1998-0407_BLUE SKY PROPERTIES, LTD_Reimbursement Agr• a
SALES TAX GUARANTEE
AND RIGHT-OF-WAY IMPROVEMENT
REIMBURSEMENT AGREEMENT
This Agreement is entered into this "/'day of fir/ / 1998, by and
between the City of San Juan Capistrano (hereinafter referr6d to as "City") and Blue Sky
Properties, LTD., a California Limited Partnership (hereinafter referred to as "Developer").
WHEREAS, the parties hereto have entered into that certain Purchase and Sale
Agreement (the "Purchase Agreement") dated /on, / 7 , 1998, for the
purchase of certain property from the City, along with the purchase of other properties
(defined respectively in said Purchase Agreement as the "Property" and altogether as the
"Site") for development of a motor vehicle sales facility affiliated with the existing
Capistrano Ford dealership; and
WHEREAS, City has the interest in upgrading the surrounding public facilities,
including, but not limited to, the undergrounding of utilities located along Camino
Capistrano and Stonehill Drive adjacent to the Site; and
WHEREAS, City agrees to provide certain improvements to the adjacent rights-of-
way of the Site as part of City's sale of the Property to Developer; and
WHEREAS, Developer has agreed to advance such costs to City and to coordinate
these public improvements with the development of the Site;
NOW, THEREFORE, in consideration of the promises hereinafter contained, City
and Developer hereby agree as follows:
Section 1. City Reimbursement for Off -Site Public Improvements.
A. Scope of Reimbursement Obligation. City agrees to reimburse Developer
for the cost of certain off-site public improvements which would otherwise have been the
obligation of Developer arising out of Developer's project proposal. City's reimbursement
obligation shall be actual cost of the construction of the public improvements, but in any
case not to exceed the total sum of Two Hundred Twenty -Four Thousand Eight Hundred
Eighty -One Dollars ($224,881). The subject off-site improvements are set forth in
Attachment 1", which is attached and incorporated herein by reference to this Agreement.
B. Developer Loan to City. Developer shall assume the responsibility for
construction of these improvements in conjunction with the construction of its project.
Accordingly, Citys reimbursement obligation to Developer shall be treated as an up -front
loan by Developer to City under the terms and conditions provided for in this Agreement.
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C. Verification of Costs. The Actual Cost of the Public Improvements set forth
in Attachment "'I" shall be established based upon the submission to City by Developer
of evidence of the improvement costs, including, but not limited to, construction contracts,
invoices and other items associated with the costs of construction. Developer shall submit
to the City a written request for reimbursement which includes: (i) documentation verifying
the actual costs for which Developer seeks reimbursement and eligible expenses in
accordance with the approved plans and permits and this Agreement; (ii) certification from
the project architect or engineer that the work for which the reimbursement is sought has
been completed and conforms to the approved plans and permits; (iii) appropriate
conditional or unconditional lien releases and waivers, including mechanics' liens,
materialmens' liens, stop notice claims, and equitable lien claims, said lien releases and
waivers to be in the form that conforms to California Civil Code Section 3262; and (iv) any
other documentation or evidence reasonably required by City.
Section 2. Sales Tax Revenue Guarantee to City and Loan Reimbursement
Methodology.
A. Sales Tax Revenue Guarantee to Citv.
City and Developer agree that City shall receive from Developer a
Guaranteed Minimum Sales Tax based upon the formula set forth in this section. Sales
Tax generated from the Site shall first be used to pay to the City the Guaranteed Minimum
Sales Tax as set forth herein.
City and Developer agree that the loan from Developer to City (in the form
of Developer's financial commitment to construct the subject public improvements) shall
be reimbursed from additional sales tax revenues from the Site available after City has
received its Guaranteed Minimum Sales Tax for each operating year.
Developer's Minimum Sales Tax guarantee and City's reimbursement
obligation shall remain in force and effect only so long as the use of the Site remains in
conjunction with the existing Capistrano Ford Dealership.
Formula.
B. Reimbursement of Loan Methodology/Sales Tax Revenue Guarantee
(a) Guaranteed Minimum Sales Tax Revenue Formula.
