HomeMy WebLinkAbout04. Public Hearing Approve Operating Cov Agmt w-Champion Auto Group dba Downey MaseratiTY MANAGER
FROM: OFFICE OF THE CITY MANAGER
BY: ALDO E. SCHINDLER, DIRECTOR OF COMMUNITY DEVELOPMEN
DATE: JUNE 25, 2019 5 -6
That the City Council approve and authorize the Mayor to execute an Operating Covenant
Agreement with Champion Auto Group, LLC, for a sales tax rebate and jobs creation covenant
regarding the development of a new Maserati dealership at 9715 Firestone Boulevard, and
authorize the City Manager to execute any and all amendments to the agreement, and adopt:
RESOLUTION OF • OF OF DOWNEY APPROVING ,
CHAMPIONOPERATING COVENANT AGREEMENT WITH CHAMPION AUTO GROUP, LLC, (DBA
Recently, City staff was informed by the owner of Champion Chrysler/Dodge/Jeep/RAM/
Alfa Romeo/Fiat ("Champion") that he had successfully obtained permission to sell Maserati
vehicles at his existing dealership. This opportunity has materialized as a result of the success
of the existing Champion dealership. Thus, the owner of Champion is interested in expanding
the franchise to introduce the Maserati brand of vehicles.
Fiat Chrysler Automobiles, which currently does business with Champion, determined recently
that the Maserati brand would expand in worldwide sales. Since 2013, Maserati North America
("Maserati") has been increasing the number of dealerships in the continental United States;
from 74 dealerships in 2013, to 142 in 2018. Today, there are approximately 17 Maserati
dealerships in California. Maserati is looking to expand its dealerships in the state to take
advantage of California's car culture.
The proposed Downey Maserati dealership would be one of four in the Los Angeles Basin, and
one of nine in Southern California. The closest dealership is over 17 miles away from the
proposed Downey Maserati dealership. The Downey Maserati dealership will draw a pipeline of
consumer access drawing from the South Bay, Long Beach, San Gabriel Valley, South West
Los Angeles, and North Orange County markets.
OPERATING COVENANT AGREEMENT FOR CHAMPION MASERATI
JUNE 25, 2019
PAGE 2
In December 2018, Champion and Maserati entered into a "Letter of Intent" to establish the
Downey Maserati dealership. Champion has requested that Maserati enter into a Dealer
Agreement, including additional terms and provisions; among other things, the exclusive
display, sales and service of the Maserati vehicle line at the existing Champion dealership.
At the March 26, 2019 City Council meeting, staff recommended, and City Council approved, a
Memorandum of Understanding that allowed Champion to immediately start selling Maserati
vehicles at their current location, while continuing to work with Champion to establish a
permanent Maserati dealership.
Attracting a Maserati dealership to the City of Downey is a tremendous undertaking for
Champion and the City. Constructing and establishing the dealership will be just as
monumental. Champion continues to seek partnership opportunities with the City, in the form of
economic development assistance. In order to remain competitive and promote economic
expansion, the City and Champion 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 "C". The Agreement between the two parties serves as a sales tax
rebate and jobs creation covenant for the development of the new Maserati dealership. The
City is being proactive by attracting Maserati to Downey, and is making a significant
commitment to maintain the economic momentum it has gained over the years. Maserati is
anticipated to grow as one of the key contributors to the City's general fund.
Champion has requested $1,000,000 in economic development assistance from the City over a
ten (10) year period. Staff is recommending the financial assistance be provided as a loan of
$500,000 payable upon execution of this Agreement, and the remaining $500,000 reimbursed
through a sales tax rebate agreement. The combined term for the financing will be ten (10) years,
at an interest rate of five and one-half percent (5.5%) per annum, simple interest, commencing at
the time of the disbursement of the loan proceeds. The $500,000 loan will be secured by a
Promissory Note and Personal Guarantee, secured by the Champion owner's business and
personal equity and investments.
The Agreement provides for a loan and sales tax sharing structure for Maserati and the City in the
following manner:
A. Upon execution of the Agreement, the City will disperse the $500,000 loan to Champion
B. The sales tax base will be based on 100% of Operator's sales projections, and the City
will retain the first 50% of sales tax collected. The second 50% is shared equally
between Champion and City (25% each), but Champion's 25% will be credited against
the City's $500,000 loan;
C. UponChampion's payment of the $500,000 loan to the City, the City will then disburse to
Champion 25% of the total of sales tax collected by the City, up to a maximum of
$500,000; and,
D. A combination of sales tax credit for Champion's loan payment of the $500,000, plus the
remaining sales tax rebate of $500,000, will not exceed a total of $1,000,000.
OPERATING COVENANT AGREEMENT FOR CHAMPION MASERATI
JUNE 25, 2019
PAGE 3
Based upon the Agreement, it is estimated that the City will receive an additional $19,393,731 in
sales tax revenue during the ten (10) years of the Agreement. In addition, Champion shall be
required to create and maintain not less than fifteen (15) new full-time equivalent jobs on or
before the end of the second Operating Year, through the end of the ten (10) year term.
Champion 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 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.
Approval of the Agreement will attract and retain the Maserati auto dealership in the City of
Downey for decades to come. The Agreement is intended to provide Champion and the City the
ability to:
• Retain City General Fund revenues to provide needed services for residents;
• Retain and capture future growth in Maserati product sales;
• Increase the economic competitiveness of Downey;
• Maintain and enhance a consistent, business -friendly environment;
• Maintain current and future City Public Services, capital projects and maintenance; and,
• Create additional job opportunities for City residents, including low- and moderate -income
residents.
The City hired a financial services consultant, Tierra West Advisors, to conduct an Economic
Development Strategy Job Retention analysis (Attachment "D"), and determined that Champion
displays a financial need in order to retain and expand jobs, attract Maserati as a local business,
assist Champion to gain competitiveness within the automotive industry, and to incentivize
Champion to consider and complete upgrades and improvements required by the Maserati
Corporation.
The City's Economic Development Program, in the form of a sales tax sharing agreement, is
also considered an economic development subsidy under the provisions of the 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, and is listed as Attachment "E" to this agenda
memo.
OPERATING COVENANT AGREEMENT FOR CHAMPION MASERATI
JUNE 25, 2019
PAGE 4
Efficiency & Adaptability
Economic Vibrancy
FISCAL IMPACT
Staff has identified $500,000 from the General Fund Reserve for an Operating Covenant
Agreement loan with Champion Auto Group, LLC; while the remaining $500,000 allocation will
be reimbursed through a sales tax rebate agreement over the ten (10) year term of the
Agreement.
ATTACHMENTS
Attachment A—Site Aerial
Attachment B — Site Photo
Attachment C —Resolution, with Operating Covenant Agreement
Attachment D —Financial Analysis
Attachment E — State of California Section 53083 Report
,r
r•��� 1
A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF DOWNEY APPROVING AN
OPERATING COVENANT AGREEMENT WITH CHAMPION AUTO GROUP, LLC, (DBA
DOWNEY ASERATI)
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, Champion Auto Group, LLC, a California Limited Liability Company doing
business as Downey Maserati, ("Maserati") will open a new automotive dealership located at 9715
Firestone 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 provide significant 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 payments to Maserati (including a loan payment to be repaid with
increased sales tax revenue), and sales tax rebate payments as an incentive for creating and
operating a new dealership within the City; and
WHEREAS, City staff and Maserati 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
"Maserati 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
Attachment "C"
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
NOW, THEREFORE, THE CITY COUNCIL OF THE CITY OF DOWNEY DOES
YETEBY TESOLVE_ • •
SECTION 1. Recitals. The City Council finds and determines that the foregoing
recitals of fact are true and correct.
SECTION 2. Fndin 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 Maserati.
SECTION 3. 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 4. tipgMyal. 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 Date. 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.
RESOLUTION NO.
PAGE 3
'•i' RODRIGUEZ, Mayor
MARIA ALICIA DUARTE, CIVIC
City Clerk
I HEREBY CERTIFY that the-f6regoing Resolution Was adopted by the City Council of
the City of Downey at a Regular Meeting held on the 25 th day of June, 2019, by the following
•'- to wit:
AYES:
MARIA ALICIA DUARTE, CIVIC
City Clerk
• Members -
NOES:
Council Member:
ABSENT'
Council Member:
ABSTAIN.-
Council Member:
MARIA ALICIA DUARTE, CIVIC
City Clerk
RESOLUTION NO.
PAGE 4
DOWNEY MASERATI
-COVENANT AGREEMENT
OPERATING COVENANT AGREEMENT
(CHAMPION MASERATI)
by and between the
CITY OF DOWNEY,
a California municipal corporation and charter city
and
CHAMPION AUTO GROUP, LLC,
a California Limited Liability Company doing business as C14ANTION
SE TI
�Dated 2019 for reference purposes only]
L
DEFINITIONS ............................ 3
3 l^l 2�f�l�de...,.~~....__..__^ ~^~_~.°~__°'
1.2 Aoouu} Report - ..........,3
1.3 Annual Report Dete,... "____~-__......................................
1'4 Application ............................ ............. ___ ~~-........... ~............... ~~~,........... ~_~_==^,3
1.5 Approval .......... ,~.......... 3
1.6 City ...... ~.................... ^....... ---- �............ ............... o__,~ .............. ___—,�_~^^_~_3
1.7 City Manager ................... .... .~~.-°,_~_........ "°-=............. ~~_~3
1.0 City Parties .......................... ^~............. =,~^��=_~."~~__/3
1.9 City Party ..................... ~_�,°`_~._.... ~~-_~~,'3
1.10 Claim ...................... ~^_-^~~=~ 3
lLllControl ..~........ _°_°_~_~°_~_~___~_^_°~4
'
1.12 CnubU
�' -and Controlled ....................................... ~~-^~"~~^~_~_--................ = 4
1.13 Dofault,_'___ _~_^~",_~~-........ ~^~__.~*
1.14 Default Interest ......... .... _............ ._~~~~^~____ ~...~,.�=,~=.~~,,~_^=...... .^_............... 4`
1.15 Effective Date ..................................... ~°~~~,~~_^~.°-.... ^-=..~,,~-..... -,_^'~,~=_.^+
1J6Equity Interest .................................. _.......... ....... ................ --............... _,^_9._-4
1.17 Expanded Fauilitv.-........---..- /+
1.18 4
4
1.19_
1.20 Indemnify -=``` 4
1,21 Indemnitee ............... 5
1.22 ludeozoit0r.
1.23 Laws ........... 5
5
1.25 Negotiation Period 5
1.26Notice ~��_.~.... ~ 5
1.27 Notice ofAgreement and Declaration Df
1.28 Notify ................. ,^^_,,~~,__`_,^......... ___ �~_~~_.~~^^.5
65188.00009Q1989*em5 +-
2.
3.
TABLE OF CONTENTS
(continued)
1.30 Operating Period..... .. 5
1.31 Operating Year ............ ........... .......::...... ........... ......... .......::.......<.......... 6
1.32 Operator ........................................... w....,.........,..,.................,.........,..t..6
1.33 Operator Business .................................................................................: 6
1.34 Operator Official Action. 6
1.35 Operator Parties ............ ......... ........ .........: .......: ................. ......... 6
1-.36 Operator Party ........ ....................... ............................................... 6
1.37 Operator Taxable Sales ......... . ....... .... ...................... ............................ 6
1.38 Outside Effective Date ............... .......:........:......... ..... .. .................. .......: 6
1.39 Parties........................................ .,..........................................:......... ,....... 6
1.40 Party ........... ........................... ......... .............,.... ,.....,..6
1.41 Person .................... .................. ......... ........................... .. 6
1.42 Pre -Development ...................... „,............................................................................ 6
1.43 Prevailing Wage Action ............. ....... .................... ..................... .... ,..., 6
1.44 Prohibited Financial Assistance .:........:.. . ...... ......:: .......................... ....... 7
1.45 Property..................................................................................................................7
1.46 SBE .., ......... ......... ............................. ......... ......... 7
1.47 State ..................... .................. ......... ......... ,,,,,,,,..................... ......... .,.......7
1.48 Southern California .......................................................................... .........7
1.49
Taxable Sale....... ........................ ........................... ......... ................. ........ 7
1.50
Transaction Point....... ... ____ ... - ....... 7
1.51
Transfer ................:..................... .................... ........... .,.,,........................... ,....,...7
1.52
Unavoidable Delay................................................................................. 8
EFFECTIVEDATE
........................................................................................................... 8
2.1
Definition .............. .................. .. .. ... 8
2.2
Termination on Failure to Occur........F..................................................... 8
ESTABLISHMENT AND OPERATION COVENANTS ..... ......... ......................... 9
3.1
Establishment oOperator Business in City ............. .................. ...............: 9
3.2
Continuous Operation ................ ......... .................
10
3.3
Sales Tax Reporting Information ................................ .;
10
65186.00009\31989698.5 -11-
3^5 Reasonably Determinable Amounts ..............................................................
3.6 SBE Determination of Improperly Allocated Sales Tax Revenues .......... ___ll
3,7 Operator's Covenant Not ToAccept Prohibited Financial Assistance ................ ll
3.0 Reporting ............................. _~_,~~-_~~.=~.-..-~.�,�,_-~-^--~~^~^~°__.............. ll
lQDispute Resolution ............................. ...... ._``°._.__~°,.,°=�...... ...... 12
4.1 New Jobs ............ 13
4.2 ----------.-..l3
4.3of Loan for 14
4.5
14
4.6
Local Hiring
/4
5.PRE-DEVELOPMENT LOAN. - ~ _~____�_~l4
5.1
General Provisions; Promissory Note, and Personal Guaranty or Letter of
Credit ................................ ~~~^.^~."-~'~___ _^-~_--=--~~.-^~�~"`^^~~^-~^`~°-__^^-^14�
5.2
Term and lntercm1°~~...... ........ _^=~~``........................ ,~_~...... _
15
5.3
Deemed Payment through Sales Tax Generation ............................. _..,^......... ,_15
5.4
Disbursements=e-.-._____.=^~,.~~^-,_°.~__~~.~~~~.................... ~,~_-~~__'... _^....
