
private individuals we have spoken with do not have sufficient
financial support to take over the operation without continued City
financial support.
The most feasible alternative is the proposal you have before you
tonight between the City and J & W Farms. Under the-terms of this
agreement, the City will have no financial obligation,to subsidize
the farming operation.
J & W Farms will be .responsible for all operating costs associated
with Kinoshita Farms. This includes all utilities, supplies,
labor, maintenance and any other operating costs. There will be no
management fee paid to J & W Farms, unlike the current $100, ooo
paid to Kinoshita Farms, Inc •• In addition, the City will receive
3% of the total gr,oss sales of the farm produce. This includes
both wholesale distributor sales and retail sales at the roadside
t I \, I I I I stand, which will cpntinue in operation. Based on proJected sales
amounts by J & W, this should produce $15,000 to $20,000 per year-
in revenue to the City. The total dollar value to the City under
the terms of this agreement is projected to be approximately
$150,000 per year savings in subsidies, plus the $15,000 to $20,000
revenue projected, for a total of $165,000 to $170,000 per year.
J & w Farms has a solid track record in farming. They currently
have a similar agreement for farming portions of the Honeyman Farms
in San Juan Capistrano. They also have several other agricultural
.Agenda Item
March 16, 1993
Page 3
operations throughout Southern California. J & W understands that
the Open Space Master Plan recently approved by the City Council
will reduce the agricultural acreage at Kinoshita farms to
approximately 3·0 acres in the near future. They also realize that
they may only have the management agreement for three years, as
other alternatives may be chosen after that period of time. Also,
this agr~ement may be·terminated by the City at any time provided
six months notice is given to J & W Farms.
We feel that this agreement between the City and J & W Farms will
provide for the ongoing operations of the farm, which is an
important tradition in the City. It will also save the City
between $165, ooo and, $170, ooo per year. Finally, it allows· for the
implementation of the Open Space Master Plan to proceed without
suspending the farm operations. J & W Farms has stated that it is
imp~rative for them to take over the management of the farm
inunedia~ely. This allows J & W the lead time necessary for
ordering plants, seed, fertilizer, packing materials, etc. in
anticipation o.f the Spring, Summer and .Fall seasons. . It must be
noted that the current management agreement between the City and
Kinoshita Farms, Inc. provides that either party may terminate the
existing agreement with written notice of not less than six (6)
months. Due to the need to implement the new agreement with J & w.
Farms as soon as possibl.e ,· to prevent on-going losses, the current
contract with Kinoshita Farms, Inc. will be bought out for the six
(6) month period noted above for $50, 000. This represents the
value of the existing contract between the City and Kinoshita
Farms, Inc. for six (6) months.
Kinoshita Farms, Inc. has agreed to this buy out and have signed
documents. releasing the City from the six (6) month written
notification clause of the existing contract. A formal agenda item
on this· issue will be brought to the City Council at the next
meeting on April 6, 1993.
Mr. John Kotake, representing J & W Farms, will be present at the
City Council meeting to answer any questions· you may have regarding
this agreement.
COMMISSION/BOARD REVIEW. RECOMMENDATIONS
N/A
FINANCIAL CONSIDERATIONS-
Actual financial impact will be dependent upon the fa.rm' s gross
sales. However, combined savings and revenue are projected to be
approximately $165,000·-$170,000 per year. There will be a one
time charge to the City Agricultural Preservation Fund for $50,000
to buy out the existing contract between the City and Kinoshita
Farms, Inc.
.Agenda Item
March 16, 1993
Page 4
NOTIFICATION
0
Kinoshita Farms, Inc.
J & W Farms
ALTERNATE ACTIONS
0
1. By motion, approve the agreement between the City of San Juan
Capistrano, the San Juan Capistrano Community Redevelopment
Agency and J & W Farms for the management of the Kinoshita
Farms property.