The Guaranteed Minimum Sales Tax Revenues due the City for each
operating year shall be based upon a benchmark constant assumed sales volume for the
Site in the total amount of Eight Million Dollars ($8,000,000.00) pursuant to Section 6.F.
of this Agreement.
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The minimum sales tax revenue to which City shall be entitled shall
be determined pursuant to the following formula:
Actual Guaranteed Minimum Taxable Sales x Local Sales Tax
percentage = Guaranteed Minimum Sales Tax Revenues
(b) FORMULA FOR DETERMINATION OF ACTUAL
GUARANTEED MINIMUM TAXABLE SALES.
The Actual Guaranteed minimum taxable sales shall be determined annually
based upon the following formula:
Current Year Taxable Sales x Guaranteed Minimum= Actual Guaranteed
Base Year Taxable Sales Taxable Sales Minimum Taxable Sales
(i.e., 8 million)
Should the tax revenues under this formula received by the City during any
Operating Year be less than the Guaranteed Minimum Sales Tax Revenues, the balance
shall either be remitted to the City within thirty (30) days' written notice from the City, or the
amount of the loan shall be reduced accordingly at the City's election.
(c) 70% - 30% Split of Additional Sales Tax Revenue.
City's Bradley Burns share of sales tax revenues from the Site which is in
excess of the Guaranteed Minimum Sales Tax Revenues shall then be split as follows:
Seventy Percent (70%) to Developer, and Thirty Percent (30%) to City, until the City's
reimbursement obligation is paid off. At that time, all sales tax revenues from the project
Site shall be the property of the City.
(d) Timing of Reimbursement Payments/Interest.
The City's reimbursement obligation will be paid from sales tax revenues in
quarterly installments beginning upon the completion of the first operating quarter.
City shall pay simple interest on the loan obligation equal to the prime rate
as prime rate is defined in this Agreement. If Developer has not generated Tax Revenues
from the Site by the end of the first Operating Year, interest shall cease to accrue until the
first full quarter in which Tax Revenues are attributable to the Site.
The City's reimbursement obligation shall be paid only from Tax Revenues,
as defined herein. In the event such funds are not available to make the quarterly
payment amount, no payment by the City is required from any other City funds.
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Section 3. Indemnity and Hold Harmless
Developer shall indemnify, defend and hold harmless the City and its officers,
officials, employees and agents from and against any and all liability, loss, damage,
expense, costs (including without limitation, attorneys' fees and costs, and costs of
litigation) of every nature arising out of or in connection with Developer's use of this
Agreement and Developer's performance of the work of the subject public improvements,
or Developer's failure to comply with any of its obligations under this Agreement.
In this regard, Developer shall require its contractor to maintain general commercial
liability insurance in an amount of not less than One Million Dollars ($1,000,000) per
occurrence, and City, its officers and employees shall be named as additional named
insured on the Contractor's liability policy. Developer shall present proof of such
insurance to City before any construction work begins on the project.
Section 4. Term.
This Agreement shall continue in full force and effect so long as the use of the Site
remains in conjunction with the existing Capistrano Ford dealership or until the Off -Site
Loan is paid in full in accordance with Section 2 of this Agreement, whichever occurs last.
Section 5. Dispute Resolution.
In the event of a dispute between the parties, each agrees to first formally meet and
confer regarding the matter. If the dispute cannot be resolved through a meet and confer
session, the matter will then be referred to non-binding mediation. If non-binding
mediation is not successful, the parties shall determine in writing whether binding
arbitration is appropriate. Thereafter, judicial remedies shall be available to resolve the
dispute.
Section 6. Definitions.
A. "Base Year" shall mean the four completed calendar quarters preceding the
commencement date of business operations (i.e., date of first sale) at the site. This shall
be a constant number used in the formula in section 2 for each operating year.
B. "Base Year Taxable Sales" shall mean an amount equal to one hundred
percent (100%) of the "Transactions Subject to Local Tax" from the Costco Plaza Site as
reported to the State of California Board of Equalization
Site for the four (4) completed quarters preceding the
business (i.e., date of first sale) conducted on the Site.
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generated at the Costco Plaza
commencement date of any
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C. "Costco Plaza Site" shall mean that certain property identified as Assessor's
Parcel No. 121-254-35 and 121-254-40.