15
5.5
Available Incremental Revenues ..__..... ~_^^_^.____,,.,.,._.,^,.^~............................
15
5.8
Timing of Payments nfAvailable Incremental Revenue .....................................
L5'
5`7
Extension ofTeroo._",.... .... _~°__=_~^,,_,_~............................ `�__�=`,m-..-_~m^......
16
5.8
Failure toMeet Threshold for Deemed Payments .=___�,~g^__�_,,__.�_.............
16
5'9
Conclusion ofTax Sharing Provieinus._*... ~..^___°_~^,°_f__.-,____�.~=.......
16
5,10
Periodic Confirmation ofLoan Balance __n,.............. ................. ___
16
b_ ADEQUATE CONSIDERATION ....................... _=_..^-___��^_,~__^�........................
16
8]
Exchange ofConsideration =====.=...''._ _16
6-2
NnUnstated Consideration ..................... ____~w_........................................ ~_15
7. NO DISCRIMINATION OR
�6
65186.00009\31989698,5 -iii-
TABLE OF CONTENTS
72 17
8LDEFAULTS ............................... °_.......... _........... _~ .............................. ... l7
0.1 Monetary Defaud=_'~+_~_ 17
0.2 17
9. RESTRICTIONS � ONCHANGE [N MANAGEMENT OR CONTROL OFTHE
�
OPERATOR AND ASSIGNMENT [)RTRANSFER .................................................... 17
10m INTENTIONALLY OMITTED , _____,__l0
IL INTENTIONALLY {)MI?TED`~._.__'........ ___ ....... ..._~___.___-__,,_.,_-~~-_,_,__,... ]@
12 I�I}B�4�JDPl��.TI(��[ l#
� ....--^^=====---.,..^~^^~_-==-.__----~.^^.--.----..-
12.1 City Indemnity Obligations ~....................._._---............-....................._......_l0
12.2 Operator Indemnity Obligations -..............~...~..~.....................~~....,.......,~.....l9
12.3 Independent ofInsurance Obligations ..._.................................~.l9
12.5 Indemnification Procedures ..................... ........... _........................... ___ .... ....... l9
13. ClI?/ CONTRACT ADMINISTRATION. .......... 19
14^ GOVERNING LAW ........................ ....... ___~_=__-2O
15' TRANSFER ..................................................................................................................... 20
17. IN(}EFFECT ONEMINENT DOMAIN AUTHORITY .................................................
10. OFCITY OFFICIALS AND EMPLOYEES ........-.........2O
19. NOTICES .............................. ___,_~_.__,20
19.1 .-..---._-.-.~~-~.------_--.-------------._ 20
19.2Addresses ~~_°............... ............ ................ ........... ................ .............. 21
21. TAX CONSEQUENCES .............. 21
22. INCORPORATION OPRECITALS ............................................................................... 2l
23. PRINCIPLES OF INTERPRETATION ------.---.'--......''''.'.-'-,''-.2l
24. COUNTERPART ORIGINALS;INTEGRATION ......................................................... 22
25. SEVERABILITY ------------------------------.-.-......22
_'_-_-_'-__ �'-
WKIVI'Mm" X4111M
(continued)
mli
27. TIME IS OF THE ESSENCE .................... . ....... ........................ 22
28. UNAVOIDABLE DELAY; EXTENSION OF TIME OF PERFORMANCE ............... 22
28.1 Notice ................... ......... ........... ..... ............. ...... 22
28.2 Assumption of Economic Risks ..................... -- ...... ..... ..... 22
29. NO THIRD PARTY BENEFICIARIES .... ....... -- .......................... ....... 23
30. NO OTHER REPRESENTATIONS OR WARRANTIES ......................... .................. 23
31. WARRANTIES AGAINST PAYMENT OF CONSIDERATION FOR
AGREEMENT................................. ....... ...... ............ 23
32. RELATIONSHIP OF PARTIES ...................................................... ...... 23
33. SURVIVAL OF AGREEMENT .................................... ...... 23
1*A"2jj;jV
EXHIBIT A: Property Description ............................................... ...... — ..... A -I
EXHIBIT B: Operator Official Action -1-
EX I IT
IEXHIBIT C: Notice of Agreement and Declaration of Covenants .................. - ................... — C-1
EXHIBIT D: Secured Promissory Note ......................... --- ....... - ..... - ....... .;......,D-1
EXHIBITE: Personal Guaranty ............. ........... ---- .............. ... ...... —........ ..................E-1
65186.00009\31989698.5
(Champion Maserati)
THIS OPERATING COVENANT AGREEMENT (Champion Maserati) (this
"Agreement") is dated as of _ 2019, for reference purposes only, and is
entered into • and between the CITY • DOWNEY, a California municipal corporation and
charter city ("City"), and CHAMPION AUTO GROUP, LLC, a California Limited Liability
Company f• • as CHAMPION MASERATI ("Operator"). The City and Operator
enter into this
•. with reference to the following recited facts (each a "Recital"):
A. The Operator currently • and •• several automobile dealerships and
service businesses in the CITY
• i• and •- to expand its operations • certain
property owned by the Operator, as more •. described • hereto
(the "Property"), for the long-term operation of an expanded automobile dealership and service
business within the City; and
B. The City has determined that this Agreement serves a public purpose because the
development and operation of the Property as a newly expanded automobile sales and service
•, • Operator will likely result in public benefits to the City and its •- including
• not limited •
2. Creation of additional job •rr• for City residents, inc u•ng •
and ••- income residents; and
3. Additional tax revenue to the City that will assist the City in providing
public services to its residents.
C. The State Legislature has declared its intent (SB 470, Wright, 2013) to promote
economic development • a local level so that • can enact local strategies to increase
jobs, create economic •••t and • tax revenue for all levels • •• give
local governments tools, at no cost to 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 • • •• and the state budget.
D. 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 • • • through the employment •i all appropriate means.
E. City seeks to expand economic development opportunities in the City of Downey
in an effort to increase jobs, property tax, sales tax and all • the • benefits associated with
65186,00009\31989698.5 -I-
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 preventing deterioration of the urban landscape.
F. Operator seeks to expand within the City a viable, productive commercial
business that will produce jobs, sales tax revenue and other tangible and intangible economic
benefits contributing to the well-being of the community and spurring further economic growth
and activity in an area of the City that needs such growth and development.
G. The Parties' performance of this Agreement will, among other things: (1) increase
the productive use of land, foster orderly growth and economic development in the C ty; (2)
strengthen City's economic base by providing a means of expanding sales tax revenues and
existing jobs and providing the opportunity to increase its sales tax base and employment
opportunities; and (3) increase property tax revenues, resulting in fiscal benefits to City.
H. City finds that the public benefits that are to be received by the City through this
A i ned- and have a reasonable likelihood to promote the general and economic
w Ifare of the City of Downey, and that such benefits are in accord with the public purposes and
provisions of applicable federal, state and local laws and requirements, and that the imposition of
certain operating covenants and use restrictions upon the Property for use as an expanded
automobile dealership constitutes a valid public purpose.
1. ' 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 "Champion
Maserati Section 53083 Report" (the "Report"), which sets forth the details of the economic
accrue to the City and the net number of jobs to be created as a result of the economic
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 A��d I under the "City News" tab.
65186.00009\3198969U -2.
EV11034KIxim
1. Definitions. All initially capitalized terms used in this Agreement shall have the
meanings set forth in this Section I or, if not set forth in this Section 1, where such terms first
appear in this Agreement, unless the context of usage clearly requires another meaning.
1.1 Affiliate. In reference to any Person means any other Person Controlling or
Controlled by or under common Control with the Person. "Affiliated" shall have the correlative
meaning.
1.2 Annual Report. A written report stating the Operator Taxable Sales for a
particular Operating Year.
1.3 Annual Report Date. The date that is sixty (60) days following the last day of
the immediately preceding Operating Year.
1.4 Application. Any agreement, application, certificate, document, or submission
(or amendment of any of the foregoing), as applicable: (a) necessary or appropriate for
improvements to the Expanded Facility, including any application for any building permit,
certificate of Occupancy, utility service or hookup, easement, covenant, condition, restriction,
subdivision, or such other instrument as Operator may reasonably request for the Expanded
Facility; (b) to enable Operator to seek any Approval or to develop, use or operate the Expanded
Facility.
1.5 Approval. Any license, permit, approval, consent, certificate, ruling, variance,
authorization, conditional use permit, or amendment to any of the foregoing, as shall be
necessary or appropriate under any Law to develop or operate the Expanded Facility.
1.6 City. The CITY OF DOWNEY, a California municipal corporation and charter
sm
1.7 City`Manager. The City Manager of the City or his or her designee or successor
in function.
1.8 City Parties. Collectively, the City, its elected officials, employees, attorneys
and other agents.
1.9 City Party. Individually, the City, its elected officials, employees, attorneys or
other agents.
1.10 Claim. Any claim, loss, cost, damage, expense, liability, lien, -action, cause of
action (whether in tort, contract, under statute, at law, in equity or otherwise), charge, award,
assessment, fine or penalty of any kind (including consultant and expert fees and expenses and
investigation costs of whatever kind or nature, challenge to the City's authority to enter into or
65186,00009\31989698,5 -3-
perforrn this Agreement or approval of this Agreement in any torm, it an Indemnitor improperly
fails to provide a defense for an Indemnitee, then Legal Costs of counsel retained by the
Indemnitee), and any judgment.
1.11 Control. The possession, directly or indirectly, of the power to direct or cause
the direction of the management and policies of a Person, whether by ownership of Equity
Interests, by contract, or otherwise.
1.14 Default Interest. Interest at an annual rate equal to t e esser o : (a) eig]
ptercent (8%) per annum; or (b) the Usury Limit.
1.16 Equity Interest. All or any part of any direct or indirect equity or ownershi
interest(s) (whether stock, partnership interest, beneficial interest in a trust, membership intere
in a limited liability company, or other interest of an ownership or equity nature) in any entity,
any tier of ownership, that directly or indirectly owns or holds any ownership or equity intere
in a Person. I
1.17 Expanded Facility. A permanent full-service automobile sales dealership and
service facility located on approximately 4.5 acres in the City constructed for sales and service of
new and used automobiles, and sales of parts for automobiles. Operator intends to construct
Sales and Office Areas consisting of 3,790 sq. ft. of contiguous showroom for indoor vehicle
display and the continuous display, at a minimum of five (5) new Maserati and five (5) new A a
totaling at least 13,803 sq. ft., to be used as follows: Parts Warehousing and Counter - 3,158 sq.
ft.; Workshop Area — 10,645 sq. ft., including 14 bay lifts; and 3,225 sq. ft. allocated for repair o
complex repairs.
1.18 Federal. The government of the United States of America.
1.19 Government. Each and every governmental agency, authority, bureau,
department, quasi -governmental body, or other entity or instrumentality having or claiming
Agreement allows ) includ ng the government
of the United States of America, the State of California and County of Los Angeles governments
and their subdivisions and municipalities, including the City, and all other applicable
governmental agencies, authorities, and subdivisions thereof. "Government" shall also include
jurisdiction over the Property or any activities on or at the Property.
1.20 Indemnify. Where this Agreement states that any Indemnitor shall "indemnify"
any indemnitee from, against, or for a particular matter, that the Indemnitor shall indemnify the
Indemnitee and defend and hold the Indemnitee harmless from and against any and all loss, cost,
65186,00009o1989698,5 -4-
claims, liability, penalties, judgments, damages, and other injury, detriment, or expense
(including reasonable attorney fees, interest and penalties) that the Indemnitee su ers or incurs:
(a) from, as a result of, or on account of the particular matter; or (b) in enforcing the
Indemnitor's indemnity obligatiom '
1.21 Indemnitee. Any Person entitled to be indemnified under this Agreement and its
agents, directors, employees, shareholders, officers and elected officials.
1.22 Indemnitor. A Party that agrees to Indemnify any other Person pursuant to this
Agreement.
1.23 Laws. Every law, ordinance, requirement, order, proclamation, directive, rule,
and regulation of any Government applicable to the Property or the Expanded Facility, in any
way, including any development, use, maintenance ' taxation, operation, or occupancy of, or
environmental conditions affecting the Property or the Expanded Facility, or relating to any
taxes, or otherwise relating to this Agreement or any Party's rights, obligations or remedies
under this Agreement, or any Transfer of any of the foregoing, whether in force on the Effective
Date or passed, enacted, modified, amended or imposed at some later time, subject in all cases,
however, to any applicable waiver, variance, or exemption.
1.24 Legal Costs. All reasonable costs and expenses incurred in any legal proceeding
(or other matter for which a party is entitled to be reimbursed for its Legal Costs), including
reasonable attorneys' fees, court costs and expenses and consultant and expert witness fees and
expenses.
1.25 Negotiation Period. The forty-five (45) day period commencing on the effective
date of any Notice of dispute given pursuant to Section 3.9(a).
1.26 Notice. Any approval, consent, demand, designation, election, notice, or request
relating to this Agreement, including any Notice of Default or termination of this Agreement.
Notices shall be delivered, and shall become effective, only in accordance with Section 19.
1.27 Notice of Agreement and Declaration of Covenants. The Notice of Agreement
and Declaration of Covenants attached to this Agreement as Exhibit "C" to be recorded against
the Property to provide constructive notice of the existence and application of this Agreement
and the covenants of Operator regarding the Property. Full execution by the Parties and
recordation of the Notice of Agreement and Declaration of Covenants shall be a condition to the
effectiveness of this Agreement.
1.28 Notify. Give a Notice.
1.29 Occupancy Date. The date on which the City issues a final certificate of
occupancy for the Expanded Facility.
1.30 Operating Period. Commencing on the Occupancy Date, and continuing
through the ten (10) year anniversary of the commencement of the Operating Period, or any
extension(s) granted by the City pursuant to Section 5.4 of this Agreement.
