HomeMy WebLinkAbout02. Adopt Reso- Approving Operating Covenant Agreement and Reso Giant RVAPPROVED BY
CITY MANAGER
TO: HONORABLE MAYOR AND MEMBERS OF THE CITY COUNCIL
FROM: OFFICE OF THE CITY MANAGER
BY: ALDO E. SCHINDLER, DIRECTOR OF COMMUNITY DEVELOPMEN
DATE: AUGUST 14, 2018
That the City Council approve and authorize the Mayor to execute an Operating Covenant
Agreement with Giant Inland Empire R.V. Center, Inc., (dba, Giant RV), for a sales tax rebate and
jobs creation covenant, regarding the development of a new Giant RV dealership at 11111
Florence Avenue; and adopt:
APPRO • ' •
INLAND EMPIRE R.V. CENTER, INC.
Giant RV approached staff with their proposal to open a new dealership in Downey at the former
World of Decor furniture store site, 11111 Florence Avenue in August 2014. The decision for
the new dealership was to have a presence in Los Angeles County and sell recreational
vehicles ("RVs") in an underserved RV market.
City staff is always seeking to expand economic development opportunities in the City of
Downey in an effort to increase jobs, property tax, sales tax and all of the other benefits
associated with additional economic development activities and new projects. A sales tax
rebate agreement with Giant RV will increase the productive use of land that had been vacant
for many years, foster orderly growth and economic development in that part of the City.
Since August 2014, staff continued to negotiate a sales tax rebate and jobs creation covenant
for the RV development. During that time Giant RV had to deal with pressing business matters,
thus prolonging the negotiations and subsequently delaying the execution of the Agreement.
Regardless, Giant RV had remained committed to the site in Downey, and made a financially
strategic decision to proceed with designs, construction plans, city entitlements, and Planning
Commission approval to open an RV dealership in Downey, pending a subsidy.
In order to remain competitive and promote economic expansion, the City and Giant RV are
proposing to enter into an Operating Covenant Agreement ("Agreement") as part of the City's
Economic Development Program; the Agreement is included as Attachment "B". The
OWNER COVENANT AGREEMENT -
AUGUST 14, 2018
PAGE 2
Agreement between the two parties serves as a sales tax rebate and jobs creation covenant for
the development of the new RV dealership. The City is being proactive by attracting Giant RV
to the City, and is making a significant commitment to maintain the economic momentum it has
gained over the years.
The new Giant RV site comprises 9.7 acres of land. The site is developed with off-street
parking, landscaping, parking lot lighting facilities, and a 109,453 square foot building. Giant RV
has invested $2,000,000 in capital improvements in the site. The site is primarily utilized as an
RV dealership, although portions of the building accommodate parts sales, parts storage,
administrative offices, and vehicle servicing. Vehicle service involves minor repairs for motor
homes such as carpentry, electrical, plumbing, satellite dish installations, stereo installations,
minor oil changes, and safety inspections. Giant RV does not perform heavy chassis work or
engine repairs at this dealership. The hours of operation are 8:30 a.m. to 7:00 p.m., seven days
per week. This development project was also presented and approved by the City's Planning
Commission on July 15, 2015.
Move -in, renovation and upgrades for an RV dealership are extremely costly for all sites, to
accommodate their current use and achieve their manufacturer's branding standards. Although
Giant RV is confident that the dealership will generate considerable sales over time at the new
location, the move -in costs would have rendered the project infeasible without financial assistance
from the City. Giant RV has requested $504,000 in financial assistance from the City over a
seven (7) year period. Staff is recommending the financial assistance be provided on an annual
basis in the form of a sales tax rebate.
Commencing after the first year of operation, if the gross taxable sales at the property exceeds
$18,000,000, or the net taxable sales to the City exceeds $180,000 the City shall rebate Giant
RV 26% of that sales tax portion over $180,000 and up to a maximum of to $72,000 per year,
and shall not exceed $504,000 over the term of the Agreement.
Byway of example, if the net taxable sales equal "$300,000, -the payment to Giant RV would be
$31,200 ($300,000' $180,000 =$126,000 x 26% = $31,200).
The City shall have no obligation to make such payments in the event the sales tax revenues
attributable to and received by the City from the property do not equal or are less than $180,000
in the preceding year. Based upon the Agreement, it is estimated that the City will receive an
additional $2,500,000 in sales tax revenues during the seven (7) years of the Agreement. The
City's obligations under this Agreement shall terminate upon the seventh (7th) anniversary of
the commencement date.
The Agreement requires that Giant RV create and maintain fifty-five (55) new full-time jobs on or
before the end of their first year of operations. Giant RV will also make reasonable efforts to
utilize the services of the City for referrals of applicants to fill any such new jobs. The City's job
referral program will consist of apartnership with the City's job referral resources such as the
Downey Unified School District Regional Occupational Program, Southeast Los Angeles County
Workforce Development Board, and other appropriate community based organizations and job
placement entities.
OWNER • FOR
AUGUST 14, 2018
PAGE 3
The City hired a financial and real estate services consultant, Tierra West Advisors, to conduct
financial analysis of Giant RV's past, current and future revenue and debt (Attachment "C"), and
determined that Giant RV displays a financial need in order to retain and expand jobs, locate a
new Giant RV dealership in Downey, and assist Giant RV to gain competitiveness within the
recreational vehicle sales industry.
The City's EconomicDevelopment Program, in the form of a sales tax sharing and jobs creation
covenant, is also considered an economic development subsidy under the provisions of state of
California Assembly Bill 562, enacted in January 2014. This bill requires each local agency to
provide specified information to the public before approving an economic development subsidy
within its jurisdiction, and to review, hold hearings, and report on those subsidies at specified
intervals. As such, staff is conducting a City Council Public Hearing on this matter, has placed
the appropriate public notices, and has posted the Economic Development Strategy Job
Retention analysis on the City's website for public viewing that will comply with the continued
public reporting provisions mandated by AB 562 (Attachment °D").
Economic Vibrancy
Commencing after the first year of operation, if the gross taxable sales at the property exceeds
$18,000,000, or the net taxable' sales to the City exceeds $180,000 the City shall rebate Giant
RV 26% of that sales tax portion up to $72,000 per year, and shall not exceed $504,000 over
the term of the Agreement. By way of example, if the net taxable sales equal $300,000, the
payment to Giant RV would be $31,200 ($300,000 - $180,000 = $126,000 x 26% _ $31,200).
The City's sales tax rebate to Giant RV will be taken from the sales tax generated by the new
RV dealership.
ATTACHMENTS
Attachment Site Aerial
Attachment B — Resolution, with Operating Covenant Agreement
Attachment C — Financial Analysis
Attachment D —State of California Section 53083 Report
1
Attachment "A"
A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF DOWNEY
APPROVING AN OPERATING COVENANT AGREEMENT WITH GIANT
INLAND EMPIRE R.V. CENTER, INC.
