HomeMy WebLinkAboutMcKenna Motors Huntington Beach, Inc. - 2016-11-21Dept. ID ED 16-35 Page 1 of 2
Meeting Date: 11/21/2016
CITY OF HUNTINGTON BEACH
REQUEST FOR. CITY COUNCIL ACTION
MEETING DATE: 11/21/2016
SUBMITTED TO: Honorable Mayor and City Council Members
SUBMITTED BY: Fred A. Wilson, City Manager
PREPARED BY: Ken Domer, Assistant City Manager
Kellee Fritzal, Deputy Director, Business Development
SUBJECT: Approve and authorize execution of a Sales Tax Sharing Agreement between
the City and McKenna Motors Huntington Beach, Inc., for the opening of a new
Subaru Dealership
Statement of Issue:
The City Council is asked to approve a Sales Tax Sharing Agreement with McKenna Motors
Huntington Beach, Inc., for the development and opening of a Subaru car dealership at 18711
Beach Boulevard. The Agreement will incentivize McKenna Motors Huntington Beach to construct
the car dealership. The Agreement establishes that the sales tax portion of the first $25 million
from McKenna VW in gross car sales is retained by the City and annually after $25 million, the
sales tax is split 55% to the City and 45% to McKenna Motors Huntington Beach, LLC.
("McKenna").
Financial Impact:
The proposed agreement is revenue positive for the City. The base sales tax received from
McKenna Volkswagen will 100% remain with the City. The new dealership is estimated to generate
$27 million in annual sales; therefore, annually the City will see an increase (after the base) of
$83,700 of sales tax generated. Based upon this estimate, McKenna is projected to receive
approximately $68,500 per annum and the City a total of $234,500.
Recommended Action:
A) Approve and authorize the Mayor and City Manager to execute the "Sales Tax Agreement
Between the City of Huntington Beach and McKenna Motors Huntington Beach, Inc."; and,
B) Increase appropriation as revenue is received above the base to pay for City's share of the
Sales Tax Sharing Agreement; and,
C) Authorize the City Manager or designee to execute any additional documents required to further
the Agreement.
Alternative Action(s):
Do not approve Agreement and direct Staff as necessary.
Analysis:
Mr. Danny McKenna owns and operates the McKenna VW on Beach Boulevard. He also owns the
property that a majority of the Kia Dealership is located and operated from. Due to concerns over a
pending residential project (the proposed Urban Art Lofts on the former McDonald's site) adjacent
Item 13. - 1 Hg -810-
Dept. ID ED 16-35 Page 2 of 2
Meeting Date: 11/21/2016
to his dealership, the future of both car dealerships (VW and Kia) had been in question. Due to the
residential project being in the planning application process, the property was valued much higher
than an otherwise vacant parcel. In order to continue his auto dealer business, Mr. McKenna
purchased the adjacent land (former Urban Art Lofts project) from the residential developer for
$6.75 million. With the purchase of the land, Mr. McKenna was presented with the opportunity to
also purchase a closing Subaru dealership, which he has done. Mr. McKenna would like to expand
and use the two parcels adjacent to the McKenna VW lot, of which he is the now the owner, to
construct a new showroom/retail store and maintenance facility to meet Subaru's dealership image
and space guidelines. The opportunity is expensive and the Agreement provides for assistance.
Mr. McKenna will be investing an additional $4.5 to $5 million to construct the new dealership in
addition to the purchase of the land ($6.75 million) and the purchase of the Subaru franchise ($6
million), for a total private investment by Mr. McKenna of over $17 million.
The proposed economic development subsidy will enable Mr. McKenna to expand the operations of
both the VW and Subaru dealerships, with annual combined sales revenues of approximately $52
million per year and potentially increasing the annual sales tax revenues to the City by an average
of $148,000 per year over the existing base of $150,800 per year, or approximately by 100%.
In addition, with the Agreement, Mr. McKenna will be signing a long term lease with Kia (Ken
Phillips) for the continued operation of the Kia car dealership and will allow Kia to remain in
Huntington Beach. Mr. Phillips is in the planning process to build a new showroom representing
another large private investment which could result from this deal.