65186.00009131989698.5 -5-
1.31 Operating Year. Each four (4) quarter period during the Operating Period
commencing on the close of the calendar quarter, closest to the date in which Operator received
their Certificate of Occupancy and ending four (4) quarters later. By way of example, if the
Certificate of Occupancy is issued on April 30, 2020, the first Operating Year will end on March
31, 2021. The first Operating Year is sometimes referred to as "Operating Year I," with each
succeeding Operating Year, thereafter, being consecutively numbered, concluding with a
maximum of "Operating Year 10" or any extension Operating Year approved by the City
pursuant to Section 5.4 of this Agreement.
1.32 Operator. Champion Auto Group, LLC, a California Limited Liability Company
doing business as Champion Maserati, and its successors and assigns.
1.33 Operator Business. That certain new and used automobile sales and service
business conducted under the name "Champion Maserati" from the Expanded Facility.
1.34 Operator Official Action. The official action of Operator authorizing Operator's
entry into and performance of this Agreement, in substantially the form attached to this
Agreement as Exhibit "B," signed by the authorized representative(s) of Operator.
1.35 Operator Parties. Collectively, Operator, its Affiliates, shareholders, members,
partners, directors, officers, employees, attorneys or other agents.
1.36 Operator Party. Individually, Operator, its Affiliates, shareholders, members,
partners, directors, officers, employees, attorneys or other agents.
1.37 Operator Taxable Sales. All Taxable Sales generated from the operation of the
Operator Business for which the Transaction Point is within the City.
1.38 Outside Effective Date. April 30, 2020.
1.39 Parties. Collectively, Operator and the City,
1.40 Party. Individually, Operator or the City, as applicable.
1.41 Person. Any association, corporation, governmental entity or agency, individual,
joint venture, joint-stock company, limited liability company, partnership, trust, unincorporated
organization or other entity of any kind.
1.42 Pre -Development Loan As a jobs creation incentive and to be used for pre
development expenses, a total loan of Five Hundred Thousand Dollars ($500,000.00) to be
disbursed to Operator within 10 days of the Effective Date of this Agreement, and as further
defined in Section 5.1.
1.43 Prevailing Wage Action. Any of the following: (a) any determination by the
State Department of Industrial Relations that Prevailing wage rates should have been paid, but
were not, (b) any determination by the State Department of Industrial Relations that higher
prevailing wage rates than those paid should have been paid, (c) any administrative or legal
action or proceeding arising from any failure to comply with any of California Labor Code
6518600009131989698:5 -6-
Sections 1720 through 1781, as amended from time to time, regarding prevailing wages,
including maintaining certified payroll records pursuant to California Labor Code Section 1776,
or (d) any administrative or legal action or proceeding to recover wage amounts at law or in
equity, including pursuant to California Labor Code Section 178 1.
1.44 Prohibited Financial Assistance. Any direct or indirect payment, subsidy,
C049M 4,r 4diwRi5kn6kr *r ti
.* �fv, -&I� including, wi "hut imy-lied
limitation, payment of land subsidies, relocation expenses, financial incentives, public financing,
property or sales tax relief or rebates, relief from public improvement obligations, and payment
for public improvements to or for the benefit of Operator by any public or private person or
entity.
1.45 Property. That certain real property specifically described in Exhib t "A"
attached to this Agreement.
1.46 SBE. The California State Board of Equalization or such other governmental
agency as may have the authority from time to time, during the Operating Period, to collect
transaction, sales or use tax revenues and allocate and distribute a portion of such revenues to
cities and counties in the State.
Southern California. The geographic areas of the County of Los Angeles, thl
%-ounty of Orange, the County of San Bernardino and the County of Riverside. 0
1.49 Taxable Sale. Any transaction subject to imposition of transaction, sales or use
tax pursuant to the Bradley -Bums Uniform Sales and Use Tax Law (commencing with Section
7200 of the California Revenue and Taxation Code), the Transactions and Use Tax Law
(commencing with Section 7251 of the California Revenue and Taxation Code), or any successor
law.
1.50 Transaction Point. The physical location that, for the purposes of allocation
sales or use tax revenues to taxing entities from a Taxable Sale transaction, is the place where t
subject personal property is determined to have been sold or first functionally used,
applicable, pursuant to the Bradley Bums Uniform Local Sales and Use Tax Law (Revenue an
Taxations Code Sections 7200, et seq.), the Transactions and Use Tax Law (commencing wW
Section 7251 of the California Revenue and Taxation Code), and the associated regulations
Title 18 California Code of Regulations Sections 1800, et seq., as such laws or regulations in
be amended from time to time. I
(a) Any total or partial sale, assignment, conveyance, trust, power, or trans -F,"
in any other mode or form, by the Operator of more than a 50% interest in t e Operator's intere
in this Agreement, the Site, or the Project or a series of such sales, assignments and the like th
in the aggregate, result in a dposooor
isitin•f me 0
than a 5% Opo
interest in the eratr's interest
this Agreement, the Site, or the Project; or I
65186.00009\31989698,5 -7-
(b) Any total Or partial sale, assignment, conveyance, or transfer in any other
mode or form, of or with respect to any interest in the Operator or a series of such sales,
assignments and the like that, in the aggregate, result in a disposition of more than a 50% interest
in any interest in the Operator; or
(c) Any • consolidation, sale • lease • all ♦'f substantially all •'I the
assets of the Operator or a series of such sales, assignments and the like that, in the aggregate,
result in a disposition of more than a 50% interest of all or substantially all of the assets of the
•r`• •
• • Site Transfer-, or
(e) The recordation of any deed of trust, mortgage, lien or similar
encumbrance against all or any portion of the Site or the Project.
1.52 Unavoidable Delay. A delay in any Party performing any of its obligations
under this Agreement, except payment of money, arising from or on account of any cause
whatsoever beyond the Party's reasonable control, despite such Party's reasonable diligent
efforts, including industry -wide strikes, labor troubles or other union activities (but only to the
extent such actions do not result from the negligence or willful misconduct of the Party),
casualty, war, acts of terrorism or riots. Unavoidable Delay shall not include delay caused by a
Party's financial condition, illiquidity, or insolvency.
2. Effective Date.
2.1 Definition. This Agreement shall not become binding on either Party, unless and
until the first date on which all of the following have occurred, if at all (the "Effective Date"):
(a) Signature and Delivery of Agreement by Operator. Two (2) originals of
this Agreement are signed by authorized representative(s) of Operator and delivered to the City;
and
(b) Official Action. An Original of the Operator Official Action is signed by
the authorized representative(s) of Operator and delivered to City; and
(c) Approval of Agreement by City Council. This Agreement is approved by
the City Council of the City at a public meeting of the City Council, following all legally
required notices and hearings; and
(d) Signature and Delivery of Agreement by City. Two (2) originals of this
Agreement are signed by the authorized representative(s) of the City and delivered to Operator.
2.2 Termination on Failure to Occur. If the Effective Date does not occur on or
before the Outside Effective Date, then no part of this Agreement shall become binding on or
enforceable against either Party and any prior signatures or approvals of this Agreement by either
the City or Operator shall be void and of no further force or effect.
65186.00009\31989698.5 -8-
Establishment and Ope ion Covenants.
3.1 Establishment of Operator Business in City. Operator covenants to the City to
establish the Operator Business within the City, including development of the Expanded Facility
on the Property, purchase of all required or desirable equipment and furnishings for the
Expanded Facility and hiring of all required or desirable personnel for operation of the Expanded
Facility, all in accordance with applicable Laws and this Agreement. Operator further covenants
to the City to commence the operation of the Operator Business (sales and service of new and
used automobiles to the general public) from the Expanded Facility on or before May 1, 2020.
If Operator has not commenced operations by such date then the City may terminate this
Agreement, in the City's sole and absolute discretion, by delivering Notice of termination of this
Agreement to Operator and the balance of the Pre -development Loan will be due and payable
immediately upon termination.
(a) Submission of Development Application 0perator h It
s a exercise
reasonable efforts to prepare and submit all required Applications 'documents, fees, charges or
other items (including, without limitation, deposits, funds or sureties in the ordinary course)
required for the construction of the Expanded Facility, pursuant to all applicable Laws and
Approvals, to each necessary Government for review and approval. Prior to commencement of
any part of the construction of the Expanded Facility, Operator shall obtain all Approvals from
each Government required for the construction of the specific part of the Expanded Facility. The
City's zoning, building and land use regulations (whether contained in ordinances, the City's
municipal code, conditions of approval or elsewhere), shall be applicable to the construction of
the Expanded Facility pursuant to this Agreement. Operator acknowledges that construction of
the Expanded Facility and the plans and specifications and any changes to the plans or
for with all aAw-,Iicable Laws
and Approvals.
(b) Reservatioapproval of this Agreement by the City shall not be and
is not binding on the City Council, Planning Commission, or any other commission, committee,
board or body of the City regarding any Approvals of the Expanded Facility required by such
bodies. No action by the City with reference to this Agreement or any related documents shall
be deemed to constitute issuance or waiver of any required City Approval regarding the
Expanded Facility. Operator acknowledges and agrees that it obtains no right, permit or
entitlement to construct the Expanded Facility on the Property by virtue of this Agreement and
•
ot a statutorp, develot•ment agreement Gvursuant to Government Code Sections
65864, eg.
(C) Operator Payment of the Expanded Facility Costs and Fees. Operator and
the City agree that except as set forth specifically in this Agreement, the City shall not provide
any financial assistance to Operator in connection with any construction required for the
expansion to the Expanded Facility. Operator shall be solely responsible for paying for the costs
of all design work, construction, labor, materials, fees, permits, Applications, Approvals, surety
bonds and other expenses associated with the Expanded Facility. Operator shall pay any and all
fees pertaining to the review and approval of the Expanded Facility by each Government and
utility service providers, including the costs of preparation of all required construction, planning
and other documents reasonably required by each Government or utility service provider
65186,00009\31989698.5 -9-
pertinent to the construction, installation or operation of the Expanded Facility including, but not
limited to, specifications, drawings, plans, maps, permit applications, land use Applications,
zoning Applications, environmental review and disclosure documents and design review
documents.
(d) Performance Schedule. The Operator's obligations shall be started a
completed in accordance with the Schedule of Performance set forth below: I
City Council Approval of Operating Covenant
Operator shall submit evidence, satisfactory to City,
of the commitment by the car manufacturer for the
Expanded Facility in Downey
Operator shall submit evidence of ability to finance
the Project
Operator shall have obtained all necessary City land
use entitlements
Operator shall have obtained all necessary building
permits
Commencement of construction of Tenant
Improvements
Completion of Tenant Improvements
Operator shall obtain a Certificate of Occupancy for
the Expanded Facility
June 11, 2019
May 31, 2019
May 31, 2019
January 31, 2020
February 28, 2020
February 28, 2020
April 30, 2020
On or before April 30, 2020
3.2 Continuous Operation. Operator covenants to the City to continuously operate
(no period Of inoperation of more than forty-five (45) consecutive days) the Operator Business
from the Expanded Facility in the City and continuously maintain (at all times) the Transaction
Point for all Taxable Sales by the Operator's Business within the State throughout the entirety of
the Operating Period. Throughout the entirety of the Operating Period, Operator shall, in all
reports to the SBE related to the sale of automobiles and other tangible personal property from
the Operator Business within the State, designate the City or cause the City to be designated as
the Transaction Point, to the extent allowed by applicable Law. Operator shall, for the entirety
of the Operating Period, at Operator's sole cost and expense, obtain and maintain all franchises,
permits, contractual arrangements, licenses, and registrations necessary for the continuous sale
and service of automobiles and sale of other tangible personal property from the Operator's
Business in a manner consistent with other similar automobile dealerships in Southern
California. Operator shall operate the Operator's Business in the City throughout the entirety of
the Operating Period, in accordance with reasonable and customary automobile dealership
practices in Southern California and in a commercially reasonable and prudent manner.
Operator's obligations pursuant to this Section 3.2 shall include, without limitation, the
obligation to advertise, market and promote the Operator's Business in a manner consistent with
other similar automobile dealerships in Southern California.
3.3 Sales Tax Reporting Information. Operator acknowledges and agrees that the
sales and use tax reporting and payment information related to retail sales or use of tangible
65186.00009\31989698-5 _10-
65186.00009\31989698.5 -11-
(a) Negotiation Period. Within fifteen (15) days following Operator's receipt
of the Annual Report for a particular Operating Year, Operator may give Notice of any dispute
regarding the amount of Operator Taxable Sales reported by the City in the Annual Report for
the particular Operating Year. Any such Notice of dispute shall state all bases for Operator's
disagreement with the Annual Report, in detail. Any grounds for disagreement not stated in such
Notice shall be waived. If Operator does not give Notice of a dispute regarding the amount of
Operator's Taxable Sales reported by the City in the Annual Report for the particular Operating
Year, within the fifteen (15) day period specified in the first sentence of this Section 3.9(a),
Operator shall have waived any objection to the amount of Operator Taxable Sales reported by
the City for the particular Operating Year. If Operator gives Notice of its objection to an Annual
Report, the Parties shall immediately commence good -faith negotiations to resolve the dispute(s)
stated in the Notice. The Parties shall continue such negotiations until the earlier of. (1) the end
of the Negotiation Period; or (2) the dispute is resolved by a written agreement between the
Parties. Notwithstanding any other part of this Section (a), the Parties may agree in writing to
extend the duration of any Negotiation Period for any amount of time.
65186.00009\31989698.5 -12-
(d) ARBITRATION CONSENT. WE HAVE READ AND UNDERSTAND
THE FOREGOING AND AGREE TO SUBMIT DISPUTES ARISING OUT OF THE
MATTERS INCLUDED IN THE 'ARBITRATION OF DISPU S' PROVISION TO
NEUTRAL ARBITRATION.
INITIALS OF AUTHORIZED CITY INITIALS OF AUTHJ]RIZED OPERATOR
REPRESENTATIVE(S) REPREA. � ATIVE(S)
4.1 New Jobs. Owner covenants and agrees to create and maintain new employment
jobs at the Expanded Facility ("New Jobs") as follows:
(a) On or before the end of the second Operating Year, the Owner shall create
and maintain a total of not less than fifteen (15) new Full -Time Equivalent Employment
Positions.