WHEREAS, the City of Downey ("City") is a municipal corporation and chartered city
duly created and existing under the California Constitution;_ and
WHEREAS, the City wishes to support and encourage economic development and
business development and retention in the community, including the generation of municipal
revenues to provide necessary public services and facilities; and
WHEREAS, Giant Inland Empire R.V. Center, Inc., a California Corporation doing
business as Giant RV ("Giant RV") opened a new recreational vehicle dealership located at
11111 Florence Boulevard in the City of Downey, County of Los Angeles, California
("Dealership"); and
WHEREAS, the City seeks to expand economic development opportunities in the City of
Downey in an effort to increase jobs, property tax, sales tax and all of the other benefits
associated with additional economic development activity and new projects. Further, promoting
economic development within the City is a municipal affair and serves the public purposes of
preserving and expanding opportunities for gainful employment and preventing deterioration of
the urban landscape; and
WHEREAS, the development of the new dealership will providesignificant public
benefits to the City, as the continued receipt of local sales tax revenues by the City from such
activities represents a significant source of public revenue for the City that may be used for the
funding of necessary public services and facilities, including public safety services and facilities
and
WHEREAS, the contractual obligations to continuously operate the new dealership
within the City serves the additional public purpose of fostering a business and civic
environment that may attract additional businesses and investment into the community, due to
the availability of increased public and private services and economic activity resulting
therefrom; and
WHEREAS, the City, in consideration of the local sales tax revenues, property taxes,
employment benefits, and other tangible and intangible benefits that are expected to be
received by the City arising from the continued operation of the new dealership within the City,
desires to provide certain sales tax rebate payments to Giant RV as an incentive for creating
and operating a new dealership within the City; and
WHEREAS, City staff and Giant RV have negotiated an Operating Covenant
Agreement, attached hereto as Exhibit "A" and incorporated herein by reference ("Agreement"),
a copy of which is on file with the City Clerk and available to the public for inspection during
regular business hours of the City, to, among other things, provide for the development and
continued operation of the new dealership within the City; and
WHEREAS, City conducted an analysis in accordance with the requirements of
Government Code section 53083. The results of that analysis are presented in a report entitled
"Giant RV Section 53083 Report" (the "Report"), which sets forth the details of the economic
development subsidy contained within the Agreement, as well as the net tax revenue expected
to accrue to the City and the net number of jobs to be created as a result of the economic
1
RESOLUTION NO..
PAGE 2
development subsidy. A copy of the Report is available in the Office of the City Clerk of the City
and on the City's website at www.downeyca.org, under the "City News" tab; and
RESOLVENOW, THEREFORE, THE CITY COUNCIL OF THE CITY OF DOWNEY DOES
HEREBY • •
SECTION 1. Recitals. The City Council finds and determines that the foregoing
recitals of fact are true and correct.
SECTION 2. CEQA Compliance: City Staff has reviewed the proposed use for
compliance with the California Environmental Quality Act (CEQA). Upon completion of this
review, it had been determined that the project is categorically exempt from CEQA, pursuant to
Guideline Section No. 15301 (Class 1, Existing Facilities). Categorical Exemptions apply to
projects that have been determined not to have a significant effect on the environment and have
been exempted from the requirements of the CEQA. Class 1 exemptions consists of projects
that involve no or negligible expansion of the existing building or use. Inasmuch as the
applicant is occupying an existing tenant space within the building, staff feels that this request
qualifies for this exemption.
SECTION 3. Eiqdin 's. The City Council finds and determines that: (a) there are
identifiable public purposes fulfilled by the Agreement, as set forth in the recitals; (b) the public
purposes set forth in the recitals outweigh any private benefit to private persons; (c) the findings
set forth in this Resolution are based upon substantial written and oral evidence presented to
the City Council; and (d) the Agreement is authorized by law and constitutes a valid and binding
agreement between the City and Giant RV.
SECTION 4. Approval. The City Council hereby approves the Agreement and
authorizes the Mayor to execute the Agreement together with such non -substantive changes
and amendments as may be approved by the City Manager and the City Attorney. The City
Manager is further authorized to take any action and execute any and all necessary documents
to implement the Agreement.
SECTION 5. Effective mate. The Mayor shall sign this Resolution and the City Clerk
shall attest thereto, and this Resolution shall thereafter take effect immediately in accordance
with applicable law.
P ZEN21 fini INTA -
MARIA t DUARTEj CIVIC
City Clerk
I HEREBY CERTIFY ih�� the foregoing Resolution was adopted by the City Council o
the City of Downey at a Reoular Meeting held on the 14 th day of August, 2018, by the following
vote, to wit:
AYE&
Council Members,
NOE&
Council Member:
ABSENT:
Council Member:
ABSTAK
Council Member:
MARIA ALICIA DUARTE, CIVIC
City Clerk
RESOLUTION NO..
PAGE 4
DOWNEY NISSAN
OPERATING
OPERATING COVENANT AGREEMENT
by and between
GIANT INLAND EMPIRE RV CENTER, INC.
a California Corporation
mm
CITY OF OOWNEY�
1102291.1
65186.00003\31102692.2
• 1 1
1,
PARTIES AND DATE ...........................................................
.....I...........................
I
1.1
Date of Agreement..........................................................................;..,.,,...
1
1.2
Parties to Agreement................................................................................1
2.
RECITALS ................... ........................ .............................
............ ..,.... ,,....*........1
3.
SPECIAL TERMS .. ........................ ......................................................................
2
3.1
The Property..., ..,.................... ........... --- ..................
,................ ,............. , ,.....2
3.2
Scope of Development.....................................................
.........................2
3.3
Schedule of Performance ................... ......................................................
3
4
STANDARD TERMS ............................................. ................
............................
3
4.1
City's Consideration for Operating Conditions .........
................:., ..............., ..3
4.2
Owner to Defend this Agreement ..............................
............. .
4
4.3
Owner Indemnification and Defense of the City ...................................................
5
4.4
Governmental Permits and Compliance With Laws ............
.......,................ —.....
6
4.5
Obligation to Refrain from Discrimination............................................................
4.6
Rights of Access .....,.............................................................................
...,
6
4.7
Prohibition Against Transfer.. .. .__ .
6
4.8
Uses ................................... ... ........».......... ,......,
,.,.........................,.....
7
4.9
Specific Performance .................................................................................
7
4.10
Notices and Demands......................................................
........................
7
4.11
Employees
Nonl>ability of City Officials and E ...................
�•••�••• ...._�.�¢ ...........
7
4.12
Time Deadlines Critical; Extensions and Delays..............................................8
4.13 Attorney's Fees...... ......................................................................., 8
4.14 Real Estate Commissions .................................. ..........................
4.15 Submission of Documents and Other Actions for Approval ...............................
4.16 Amendments to this Agreement .................................................................... 8
4.17 Counterpart Originals; Integration ................. ................. .......................... 8
4.18 No Waiver. ....... ........................ ,.... .................... 8
-i-
65186.00003131102692.2
1102291.1
1.2.1 The City. The City is a California charter city and municipal corporation,
exercising governmental functions and powers. The address of the City is:
City of Downey
11111 Brookshire Avenue
Downey, CA 90241
Attention: City Manager
1.2.2 The Owner. The Owner is Giant Inland Empire RV Center, a California
corporation. The address of the Owner for the purposes of this Agreement is:
Giant Inland Empire RN. Center, Inc.
