01-1204_BRANDON, MILES D._C1_Agenda Report0
COMMUNITY REDEVELOPMENT AGENCY
AGENDA ITEM
TO: George Scarborough, Executive Director
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12/04/01 CRA
FROM: Douglas D. Dumhart, Principal Management Analyst
SUBJECT: Consideration of Request to Amend Owner Participation Agreement
with Miles D. Brandon - Capistrano Volkswagen.
RECOMMENDATION:
By motion, approve the First Amendment to the Owner Participation Agreement with Miles
D. Brandon and authorize the Chairman to execute the required documents.
SUMMARY:
In April of 2001, the Board of Directors approved an Owner Participation Agreement (OPA)
with Miles D. Brandon, owner of Capistrano Volkswagen. The OPA provided for $500,000
in financial assistance to be paid back over time in an amount based on sales tax
performance. A copy of the OPA is provided as Attachment 1.
On September 14, 2001, Mr. Brandon submitted a written request to modify this
agreement to provide a portion of these funds up front. His request is provided as
Attachment 2 to this report. Staff has reviewed his request and finds the request to modify
the agreement reasonable.
Many of the traffic circulation improvements identified in Capistrano Volkswagen's traffic
study are percentage participation. The actual improvements themselves are triggered for
construction by other developments and, projects that are targeted for initiation by the City
fall beyond the 7 year CIP budget horizon. A list of the projects that Volkswagen must
contribute to can be found in Exhibit A of Attachment 3. These fair share traffic mitigation
fees are collected prior to building permit issuance.
Capistrano Volkswagen had contacted the City's Consulting Traffic Engineer to obtain a
preliminary estimate of what the mitigation fees could be. They were provided with a figure
of $25,000. When the actual traffic analysis was completed the fair share contribution
came in at $234,108.00 The amount was unanticipated by Capistrano Volkswagen and
hence represents a cash flow problem for initiating the project.
FOR CITY COUNCIL AGENDA5�
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Community Redevelopment Agency: -2- December 4, 2001
Capistrano Volkswagen
Miles Brandon has asked if the Agency can pay for Capistrano Volkswagen's Fair Share
Traffic fees so they can start their expansion. In doing so, Capistrano Volkswagen has
agreed to return to the Agency the first $250,000 of their $500,000 in financial assistance.
The Agency can then, in turn, ask the City to accept deferred payments on the Fair Share
Traffic fees since most improvements are developer driven and have no identified time
frame. A separate agreement, between the Agency and City, for paying the Fair Share
mitigation fees has also been agendized for Board and Council consideration.
Staff has prepared a First Amendment to the OPA. The First Amendment provides for the
first $250,000 of assistance to Capistrano Volkswagen to be retained by the Agency. The
Amendment also clarifies that the agreement will terminate when the Agency sunsets
rather than having a fixed term. This Amendment also provides that the Car Dealership
will incur a financial penalty for any violation of the City's sign or special events codes. The
First Amendment to the OPA has been provided as Attachment 3 to this report.
BACKGROUND:
The Volkswagen Store was the City's first new car dealership established in 1963 by Bill
Yates. Yates operated the dealership for thirty years until its bankruptcy in 1993. From
1993 to 1997 the store was run as a factory dealership. In 1997, new ownership added
a full time, hands on, local operator. In the first two years under the new ownership sales
jumped from 36 to 121 cars per month. The number of employees increased from 23 to
more than 50 and service and parts sales doubled.
The almost 40 year old facility is antiquated, outgrown, and hinders continued prosperity.
The existing facility has an area of 8,300 s.f. on a 2.4 acre site. The owner proposes to
add the adjacent 1.2 acre parcel and construct a building addition of 6,800s.f. This will
bring the store to a total of 15,100 s.f. on 3.6 acres, typical of today's dealerships. The
cost of the expansion necessary to bring the dealership up to competitive standards is
prohibitive. The owner requested financial assistance from the Agency to make the project
feasible and an Agreement for assistance was executed on April 17, 2001.