(b) Owner shall maintain not less than fifteen (15) new Full -Time Equivalent
Employment Positions from and during the start of the third Operating Year through the end of
the Operating Period.
4.2 Certification. Within forty-five (45) days following the anniversary of the
Occupancy Date and each anniversary thereafter until the tenth (10th) anniversary of the
Occupancy Date, Operator shall file or cause to be filed a written certification ("Certification"),
signed by Operator's chief financial officer, with the City Manager certifying Operator's
compliance with the New Jobs creation and all the covenants set forth in Section 4 below. The
certifications shall include a suitably detailed written report relating to the employees of
65186.00009131989698.5 -13-
Operator who are claimed by Operator as holding New jobs, including appropriately detailed
payroll accounting information relating to the total number of hours worked by such persons and
the total number of persons who were recruited. hired or released from employment for a New
Job and the total number of other employees of Operator employed at the Expanded Facility and
the gross revenues of the Expanded Facility during that year. Each such annual certification need
not identify any employee by name, by specific job description nor by new hire date, and the
payroll accounting information may aggregate the hours worked by all persons claimed by
Operator to hold New Jobs at the Expanded Facility.
4.3 Repayment of Pre -Development Loan for Default. If an Event of Default
occurs, or if Operator otherwise ceases conduct of the business during the Operating Period,
except for Permitted Closures, Operator shall repay City within thirty (30) days after City's
written demand the amount equal to the remaining balance on the Pre-Deve opment Loan.
4.4 Records Inspection. Operator shall keep and maintain all records as may
reasonably be required by City to enable City to evaluate compliance by Operator with the terms
of this Agreement, and to substantiate any Certification of New Jobs provided to City, which
records shall include, without limitation, the payroll, accounting, and employee personnel
times, to inspect any such records. Operator acknowledges and agrees that City must have access
to Operator's records to verify that Operator has employed a certain number o emp oyees in
connection with the use of the Covenant Payment. The books and records required to be
maintained under this Agreement shall be retained for a period of five (5) years, provi e ,
however, in the event any litigation, audit, negotiation, or other action involving the books and
records is commenced prior to the expiration of the five (5) year retention period, Operator shall
retain the books and records until completion of the action and resolution of all issues which
arise from it.
4.5 Monitoring. Operator shall reasonably cooperate with City and its
representatives, and shall make available to City all information, documents, and records
reasonably requested by City, and shall provide City the reasonable right of access to the
Property during normal business hours for the purpose of assuring compliance with this
4.6 Local Hiring Preference. Operator shall use good faith efforts to utilize or cause
to be utilized the services of City for referrals of applicants to fill any such New Jobs. When
V.
that such hiring preference is in conformance with all applicable laws.
5.
5.1 General Provisions; Promissory Note, and Personal Guaranty or Letter of
Credit. Within ten (10) days following the Effective Date, as consideration for Operator's
the sum of Five Hundred Thousand Dollars ($500,000.00) (the "Loan") to Operator concurrent
with Operator's delivery to City of a Promissory Note in substantially the same form as Exhibit
D to this Agreement, which Promissory Note will be secured by a Personal Guaranty to be
'
recorded against Operator's real property at 9715 Firestone Blvd. in the City of Downey,
California). The Personal Guaranty must be in substantially the same form as Exhibit E to this
Agreement. If Operator decides to sell or otherwise encumber the real property at 9715
Firestone Boulevard, Operator shall inform the City of such decision at its earliest opportunity,
and City and Operator shall enter into discussions to amend this Agreement to provide for
alternative security for the Loan and Operator's other obligations under this Agreement, by Way
of an Irrevocable Standby Letter of Credit in form and substance acceptable to City in its sole
and absolute discretion ("LOC"). The LOC will at all times be in a sufficient amount to satisfy
the then current unpaid principal balance of the Loan plus interest and the LOC shall remain in
effect through the entire term of the Loan. The LOC shall be issued by a financial institution
reasonably acceptable to City. In no event will the Personal Guaranty be released or otherwise
disturbed until the LOC is in effect.
5.2 Term and Interest. Unless extended pursuant to section 5.4 of this Agreement,
the term of the Loan will be up to a limit of ten (10) years at market rate interest, which is a rate
of 5.5% per annum, simple interest, commencing in Year 1. Annual interest payments will be
added to the unpaid principal amount on the Note (Exhibit D) and the advanced funds/loan of
$5009000.
(a) Commencing on the Occupancy Date ("Commencement Date"), the City
shall retain for payment or credit on Operator's behalf, a prorata percentage o e sa es tax
revenues attributable to and received by the City from the Property (referred to herein as the
"Available Incremental Revenues") in accordance with the following schedule:
(b) The Sales tax Base will be based on 100% of Operator's sales projections
and the City retains the first 50% of sales tax collected. The second 50% is shared equally
between Operator and City (25% each) but Operator's 25% will be credited against the City's
$500,000 Loan.
5.4 Disbursements. Upon the Operator's payment or credit of $500 ' 000 for Loan
repayment to the City, City will disburse to Owner 25% of the total sales tax co ecte y t e
City, up to a maximum of $500,000, a combination of sales tax credit for Operator's loan
repayment of the $500,000 note plus interest and the difference to not exceed a tota o
$1,000,000
5.5 Available Incremental Revenues. For purposes of this Agreement, Available
Incremental Revenues means that amount of sales tax revenues received by the City that are: (i)
generated by the Operations from and after the date of the issuance of the Certificate of
Occupancy; (ii) attributable to the Property; and (iii) apportioned as provided in the schedule
above.
5.6
oPR
Timing f ayments of Available Incremental evenue. Wi in ninety
days of the end of an Operating Year, each calendar year the City shall pay to the Operator 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
65186.00009\31989698.5 -15-
65186.0000 913 1 9 89698;5 -16
7.1 Standards. That there shall be no discrimination against or segregation of any
Person or group of Persons, on account of any basis listed in subdivision (a) or (d) of Section
• • the • Code, as those bases are defined in Sections 12926, •>
subdivision (in) and paragraph (1) • subdivision (p) • Section • and • • •i
the Government Code, in the leasing, subleasing, transferring, use, occupancy, tenure, •;
enjoyment of the Property nor shall Operator, itself, himself or herself, or any Person claiming
under • through it, him or her, establish • permit any such practice • practices of
discrimination or segregation with reference to the selection, location, number, use, or
occupancy, of tenants, lessees, sublessees, subtenants, or vendees in the Property.
7.2 Interpretation. Notwithstanding Section 7.1, with respect to familial status,
Section 7.1 shall not be construed to apply to housing for older persons, as defined in Section
12955.9 • the • Code. With respect to familial status, nothing in Section 7.1 shall be
construed to affect Sections 51.2, 51.3, 51.4, 51.10, 5 1.11, • ••' • the Civil Code, relating
to housing for senior citizens. Subdivision (d) • Section 51 and • 1360 •' the Civil Code
• subdivisions (n), (o), and • • Section • • the • Code shall apply to
Section
9.1 Operator acknowledges that the qualifications and • • Operator are •
particular importance to the City. Operator further recognizes and acknowledges that the
Agency has
• and is relying • the specific qualifications and identity • Operator in
entering
• this Agreement with Operator and, as a consequence, Transfers are permitted on y
as expressly provided in this Agreement.
• Operator shall promptly notify City in writing • any and all changes whatsoever
in the identity • the business entities • individuals either comprising • in Control • the
Operator, as well as any and all changes in the interest or the degree of Control of the Operator
by any such person, • which information the Operator • any • its partners, members,
65186,00009\31989698:5 -17-
shareholders or officers are notified or may otherwise have knowledge or information. This
Agreement may be terminated by City, without liability to the Operator or any other Person, or
the Occupancy Date, if there is any Transfer, whether voluntary or involuntary (other than such
changes occasioned by the death or incapacity of any individual) that has not been approved in
writing by the City, prior to the time of such Transfer, provided, however, that (i) the City shall
first notify Operator in writing of its intention to terminate this Agreement or to exercise any
other remedy, and (ii) Operator shall have twenty (20) calendar days following its receipt of such
written notice to commence and, thereafter, diligently and continuously proceed to cure the
default of Operator and submit evidence of the initiation and satisfactory completion of such cure
to the City, in a form and substance reasonably satisfactory to City.
9.3 Except as permitted in this Section 9 or with respect to a Permitted Encumbrance,
prior to the Occupancy Date, the Operator shall not cause or allow any Transfer, without the
prior written approval of the City. Operator recognizes that the qualifications and identity of
Operator are of particular concern to City and that a Transfer is for all practical purposes a
transfer or disposition of the responsibilities of Operator with respect to this Agreement, the Site
and/or the Project and, therefore, Transfers are only allowed in accordance with the provisions of
this Section 9 and as Permitted Encumbrances.
9.4 Except as expressly permitted in this Agreement, Operatory represents to City that
it has not made and agrees that it will not create or suffer to be made or created, any Transfer,
either voluntarily, involuntarily or by operation of law, without the prior written approval of
City, until after the Occupancy Date. Any Transfer made in contravention of this Section 9 shall
be voidable at the election of the City and, if voided, shall be deemed to be an Event of Default
by the Operator, whether or not Operator knew of or participated in such Transfer.
10. Int entionaltv Omitted.
H. Intentionaliv Omitted.
11 Indemnification.
12.1 City Indemnity Obligations. The City shall Indemnify the Operator Parties
against any Claim to the extent such Claim arises from any wrongful intentional act or
negligence of the City Parties, but only to the extent that the City may be held liable under
applicable law for such wrongful intentional act or negligence and exclusive of any violation of
law (including the State Constitution) relating to the City's approval, entry into or performance
of this Agreement. Nothing in this Agreement is intended nor shall be interpreted to waive any
limitation on the City's liability, any exemption from liability in favor of the City, any claim
presentment requirement for bringing an action regarding any liability of the City or any
limitations period applicable to liability of the City, as set forth in Government Code Sections
800, et seq., Sections 900, et seq., or in any other law or require the City to Indemnify any
Person beyond such limitations on the City's liability.
65186.00009\31989698.5 -18-
12.2 Operator Indemnity Obligations. Operator shall Indemnify the City Parties
against any Prevailing Wage Action relating to this Agreement and all Claims to the extent such
Claims arise from any wrongful intentional act or negligence of the Operator Parties.
12.3 Independent of Insurance Obligations. Neither Party's indemnification
obligations under this Agreement shall be construed or interpreted as in any way being restricted,
limited or modified by any insurance coverage carried by such Party.
12.4 Survival of Indemnification and Defense Obligations. The indemnity and
defense obligations of the Parties under this Agreement shall survive the expiration or earlier
termination of this Agreement, until any and all actual or prospective claims regarding any
matter subject to an indemnity obligation under this Agreement are fully, finally, absolutely and
completely barred by applicable statutes of limitations.
12.5 Indemnification Procedures. Wherever this Agreement requires any Indemnitor
to Indemnify any Indemnitee:
(a) Prompt Notice. The Indemnitee shall promptly Notify the Indemnitor of
any Claim.
(b) Selection of Counsel. The Indemnitor shall select counsel reasonably
acceptable to the Indemnitee. Counsel to Indemnitor's insurance carrier that is providing
coverage for a Claim shall be deemed reasonably satisfactory, except in the event of a potential
or actual conflict of interest for such counsel regarding such representation or such counsel
proves to be incompetent regarding such representation. Even though the Indemnitor shall
defend the Claim, Indemnitee may, at its option and its own expense, engage separate counsel to
advise it regarding the Claim and its defense. The Indemnitee's separate counsel may attend all
proceedings and meetings. The Indemnitor's counsel shall actively consult with the
Indemnitee's separate counsel. The Indemnitor and its counsel shall, however, fully control the
defense, except to the extent that the Indemnitee waives its rights to indemnity and defense for
such Claim.
(c) Cooperation. The Indemnitee shall reasonably cooperate with the
Indemnitor's defense of the Indemnitee.
(d) Settlement. The Indemnitor may only settle a Claim with the Indemnitee's
consent, not to be unreasonably withheld.
13. City Contract, Administration`. The City Manager shall administer this Agreement on
behalf of the City. The City Manager may designate any member or members of the City staff to
carry out such responsibilities. Except as otherwise expressly provided in this Agreement, the
City Manager has the authority to approve or consent to those matters in this Agreement
requiring the City's approval or consent and to make all other decisions on behalf of the City,
subject to the City Manager's retained and reserved sole and absolute discretion to seek City
Council approval of any such matter.
65186,00009\31989698.5 -19-
14. G&6ftfifik L�� The substantive and procedural laws of the State of California shall
govern the interpretation and enforcement of this Agreement, without application of conflicts of
laws principles.
15. Transfer. Operator may only Transfer its rights or obligations under this Agre-
r •
prior written consent of the City, which shall not be unreasonably withheld. Any Transfer of
any of Operator's rights or obligations under this Agreement shall not change or waive any
conditions precedent to the Covenant Payment under this Agreement nor relieve Operator of any
obligation under this Agreement.
M .1
19.1 Delivery. Any and all Notices submitted by either Party to the other Party
pursuant to or as required by this Agreement shall be in Writing and addressed to the City or
Operator (and their designated copy recipients) as set forth in Section 19.2. Notices (including
any required copies) shall be delivered personally, by Federal Express, United Parcel Service or
other nationally recognized overnight (one-night) courier service or by registered or certified
United States mail, return receipt requested and postage prepaid, to the addresses set forth in
Section 19.2, in which case they shall be deemed delivered on the date of delivery (or when
"Very has been attempW twice, as evidenced by the written report of the courier service) to
suo addke*O$) or on 'the fburth (4 th ) day following deposit -with the United States Postal
Service for delivery. Either Party may change its address for delivery of Notices by Notice in
compliance with this Agreement. Notice of a change of address shall be effective only upon
receipt. Any Party giving a Notice may request that the recipient acknowledge receipt of such
Notice. The recipient shall promptly comply with any such request, but failure to do so shall not
limit the effectiveness of any Notice. Any attorney may give any Notice on behalf of its client.