9150 Benson Avenue
Montclair, CA 91763
Attention: Bob Barouti/Mike Murphy
Owner represents and warrants to the City- that the individuals executing this Agreement
are authorized to execute this Agreement on behalf of the Owner, and the Owner has taken all
action required by law to approve the execution of this Agreement.
All of the terms and conditions of this Agreement shall be binding on and shall inure to
the benefit of the Owner and its permitted nominees, successors and assigns. Wherever the term
"Owner" is used herein, such term shall include any permitted nominee, assignee or successor of
the Owner.
2. RECITALS
2.1 The State Legislature has declared its intent (SB 470, Wright, 2013) to promote
economic development on a local level so that communities can enact local strategies to increase
jobs, create economic opportunity, and generate tax revenue for all levels of government; give
&Z2� the -state. that allow local governments to use their funds in
a manner that promotes economic opportunity; and with the loss of redevelopment funds, cities
need to continue certain powers afforded to redevelopment agencies that were critical to
economic development, yet do not have an impact on schools and the state budget.
2.2 It is further declared to be the policy of the State to protect and promote the sound
development of economic opportunity in cities and counties and the general welfare of the
inhabitants of those communities through the employment of all appropriate means.
2.3 City seeks to expand economic development opportunities in the City of Downey
in an effort to increase jobs, property tax, sales tax and all of the other benefits associated with
additional economic development activity and new projects. Promoting economic development
65186.00003\31102692.2
3A The Property. The Property is located within the City and is shown on the map
and is more particularly designated in Exhibit A. The Property is comprised of approximately
9.71 acres, which are owned by a private third party, and which are being leased by the Owner
for a period •' at least 15 years.
2
65186.00003\31102692.2
3.2 Scope of Development. The Property shall be developed in accordance with the
terms of this Agreement and more specifically the following:
3.2.1 Owner shall develop and Open a new recreational vehicle dealership on the
Property. Owner agrees to use the Property only for the operation of this new dealership, and
shall use its best efforts in a commercially reasonable fashion to ensure the dealership which
shall annually generates not less than $180,000 of sales tax revenues to the City, attributable to
Iritf 4o
t&le-e
_.dam of this
Agreement ("Operating Period").
3.2.2 Owner shall use good faith efforts in a commercially reasonable fashion to
create and maintain new employment jobs at the RV dealership ("New Jobs") as follows:
(a) On or before the end of the first year of the Operating Period, the
Owner shall have used its good faith efforts in a commercially reasonable fashion to have created
and maintained a total of not less than fifty-five (55) new Full -Time Equivalent Employment
Positions.
(b) Owner shall maintain not less than fifty-five (55) Full -Time
Equivalent Employment Positions from and during the start of the second year through the end
of the Operating Period.
3.2.3 The conditions to use the Property only for operation of a recre iona
vehicle dealership which generates at least $180,000 annually in sales tax revenues to the City,
and to create and maintain the Full -Time Equivalent Employment Positions, as hereinabove
stated, shall be together defined as the "Operating Conditions."
3.2.4 For purposes Of this Agreement, "Full -Time Equivalent Employment
Positions" is defined as total annual hours worked (including credit for vacation, sick leave, and
holidays) in all counted employment positions at the Operation divided by average annual hours
(2080 hours) worked in a full-time job.
3.2.5 Owner shall use commercially reasonable good faith efforts to utilize thd
services of the City for referrals of applicants to fill any such New Jobs. The City's job referral
program will consist of a partnership with the City's job referral resources such as the Downey
Unified School District Regional Occupational Program, Southeast Los Angeles County
Workforce Development Board, and other appropriate community based organizations and job
placement entities. When applicants are equally qualified, hiring preference will be given to
residents of the City, provided that such hiring preference is in conformance with all applicable
laws.
3.4 City and Owner acknowledge and agree that this Agreement in no way violates
either Sections 53084 or 53084.5 of the California Government Code, in that the economic
incentives offered herein are not being offered in exchange for Owner's relocation of the
dealership; rather, Owner will open a new dealership in the City. Further, Owner's
establishment of the RV dealership will not divert sales tax revenue from another local agency as
65186.00003\31102692.2
DOW
the issuance of the Certiticate ot 4occupancy; k1l) ULLJr1ULLdU1nU CY•-
total annual sales tax revenues received by the City in excess of $180,000 in any year; and (iv)
apportioned as provided in the schedule above.
(b) On or after the anniversary date of issuance of Certificate of
Occupancy of each calendar year, the City shall pay to the Owner the amount of the Available
Incremental Revenues for the immediately preceding twelve (12) months. The City shall have no
obligation to make such payment in the event there are no Available Incremental Revenues i.e.,
sales tax revenues attributable to and received by the City from the Property do not equal or are
less than $180,000 in the preceding year.
(c) Nbfwithstimdlingpyoro� to the contrary in thisAgrectner(t,
4 :1 � I AhAl ceiSe at the City'& 00indtit
t the end of of
F11
65186,00003131102692.2
Commencement D.
0
4.2 Owner to Defend this Agreement� The owner acknowledges that the City is a
"Public entity" and/or a "public agency" as defined under applicable California law. Therefore,
the City must satisfy the requirements of certain California statutes relating to the actions of
public entities and redevelopment successor agencies, including, without limitation, California
Environmental Quality Act ("CEQA"). By Resolution No. 15-2929 dated July 15, 2015, the
City's Planning Commission approved a conditional use permit to allow recreational vehicle
sales and service on the Property, finding the project categorically exempt from CEQA pursuant
to the CEQA Guideline pertaining to Class 1, Existing Facilities. Categorical Exemptions are
projects that have been determined not to have a significant effect on the environment and have
been exempted from the requirements of CEQA. Class I consists of projects that involve no or
negligible expansion of the existing building or use. This Agreement does not change or expan
that earlier -approved building and use, and the earlier -approved CEQA exemption remains fully
applicable. Also, as a public body, the City's action in approving this Agreement may be subject
to proceedings to invalidate this Agreement or mandamus. Owner assumes the risk of an
waives and releases any claims for delays and damages that may result to the Owner from any
third -party legal actions related to the City's approval of this Agreement, or the pursuit of the
activities contemplated by this Agreement, even in the event that an error, omission or abuse of
discretion by the City is determined to have occurred. If a third -party files a legal action
regarding the City's approval of this Agreement or the pursuit of the activities contemplated by
this Agreement, the City may terminate this Agreement on thirty (3 0) calendar days' written
'cwiviorzft; this Agreement referencing this Section 4.2,
without any ftirther obligation to perform the terms of this Agreement and without any liability
to the Owner resulting from such termination, unless the Owner unconditionally agrees to
indemnify and defend the City, with legal counsel acceptable to the City, against such third -party
legal action within thirty (30) calendar days following receipt of the City's notice of intent to
terminate this Agreement, and pay all of the court costs, attorney fees, monetary awards,
sanctions ' attorney fee awards, expert witness and consulting fees, and the expenses of any and
all financial or performance obligations resulting from the disposition of the legal action. Any
such offer from the Owner must be in writing and reasonably acceptable to the City in both form
and substance. Nothing contained in this Section 4.2 shall be deemed or construed to be an
twrw *z_?_n�,r *&Mer for
damages alleged from any alleged or established failure of the City to comply with any statute,
including, without limitation, CEQA.