Environmental Status:
Not Applicable
Strategic Plan Goal:
Strengthen Economic and Financial Sustainability
Attachment(s):
1. Sales Tax Sharing Agreement between the City of Huntington Beach and McKenna Motors
Huntington Beach, LLC
2. Letter from Danny McKenna
3. Subsidy Report — Government Code Section 53083
HB -811- Item 13. - 2
ATTACHMENT #1
SALES TAX SHARING AGREEMENT BETWEEN
THE CITY OF HUNTINGTON BEACH
AND
McKENNA MOTORS HUNTINGTON BEACH, INC.
THIS SALES TAX SHARING AGREEMENT ("Agreement") dated as of
Mill- n 20A, is entered into by and between the CITY OF HUNTINGTON
BEACH, a Municipal Corporation of the State of California ("City"), and McKENNA
MOTORS HUNTINGTON BEACH, INC., a California corporation ("McKenna").
RECITALS
A. McKenna in the business of selling motor vehicles. McKenna's point of
sale for purposes of the Uniform Local Sales and Use Tax Law is located at 18711 Beach
Blvd., Huntington Beach, Catifornia 92648.
B. McKenna is contemplating opening a new Subaru Dealership at 18711.
Beach Blvd., in Huntington Beach.
C. City recognizes that the expansion of McKenna to Huntington Beach will
contribute to the economic vitality of the City, provide additional jobs, expand the City's
tax base and otherwise improve economic and physical conditions in the City.
D. In order to induce McKenna to open a new Subaru Dealership in
Huntington Beach, the City is willing to provide incentive to McKenna as described in
this Agreement.
E. By its approval of this Agreement, the City Council of the City of
Huntington Beach finds and determines that this Agreement serves a valid public purpose
through expanding economic opportunities for businesses in the City, expanding the
City's.employment base, and generating Sales Tax that City can utilize to fund general
governmental services such as police, fire, street maintenance, and parks and. recreation
programs. City and McKenna have agreed that the respective considerations are a fair
exchange.
F. The City has found that it is of benefit to the City and its citizens that
certain obligations be imposed upon McKenna's future place of business to ensure
Subaru vehicle sates and the resulting sales -tax revenues to the City.
NOW, THEREFORE, based upon the foregoing Recitals and in consideration of
the mutual covenants and conditions hereinafter set forth, McKenna and City agree as
follows:
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DEFfNITIONS.
The capitalized teens and words used in this Agreement shall have the following
meanings unless expressly provided to the contrary.
1.1 "Commencement Date" means first day of the month following McKenna
Motors Huntington Beach, Inc.'s opening of a Subaru Dealership in Huntington Beach.
1.2 "Event of Default" means any event so designated in this Agreement.
1.3 "Fiscal Year" means the City's Fiscal Year of October 1 through
September 30.
1.4 "Laws" means all California State Statutes, laws, Ordinances, regulations,
orders, writs, judgments, injunctions, decrees or awards of the United States or any state,
county, municipality or other Governmental Agency.
1.5 "Operating Period" means the period beginning with the Commencement
Date and expiring sixteen (16) years later.
1.6 "Party" means any party to this Agreement. The "Parties" shall be all
parties to this Agreement.
1.7 "Penalty Assessments" means. penalties, assessments, collection costs and
other costs, fees or charges resulting from late or delinquent payment of Sales Tax and
which are levied, assessed, or otherwise collected from the business on the Site owning or
obligated to pay Sales Tax.
1.8 "Person" means any entity, whether an individual, trustee, corporation,
partnership, trust; unincorporated organization, governmental agency or otherwise.
1.9 "Sales Tax Increment" means that portion of taxes derived and received
by the City of Huntington Beach from the imposition of the Bradley Bruns Uniform
Local Sales And Use Tax Law, commencing with Section 7200 of the Revenue and
Taxation Code of the State of California, as amended, or its equivalent, arising from all
businesses and activities conducted on the Site. Sales Tax Increment shall not include
Penalty Assessments, any Sales Taxes levied by, collected for or allocated to the State of
California, the County of Orange, a district or any other entity, notwithstanding that such
funds received by City are derived or measured by such other entity based upon Sales
Taxes. The Sales Tax Increment shall not exceed one percent (1%) upon taxable sales
and uses on the Site.
1.10 "Site" refers to 18711 Beach Blvd., Huntington Beach, California 92648,
the property within the City of Huntington Beach where McKenna will establish a Subaru
Dealership.