6518600009\319896985 -20-
19.2 Addresses. The following are the authorized addresses for the submission of
Notices, demands or communications to the Parties, under th s Agreement, as o t e Re erence
Date:
To City: CITY OF D® EY
11111 Brookshire Avenue
Downey, CA 90241
Attention: City Manager
With a copy to: Best Best & Krieger LLP
300 S. Grand Avenue, 25th Floor
Los Angeles, CA 90071
Attention: Ruben Duran
am
CITY OF DOWNEY
I I I I I Brookshire Avenue
Downey, CA 90241
Attention: City Attorney
To Operator: Champion Maserati
9715 Firestone Blvd.
Downey, CA 90241
Attention: Paul Antepara
65186.00009\31989698,5 -21-
Each collective noun shall be interpreted as if followed • the words "(or any part • it)," except
where the context clearly requires otherwise. Every reference to any document, including this
Agreement, refers to such document as modified from time to time (excepting any modification
that violates this Agreement), and includes all exhibits, schedules, addenda and riders to such
document. The word "or" includes the word "and."
24. CounkWaft 040nals: Intearation. This Agreement may be executed in duplicate
originals, each of which is deemed to be an original, but all of which taken together shall
constitute • and the same instrument. This Agreement and the exhibits attached to this
Agreement represent the entire understanding of the Parties and supersede all previous
negotiations, letters of intent, memoranda of understanding or agreements between the Parties
with respect to all or any part of the subject matter of this Agreement.
25. S�v�g jb� If any tenn
• provision •' this Agreement • its application to any Party •
circumstance shall
• any extent be invalid • unenforceable, then the remainder • this
n r h a lic tion of such Wri i Dr rovision to Persons or circumstances exce
WQIM
its I
• • ITM
65186.00009\31989698,5 -22-
ANY DEFENSE, CLAIM, OR CAUSE OF ACTION BASED IN WHOLE OR IN PART ON
ECONOMIC NECESSITY, IMPRACTICABILITY, CHANGED ECONOMIC
CIRCUMSTANCES, FRUSTRATION OF PURPOSE, OR SIMILAR THEORIES. EACH
PARTY AGREES THATi •NGES IN ECONOMIC CONDITIONS,OF
SUCH PARTY SPECIFICALLYOR THE ECONOMY GENERALLY,O', CHANGES IN
MARKET CONDITIONS OR DEMANDS, • NOT OPERATE TO EXCUSE OR
DELAY THE STRICT OBSERVANCE OF EACH AND EVERY OF THE OBLIGATIONS,
COVENANTS,CONDITIONS i REQUIREMENTS OF `
PARTIES EXPRESSLY ASSUME THE RISK OF SUCH ADVERSE ECONOMIC OR
MARKET CHANGES, WHETHER OR NOT FORESEEABLE
DATE.
r _ _
LNITIALS OF AUTHORIZED CITY INITIALS OF AUTH RIZED—,."
REPRESENTATIVE(S) REPRESITATIVE(m,
29. Nb Third Pady Bthefidiui&s. The performance of the Parties' respective obligations
under this Agreement are not intended to benefit any Person other than the City and Operator,
except as may be expressly provided otherwise in this Agreement. No Person not a signatory to
expressly provided in this Agreement.
111#11iradVAIINI; My
31. Warranties Against Payment of Consideration for Agreemen . Operator represents and
warrants that Operator has not employed or retained any Person to solicit or secure this
Agreement upon an agreement or understanding for a commission, percentage, brokerage, or
contingent fee, excepting bona fide employees of Operator. Operator further represents and
warrants that no gratuities, in the form of entertainment, gifts or otherwise have been or will be
given by Operator or any of its agents, employees or representatives to any elected or appointed
official or 'r • of attempt to secure or .. i . •le terms or
conditions for this Agreement. Breach of the representations or warranties of this Section 29
shall automatically terminate this Agreement, without further notice to or action by either Party.
31 &OtAti�bA� �j Paid The Parties agree• intend that the City and Operator
independent contracting entities and do not intend by this Agreement to create any partnership,
joint venture, or similar business arrangement, relationship or association between them.
33. Survival of Agreement. All of the provisions of this Agreement shall be applicable to
any dispute between the Parties arising from this Agreement, whether prior to or following
expiration or termination of this Agreement, until any such dispute is finally and completely
resolved between the Parties, by of • •r`. .r ` judgment or
expiration of all applicable limitations periods and all terms and conditions of this Agreement
relating to dispute resolutionand limitations on damages or •ies shall survive any expiration
or • of • • `
65186.00009131989698,5 -23-
65186.00009\31989698,5 -24-
SIGNATURE PAGE
TO
OPERATING COVENANT AGREEMENT
(CHAMPION MASERATI)
CITY OF DOWNEY, a Califomia municipal
corporation and charter city
By -
Mayor
CITY OF DO EY
By:
City Clerk
By:
Special Counsel
65186,00009\31989698.5 -25-
- Lei gm Mri I
Xqloiffffllw- INKMON111 ,• -.: • *
..
M1
MR
In
By:
Name:
Its:
SIGNATURE
PAGE
TO
OPERATING COVENANT AGREEMENT
•
r r . •municipal
corporation and charter city
By:
Mayor
CITY OF DOWNEY
I:
City Clerk
:w♦ • a .: �
Best Best & Krieger LLP
y:y
Specie Counsel
65186.00009\31989698,5 -25-
CHAMPIONAUTO GROUP,
California` •. Liability Company
Champion
By:
Name:
Its:
By:
Name:
Its;
TO
OPERATING i
(CHAMPION■ .
[To be attached behind this cover page]
Exhibit A
PROPERTY LEGAL DESCRIPTION
Champion Auto Group, LLC. dba Champion Maserati
All that certain property located in the City of Downey, County of Los Angeles, State of
California, described as follows:
THAT PORTION OF THE RANCHO SANTA GERTRUDES, IN THE CITY OF
DOWNEY, COUNTY OF LOS ANGELES, STATE OF CALIFORNIA, AS PER MAP
RECORDED IN BOOK 1, PAGE 156 OF PATENTS, IN THE OFFICE OF THE COUNTY
RECORDER OF SAID COUNTY, DESCRIBED AS FOLLOWS:
BEGINNING AT THE INTERSECTION OF THE NORTHERLY LINE OF
FIRESTONE BOULEVARD, 80 FEET WIDE, AND THE WESTERLY LINE OF THE NEW
SAN GABRIEL RIVER FLOOD CONTROL CHANNEL, 400 FEET WIDE, OF THE LOS
ANGELES COUNTY FLOOD CONTROL DISTRICT AS SHOWN ON COUNTY
SURVEYOR'S MAP NO. B-1791, ON FILE IN THE OFFICE OF THE COUNTY
SURVEYOR OF SAID COUNTY; THENCE ALONG SAID WESTERLY LINE, NORTH 22'
53'22" EAST 10.14 FEET TO THE TRUE POINT OF BEGINNING OF THIS DESCRIPTION;
THENCE FROM SAID TRUE POINT OF BEGINNING AND CONTINUING ALONG SAID
WESTERLY LINE, NORTH 22- 53' 22" EAST 563.78 FEET TO A POINT IN THE
SOUTHWESTERLY LINE OF LOT 2 OF TRACT NO. 5793AS PER MAP RECORDED IN
BOOK 79, PAGES 60 AND 61 OF MAPS, RECORDS OF SAID COUNTY; THENCE
ALONG SAID SOUTHWESTERLY LINE, NORTH 58- 10'10" WEST 282.89 FEET, MORE
OR LESS, TO THE INTERSECTION WITH THE NORTHEASTERLY PROLONGATION OF
THE NORTHWESTERLY LINE OF THE LAND DESCRIBED IN THE DEED TO JAMES B.
LUNDQUIST, ET AL., RECORDED ON JANUARY 7,1959, AS INSTRUMENT NO. 1547 IN
BOOK D-324, PAGE 602, OFFICIAL RECORDS OF SAID COUNTY; THENCE ALONG
SAID PROLONGATION TO AND ALONG SAID NORTHWESTERLY LINE, SOUTH 32-
07' 44" WEST 537.08 FEET TO THE NORTHERLY LINE OF SAID FIRESTONE
BOULEVARD, 80 FEET WIDE; THENCE ALONG SAID NORTHERLY LINE, SOUTH 53'
39 00" EAST 200.73 FEET; THENCE SOUTH 56' 50' 03" EAST 173.25 FEET TO THE
POVIT OF BEGINNING.
Exhibit A- I
azz 11A 4 hA M & k GA
13091r�
TO
OPERATING COVENANT AGREEMENT
[Attached behind this cover page]
Exhibit B
Operator Official Action
65186.00009\31989698.5
OPERATOR OFFICIAL ACTION
Champion Auto Group, LLC. dba Champion Maserati
By my notarized signature below, 1, a
duly authorized representative of Champion Auto Group, LLC.1 a California Limited Liability
Company doing business as Champion Maserati ("the Company"), and holding a position of
'� within the Company, hereby certify that each and every necessary
corporate act for the approval of the Champion Maserati Operating Covenant Agreement has
been completed in accordance with each and every applicable law and regulation, including
corporate bylaws and any other applicable internal control of the Company. I further certify that
I am a duly authorized and designated signatory on behalf of the Company.
I declare under penalty of perjury under the laws of the State of California that the
• • June-�7 . 2019, at • •
IN 0 1.
well
Exhibit B -I
A notary public or other officer completing this certificate verifies only the -i a i
identity of
the individual who signed1the document to is this certificate is attached, and nota e
truthfulness, accuracy, or validity oft document.
STATE OF CALIFORNIA
COUNTY OF
On /7 before me,
DATE INSERT NAME, TITLE OF OFFICER— E.G.., -JANE DOE, NOTARY PUB
personally appeared, I-Ict L, l14 -n
who proved to me on the basis of satisfactory evidence to be the person(s) whose nam'e(s)
is/are subscribed tothe within instrument and acknowledged to me that he/she/they
executed the same in his/her/their authorized capacity(ies), and that by his/her/their
signature(s) on the instrument the person(s), ort e entity upon behalf of is 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.
WI NESS hand and official seal.
ITmy (SEAL)
ILI I evm I PUBLIC SIGNATURE
OPTIONAL INFORMATION
THIS OPTIONAL INFORMATION SECTION IS NOT REQUIRED BY LAW BUT MAY BE BENEFICIAL TO PERSONS RELYING ON THIS NOTARIZED
DOCUMENT.
TITLE OR TYPE OF DOCUMENT
DATE OF DOCUMENT NUMBER OF PAGES
SIGNERS(S) OTHER THAN NAMED ABOVE
SIGNER'S NAME SIGNER'S NAME
IRIGHT THUMBPRINT F RIGHT THUMBPRINT
To order supplies, please contact McGlone Insurance Services, Inc. at (916) 484 0804.
i
ORNO nowl DI MIN V
i1111111111 i i 11i
[Attached behindthis cover age]
Exhibit C
Notice of Agreement and Declaration of Covenants
65186.00009\31989698,5
10.14,0111
TO
*1PERATING COVENANT AGREEMENT
(CHAMPION MASERATI)
1!1! rill
RECORDING REQUESTED BY AND
WHEN RECORDED RETURN TO:
CITY OF DOWNEY
I I I I I Brookshire Avenue
Downey, CA 90241
Attention: City Attorney
THIS NOTICE OF AGREEMENT AND DECLARATION OF COVENANTS
("Memorandum") is made as of 20 among CITY OF DOWNEY,
a California municipal corporation and charter city ("City"), CHAMPION AUTO GROUP,
California Limited Liability Company doing business as Champion Maserati , the
("Operator").
1. Ajb�6 . City and Operator have entered intothat certain unrecorld
Operating Covenant Agreement ("Agreement") dated as of —� 20
establishing certain commitments and requirements regarding certain real property located in L
Angeles, California, described on Exhibit A attached hereto (the "Property").
2. Covenants of Operator. The parties have executed and recorded this instrume
for the purpose of imparting notice of the existence and application of the Agreement and t
covenants of Operator regarding the Use of the Property for an expanded automobile dealersh
purpose for a ten (10) year operating period. The terms areas set forth in the unrecord
Agreement all of which are incorpobrated herein by reference as though set forth fully herein.
the event of an inconsistency etween this Memorandum and the Agreement the Agreeme
ooodd o
e bd o
shall cntrl. This Memranum an• thAgreement shall•in• an inure t• the benefit •f t
parties hereto, and their respective heirs, successors and assigns. I
3. Termination. This Memorandum shall terminate and be of no further force of
effect in the event the termination or expiration of the Agreement.
Exhibit C-1
Notice of Agreement and Declaration of Covenants
65186,00009\31989698,5
IN WITNESS WHEREOF, •i-.• and City have executed this Memorandum • the
dates set forth belexv.
MINIM
City Clerk
By: BEST BEST & KRIEGER LLP
• Counsel
GCC419
CITY OF DOWNEY
By:
Mayor
"Operator"
CHAMPION AUTO GROUP, LLC dba Champion
Maserati
M
Title:
Exhibit C-2
Notice of Agreement and Declaration of Covenants
6518600009\31989698.5
IN WITNESS WHEREOF, Operator and City have executed this Memorandum on the
dates set forth below.