THE OWNER ACKNOWLEDGES
SECTION 1542 RELATIVE TO THE WAIVER AND RELEASE CONTAINED IN THIS
SECTION 4.2, WHICH READS AS FOLLOWS.
0"41W1 JIM 1[@X4)WJ1&M1JT: NOUN 0 WEI•
03
IN 11696010" URN 11
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5
65186.00003\31102692.2
BY INITIALING BELOW, THE OWNER KNOWINGLY AND VOLUNTARILY WAIVES
THE PROVISIONS OF CALIFORNIA CIVIL CODE SECTION 1542 SOLELY IN
CONNECTION WITH THE WAIVERS AND RELEASES OF THIS SECTION 4.2:
Owher, s Initials
4.3 Owner Indemnification and Defense of The CitXJ
4.3.1 In addition to any other specific indemnification or defense obligations of
the Owner set forth in this Agreement and to the fullest extent permitted by law, the Owner
agrees to indemnify, defend (upon written request by the City and with counsel reasonably
acceptable to the City) and hold harmless each and all of the City Parties from and against all
Claims, as defined in subsection (b), below, that are in any manner directly or indirectly caused,
occasioned or contributed to in whole or in part by:
(a) Any act, omission, fault or negligence, whether active or passive,
tier, relating in any manner to this Agreement, any work to be performed by any such person
related to this Agreement, the Property, or the Personal Property; or
(b) Any authority or obligation exercised or undertaken by the Owner
under this Agreement; or
(c) Any breach or default in performance of any obligation of the
Owner under this Agreement.
43.2 Definition of "Claims." For purposes of this Agreement, "Claims" means
any and all claims, losses, costs, damages, expenses, liabilities, liens, actions, causes of action
(whether in tort or contract, at law or in equity, or otherwise), charges, awards, assessments,
fines, and penalties of any kind (including consultant and expert expenses, court costs, and
reasonable attorneys' fees of counsel retained by the City Parties, expert fees, costs of staff time,
and investigation costs, of whatever kind or nature), and judgments, including, but not limited to,
Claims for: (1) injury to any person (including death at any time resulting from that injury); (2)
loss of, injury or damage to, or destruction of property (including all loss of use resulting from
that loss, injury, damage, or destruction) regardless of where located, including the property of
the City Parties; (3) any workers' compensation; (4) goods or services provided to the Owner or
the Property; and (5) all economic losses and consequential or resulting damage of any kind.
4.3.3 Strict Liability. The indemnification obligation of the Owner shall apply
regardless of whether liability without fault or strict liability is imposed or sought to be imposed
on one or more of the City Partie& The indemnification obligations of the Owner shall not apply
to the extent that a final judgment of a court of competent jurisdiction establishes that a Claim
Party. In such event, however, the Owner's indemnification obligations to all other City Parties
shall be unaffected.
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65186.00003\31102692.2
4.4 Governmental Permits and Compliance with Laws. Before commencement of
construction or development of any buildings, structures or other work of improvement upon the
Property, the Owner shall at its own expense secure or cause to be secured any and all permits or
approvals which may be required by or from the City or any other governmental agency. The
City shall provide reasonable assistance to the Owner in securing these permits or approvals. The
Owner shall carry out the construction of the Project (including offsite improvements) in
conformity with all applicable laws, including all applicable federal and state labor laws and
safety standards.
4.5 Obligation to Refrain from Discrimination. The Owner agrees for itself, its
successors, its assigns and all persons claiming under or through them to the Property or any part
thereof, that there shall be no discrimination against or segregation of any person or group of
persons on account of race, color, creed, religion, sex, marital status, ancestry or national origin
in the sale, lease, sublease, transfer, use, occupancy, tenure or enjoyment of the Property, nor
shall the Owner, itself, or any person claiming under or through it, establish or permit any such
practice or practices of discrimination or segregation with reference to the selection, location,
number, use or occupancy of tenants, lessees, subtenants, or sublessees of the Property.
4.6 Rights of Accem For the purpose o assuring compliance with this Agreement,
representatives of the City and the City shall have reasonable right of access to the Property
without charge.
4.7 Prohibition Against Tra, sfer. The Owner acknowledges that the qualifications
Z�r1 A-rovisfer -of more thaa
5 0% of the voting stock of Owner ("Majority Transfer") is for all practical purposes a trans er or
disposition of the responsibilities of the Owner with respect to this Agreement and the Property.
Therefore, any Majority Transfer is only allowed pursuant to the written approval of the City,
within the City's reasonable discretion. The Owner further acknowledges that the City has relied
and is relying on the specific qualifications and identity of the Owner in entering into this
Agreement with the Owner and, as a consequence, transfers are permitted only as expressly
provided in this Agreement. Notwithstanding the foregoing, a Majority Transfer is permitted
without the City's approval so long as such transfer is: (i) to any trust which at the time of
transfer and at all times thereafter is and remains solely for the benefit of the shareholders of
*1 wnw *r among the shareholders, their
spouses and/or descendants in an intra -family transfer or for the purposes of estate planning.
City's sole remedy for an unauthorized transfer shall be to terminate this Agreement.
4.8 Uses. The Owner agrees for itself, its successors, its assigns and every successor
in interest to the Property or any part thereof, that during construction and thereafter for the term
of Owner's leasehold interest in the Property, the Owner, its successors and assignees, shall
devote Owner's use of the Property to the uses specified in the Specific Plan and the City of
Downey General Plan and Zoning Ordinance, this Agreement, and any permits which may be
required.
The Owner agrees that, during the term of Owner's leasehold interest in the
Property, neither it nor its assigns or successors in interest to the Property or the Agreement shall
use or otherwise sell, transfer, convey, assign, lease, leaseback or hypothecate Owner's use of
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65186.00003131102692,2
exempt from the payment of real property taxes, or which would cause the exemption of the
payment of all or any portion of such real property taxes.
4.9 Specific Performance. If the Owner or the City defaults under any of the
nrovisgris of Ais Agreement. the nondefaulting party shall serve written notice of such defaull
HMO
all other legal or equitable remedies available to it, may institute an action for specific
performance of the terms of this Agreement, except as may be otherwise expressly provided
1 ! `
upon receipt of the same by the party to whom the notice is given.