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1.11 "Sales Tax" means the tax derived from McKenna's business conducted
on the Site and a portion of which is allocated to and received by the City pursuant to the
Uniform Local Sales and Use Tax Law, commencing with California Revenue and
Taxation Code Section 7200, et seq., as amended.
2. THE PARTIES
2.1 McKenna, a California corporation, whose mailing address for purposes of
this Agreement is: 18711 Beach Blvd., Huntington Beach, California 92648. Wherever_
the term McKenna is used in this Agreement, the term shall be deemed to refer to
McKenna Motors Huntington Beach, Inc.
McKenna may assign the rights and obligations of this Agreement to any
other person, entity, or organization as long as the underlying business operations at the
location remain an automobile dealership.
By executing this Agreement, McKenna warrants and represents to City
that it has the full power and authority to enter into this Agreement and that all
authorizations and approvals required to make this Agreement binding upon McKenna
have been duly obtained.
2.2 The City is a Municipal Corporation, duly organized and existing pursuant
to its City Charter.
3. OBLIGATIONS OF McKENNA
3.1 Agreement. McKenna hereby covenants and agrees that they have opened
a Subaru Dealership and are selling vehicles at the Site within, and to continue to use the
Site as its primary Subaru Dealership business location during the Operating Period.
3.2 Site and Restrictions. McKenna shall, within a reasonable time, not to
exceed three years from approval of this document by the City Council of the City of
Huntington Beach, establish a Subaru Dealership at the Site. The purchase of the Site by
McKenna shall result in a deed restriction on the Site, good and lasting for 16 years,
which restricts the use of the Site and underlying property for new Auto Sales only. If
McKenna is unable to purchase the Site in Huntington Beach, McKenna and the City
Manager or his or her designee shall help identify an alternative site within the City of
Huntington Beach. If said negotiations are unsuccessful, either party may terminate this
Agreement upon thirty (30) days' written notice to the other party.
3.3 Maximize Sales Tax. During the Operating Period, McKenna shall use its
best efforts, consistent with the requirements of law, to designate the Site as the point of
sale in all sales of its products.
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3.4 Indemnification. From the Commencement bate of this Agreement
through the termination date, McKenna shall indemnify, defend, and hold harmless City
and its officers, employees and agents, from and against all liabilities, obligations, claims,
damages, penalties, causes of action, judgments, costs and expenses (including, without
limitation, reasonable attorneys' fees and expenses) (collectively "Claims") imposed
upon or incurred by or asserted against City arising out of any act or omission of
McKenna or its business; provided, however, that the aforesaid obligations of McKenna
shall not apply to the extent any Claim results from the active negligence or intentional
misconduct of City or any of City's officers, employees, agents, or contractors. In the
event that any action, suit or proceeding is brought against City by reason of any such
occurrence, McKenna, upon City's request, will, at McKenna's expense, defend such
action, suit or proceeding at its sole cost.
3.5 Insurance. McKenna shall take out and maintain in effect through the
Operating period, at McKenna's sole cost and expense, the following insurance policies
in. the minimum amounts specified and in the forms provided below:
(1) Comprehensive General Liability in an amount of not less than One
Million Dollars ($1,000,000) combined single limits for each occurrence for bodily
injury, personal injury, and property damage including contractual liability.
(ii) Workers" Compensation as required by the Labor Code of the State of
California and Employers' Liability insurance in an amount not less than required by
California law.
3.6 Local, State and Federal Laws. McKenna shall carry out the operation of
the business in conformity with all applicable local, State and Federal laws.
3.7 Anti -discrimination. McKenna shall not discriminate against any
employee or applicant for employment because of age, sex, marital status, race, handicap,
color, religion, reed, ancestry, or national origin.
3.8. McKenna's Representations and Warranties. McKenna makes the
following representations and warranties as of the date of this Agreement and agrees that
such representations and warranties shall survive and continue thereafter but shall not be
remade after the date of this Agreement.
3.8.1 No Litigation. "There is no litigation, action, suit, or other
proceeding pending or threatened against McKenna or the Site that may adversely affect
the validity or enforceability of this Agreement or sale of vehicles at the Site. To the best
of McKenna's knowledge, McKenna is not in violation of any State Statute, Federal law,
regulation or Ordinance, or of any order of any court or governmental entity, the effect of
which would prohibit McKenna from performing its obligations hereunder.