M
By:_
Mayor
City Clerk
APPROVED AS TO FORM
By�� B S:T ST & Kkf JER LLP
Special Counsel
CHAMPION AUTO GROUP, LLC dba Champion
Maserati
By:
Name:
EM
Exhibit C-2
Notice of Agreement and Declaration of Covenants
sm �## I �-- I I I -
TO
i
[Attached behin this cover page]
Exhibit
1% LVIW All" . I'd .& AIIA6
TO
OPERATING COVENANT AGREEMENT
(CHAMPION MASERATI)
W"W*!7" -•
2019
FOR VALUE RECEIVED, the undersigned, CHAMPION MASERATI, a California
Limited Liability Company ("Maker") promises to pay to CITY OF DOWNEY, a California
municipal corporation and charter city ("Holder"), or order, at I I I I I Brookshire Avenue,
Downey, CA 90241 Attention: City Manager, or such other address as Holder may from time to
time designate, the principal sum of Five Hundred Thousand Dollars 00/100 ($500,000.00),
together with simple market rate interest thereon at the rate of 5.5% per annum, such interest to
accrue from the date of this Note.
I . Payments on this Note will be credited on a quarterly basis in accordance with the
provisions of Section 5 of that certain "Operating Covenant Agreement (Champion Maserati)"
between Maker and Holder dated �� 2019 ("Agreement"). Any remaining unpaid
principal balance and any accrued interest will be fully due and payable one hundred and twenty
(120) months following the date of this Note ("Maturity Date"), or at a later date if the term of
this Note is extended pursuant to section 5.7 of the Agreement.
2. All payments hereunder not credited pursuant to the Agreement shall be paid in
lawful money of the United States of America to Holder at I I I I I Brookshire Avenue, Downey,
CA 90241 Attention: City Manager or such other place as Holder may designate from time to
time.
3. All payments on account of the indebtedness evidenced by this Note shall be firi
.-pplied to the interest on the unpaid principal balance, and the remainder to principal.
4. This Note and Maker's other obligations pursuant to the Agreement are secured
by either (a) a Deed of Trust recorded against the real property at 9715 Firestone Boulevard in
the City of Downey, California in the form attached to the Agreement as Exhibit E; or (b) an
Irrevocable Standby Letter of Credit; provided, however, that if, upon the Maturity D. the
Letter of Credit is not in effect or is for any reason not collectable or not honored by the issuer,
or is insufficient to satisfy any remaining unpaid principal balance and accrued interest due
hereunder.
5. Should any payment not be made within ten (10) days of when due under this
Note or should any material uncured default exist under the Agreement and remain uncured
beyond the notice and cure period described in the Agreement, the Holder hereof may, at
Exhibit D-1
Secured Promissory Note
65186,00009\3198969M
Holder's option, declare this Note and the entire indebtedness hereby evidenced to be
immediately due and payable, regardless of the Maturity Date.
6. Maker agrees to indemnify Holder and to hold Holder and Holder's successors
and assigns harmless from and against any and all claims, demands, costs, liabilities and
obligations of any kind or nature arising out of any default hereunder, including without
limitation all costs of collection, including reasonable attorneys' fees and all costs of suit, in the
event the unpaid principal sum of this Note and/or any interest thereon is not paid when due.
7. The indebtedness evidenced by this Note may be prepaid in whole or in part at
any time prior to the Maturity Date, without penalty or other charges.
8 -Following the maturity of the indebtedness evidenced hereby, whether by
acceleration or othenvise- anki amount remainin-• vaid to Holderr —together with unvaid interest
on such unpaid amounts, shall thereafter bear interest at the highest legal rate.
9. It is the intention of Maker and Holder to conform strictly to the usury laws now
or hereafter enforced in the State of California, and any interest payable under this Note and/or
any of the other documents to be executed by Maker in connection with the loan made or to be
made hereunder, shall be subject to reduction to the amount not in excess of the maximum non -
usurious amount allowed under the usury laws of California as now or hereafter construed by the
courts having jurisdiction over such matters. In the event the maturity of this Note is accelerated
by reason of any provision of this Note or by reason of an election by Holder resulting from any
default (or an event perinitting acceleration), under this Note or any other instrument given to
secure the -,tawment hereof. or o thrwise- thn earned interest in,%-, never include more than the
maximum amount permitted by law, computed from the date hereof until payment, and any
interest in excess of the maximum amount permitted by aw s a e cance e automatica y an ,
if theretofore paid, shall at the option of the Holder either be rebated to Maker or be credited on
the principal amount of this Note or if all principal has been repaid then the excess shall be
rebated to Maker. The aggregate of all interest (whether designated as interest, service charges,
points, or otherwise) contracted for, chargeable, or receivable under this Note or any other
document executed in connection herewith shall under no circumstances exceed the maximum
legal rate upon the unpaid principal balance of this Note remaining unpaid from time to time. In
the event such interest does exceed the maximum legal rate, such excess shall be canceled
automatically and if theretofore paid, rebated to the undersigned or credited on the principal
amount of this Note, or if the Note has been repaid, then such excess shall be rebated to Maker.
10. Maker acknowledges and agrees that Maker shall not have any rights whatsoever
to set-off against amounts due hereunder or otherwise due Holder any , amount or obligation due
Maker or claimed to be due Maker from Holder.
11. The unenforceability or invalidity of any provision or provisions o t is ote as to
any persons or circumstances shall not render that provision or those provisions unenforceable or
invalid as to any other persons or circumstances, and all provisions hereof, in all other respects,
shall remain valid and enforceable.
Exhibit D-2
Secured Promissory Note
65186.00009\31989698-5
12. This Note shall bind Maker and its successors and assigns and the benefits hereof
shall inure to Holder and Holder's successors and assigns.
13. The validity, interpretation and performance of this Note shall be governed by and
construed in accordance with the laws of the State • California.
• AUTO GROUP, LLC, a California
Limited Liability Company doing business as
Champion Maserati
R-1
[a
Exhibit D-3
Secured Promissory •.
EXHIBIT ""
TO
*'PERATING
COVENANT AGREEMENT
(CHAMPION i
[Attached a in this coverpage]
IM-1411TUMM
TO
OPERATING COVENANT AGREEMENT
(CHAMPION MASERATI)
THIS PERSONAL GUARANTY ("Guaranty") is made as of 20
by - 11 ", a California corporation ("Guarantor") in favor of the CITY OF
DOV,rNEY, a California municipal corporation and charter city ("City"). I
I u mall I Iffl,
A. CHAMPION AUTO GROUP, LLC, a California Limited Liability Company
doing business as CHAMPION MASERATI ("Operator") and City intend to enter into an
Operating Covenant Agreement whereby City seeks to expand economic development
opportunities in City and Operator seeks to expand its automobile dealership and service
operations on certain property owned by Operator ("Property").
B. Guarantor and City intend to enter into this Personal Guarantee to provide City
with additional security that the Operator will abide by and comply with the obligations o the
Operating Covenant Agreement ("Agreement").
NOW THEREFORE, in consideration of City agreeing to e enter into e greement,
Guarantor hereby agrees, warrants and covenants as follows:
I . Guaranteed Obligations. The Guarantor absolutely and unconditionally
guarantees the performance and payment by Operator of the Guaranteed Obligations (as defined
below). "Guaranteed Obligations" shall mean all obligations of Operator to City arising under
the Agreement, whether voluntary or involuntary and however arising, whether absolute or
contingent, liquidated or unliquidated, legal or equitable, whether incurred before, during or after
any bankruptcy, reorganization, insolvency, receivership or similar proceeding involving
Operator ("Insolvency Proceeding"), together with all reasonable expenses of and incidental to
collection, including reasonable attorneys' fees.
2. Nature and Duration of Guaranty. This Guaranty is a guaranty of performance
and payment and applies to all Guaranteed Obligations. This Guaranty shall remain in effect for
the duration of the term of the Agreement and any extension thereof.
3. Obligations Independent. The obligations of the Guarantor under this Guaranty
are independent of the obligations of Operator or the obligations of any other guarantor. City
may bring action against the Guarantor and otherwise enforce this Guaranty without bringing
action aiainst Oierator or any other warantor, and otherwise indeiendentli of ani other remed
I 11 rj W11 r! FA I'lwagg 1 .r U-JEW-920"'FAC I BE-11VAN I I USE 5 121011 M, 1 C11 11 IN= I Mr-11-wil IVA 8 [_9 11M FOR K7,16 Iq I I OEM IYAL,
Exhibit E-1
Personal Guaranty
65186.00009\31989698.5
time to proceed .•. Operator, • otherwise enforce, proceed .• join with • exhaust any
•" obligations • • any • remedy in City's r•
4. Waiver • Defenses. The • waives any defense to the enforcement •
this Guaranty arising by reason •I (a) any present •; future laws • orders affecting the terms
•' • City's remedies with respect to, any Guaranteed Obligation; (b) the failure • any •
person • entity to execute this Guaranty • any • guaranty •; agreement; (c) any •
or release • Operator • any •. • suspension • any remedies • City, whether
resulting from any act • omission • City • any • person • entity • by operation • law •
•; (d) any Insolvency Proceeding • Operator; (e) any other action by City • any
omission by City or other failure of City to pursue, or any delay in pursuing, any other remedy in
City's
••
5. Representations and Covenants of the Guarantor. The Guarantor represents and
warrants to City that: (a) the Guarantor has received and approved a •r •; the Agreement;
(b) no oral promises, assurances, representations or warranties have been made by or on behalf
• City to induce the Guarantor to execute and • this Guaranty; (c) the Guarantor has
received reasonably equivalent value in return for its execution and • • this Guaranty-, (d)
the Guarantor is not insolvent nor will the Guarantor become insolvent as a result of the
execution and delivery • this Guaranty; (e) the execution, •- and performance • this
Guaranty
•• not and will not • any authorization • approval which has not been
obtained by official action of Guarantor prior to or concurrently with the acceptance hereof or
contravene any applicable laws or other requirements or any agreement or restriction binding on
• affecting Guarantor • its properties; (g) this Guaranty, when executed and delivered •
Guarantor, will constitute the legal, valid and binding obligation of Guarantor, enforceable
against Guarantor in accordance with its terms, except as • may • limited •
outstanding bonded indebtedness, bankruptcy, • • • similar laws affecting the
rights
•f creditors •- (h) except as otherwise disclosed in writing to City, no • •
other proceedings are pending • to the • knowledge • Guarantor, threatened •. •
affecting Guarantor • any • its properties which, if determined .• could materially
impair the financial condition, operations, properties or prospects of Guarantor or the ability of
Guarantor to perform its obligations under this Guaranty.
• Indemnification • the Guarantor. Without limitation • any • obligations •
the Guarantor • remedies • City under this Guaranty, the Guarantor shall indemnify, defend,
save and hold City harmless from and against, and shall pay • demand, any and all reasonable
fees and disbursements • City's legal counsel suffered • incurred by City as a result •; any
failure
• Guarantor to •. and perform any Guaranteed Obligations in accordance with the
terms
• such Guaranteed Obligations.
7. Waivers and • No r• to, modification • amen•ment • , •,
waiver, consent • approval under, any provision • this Guaranty shall be effective unless in
writing and signed • City, and any waiver, consent • approval shall be effective •; in the
specific instance and for the specific purpose for which given.
8. Remedies. Each •i the remedies provided in this Guaranty is cumulative and •
exclusive
• and shall not prejudice, any • remedy provided in this Guaranty • by
Exhibit E-2
Personal Guaranty
65186,00009131989698.5
applicable laws or under the Agreement. Each remedy may be exercised from time to time as
often as deemed necessary by City, and in such order and manner as City may determine. No
failure or delay on the part of City in exercising any remedy shall operate as a waiver of such
remedy; nor shall any single or partial exercise of any remedy preclude any other or further
exercise of such remedy or of any other remedy.
9. Notices. All notices and other communications provided under this Guaranty
shall be in writing and be given in accordance with the terms of the Agreement.
10. Binding Agreement. This Guaranty shall be binding on and inure to the benefit of
the Guarantor and City and their respective successors and assigns, except that the Guarantor
shall have no right to assign any interest or obligation under this Guaranty without the prior
written consent of City.
11. Governing Law and Venue.This Guaranty shall be governed by, and construed
and enforced in accordance with, the laws of the State of California. The parties hereby agrees
that any action brought to enforce the terms of this Guaranty shall be in the courts of the County
of Los Angeles and the parties hereby submit to the jurisdiction of such courts. The prevailing
party in any such action shall be entitled to an award of its reasonable attorneys' fees an costs.
rNUFTY&MAUffreffil
M
Exhibit E-3
i'le-MAIM46PIN W"
65186.00009\3198969&5
Tierra West Advisors, Inc.
To: Aldo E. Schindler
City of Downey
From: John Yonai
Rose Acosta Yonai
Tierra West Advisors, Inc.
Date; June 17, 2019
Re: Champion Maserati Dealership — Financial Analysis: Tax Sharing Agreement
Tierra West Advisors, Inc. ("Tierra West") was retained by the City of Downey ("City") to assist in the
analysis of a proposed car dealership development. Champion Auto Group, LLC (Mr. Paul Antepara)/
dba Champion Fiat (respectively "Champion"/"Developer") provided the City of Downey ("City") with
a proposal to develop a new dealership, Champion Maserati and Alfa Romeo ("Dealership") in the City.
Champion currently owns and operates three (3) franchises in the City; Champion Dodge, Jeep and Fiat.
Subsequent to Chrysler's reorganization in 2009, the Fiat Group acquired a controlling stake in Chrysler
and the new Chrysler Group, LLC announced a consolidation strategy; Chrysler, Jeep and Dodge brands
were to be under a single point dealership. The selected dealers would also represent different car lines
of Fiat products in specific selected markets and were to be combined as one (1) retailer. Champion was
the selected dealership group by the Chrysler Corporation; due to location, freeway access,
demographics, and radius from other Maserati and Alfa Romeo dealerships. After much consideration
and successful sales history in the City, Champion chose to remain in Downey and expand the operations
of the Chrysler Jeep store.
As a result of the Chrysler Jeep merger and prominent share of the market, the Developer is looking to
expand the franchise and add the other car lines of Fiat products, introducing a Maserati and Alfa Romeo
dealership in the City. Although Champion Fiat has been provided adequate loans for working capital,
such an undertaking will require substantial capital infusion in addition to Champion's investment for
inventory (vehicles, special parts and tools) and capital loans. The facility expansion and additional
improvements, inclusive of hard and soft costs, leave the Developer facing a financing gap and economic
concerns. Therefore, Champion's spokesperson Mr. Antepara, is requesting that the City provide an
assistance package of $1MM. The source of the requested assistance is to be provided from the annual
incremental sales tax revenue which will be generated as a result of the merger and addition of the
Maserati and Alfa Romeo dealership to the City.