COMMISSION/BOARD REVIEW AND RECOMMENDATIONS:
FINANCIAL CONSIDERATIONS:
The Agency is processing a request to the City to defer collection of the Fair Share Traffic
Mitigation Fees. Payments will be made from the reimbursement previously pledged to
Capistrano Valley Volkswagen.
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Community Redevelopment Agency: -3-
Capistrano Volkswagen
Miles D. Brandon
ALTERNATE ACTIONS:
December 4, 2001
By motion, approve the First Amendment to the Owner Participation Agreementwith
Miles D. Brandon and authorize the Chairman to execute the required documents.
2. By motion, approve the FirstAmendment to the Owner Participation Agreementwith
Miles D. Brandon and authorize the Chairman to execute the required documents
subject to modification.
3. By motion deny the request to amend the Owner Participation Agreementwith Miles
D. Brandon.
By motion, approve the First Amendment to the Owner Participation Agreement with Miles
D. Brandon and authorize the Chairman to execute the required documents.
Resp Ily su mittted
Douglas . Dumhart
Principal Management Analyst
Attachments:
1. OPA dated April 17, 2001
2. Letter from Mr. Brandon dated April 14, 2001
3. First Amendment to the OPA
OWNER PARTICIPATION AGREEMENT
This Agreement is made this 17th day of April 2001, by and between the San Juan
Capistrano Community Redevelopment Agency (hereinafter "Agency'), and Miles D.
Brandon, an individual (hereinafter "Owner").
RECITALS:
Whereas, Owner proposes to expand its automobile sales business known as
Capistrano Volkswagen at its existing location on Valle Road in San Juan Capistrano by
establishing new additional auto showroom and service areas ("the project improvements"),
and
Whereas, Owner intends to construct such project improvements on an adjoining
parcel which has previously been used for auto dealership purposes for many years, and
Whereas, Owner has requested financial assistance from the Agency to construct
certain public and related improvements to complete the project improvements, and
Whereas, Agency finds that pursuant to a study by its consultant, Keyser and
Marston Associates, the establishment of such improvements at this location will result in
substantial additional sales taxes to the City of San Juan Capistrano (hereinafter "City')
and property tax increment to the Agency, and
Whereas, Agency is authorized to provide financial assistance to Owner pursuant
to Health and Safety Code section 33220(b),
NOW, THEREFORE, BE IT MUTUALLY AGREED between the Agency and Owner
as follows:
Section 1. Contingent Financial Assistance To Owner.
In consideration of the significant economic benefits that Owner will bring to the San
Juan Capistrano community from the addition of the above described improvements,
Agencywill provide financial assistance to Owner under the following terms and conditions:
(a) Agency shall reimburse Owner funds in accordance with the following
apportionment formula. Owner shall be paid on a quarterly basis in an amount determined
in accordance with sales tax generated from new sales generated from the project
improvements as follows:
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Attachment 1
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1. Owner shall be paid from Agency funds annually an
amount equal to fifty percent (50%) of sales taxes generated
over and above the first $225,000 of sales taxes derived from
Owner' s entire automobile sales operation on Valle Road over
the course of a operating year, but in any event not to exceed
$35,000 in any one operating year. Thus, Owner shall not
receive any quarterly funds in and operating year should sales
taxes not exceed $225,000 in any given year.
2. This reimbursement obligation shall terminate when
Owner has been paid the total sum of Five Hundred Thousand
Dollars ($500,000.00), or at the end of twenty-two (22) years,
whichever occurs first.
3. Owner shall receive quarterly payments based upon
sales tax generation as described above approximately 120
days after the end of each calender quarter.
(b) "Operating year" shall mean (1) the twelve (12) calendar months beginning on
the commencement date of business activity (i.e., date of first sale) upon completion of
Project improvements, 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 Owner within
approximately (90) days following verification by City of the Tax revenues during the
immediate previous quarter.