4.11 Nonliabilityof Officials and Employees.No councilmember,official,
consultant or employee of the City shall be personally liable to the Owner, or any successor in
interest, in the event of default or breachby or •r any amount which may become
• - to the Owner or to its successor,or on obligations arisin• under this Agreement.
4.12 Time Deadlines Critical; Extensions and Delays. Time is of the essence of this
41 -Nisient. In addition to sivecific %rovisions of this X-geement neither party hereunder shall be
deemed to be in default where delays or defaults are due to war; insurrection; strikes; lockouts;
riots; floods; earthquakes; fires; acts of God; acts of a public enemy; epidemics; quarantine
deadlines for v formance may not be extended as
provided above due to any inability of the Owner to obtain financing for the construction of the
Project.
4.13 Attorney's party brings• or proceeding •. other
be entitled to recover as an element of its costs of suit, and not as damages, its reasonable
attorney's fees as fixed by the court in such action or proceeding or in a separate action or
proceeding / :• • • recover such attorney's
4.14 Real Estate Commissions. The City shall not be liable for any real estate
commission, brokerage feesor • - fees which may arise fromAgreement. The City and
the Owner each represent and warrant to the other that it has engaged no broker, agent, or finder
in connection with this transaction.
4.15 Submissionof Documents and Other Actionsfor •r •Except
approval is expressly reserved to the solediscretion of the approvingparty,r1 •
8
65186,00003\31102692.2
of documents submitted to the City shall contain the following heading in bold type on the first
page of the request:
DISAPPROVE IT IN WRITING WITHIN THE TIME ESTABLISHED
THEREFOR IN THE OPERATING COVENANT AGREEMENT OR
SCHEDULE OF PERFORMANCE.
4.16 Amendments to This Agreement. The Owner and the City agree to consider
-�Wx�-f&2 - ofe Tartie—s
hereto, lending institutions, bond counsel or financial consultants. Any amendments to the
Agreement must be in writing and signed by the appropriate authorities of both the City and the
Owner. The Executive Director is authorized to approve and execute minor amendments to this
Agreement including but not limited to the granting of extensions of time to the Owner.
4.17 Counterpart Originals; Integration. This Agreement may be executed in duplicate
originals, each of which is deemed to be an original. This Agreement and its Exhibits represent
the entire understanding of the parties and supersedes all negotiations or previous agreements —
between the parties with respect to all or any part of the subject matter hereof.
4.18 No Waiver. Failure to insist on any one occasion upon strict compliance with any
of the terms or conditions hereof shall not be deemed a waiver of such term or condi ion, nor
shall any waiver or relinquishment of any rights or powers hereunder at any one time or more
times be deemed a waiver or relinquishment of such other right or power at any other time or
times.
IN WITNESS WHEREOF, the parties have entered into this Owner (Tenant) Participation
Agreement as of the date first above written.
CITY OF DOWNEY, GIANT INLAND EMPIRE RV CENTER, a
9, C91ifv,-,Tti2 r.4.9 -ter ritv California Comoration
9
65186.00003\31102692.2
City Clerk
a
6518&00003\311026922
STATE OF •.
• • LOS ANGELES
Notary Public, personall!
ana Inat y nis ne tnelf sig •Me insirl"IM
which the person(s) acted, executed the instrument.
UMMEM
4 �-
Signature
11
65186.00003\31102692.2
Eff Molu"M
M
STATE OF CALIFORNIA
COUNTY OF LOS ANGELES
On b*ivme� ---- � Notary Public, personally
400*0 1 who pW��d to me on the basis of satisfactory
owefiw to be the persou whose oawW'* subscii*'-to the within instrument
ar-k-u-411ae, I 1..W n 1,j
j-jjj,jr/tVjjj authorized cliacit liesi
ZT11-M&W lvrw& -Maw. *W11WI. M(�;M1111" -�Mw
which the person(s) acted, executed the instrument.
I certify under PENALTY OF PERJURY under the laws Of the State of California that
the foregoing paragraph is true and correct.
,I
111 FIT, 1MM. C -77 -IM
Signature
(seal)
12
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OftENCEAVENUE DOWNEY CA 90241 5.mM-,CA 91773
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Tierra West Advisors, Inc.
To: Aldo E. Schindler
City of Downey
From: John Yonai
Tierra West Advisors, Inc.
Date: August 7, 2018
Re: Downey — Giant RV Dealership Financial Analysis
Updated Project information
Per your request, Tierra West Advisors, Inc. ("Tierra West") has reviewed and evaluated the updated
financial statements submitted by Giant RV ("Developer") dated September 25, 2017 in preparation
for project discussions for the Developers new location. The review is based upon the updated
financial data provided by the Developer for 2014, 2015 and 2016 from the Developer's operations
and comparing project related operating revenue and expense projections for the development of a
new dealership within the City of Downey ("City"). The analysis compares the recentfinancial
information provided from the Developer's operations to address and evaluate the Developer's
assistance request.
BACKGROUND
The Developer has over the past four (4) years pursued to developer a new dealership in Downey
California. Tierra West Advisors has reviewed the Developer's proposal to construct and operate a
Recreational Vehicle Dealership within the City and the financial operational information provided.
The Developer has requested tax sharing assistance to move forward with the project.
Subsequently, after a two (2) year delay, a revised Developer submittal was presented to the City in
early 2018. The request was based upon the following information:
Sales tax rebate agreement
o City retains 100% of sales tax generated by Developer at new site up to $180,000
o Developer receives 26% tax share above a base of $180,000
o City retains 74% tax share above a base of $180,000
• Developer maximum tax sharing amount not to exceed $504,000
o Developer maximum tax sharing term is (7) years
• Newly proposed Site lease term is 15 years with one (1) 5 year extension
• $1,781,750 in capital improvements
• Indoor show room
• Provide service, parts, electrical, mechanical support
• The first location in Los Angeles County
D V S 0 K
Attachment "C"
Tierra West's review indicates that the Developer's initial sales estimates were on the higher end
(optimistic) of the sales range but were none -the -less reasonable projections for dealership
operations. For the purpose of the analysis, Tierra West adjusted the Developer's initial annual sales
projections to account for adequate time for the new dealership to ramp up operations and sales to
stabilization.