Fiat Chrysler Automobiles ("FCA") determined in 2013 that the Maserati brand would be expanded five
(5) fold in worldwide sales from the base amount of 15,400 units in 2013. Since 2013, Maserati North
America ("MNA") has been increasing the number of dealerships in the continental United States; from
T1 RR `I -S
Page 1 of 11
Attachment "
74 dealerships in 2013 to 142 units in 2018. Today, there are approximately 17 Maserati dealerships in
California. MNA is looking to expand its dealerships in the Golden State to take advantage of California's
car culture. Considering that California makes up approximately 13% of the United States population
(45m/350m) and is ranked as having the 6th largest Gross Domestic Product (GDP) in the world, the
Golden State is the ideal market for MNA's high-end vehicle line and also a sound financial investment.
The proposed Champion Maserati dealership would be one (1) of four (4) in the Los Angeles Basin ("LA
Basin") and one (1) of nine (9) in Southern California. The closest dealership is approximately 20 miles
away from the proposed Champion Maserati dealership and the other three (3) LA Basin dealerships are
approximately 24 miles away. Champion Maserati represents a pipeline of consumer access drawing
from the South Bay, Long Beach, San Gabriel Valley, South West Los Angeles and North Orange County
markets. Los Angeles County represents approximately 12.5 million residents or approximately 28% of
the State's population and consumer market. The region has the highest concentration of listed
billionaires and annual millionaire per capita of any county in California. Consequently, it's no surprise
that MNA is looking to expand its dealership presence in the greater Los Angeles market.
BASIC PROJECT DESCRIPTION:
Champion, is requesting $1MM from the City of Downey in financial assistance to open a Maserati and
Alfa Romeo Dealership in the City at 9715 Firestone Boulevard ("Site"). Champion anticipates project
costs of approximately $3.010MM, inclusive of hard and soft costs, forthe remodel of the entire building
of the existing Champion Fiat facility, ("Facility"). In addition to the construction costs, the new
dealerships will require $1.51VIM for working capital, $300,000 in parts inventory, and $1.5 MM in used
car inventory. Total required project capital is $3.010MM. Champion's goal and intent is to open the
Champion Maserati dealership by the summer of 2019.
PROJECT DETAIL:
Champion Auto Group, LLC, ("Champion") and Maserati North America (MNA) have entered into a Letter
of Intent ("LOB") to close the identified Open Point. The LOI has an expiration date of either 12/31/2018
("Expiration Date") or the date the Agreements are counter -signed by MNA's Director of Development
or other Officer of MNA ("Effective Date"). Champion has requested that MNA enter into a MNA Dealer
Agreement, including Additional Terms and Provisions (collectively the "Agreements") with them;
authorizing, among otherthings, the exclusive display, sale and service of the Maserati vehicle line along
with the Alfa Romeo vehicle line from the approved location and Facility at 9715 Firestone Blvd., Downey
CA as defined in the MNA.
The MNA has agreed to enter intothe requested Terms Agreement with Champion, subjectto Champion
performing all requirements and terms of the LOI in a timely manner; including without limitation
Champion's satisfactory completion of all the conditions set forth in the LOI. The conditions set forth in
the LOI are divided into four (4) major categories of requirements and terms that must be completed:
1. State Notification and Challenges -confirm there are no challenges from other Dealers,
2. Submission of Plans and Facility Requirements -Champion to retain MNA designated design firm;
Paget of 11
3. Review and Approval of Plans -Champion, MNA and City approval for reconstruction plans;
4. Additional Requirements before Expiration Date-MNA has indicated an LOl end date of
December 31, 2018. Most likely this year end date is not practical to achieve the review of plans
and approval and will require an extension.
The following summary is a detailed overview of the terms and requirements of LOI:
STATE NOTIFICATION AND CHALLENGES
• Upon the execution of the 1_01, MNA will give notice of the proposed establishment of the
Developer's new dealership, if any, as may be required by applicable state law.
• The Developer has 90 days to file and resolve a challenge in a manner that does not affect,
in any way, the terms of the LOI, whereby MNA will notify the Developer in writing and the
parties shall proceed with the submission of complete architectural plans and specifications
for the Facility to the Manager of Network Development.
• Should any kind of challenge be filed or demanded, opposing the proposed establishment
of a dealership, the Developer has 30 days, from date of the challenge being filed, to resolve
or potentially have MNA terminate and or suspend LOI upon written notice or suspend all
rights and obligations until challenge is resolved.
• MNA has the right to terminate LOI if a challenge is resolved in a manner that does not
permit the establishment of dealership.
• Should the final resolution of a challenge affect the terms and/or deadlines or ability of any
party to comply with these terms, the MNA and Developer shall use commercially
reasonable efforts to enter into a mutually acceptable amendment. If both parties cannot
agree to such an amendment, after a 30 day negotiating period, the MNA may terminate
1_01, at its sole discretion upon written notice to Developer.
SUBMISSION OF PLANS AND FACILITY REQUIREMENTS
• Within 30 days of notification, the Developer shall consult with MNA's contracted project
manager and architectural firms ("Vendors"). Vendors to develop an architectural
consultation package for the Facility ("Design Package"). MNA to be invoiced for Vendors'
design consultation and project management services ("Vendors' Fee") in amount up to
$25,000 as well as travel expenses, lodging, meals and ground transportation ("Vendors'
Expenses"). Developer to reimburse MNA for Vendors' Fees. In the event that Developer
fails to complete the requirements of the LOI, Developer agrees to reimburse MNA for any
and all Fees within 30 days of termination or Expiration Date of LOI.
• Developer has 30 days from receipt of the Design Package to submit a' complete copy of
architectural plans and specifications (collectively, the "Plans") for the Facility to the
Manager of Network Development.
• The Facility must meet MNA's then -current Corporate Identification Program ("Cl -
Standards") for the assigned planning Potential ("P.P.") of the Maserati vehicle line
combined with the Alfa Romeo vehicle _line, as separately approved by Fiat Chrysler
Automotive ("FCA US LLC"), would require the following:
Ii RRA NVFS 1
, I I „ R
Page 3 of 11
Sales and Office Areas
3,790 sq.ft. of contiguous showroom for indoor vehicle display showroom.
Continuous display, at,a minimum of five (5) new Maserati and five (5) new Alfa Romeo
vehicles.
Parts and Service Operations
< Total 13,803 sq.ft:
o Parts Warehousing and Counter- 3,158 sq.ft.
o Workshop Area —10,645 sq.ft.;
w Including 14 bay lifts; and,
3,225 sq. ft. allocated for repair of complex repairs.
Materials and Branding Guidelines
Facility must comply with MNA's materials and branding guidelines as they exist on the date
Developer submits the Plans, including all elements and design specifications set forth in MNA's CI
Standards. All branding, marketing, and alterations (cosmetic or other), must be approved and meet
MNA's Cl Standards and Installation requirements. Such elements and design specifications include,
without limitation:
• Removal of any existing non-MNA brand logos and replaced with approved MNA graphics:
signage for service write-up area, exterior directional signs, all wall graphics for reception
area, customer lounge, coffee/refreshment area, as well as all marketing materials.
• Interior and exterior paint colors, furnishing selection, cabinetry, fixtures, exterior ACM
panels, and interior space layout for General Manager, sales, reception desk, refreshment
area, customer lounge, customer service, wash and detail area, and work bay equipment
and machinery.
• Enrollment in MNA approved design services program and purchase all Maserati/Alfa
Romeo interior graphics package. Ordering of rim and wheel niche wall, leather and sample
wall, and merchandising unit.
REVIEW AND APPROVAL OF PLANS
• MNA at its sole discretion may provide comments, in writing, on Plans submitted by
Developer. Subsequently Developer has 30 days to make requested revisions and resubmit
Plans to MNA.
• MNA to notify in writing when Plans have been approved ("Plan Approval Notification").
• Developer is solely responsible for compliance with all federal, state, and local laws,
regulations and licensing requirements (collectively, "Government Regulations"). MNA shall
have no obligation to review Plans for compliance with Government Regulations and
Developer is solely responsible for any costs incurred for revisions and related fees.
• Developer has 90 days after receiving MNA's Plan Approval Notification, to begin
construction and/or renovation of Facility at Approved Site and complete by Expiration
Date.
• Any material changes to the Approved Plans, including but not limited to change of Site or
delay of more than 180 days to commence construction, may require an additional
engagement cost with Vendors above and beyond the previously paid Vendors' Fee.
Page 4 of 11
Additional Requirements Before Expiration Date
Prior to Expiration Date Developer must:
o Complete construction/renovation of Facility in accordance with Approved Plans
o Provide legal entity and ownerships' information for legal entity; legal entity name and
DBA by following requirements.
Champion calls for a complete facility rehabilitation of the existing 21,380 sq. ft. facility located at 9715
Firestone Boulevard, Downey, CA, in order to develop a flagship Maserati and Alfa Romeo dealership
under Fiat Chrysler Automobile (FCA) company requirements.
The existing facility was previously designed and built to accommodate a Dodge/Chrysler/Jeep
dealership. The Dodge/Chrysler/Jeep dealership has been extremely successful for the Developer and
City since the opening at the Site. Success and brand consolidation has allowed Champion to relocate
the Dodge/Chrysler/Jeep/Fiat automobile lines to an adjacent facility, thereby allowing for the addition
of the most coveted automobile line offered by FCA and joining the likes of the other successful vehicle
lines of Downey dealerships.
The MNA has determined through its North American Marketing analysis and dealership expansion
program that the City of Downey is an ideal new dealership location. Downey provides the ideal
demographics and immediate access to a new dealership location as well as having the Dealership's
ownership being a valued FCA vendor. The MNA analysis of the City's location has noted the following:
location is sufficiently distant to the other MNA dealerships, so as not cause any sales conflicts; location
is next to major freeways and arterials, providing regional buyers easy egress and ingress for sales and
repairs; local demographics provide for a strong market; Site offers the immediate ability and ease to
convert an existing FCA dealership to accommodate a new line of FCA vehicles. The conversion of the
current dealership will be a relatively quick process though costly, in order to maintain and deliver an
environment that is consistent with the caliber of Maserati's line of vehicles. The interior, exterior,
porte-cochere, work areas, offices, restrooms and waiting areas will be elegantly designed and
consistent with the branding of other FCA dealerships; to showcase what is considered one of the
world's most well designed exotic automobiles; featuring a Ferrari engine under the hood.
In order to deliver the best experience for the client, MNA has retained the design firms of Interior
Environments and DeKalb Office (collectively "Firms") to develop and implement a standard North
American design for Maserati and Alfa Romeo. These Firms have collectively reviewed the existing
facility and developed a program for converting the building into a world class Maserati and Alfa Romeo
dealership. The design and layout involves a complete rebranding of the building to accommodate
automobiles that range in value from $90,000 up to $175,000.
Page 5 of 11
Cost estimates provided by Champion, Interior Environments and Dekalb Office, and Champion's
contractor are estimating project and construction costs of approximately $3,010,000. This is inclusive
of:
1.
Facility Preparation/installation
$175,000
2.
Brand Furniture
$300,000
3.
Brand Walls
$350,000
4.
Brand Fascia -Exterior
$200,000
5.
Brand Floor Tiles and Paint
$335,000
6.
Brand Signage
$140,000
7.
General Interior remodel per FCA
$525,000
8.
Exterior porte-cochere
$200,000
9.
Service/Parts/Counters/Displays
150 000
Total Interior and Construction
$2,375,000
In order to work on these exotic cars, Champion has to retool all of its work bays and tools.
This includes:
1. Service equipment= lifts/computers $450,000
2. Special Tools $185,000
Technician Fixtures $635,000
Building costs are estimated by FCA team and TWA to be: $3,010,000
vii .R, WES
:§ I3 .t.'. 9 t 0 R , .
Page 6 of 11
TABLE A -PROJECT COSTS
MASERATI -ALFA ROMEO
Preliminary Cost Analysis- 179,481 sq. ft./ 4.12 Acres on 2 Parcels, 21,380 sq. ft. building
The following preliminary costanalysis reflects Champion provided information, costing guides, Tierra West information and updated research
Complete constrution drawings will allow for greater accuracy of project cost estimates
SOFT COSTS
D
P
U
B
C
T
'D
'C
C
CONSTRUCTION COST
SITE
oul
Mase
WORK
Estimated Cost -Breakdown
Estimated Cost Breakdown
Estimated Cost
Estil mated cost
Sq. Footage per sq. ft Estmate Cost
esign/Construction Documents
25,000
Interio
Estmate Cost
30,000
lan,Cheqj Permit Fees
23,500
tilltv Company
Off-site rn rovemenWDrivewa A roaches/Utilities to Propeqy Line
N/A
luepri
1,500
ivil Engineering/Landscape Architect
3,500
N/A
eologist During Construction
NJA
2MEL, nj
ISin le Floor Existin Structure
N)A
alGreen Accrediting Agent
1,875
axes, Jnsuran
4,500
eputy Ins pectors
NJA
onstruction Administration - 6 months
i3-51000
208,450
$
35,000
financin
J $
25,000
ontinoency -5%
is
9,000
LIOTALESTIMATED SOFT COSTS
$ _
173 875
D
P
U
B
C
T
'D
'C
C
CONSTRUCTION COST
SITE
oul
Mase
WORK
Estimated Cost Breakdown
Estil mated cost
Sq. Footage
per sq. ft.