2. Do not approve the agreement.
3. Refer to staff for additional information.
RECOMMENDATION
By motion, approve the agreement between the City of San Juan
Capistrano, the San Juan Capistrano Community Redevelopment Agency
and J & W Farms for the management of the Kinoshita Farms Property.
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Respectfully submitted,
/
Ronald c. sievers
RCS:sc
0 0
MEMORANDUM February 19, 1993
TO: Ron Sievers, Director of Public Lands & Facilities
FROM: Cynthia L. Pendleton, Interim Director o( Administrative Services
SUBJECT: Kinoshita Farms Income and Expenditures
March 1, 1991 -January 31, 1993
The following is the information requested:
Period Revenues Ex2enditures
March 1, 1991 '.'"June 30, 1991 $ 6,614 $ 77,216
July 1, 1991 -June 30, 1992 325,850 417 ,092
July 1, 1992 -January 31, 1993 118 2324 245 2974
$ l/.50 2788 $ 7l/.0 2282
Please contact me if you need any additional information.
)
Profit
(Loss)
$ (70,602)
(91,242)
(127 2650)
$ (289 2l/.9l/.)
AYES: Council Members Campbell, Hausdorfer, Nash, Vasquez, and Mayor Jones
NOES: None
ABSENT: None
DIRECTQR OF PUBLIC IANDS AND FACILITIE.5
--)-1.
W FARM ( (o00 . 30
~!:MI;;~ ~Ml:fil FOR QPERATIQN QF KJNQ~HITA FARM
1'
Written Communication:
Report dated March 16, 1993, from the Director of Public Lands and Facilities, recommending that the
City, CRA, and J & W Farms enter into a three-year agreement for the management of the Kinoshita
Farm in order to reduce the cost to the City for continuing the operation of the Kinoshita Farm. Under
the terms of the new agreement, the City will have no financial obligation to subsidize the farming
operation; J & W Farms will be responsible for all operating costs, including all utilities, supplies, labor,
maintenance and any other operating costs. In addition, the City will receive 3% of the total gross sales
of the farm produce up to an annual cap of $47,500. Because of the immediate need for the new
operators to begin managing the farm, the present operators have agreed to accept a six-month buy-out
in the amount of $50,000, which represents the required notification period for termination of the
contract with Shig and Bobby Kinoshita.
Mr. Sievers made an oral presentation and introduced John Kotalce and his family of J & W Farms.
Mayor Jones noted that the agreement did not include the cleanup of the pallets and other unsightly
conditions at the site. Mr. Sievers stated that bids had been received for the purchase of the pallets,
which are expected to be removed within ten working days . In addition, Mr. Kotalce will assess the
existing equipment at the farm , which may be restored and displayed to show the farm's history.
Landscaping will be installed along the fence. He noted that the Congden House is excluded from the
agreement since it may be restored in the future . With regard to the annual cap of $47,000 for revenue
to the City, he explained that the City must stay within a 3% profit margin to retain the tax-exempt
status of the bonds.
Approval of A~eement with J & W Farms:
It was moved by Council Member Hausdorfer, seconded by Council Member Campbell, and
unanimously carried that the Management and Operation Agreement between the City, the Community
Redevelopment Agency, and J & W Farms, for the for the management of the Kinoshita Farm property
be approved for a three-year period ending March 1996. Compensation to the Agency shall not exceed
the $47,500 annual cap. The Mayor was authorized to execute the agreement on behalf of the City. Staff
was directed to prepare a Resolution/Letter of Appreciation to the Kinoshita family for their service.
The Council welcomed Mr. Kotalce and expressed appreciation to the Kinoshita family for their
contributions to the community.
CQUNCllMANIC ITEMS
1. ACCEPIANCE OF RESIGNATION AND DECLARATION OF VACANCY
(JAMES E. ERICKSON. PLANNING COMMISSION) {110 .20)
Written Communication:
Report dated March 16, 1993, from the Council Services Manager, forwarding the letter of resignation.
City Council Minutes -8-3/16/93