Tierra West's review also included the proposed leaseandterms for the new Giant RV dealership
site. Tierra West's analyses concluded that the operating costs, capital investment, ramp up in
operations and lease terms supported a monthly rental payment that was $6,000 per month less
than the Recreational Vehicle Dealership Association's suggested monthly rental amount based
upon sales and rental occupancy factors.
tevelo er's Estimate
The Developer estimated $28.0 million in annual sales revenue from the proposed RV dealership in
the initial year of operation. The Developer's estimate includes the following assumptions:
• $80,000 average per vehicle sale
• inventory, 200-300 RVs on site
Tierra West Estimates
Tierra West reviewed the updated Developer financial data over the past three (3) years and
prepared sales revenue estimates based upon research and experience pertaining to projects of
similar scope and scale. Tierra West's analysis determined initial year sales starting at $22.0 million
in taxable sales. Tierra West's sales estimates were approximately 25% less than the developer's
initial estimateofsales revenue to address the ramp up and ultimate stabilization of the new
dealership over a five (5) year period.
y r F a x t.mKoll
The Developer provided consolidated audited financial data for its current operations. Financial
data for the years 2014, 2015 and 2016 was reviewed. The Developer currently owns four RV
dealerships in California (Montclair, Murrieta, Colton and Corona). Review of the Developer's
financial statements provided insight pertaining to dealership annual sales levels.
Dealers hip 'Sales
According to the Developer's financial data, total vehicle sales reported in 2014 were $141.9million.
Total vehicle sales were reported at $163.5 million in 2015 and $185.1 million in 2016. As noted, the
Developer currently operates four dealerships. Assuming all sales to be equal amongst dealerships,
total sales per dealership (divided by 4 facilities) were $35.5 million in 2014, $40.9 million in 2015
and $46.3million in 2016. Dealership sales increased by 15.20% between 2014 and 2015 and 13.2%
between 2015 and 2016 per dealership.
0 1
TIERRAWEST:
Pgaerating Expenses
Based upon annual statement studies prepared by the association of lending and credit risk
professionals, annual operating expenses for RV dealerships should represent approximately 13.3%
of net sales (gross sales, net of returns and discounts allowed, if any).
Review of the Developer's 2041, 2015 and 2016 financial statements revealed operating expenses
higher than the suggested industry threshold. In 2014, the average dealership operating expense
was $6.0 million or 16.9% of sales. The average per dealership operating expense was $7 million or
15.2% of sales in 20152 and $4.73 million or 10.2% of sales in 2016.
Operating expenses increased by 15.97% from year 7014 to 2015. There was a significant drop in
expenses from the year 7015 to 2016, approximately 67.6% less than the previous year.
Occupancy Costs
Tierra West utilized an average RV dealership occupancy costs, typically provided by Recreation
Vehicle Dealership Association (RVDA) to identify existing dealership occupancy costs. Occupancy
costs estimates include rent, utilities, and maintenance expenses. The average occupancy costs
(rent, real estate costs, utilities and maintenance) for the typical RV dealership is approximately
2.4% of total sales.
Dealership occupancy costs were calculated based upon the reported dealership sales for 2014,
2015 and 2016, as well as, the rent, real estate costs, utilities and maintenance expenses
documented in the Developer's financial data. In 2014, average dealership sales were
approximately $35.5 million with occupancy costs of approximately $846,000 resulting in an
occupancy costs factor of 2.38%. In 2015 there was approximately $40.9 million in sales per
dealership and _$919,500 in occupancy costs resulting in a 2.25% occupancy cost factor. The
occupancy costs factor in 2016 was 2.53%, based upon average dealership sales of $46.3 million and
occupancy costs of $1,171,300 per dealership.
Dealership occupancy costs increased in each year, approximately 8.89% from 2014 to 2015 and
27.38% from 2015 to 2016. The occupancy costs factor were below the industry basic threshold in
2014 (2.38%) and 2015 (2.35%), although in 2016 occupancy costs did exceed industry standards at
2.53%. .
Industry Operating Thresholds'
Tierra West determined that the typical Cost of Sales as a percentage total sales is 79.4% and Gross
Profits is 15.9% as a percentage of total sales. These percentages were used as a measure to
determine whether or not the Developer's dealerships are operating in the range of industry
standard.
'ER,
V � S 0 R
Cost of Sales as a Percentage of Total Sales;
The cost of sales increased each year, with 2014 at 16.93%, 2015 at 17.11% and 2016 at 17.39%.
Cost of sales as a percentage of total sales in 2014 was 82.05%, 81.15% in 2015 and 81.27% in 2016.
These percentages are slightly greater than the industry threshold percentage of 79.4%. The actual
dealership percentages between 2014, 2015 and 2016 were very consistent and within 2% of
industry standards.
Gross Profits as a Percentageof Total Sales
Gross Profits as a percentage of total sales in 2014 was 17.95%, 18.85% in 2015 and 18.73% in 2016.
The annual percentages are approximately 2% to 3% higher than the industry threshold percentage
of 15.9%.
Operating Profit as a Percents e of Sales
Operating profit is the balance of gross profit less operating expenses. The industry threshold
hurdle rate for operating profit as a percentage of dealership sales is 2.6%. While there has been
significant growth in sales volumes, review of the Developer's financial data revealed that the
operating profit as a percentage of sales was below standard performance for two (2) of the three
(3) years. In 2014 the operating profit percentage of sales was 1.39%, 2015 was 2.82%, and 2016
1.71%.
SUMMARY AND RECOMMENDATION
As previously provided by the Developer, sales generated by the proposed Dealership is
approximately $28.0 million While sales have grown each year under the current dealerships, the
sales of these established operations are not reflective of the Developer's estimated sales for a new
operation in a new market place.
Tierra West's estimate of anew dealership initial sales start at $18.80 million per year ramping up to
$28.0 million over a three year period is consistent with the annual dealership sales of the
Developer's audited financials for its existing operations. Giant RV anticipates approximately
$56,250 per month for its facility expense/lease payment. Based upon the estimated sales and a
rental occupancy factor, Giant RV is approximately $6,000 per month or $72,000 annually, higher
then RVDA suggested monthly rental amount. We would recommend a sales tax participation of
this amount for up to seven (7) years to allow Giant RV to stabilize operations.
T)E) R A W
1- ST
A D V 0 �t s
msi � r
Mr. Aldo E. Schindler
CITY OF DOWNEY
I I I I I Brookshire Avenue
Downey, CA 90241
dba Giant RV Downey
A
-V-�
Job Creation
The City of Downey (City) commissioned Tierra West Advisors, Inc. (Tierra West) to review, analyze and
prepare a report pertaining to an Operating Covenant Agreement (Agreement), between the City and
GIANT INLAND EMPIRE RV CENTER, a California Corporation dba Giant RV of Downey ("Giant
report is based upon an economic development strategy and must also comply with the newly
enacted public reporting requirements of Assembly Bill 562 A; •,
Due to the elimination of Redevelopment, the State Legislature and Governor Brown provided public
assistance through AB -562. AB -562 provides cities, counties and communities the ability to
legislatively assist local businesses with public financial assistance, AB -562 was approved to
encourage employment, retain jobs and companies in local communities. The elimination of
redevelopment has left the City of Downey with a loss of local resources to encourage and promote
economic development. In response to this loss, the City of Downey has developed an economic
development strategy that includes the consideration an economic development subsidy that will
comply with the continued public reporting provisions mandated by AB -562.