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3.8.2 Authority. McKenna has complied with all governmental
requirements concerning its organization, existence and transactions. McKenna has the
right and power to own and operate its business as contemplated in this Agreement.
3.8.3 No Breach, To McKenna's knowledge, none of the undertakings
contained in this Agreement violate any applicable governmental requirements, or
conflicts with, or constitutes a breach or default under, any agreement by which
McKenna is bound or regulated.
3.8.4 Warranty Against Payment of Consideration for Agreement.
McKenna warrants that it has not paid or given, and will not pay or give, to any third
person, any money or other consideration for obtaining this Agreement, other than
nonnal costs of conducting business and costs of professional services such as
accountants and attorneys.
3.9 Release of City Officials. No member, official, agent, employee, or
attorney of the City shall be personally liable to McKenna, or any successor in interest of
McKenna, in the event of any default or breach by the City or for any amount which may
become due to McKenna or its successors, or on any obligations under the terins of this
Agreement. McKenna hereby waives and releases any Claim it may have personally
against the members, officials, agents, employees, consultants, or attorneys of the City
with respect to any default or breach by the City or for any amount that may become due
to McKenna or its successors, or on any obligations under the terms of this Agreement.
3.10 Reports. Within ten (10) days of filing each report with the State Board of
Equalization, McKenna shall provide to the City true and correct copies of all reports
filed by McKenna with the State Board of Equalization in order to allow the City to
preliminarily determine the amount of Sales Tax paid by McKenna on account of sales
from the Site; provided, however, that the City shall not be deemed to have received any
Sales Tax until the City's actual receipt thereof.
4. OBLIGATIONS OF CITY OF HUNUNGTON BEACH
4.1 Tax Rebate. Within thirty (30) days after the City confirms its receipt of
Sales Tax paid by McKenna on account of sales from the Site during the Operating
Period, the City shall pay to McKenna on a quarterly basis financial assistance in an
amount equal to forty-five percent (45%) of annual Sales Tax Increment generated by
McKenna within the City of Huntington Beach and actually received by the City, after
the first $150,800.00 in annual gross sales. City retains all sales tax of the first
$150,800.00 in annual gross sales.
4.2 City's Obligation to Provide Assistance Conditional on Sales Tax
Increment. The City's obligation to provide McKenna with assistance pursuant to 4.1 is
conditioned upon McKenna producing Sales Tax Increment each Fiscal Year. To the
extent McKenna does not produce Sales. Tax Increment, then the tax rebate obligations
herein shall be reduced to zero.
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4.3 Annual Adjustment. Promptly after each fiscal year of the City which
includes a portion of the Operating Period, the City shall determine with respect to that
fiscal year the aggregate amount of Sales Tax received by the City and the aggregate
amount of financial assistance payments made to McKenna pursuant to Section 4.1. If
for any reason (.including but not limited to reporting errors or other adjustments) the
aggregate amount of payments by the City with respect to that fiscal year is less than the
aggregate amount payable with respect to that fiscal year, the City shall pay to McKenna
an adjustment payment equal to the amount of deficiency; if for any reason (including but
not limited to reporting errors or other adjustments) the aggregate amount of payments by
the City with respect to that fiscal year is more than the aggregate amount payable with
respect to that fiscal year, then the amount of the excess shall be applied against the next
payments due under Section 4.1, except that if any unapplied excess remains after the
Operating Period, McKenna shall pay the amount of the unapplied excess to the City
upon demand.
4.4 Legal Challenge. Should any third party successfully challenge the
validity of this Agreement through a taxpayer suit or otherwise, either party may
terminate this Agreement upon thirty (30) days written notice.
4.5 Contingent Liability and Limitations. The tax rebate obligations of the
City of Huntington Beach shall be subject to the provisions of City Charter Section 605,
regarding manual budget appropriations, and will not be payable for a period in excess of
the twenty-year Operating Period after relocation to the new site.
DEFAULTS AND REMEDIES
5.1 Events of Default. The following shall initiate the default sequence_
(a) If McKenna materially breaches any of its obligations under
Sections 3.1 through 3.7 of this Agreement.
(b) If McKenna is found by a trier of fact, after hearing, to be in
violation of any Local, State or Federal Iaw.
(c) If McKenna is found by a trier of fact, after hearing, in a final,
non -appealable order or judgment, either to be in violation of any anti -discrimination
regulation or to be liable in a suit for discrimination.