For purposes of determining sales tax revenue deriving from leased
automobile sales, sales tax data shall be used only from sales data supplied from Owner's
primary leasing agent. Owner and Agency agree that the primary leasing agents are VW
Credit, Inc. and Capistrano Finance Corporation. Owner agrees to cooperate and make
every effort to have its leasing agent provide this data in a timely manner.
"Taxes and Sales Taxes" 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 seq.).
If there is change in the applicable law at any time during the term of this Agreement and
City, s share of sales tax revenues becomes less than one percent (1 %) of retail sales, that
reduction shall be reflected in the computations required under this agreement.
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Section 2. Owner's Projected Time-frame for Start Up.
Owner projects to have his improvements in place and operational by January 1,
2002.
Section 3. Term of Agreement.
This Agreement shall remain in full force and effect so long as the obligations under
this Agreement remain uncompleted, but in any event not later than twenty-two (22) years
from the date of execution of this Agreement.
Section 4. 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 5. Assignments
This agreement may not be assigned to any party without the written consent of the
agency.
Section 6. Notices.
Any notices given under this Agreement may be sent by first class mail, postage
prepaid, or by fax transmission as follows:
To Agency:
San Juan Capistrano Redevelopment Agency
Attn: George Scarborough, Executive Director
32400 Paseo Adelanto
San Juan Capistrano CA 92675
Telephone Number: 949/493-1171
Facsimile Number: 949/493-1053
To Owner:
Capistrano Volkswagen
Miles Brandon
32852 Valle Road
San Juan Capistrano CA 92675
Telephone Number: 949/837-4800
Facsimile Number: 949/493-4511
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Section 7. No Assignments Without Agencv Consent.
This Agreement may not be assigned or hypothecated in any manner without the
written approval of the Agency.
Section 8. Entire Agreement.
This Agreement contains the entire Agreement and understanding of the parties
concerning the subject matter herein. „
IN WITNESS WHEREOF, the parties have executed this Agreement as of the day and
year first written above.
Owner:
By: al P'�' 'k
Milds Brandon
Agency:
By:Q�
ATTEST: DIANE BATHGATE, VIC :AIRMAN
Dawn Sch6ry8erl, Acting City Clerk
APPRTAS TO FORM:
I
John . Shaw, ity Attorney
-� C \2 CI IY AT TO RNEV VolkswegenWgroymanl wpa
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Capistrano Volkswagen
September 14, 2001
George Scarborough
City Manager
CITY OF SAN JUAN CAPISTRANO
32400 Paseo Adelanto
San Juan Capistrano, CA 92675
it
32852 Valle Road
San Juan Capistrano, CA 92675
Phone(949)493-4511
Fax (949)493-3473
Re: Improvement plans for Capistrano Volkswagen
Dear Mr. Scarborough:
Early this year the City of San Juan Capistrano entered into an Owners Participation agreement
with Capistrano Volkswagen to help offset the cost of the our expansion. I very much appreciate
the support given us and the commitment to allow a sales tax credit of $500,000.
At the time of negotiating the agreement the city support looked like the answer to my dreams.
However, in the months since the agreement was signed some new issues have developed which
make the financing difficult at this time.
Foremost among the issues are a change in the estimated Fair Share traffic fees. When we first
contracted with Austin -Foust Traffic engineers to determine our fair share costs we were told the
fee would be about $25,000. When the study was actually completed the cost was projected at
$331,000. We had used the $25,000 figure to determine our first working budget and our pro
forma for the OPA . We approached the city engineering department for a review, and have been
told the real cost will be around $235,000. This is still 5210,000 more than we projected in our
original request to the city for help.
In addition the project's requirements for drainage to include capacity to serve adjacent properties
has raised the cost of the drainage improvements by an additional $60,000.