Um -r -re*aring to oi�en a new location in the CitrA of
W&NAWwKsTsTo. c-Agis vwd in Montclair California
Downey and is proposing to maintain its operations in the City for a minimum of seven (7) years. In
order to remain competitive, promote expansion and new employment, Giant RV and the City are
proposing to enter into the Agreement and tax revenue sharing arrangement as part of the City's
Economic Development Program. The Agreement is intended to provide Giant RV and the City the
ability to:
• Create a new recreational vehicle dealership in the City
• Expand City General Fund revenues to provide needed services for residents
i Capture future growth with Giant RV product sales (leveraging estimated future revenue
and industry price increases)
Increase the economic competitiveness of the City of Downey
Prevent sales tax leakage from the City of Downey
Maximize public revenues and economic development financing options
Maintain and enhance a consistent, business -friendly •
Maintain current and provide future City Public Services, capital projects and
maintenance
Create additional job •r,•• for City Residents, including low and •f
• •
Tierra West recognizes that the Provisions of the Operating Covenant Agreement and the addition o
Giant RV in the City will not only assist Giant RV but also provide a strong public purpose through the
City's continued expansion of economic development opportunities for businesses within the City.
Lastly, the Agreement will provide for continued growth of the City's General Fund revenue and tax
base, as well as improve the economic and physical conditions and services in the City.
Sincerely,
TIE RRA WEST ADVISORS, INC.
John N. Y i
i se Acosta Yonai
Uffly-61-11—powney
a -Fid
Giant Inland Empire RV Center, a California Corporation
dba Giant RV Downey
The City of Downey (City) to maintain and assist sustainable economic development And
community vitality is implementing economic development strategies that include the application
of Assembly Bill 562 (AB -562). Promoting economic development within the City is a municipal
affair and serves the public purposes of preserving and expanding opportunities for gainful
employment and preventing deterioration of the urban landscape. The City and Giant Inland
Empire RV Center, dba Giant RV ("Giant RV") propose to enter into an Operating Covenant
Agreement ("Agreement"). The Agreement requires Giant RV to develop and open a new
recreational vehicle dealership on a site located I 1111 Florence Avenue in the City of Downey,
California. The Agreement also restricts the use of the property for the operation of this new
dealership whereby the City will provide a tax revenue sharing structure with Giant RV.
The loss of redevelopment has left the City of Downey as well as all cities statewide with a loss
of local resources to encourage economic development and maintain local services. The California
Legislature and Governor Brown made the decision to terminate redevelopment and removed the
single largest economic development tool available to local agencies. The Governor and
Legislature recognized the necessity of cities, counties and the State to encourage employment,
iQ4iAAvidLe�-t&O&esw-.%-amd.,oroviding Rublic input
by requiring:
1. A public hearing prior to the granting of the subsidy
2. A report regarding the subsidy within the 7 -year term
3. Where a subsidy has a term of more than 10 years, an additional public hearing at th-
• •
onclusion of the subsidy.
The State approved AB -562, which went into effect on January 1, 2014, codifying a continued
public reporting requirement for economic development subsi ies.
This report includes the information required by AB -562 and the fiscal analysis necessary to
determine the projected revenue generated by Giant RV for the City as part of the economic
development strategy for business retention through an Operating Covenant Agreement. The City -
provided information which was utilized to establish an estimated "Revenue Tax Base" of sales tax
collected by the City from Giant RV. After the Revenue Tax Base was determined, projections of
additional revenue generation from sales tax collections directly attributable to the business were
developed. The projected revenue tax increases from Giant RV represents new resources as well
as the retention of a portion of existing general fund revenues to the City, of which a percentage of
the revenue collected will be shared with Giant RV. This will avoid significant fiscal impacts to City
revenues and community services�
result in community -wide benefits, which is evidenced by the retention of revenues that will be
used to provide municipal services. The City Council may choose to approve the Agreement in
order to retain and expand jobs, maintain a local business, assist Giant RV to gain competitiveness
within the recreational vehicle dealership sales and service industry, and incentivize the business
owner to consider and complete upgrades and improvements. This report identifies the financial
data necessary to allow the City Council to determine the value of entering into the proposed
Agreement.
On and after January 1, 2014, each local agency shall, before approving any economic development
subsidy within its jurisdiction, provide all of the following information in written form and made
available to the public, and through its Internet Web site, if applicable:
1. The name and address of all corporations or any other business entities, except for sole
proprietorships, that are the beneficiary of the economic development subsidy, if applicable.
Giant Inland Empire RV Center, a California Corporation - dba Giant RV Downey
I I I I I Florence Avenue, Downey, CA 90241
ana FUPUIF SUINIUU. IL NUU&N LU UUT--�J; d 11r, 1; 1 QQ
City of Downey that will offer both new and used RV sales and repair service. It seeks to
lease the land, buildings, and improvements located at I I I I I Florence Avenue in the City
of Downey, California. The proposed site (Site) is approximately 9.71 acres (or 422,967
square feet) in size and is generally bound by the San Gabriel River Freeway (Interstate -
605 Freeway) and Interstate -5 Freeway interchange on the north, Florence Avenue on the
Attachment A). The Site currently is developed with a retail building consisting of
approximately 112,790 square feet.
Recreational Vehicle Industry
i-Ediistry '(as seei cojisistent increases in new registrations over
lr�M*N ELUE141111114KIN1116M
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remain as vacant, abandoned, and/or underutilized and are in need of a plan and strategy for
reuse.
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INW-18101 I , MVA re M
61111-1601
a priv e w
(4) other sites/dealerships "free & clear" the investment capital required for such an
undertaking is costly, with initial estimates just under $2,000,000.
Giant RV is a viable and productive commercial business that will produce jobs, sales tax
AWAMM 214,
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establishment and operations of a new RV Dealership within the City.
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that might not otherwise exist or be as successful. Having the dealership open a business in
the City will create a new source of revenues for the general fund which supports public
services required by residents, visitors, and other constituents of Downey. Although the
Applicant is confident that the dealership can generate significant sales over time, the
ramp up years.
2. The start and end dates and schedule, if applicable, for the economic development subsidy,
Operating Covenant Agreement, if approved is anticipated to commence on August 2018 and
continue for seven (7) years.
Sales Tax Generation
The Bradley Burns Uniform Local Sales and Use Tax ("Bradley Bums") applies to the sales of
tangible personal property in which a percentage of California's sales and use tax rate is
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For many jurisdictions, including the City, this amount is one percent (M). Sales taxis payable
to the City from the State Board of Equalization.
"i, sales data between the pears of
2014 through 2016. According to the historical sales data, Giant RV generated on average
approximately $7.56 million in revenue per quarter or approximately $30.3 million annually.