Estmate Cost
Site improvements
N/A
Off-site rn rovemenWDrivewa A roaches/Utilities to Propeqy Line
N/A
1',Storm Water. Treatment System
N/A
ISin le Floor Existin Structure
Sales &Office Areas
Showroom Area ConstructJon
1,790—
$55X0
208,450
Offices, Conference Rooms
3,907
$55.00
$
214885
Stairs -Tile
690
535M
$
24,150
Customer- Waiting AreajRestmoms
990
$55,00
$
54,450
SeMre,Area-Ba Areas
10 545
$25,00
$
266,125
Service Area - Carport
.t_
1,800
1105 _00
189,000
Rd. air &Pads Areas
Service Writers/Customer LouNejRetall Parts
3,440
$65,00
223,600
Mechanics Restroorns
390
$50,00
S
19,500
Technician Lunch area, tool storage, utility Rooms
780
$25,00
19,500
Parts Counter& Storage
S48,00
151584.
North America 8randfoR -Furniture- Equ3pmettt
Service eouir,ment and Tools
ESTIMATED CON57`R'U16NC ST 21,380 $132.61 $ 835,253
TOTAL ESTIMATED PROJECT COST -TWA/ FCA/Deve lope r 31,009,128]
Page 7 of 11
:011#
1� 1=, A
Non Facility required Capital costs include'.
Working capital required to open a new Maserati and Alfa Romeo
dealership until stabilization:
Opening parts inventory:
Opening used car inventory:
Capital required for opening:
Project construction costs are estimated at:
Working capital allowance:
Total required capital:
Return of capital, interest and profit for this project is based on a ten (10) year analysis. Ten (10) years
represents the average required time frame to depreciate redeveloped dealerships based on the
manufacturer's requirements. It is not unusual for manufacturers to require dealers to completely
update and upgrade facilities when major design changes take place with a line of automobiles.
Based on the above information, Tierra West has estimated that in order toreceivea return on the
capital investment of $6,310,000 over a ten (10) year period, calculations are based on an interest rate
of 4.5% with a 5.5% profit on investment, which equates to annual repayment of $1,026,923.
Dealership sales and revenue projections:
New Maserati sales starting at 288 units in2019and grow four (4) fold to 1,048 units by
2023:
o This represents an average of 38.25% sales growth per year;
o Revenue during this time mirrors the sales growth proportionately.
• Used car sales start at 900 units in 2019 and grow four (4) fold to 3,420 units by 2023:
o This represents an average of 39.64% sales growth per year;
o Revenue also mirrors this growth proportionately.
• Service Department labor hours and revenue:
o This represents an average of 12.5% growth per year
o Net revenue mirrors this growth factor proportionately.
Parts Department sales:
• Sales growth over the five (5) years is an average of 12.5% annually;
o Net revenue growth mirrors this growth factor proportionately.
Review by Tierra West of the sales increases for both new and used cars is greater than the amount that
would be anticipated for a new luxury car brand dealership; calculations are based on an average growth
rate in new car sales of 38.5% per year from the initial opening. Based on our analysis, it is our
determination that the initial sales of 288 new units in 2019 increasing to 1,048 new units in 2023 is
strong growth for Maserati as a luxury vehicle. In addition to new sales, Tierra West also reviewed the
sale of used cars. In 2019, used unit sales start at 900 per year or 75 per month and ramp up to 3,420
used units in 2023 or 285 units per month.
TiFRRAWEST
_A U 1 15 O H. N
Page 8 of 11
A luxury dealer selling a total of 1,108 combined units in 2019 and increasing up to 4,468 units in 2023
provides sales numbers that are consistent with the manufacturer's goals for United States sales and
specifically brand increase in California. While the growth rate is significant, the 400 percent growth
factor is achievable by the Champion Dealership group, being that they have a strong success record of
growth in Downey and consumer recognition.
The capital investment by Champion of $6,010,000 requires a return over a ten (10) year period. In
order to amortize this investment during this period at a 10% combined cost of funds and return on
investment, Champion is seeking an average return of a minimum of $1,026,923 per year from this new
dealership.
The Developer's estimates and pro forma are viewed with caution. Though the United States has
enjoyed ten (10) years of economic growth, such growth may be hampered by the current
administration's effort of adding tariffs to foreign commodities and products. The pro forma included
as Table B indicates that the new Maserati Dealership is in the red during the first four (4) years of
operation. The pro forma shown in Table B clearly indicates that during the ramp -up to stabilization,
after net revenue is calculated less return on capital and interest, losses are experienced by the
Dealership for the first four (4) years. Net losses are:
• Year 1- <$527,456>
• Year - <$271,829>
• Year 3 - <$209,016>
• Year 4 - <$64,628>
Total losses before profit and dealership stabilization is approximately $1,072,931 annually.
The annual shortfall or loss of repayment of capital, interest and return on investment during the first
four (4) years of the dealership's operations supports the request for assistance for launching the
Maserati Dealership.
iisRV� kWi_p V
Page 9 of 11
`•:.- i
Potential City Benefits and Revenue,
The proposed project will generate local ]obs and sales tax. Based on discussions with the Developer
and Tierra West operating estimates, the Maserati Dealership is expected to provide approximately 15
full/part time employees. This includes management, administrative, sales force, mechanics and other
support personnel.
|naddition toemployment opportunities, the new dealership has the potential ofgenerating significant
sales tax to the City of Downey. Sales projections demonstrate that over the first five (5) years, the
Dealership may produce over $6,100000 in new sales tax revenue to the City (Table [). During the
second five (5) years, based on moderate sales growth the Dealership may produce $13,250,000. Over
aten (1O)year period the Dealer may develop over $19,35O,OOOinsales tax.
Table
CityqfDowney
HnASENAT&ALFA ROMEO DEALERSHIP OFDO8VNEY
||
Years 6tn10 Sales Tax Estimates ' Champion Pro Forma
�Growth
Vehicle
Parts/Accessory
Table C
Tax
Vehicle
Parts/Accesso!y
Total
Year
Factor
Sales
Sales
CilyofDowney
Rate
Tax
Tax
Tax
MASERATI & ALFA ROMEO DEALERSHIP OF
DOWNEY
Years
1 to 5 Sales Tax Estimates - Champion Pro Forma
G rowth
Vehicle
Parts/Accessory
Total
Tax
Vehicle
Parts/Accessop�_
�otal
Year
Factor
Sales
Sales
Sales
Rate
Tax
Tax
..
Tax
2019
W,926,000
S11080,000
S48,006,000
1.0%
S469,260
S10,800
$480,060
2020
152.7%
S71,658,000
S1,296,000
$72,954,000
1.0%
S716,580
S12,960
S729,540
2023
125.8%
$213,687,000
S1,724,976
S215,411,976
1.0%
$2,136,870
S17,250
$2,154,120
Table
CityqfDowney
HnASENAT&ALFA ROMEO DEALERSHIP OFDO8VNEY
||
Years 6tn10 Sales Tax Estimates ' Champion Pro Forma
�Growth
Vehicle
Parts/Accessory
Total
Tax
Vehicle
Parts/Accesso!y
Total
Year
Factor
Sales
Sales
Sales
Rate
Tax
Tax
Tax
Source: Tierra West Advisors, Inc. I
"F7F ItuA 2!,T
Page iim11
c"I"'IERRAWEST
A D V I
Jure 10, 2019
Attachment "E"
071 1 , U_ i� -
V S
A I; I R
Mr. Aldo E. Schindler
Director of Community Development
CITY OF DOWNEY
11111 Brookshire Avenue
Downey, CA 90241
RE: Downey Maserati § 53083 Report - Economic Development Subsidy
Dear Mr. Schindler:
The City of Downey ("City") has commissioned Tierra West Advisors, Inc. ("Tierra West") to review,
analyze and prepare a report pertaining to a tax sharing proposal to develop a new dealership, Downey
Maserati and Alfa Romeo ("Dealership") between the City and Champion Auto Group, LLC, (Paul
Antepara dba Champion Fiat (respectively "Champion"/ "Developer"). Champion currently owns and
operates three (3) franchises in the City; Champion Dodge, Jeep and Fiat.
Due to the elimination of redevelopment, the State Legislature and Governor Brown addressed the
loud outcry by cities, counties and communities and need to legislatively assist local agencies, as well
as the State; to encourage employment, retain jobs and companies in local communities. The demise
of redevelopment has left the City of Downey with a loss of local resources to encourage economic
development. In response to this loss, the City of Downey is developing an economic development
strategy while also considering an economic development subsidy that will comply with the continued
public reporting provisions mandated by Cal. Gov't Code § 53083.
In order to remain competitive and promote expansion, the Dealership and the City are proposing to
enter into an Operating Covenant Agreement ("Agreement") regarding a tax revenue sharing
arrangement as part of the City's Economic Development Program. The Agreement is intended to
provide the Dealership and the City the ability to:
• Extend Champion's dealership operations in the City
• Retain City General Fund revenues to provide needed services for residents
• Retain and capture future growth in Downey Maserati product sales (leveraging estimated
future revenue and industry price increases)
• Increase the economic competitiveness of Downey
• Maximize public revenues and economic development financing options
• Maintain and enhance a consistent, business -friendly environment
• Maintain current and provide future City public services, capital projects and maintenance
A''r3pl, Ca
T 65 IN
rl
REAL ESTATE [t DNELOPMENT
STRATEGISTS
Create additional job opportunities for City residents, including low and moderate income
residents.
Sincerely,
TIE RRA WEST ADVISORS, INC.
�
lfb�n N. nai
6 Y
�M
Section 53693 Report
& I P $41, lot "-,- I -
The City of Downey (City) in order to maintain sustainable economic development, community
vitality and recovery from the loss of monies previously received by the City's Redevelopment
Agency, is implementing economic development strategies that include the application of Cal.
Gov't Code §53083. The City and Champion Auto Group, LLC, (Paul Antepara) dba Downey
Maserati (respectively "Champion" or "Downey Maserati") propose to enter into an Operating
Covenant Agreement ("Agreement"). Downey Maserati will be established as a new dealership
in the City, who in turn, will provide a tax revenue sharing structure with Downey Maserati.
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
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1. A public hearing prior to the granting of the subsidy
2. A report regarding the subsidy within the term
3. Where a subsidy has a term of more than 10 years, an additional public hearing at the
conclusion of the subsidy.
The State approved AB 562, which went into e ect on anuary , , an• a e• ection
to the Cal, Gov't Code, codifying a continued public reporting requirement for economic
development subsidies.
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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 Downey Maserati to gain
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.
Scit]166 53083
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.
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Champion Auto Group, LLC, (Paul Antepara) dba Downey Maserati, 9715 Firestone Blvd,
Downey, CA 90241
2. The start and end dates and schedule, if applicable, for the economic development
subsidy.
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date as referenced in section 2.1 of the Operating Covenant Agreement and continue for
ten (10) years.
3. A description of the economic development subsidy, including the estimated total
amount of the expenditure of public funds by, or of revenue lost to, the local agency
as a result of the economic development subsidy.
The City proposes to enter into an Agreement to provide Downey Maserati up to
$1,000,000, plus interest, in financial assistance to establish a new Maserati Dealership in
Downey, provided Downey Maserati complies with the following:
I ' Execute an Operational Covenant and Agreement with the City�
2. Execute a Note, Deed of Trust and Personal Guarantee with the City.
3. Receive a certified award of a Maserati dealership point from Flat Chrysler
Automobiles for the proposed site of 9715 Firestone Boulevard, Downey, CA.
4. Create and maintain a total of not less than fifteen (15) new Full -Time Equivalent
Employment Positions.
In exchange for the above terms and agreements, the City will advance the Dealershi
$500,000 as a loan for a term of up to ten (10) years at an interest rate of five and one -hal
percent (5.50%) per annum, simple interest, commencing at the time of loan disbursemen
Annual accrued interest will be added to the unpaid principal amount on the $500,00
advanced funds/loan until payment or credit is applied by the City. I
Loan Repayment will be based on the sales tax collected by the City and will occur as
follows:
The base sales tax amount will be 100% of Maserati Downey's submitted
sales projections and City sales tax estimated collection.
i� The City will retain the first 50% of sales tax collected in the I" year
Downey Maserati and the City will share equally the 2 d 50% of sales tax
collected
o City share of the 2 d 50% is based on gross taxable sales projections
and 100% projections of what the Dealership submitted to determine
sales tax collected in year 1 (25% each).
Downey Maserati's 25% sales tax share will be credited against the City's
$500,000 loan.
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Downey Maserati will not receive credit or receive payment above
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advanced $500,000 loan amount until City confirms that the advan e has
been repaid through Downey Maserati's credit portion of sales tax sharin
The tax sharing agreement ends when owner has been credited and receiv
a total of $ 1,000,000 plus accrued interest. I
4. A statement of the public purposes for the subsidy.
The Agreement serves a valid public purpose through the expansion of economic
development opportunities for businesses in the City, continuing to expand the City's
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proposed revenue sharing between Downey Maserati and the City is consistent with the
City's economic goals and strategies and is in the best interest of the general public.
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, business -friendly 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.
Retaining Champion's business operations in the City would address the need and desire
to maintain revenue streams such as property and sales tax to the City. Additionally,
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that are supported by Downey Maserati's location in the City.
5. Projected tax revenue to the local agency as a result of the economic development
subsidy.
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6. Estimated number of jobs created by the economic development subsidy, broken
down by full-time, part-time, and temporary positions.
Downey Maserati agrees to create and maintain new employment jobs at the Expanded
Facility ("New Jobs") as follows:
(a) On or before the end of the second Operating Year (2 years after the Occupancy
[Wate) ' Downey Maserati shall create and maintain a total of not less than fifteen (15) new
Full -Time Equivalent Employment Positions.
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(b) Downey Maserati shall maintain not less than fifteen (15) new Full -Time
Equivalent Employment Positions from and during the start of the third Operating Year
through the end of the Operating Period.
(c) Downey Maserati 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 j obs, 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.
Recommendation
Attraction of Downey Maserati to the City will contribute to the economic vitality of the Ci
provide additional jobs within the City, expand the City's tax base and improve econom c a
physical conditions in the City. Loss of Downey Maserati will impact a vulnerable econom
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recovery and momentum that the City is achieving and reduce City services. As such, it
recommended that the Operating Covenant Agreement be approved. I
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 through 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 maintenance, and parks and recreation programs,