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01-1204_BRANDON, MILES D._C1_Agenda Report0 COMMUNITY REDEVELOPMENT AGENCY AGENDA ITEM TO: George Scarborough, Executive Director 0 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� 0 0 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. 0 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: -1- Attachment 1 0 0 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. -2- C Q GlY ARORNEMOIkswepenl greemenl.wpd 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 —3 CU CIN Ai ORNEMol.,.nV,,..m nl w,d 0 0 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 •) 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 0 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: dew, I1001R1TI r:mIIIIG 1961 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 Is 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