2013 and 2014 data indicated steady growth in revenue with an average of $11.5 million in
sales per quarter or $46.0 million per year.
i
3. A description of the economic development subsidy, including the estimated total amount of t
expenditure of public funds by, or of revenue lost to, the local agency as a result of the econom,
development subsidy� I
0
Economic Development Strategy Implementation and Business Retention
In furtherance of the City's economic development strategies, a revenue sharing Agreement in
the form of the Operational Covenant Agreement is being proposed. Pursuant to AB -562 the
revenue sharing Agreement is defined as an Economic Development Subsidy that is an
expenditure of public funds or loss of revenue to a local agency in the amount of one hundred
thousand dollars ($100,000) or more, for the purpose of stimulating economic development
within thejurisdiction of a local agency, including, but not limited to, bonds, grants, loans, loan
guarantees, enterprise zone or empowerment zone incentives, fee waivers, land price subsidies,
matching funds, tax abatements, tax exemptions, and tax credits. Economic Development
Subsidy shall not include expenditures of public funds by, or loss of revenue to, the local
agency for the purpose of providing housing affordable to persons and families of low or
moderate income, as defined in Section 50093 of the Health and Safety Code.
for financial assistance in the form of an annual sales tax sharing agreement. Such an
Agreement would help facilitate the establishment and operations of a new RV Dealership
within the City. The proposed dealership would be their first in Los Angeles County; making
them a substantial contributor to the City's general fund. Giant RV is requesting aggregate
public assistance up to $504,000 over seven (7) years of entering into the proposed Covenant.
The annual tax sharing amount will be calculated based upon the following:
1) the first
:1111;• sales tax generated by the Ai-
• •
p
onomic development strategies recognize the vulnerable economic position the
Nation and City are experiencing. The potential of losing Giant RV to another City in Los
Angeles County are real. Not moving forward with an Operating Covenant Agreement
(Agreement) would prove to be a substantial loss of potential revenue, would undermine the
City's economic recovery, and have a negative impact to services. The City is making a
significant commitment to maintain the economic momentum it has gained over the past 48
months.
that would provide for a sales tax sharing structure. Such an Agreement would provide Giant
RV during each operating year with 26% percent of the sales tax revenue generated by Giant
RV in excess of $180,000, •up to $72 111.
in shared tax revenue annually or $504,000
This new facilit ,, will increase localiobs and • eneral
fund revenue supporting the community. It is estimated that the Agreement and loan will
provide the City $1.4 million over a seven (7) year period or $6.7 million over twenty (20)
years.
U
Public Purpose
Review of the Agreement and proposed revenue sharing between Giant RV and the City is
consistent with the City's economic goals and strategies and is in the best interest of the general
public. The public benefits are designed, and have a reasonable likelihood, to promote the
general and economic welfare of the City of Downey.
The City seeks to expand economic development opportunities in the City of Downey in an
effort to increase jobs, property tax, sales tax and all of the other benefits associated with
additional economic development activity and new projects, Promoting economic development
within the City is a municipal affair and serves the public purposes of preserving and expanding
opportunities for gainful employment and also preventing deterioration of the urban landscapei
The City's economic goals and strategies include the following:
Increase the economic competitiveness of Downey
Increase the City's wealth and prosperity
Maximize public revenues and economic development financing options
Maintain and enhancing a consistent, fly environment
Maintain current and provide future City public Services, capital projects and
maintenance
Create additional job opportunities for City Residents, including low and moderate
income residents.
The loss of redevelopment has had significant fiscal impact on City revenues and eliminated
thic �rinnary litcal ecitatmic t**l *Intr,vfycing Qlant RV's
address the need and desire to maintain revenue streams such as property and sales tax to the
City. Additionally, Giant RV's new found presence in the City would assist with expanding
and stabilizing economic development opportunities; maintaining relative balance in the local
economy through indirect retail sales and employment from other local businesses that are
supported by Giant RV's location in the City.
The operating covenant and revenue sharing Agreement assists Giant RV in the follow ng
areas:
• Decline in competitiveness due to industry consolidation
• Need for subsidy: Giant RV anticipates approximately $56,250 per month for its facility
expense/lease payment; based upon the estimated sales and a rental occupancy factor, Giant
RV is approximately $6,000 per month or $72,000 annually, which is higher than
Recreational Vehicle Dealership Association's (RVDA) suggested monthly rental
amount
• Increased costs for wages, insurance, commodities and other operating cost increases,
and
• Early capture of future growth in product sales (leveraging on estimated future revenue
or industry price increases).
Based upon the proposed Operating Covenant Agreement, it is estimated that the City will
receive an additional $6.7 million during the term of the Lease and Agreement.
0
5. Estimated number of jobs created by the economic development subsidy, broken down by full-
time, part-time, and temporary positions.
Giant RV agrees to create and maintain new employment jobs at the new facility ("New Jobs")
as follows:
Giant RV shall create and maintain a total of not less than fifty-five (55) new Full -Time
Equivalent Employment Positions through the end of the Operating Period.
Giant RV will file an annual written Certification signed by its chief financial officer, with the
City Manager certifying its compliance with the New Jobs creation and shall use good faith
efforts to use the services of City for referrals of applicants to fill any such New Jobs. When
applicants are equally qualified, hiring preference will be given to Downey residents, provided
that such hiring preference is in conformance with all applicable laws.
Summary
The City and Giant RV agree that having Giant RV opening in Downey is beneficial for both parties. The
_Qverating Covenant Ag-reement (Agreement)Lwto remain in
Downey for the next seven (7) years. Giant RV and the City have mutually agreed to a revenue sharing
structure in exchange for the Operating Covenant that also provides Giant RV the economic development
in AB -562. Assistance is provided in the form of a revenue sharing agreement between Giant RV and the
City. The Agreement provides for a sales tax sharing structure that would provide Giant RV during each
operating year with 26% of the sales tax revenue generated by Giant RV in excess of $180,000 up to
that the Agreement will yrovide Giant RV with
approximately $504,000 million and the City $1.4 million over a seven (7) year period. Based upon
strategy is in the best interest of the general public.
The Agreement serves a valid public purpose through the expansion of economic developmeg
opportunities for businesses in the City, continuing to expand the City's employment base, anrij
coimi%y.ing t* - tXzt tke Ci"_tilizes telLfuxi gexerzI g*VerxIaV_ttaI services fffl
businesses and residents. I
Recommendation
The opening of a new Giant RV dealership in the City of Downey will continue to contribute to the
economic vitality of the City, continue to provide additional jobs within the City, continue to expand
the City's tax base and improve economic and physical conditions in the City, Failure for Giant RV to
_ii t1i eiijogic recovery and momentum that the Citi is achieving -ami
"61,1010W WN Will
P(I;LCIILIUIIJ IC:vi,L;C k-ltj
be approved.
By its approval of the Agreement, the City Council of the City of Downey finds and determines that
the Agreement serves as a valid public purpose by continuing to expand economic Opportunities for
businesses in the City, continuing to expand the City's employment base, and continuing to generate
Sales Tax that the City will utilize to fund general governmental services such as police, fire, street
p.naintenance, and parks and • programs.
ATTACHMENT A - FUTURE GIANT RV - DOWNED