D. "Current Year Taxable Sales" shall mean an amount equal to one hundred
percent (10016) of the "Transactions Subject to Local Tax" from the Costco Plaza Site as
reported to the State of California Board of Equalization on Schedule "C" of the State,
Local and District Sales and Use Tax Return generated at the Costco Plaza Site for each
operating year for the four completed quarters preceding the anniversary date of the
commencement date of business activity (i.e., date of first sale) at the site.
E. "Interest Rate" means the prime rate quoted in the Wall Street Journal on the
date of the first payment made by the Developer for the construction of off-site
improvements. The prime rate for this date shall govern the interest rate to be paid for the
entire term of the reimbursement obligation.
F. "Guaranteed Minimum Taxable Sales" is a guarantee by Developer that
business sales activities on the Site shall be a minimum taxable sales volume of eight
million dollars ($8,000,000) for any operating year. The " Guaranteed Minimum Sales Tax
Revenues" shall be deemed to be the product of the Actual Guaranteed Minimum Taxable
Sales times the City's local sales tax percentage.
G. "Operating Year" shall mean (i) the twelve (12) calendar months beginning
on the commencement date of business activity (i.e., date of first sale) at the Site, and (ii)
each twelve (12) calendar months thereafter. If the commencement date falls on a day
other than the first day of a calendar month, the first Operating Year shall consist of the
twelve calendar months beginning with the first month after the commencement date plus
the period from the commencement date until the first day of the first calendar month. The
quarterly payment shall be made to Developer within sixty (60) days following verification
by City of the Tax Revenues during the immediate previous quarter.
H. "Quarterly Payments" shall mean the payments due to the Developer for
each Quarter pursuant to the terms of the Agreement. The Quarterly Payments shall be
an amount equal to seventy percent (70%) of the Tax Revenues generated each quarter
in excess of the Minimum Guaranteed Sales Tax Revenues for the same Operating Year.
I. "Site" shall mean that certain real property identified as Assessor's Parcels
121-254-18, 121-254-31, and 121-254-42.
J. 'Tax Revenues" shall mean an amount equal to one hundred percent (100%)
of that portion of sales tax revenues derived by the City from Bradley Burns Uniform Local
Sales and Use Tax (Revenue and Taxation Code sections 7200, et sea.). If there is a
change in the applicable law at any time during the term of this Agreement and City's
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share of sales tax revenues becomes less than one percent (1.0%) of retail sales, City
shall nevertheless be deemed to have received one percent (1.0%) for purposes of this
Agreement.
Section 7. Notices.
Any notices given under this Agreement may be sent by first class mail, postage
prepaid, or by fax transmission (so long as the original of the notice is concurrently
delivered by one of the other acceptable methods) as follows:
To City:
City of San Juan Capistrano
32400 Paseo Adelanto
San Juan Capistrano, CA 92675
Attn: George Scarborough, City Manager
FAX: (714) 493-1053
To Developer:
Blue Sky Properties, LTD.
11404 E. Imperial Highway
Norwalk, CA 90650
Attn: Orval Paul or Steve Paul
FAX: (562) 864-6698
Section 8. No Assignment.
Developer shall not assign or transfer this Agreement to any person, firm or entity
without the prior written consent of the City, which consent shall not be unreasonably
withheld.
Section 9. Entire Agreement.
This Agreement contains the entire Agreement and understanding of the parties
concerning the subject matter herein. This Agreement shall not supersede, modify or
amend the rights and obligations of City and Developer as set forth in that certain
Purchase and Sale Agreement dated 7 1998 by and between the City
and Developer.
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the day
and year first written above.
CITY OF SAN JUAN CAPISTRANO
By:"�4ZL)""' -.-) —
olge1kcarWrough, City Manager
ATTEST:
By:
Cheryl Johng6n,City Clerk
APPROVED AS TO FORM:
By:
John 0
haw, ity Attorney
BLUE SKY PROPERTIES
By:
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ATTACHMENT 1"
LIST OF SPECIFIC PUBLIC IMPROVEMENTS
Street Improvements $170,2
Sanitary Sewer Improvements 23,9
Domestic Water Improvements 9,7
Storm Drain Improvements
Grading and Appurtenances
Utility Service 6,8
Total Improvement Costs $214,8
Engineering & Construction Survey 10,0
TOTAL COSTS $224,8
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