Engineering design issues for the actual construction created by new code requirements have
pushed the cost of the building up an additional $150,000. The total impact is that a project
originally budgeted at 52,900,000 is going to cost $3,400,00. This difference is equal to the
$500,000 tax credit support to which the city has agreed. If we were able to access the tax credits
now, the project would pencil. I lowever, that is not possible under the OPA. Volkswagen of
America has agreed to fund an additional S250,O00, but l must find the balance.
Attachment 2
I am respectfully requesting that the city allow $250,000 of Fair Share and other fees to be
deferred and collected over time against the sales tax OPA.
Most of the Fair Share fees are for projects that will not be done in the foreseeable future, and it
would hopefully make sense for the city to collect our portions closer to when the work on the
designated traffic systems might actually be performed.
Your attention to this issue, and council action on it in as rapid a time as possible is critical for
the project to move forward. We have obtained the grading permit and will be ready for building
permits in two weeks. However, the project is on hoid until I can find the additional funds. If
we wait much past the end of September to begin we run the risk of building in the rainy season.
Your support in solving my dilemma would be appreciated.
%Sincerely,
/ U '�e
Miles Brandon
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32400 PASEO ADELANTO
SAN JUAN CAPISTRANO, CA 92675
(949) 493-1171
(949) 493-1053 (FAX)
www.sanjuancapistrano.org
April 19, 2001
Mr. Miles Brandon
Capistrano Volkswagen
32852 Valle Road
San Juan Capistrano, California 92675
Re: Owner Participation Agreement
Dear Mr. Brandon:
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1776
MEMBERS OF THE CITY COUNCIL
DIANE L. BATHGATE
JOHN S. GELFF
JOHN GREINER
WATT HART
DAVID M. SWERDLIN
CITY MANAGER
GEORGE SCARBOROUGH
Enclosed is a fully executed copy of the Owner Participation Agreement approved the by
the San Juan Capistrano Redevelopment Agency Board of Directors at their meeting of
April 17, 2001.
Please feel free to contact Douglas Dumhart at 949-443-6316 if you have any questions.
Very truly yours,
Dawn Schanderl
Acting City Clerk
Enclosure
cc: Douglas Dumhart (with copy of agreement)
alua use
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San Juan Capistrano: Preserving the Past to Enhance the Future
April 17, 2001
REGULAR MEETING OF THE SAN JUAN CAPISTRANO
COMMUNITY REDEVELOPMENT AGENCY
BOARD OF DIRECTORS
CLOSED SESSION (610.85)— None
RECESS UNTIL 7:00 P.M. BUSINESS SESSION
The Regular Meeting of the Board of Directors of the San Juan Capistrano Community
Redevelopment Agency was called to order by Vice Chairman Bathgate at 7:37 p.m., in the
City Council Chamber. Mayor Hart had previously indicated there were no actions to report
from the Closed Session.
ROLL CALL PRESENT: Diane Bathgate, Vice Chairman
Wyatt Hart, Director
David M. Swerdlin, Director
ABSENT: John Greiner, Chairman
John S. Gelff, Director
STAFF PRESENT: George Scarbourgh, Executive Director; Thomas Tomlinson, Deputy
Director; John Shaw, Interim Agency Counsel; Cynthia L. Russell Finance Officer; Dawn
Schanderl, Acting Agency Secretary; Jennifer Murray, Assistant City Manager; William
Huber, Engineering and Building Director; Amy Amirani, Public Works Director; Al King,
Community Services Director; and Jennifer Carlin, Recording Secretary.
CONSENT CALENDAR
It was moved by Director Swerdlin, seconded by Director Hart, that the staff
recommendation be accepted for the following items listed on the Consent Calendar. The
motion carried by the following vote:
AYES: Directors Hart, Swerdlin and Vice Chairman Bathgate
NOES: None
ABSENT: Chairman Greiner and Director Gelff
APPROVAL OF MINUTES — REGULAR MEETING OF MARCH 20, 2001
The Minutes of the Regular Meeting of March 20, 2001 were approved as submitted.
CRA Minutes -1- 04/17/01