(d) If McKenna fails to provide the City with copies of the quarterly
(or, if applicable, monthly) Board of Equalization reports filed by McKenna.
(e) If City fails to timely pay its obligations hereunder.
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When any of the initiating events described in this Section 5.1 occur, City or
McKenna may give the other written notice to cure. Where such act or omission is not
cured by the breaching Party within thirty (30.) days after that Party's receipt of written
notice that such obligation was not performed, it shall constitute an Event of Default;
provided that, if cure cannot reasonably be effected within such 30-day period, such
failure shall not be an Event of Default so long as the Party promptly (in any event,
within 10 days after receipt of such notice) commences cure, and thereafter diligently (in
any event within 10 days after receipt of such notice) commences cure, and thereafter
diligently (in any event within a reasonable time after receipt of such notice) prosecutes
such cure to completion.
5.2 Remedies Upon Default. Upon the occurrence of any Event of Default,
and thirty (30) days after written notice of default, and after a reasonable opportunity to
cure such default, City or McKenna, as appropriate, may terminate this Agreement and
file any action available in law or equity.
6. GENERAL PROVISIONS
6.1 Time of the Essence. Time is of the essence of this Agreement and all
Parties' obligations hereunder.
6.2 Venue. In the event of any litigation hereunder, all such actionsshall be
instituted in the Superior Court of Orange,. State of California, or in an appropriate
municipal court in the County of Orange, State of California or an appropriate Federal
District Court in the Central District of California.
6.3 Applicable Law. The laws of the State of California shall govern the
interpretation and enforcement of this Agreement.
6.4 Execution in Counterparts. This Agreement may be executed in two or
more counterparts, each of which shall be an original, but all of which shall constitute
one and the same instrument.
6.5 Attachments Incorporated. The Attachment to this Agreement is
incorporated herein by this reference.
6.6 Copies_ Any executed copy of this Agreement shall be deemed an original
for all purposes.
6.7 Severability. If any one or more of the provisions. contained herein shall
for any reason be held to be invalid, illegal or unenforceable in any respect, such
invalidity, illegality or unenforceability, unless it affects the substantial rights of a party
or defeats the purpose of this Agreement, shall not affect any other provision of this
Agreement, but this Agreement shall be construed as if such invalid, illegal or
unenforceable provision has not been contained herein.
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16-5513/146896/DKO
6.8 Interpretation. The language in all parts of this Agreement shall in all
cases be construed as a whole according to its fair meaning, and not strictly for or against
any party. When the context of this Agreement requires, the neuter gender includes the
masculine, the feminine, a partnership or corporation of joint venture or other entity, and
the singular includes the plural.
6.9 No Partnership or Joint Venture. The parties hereto agree that nothing
contained in this Agreement shall be deemed or construed as creating a partnership, joint
venture, or association between City and McKenna; or cause City or McKenna to be
responsible in any way for the debts or obligations of the other, and no other provision
contained in this Agreement nor any acts the parties hereto shall be deemed to create any
relationship between City and McKenna other than that of contracting parties. Further,
nothing herein shall give or is intended to give any rights of any kind to any person not an
express party hereto.
6.10 Integration. This Agreement, including the Attachments attached hereto,
is. the entire Agreement between and final expression of the parties, and there are no
agreements or representations between the parties except as expressed herein. All prior
negotiations and agreements between City and McKenna with respect to the subject
matter hereof are superseded by this Agreement. Except as otherwise provided herein, no
subsequent change or addition to this Agreement shall be binding_unless in writing and
signed by the parties hereto.
6.11 Nonwaiver. None of the provisions of this Agreement shall be considered
waived by any party except when such waiver is given in writing. The failure of any
party to insist in any one or more instances upon strict performance of any of its rights
hereunder shall not be construed as a waiver of any such provisions or the relinquishment
of any such rights for the future, but the same shall continue and remain in full force and
effect.
6.12 Notices. Any notice; approval, demand or other communication required
or desired to be given pursuant to this Agreement shall be in writing and shall be
effective upon personal service (including by means of professional messenger service)
or, five (5) days after mailing via United States first-class mail or two (2) days after
hailing via federal Express or other similar reputable overnight delivery service. Any
notice shall be addressed as set forth below:
If to City: If to McKenna:
Kellee Fritzal McKenna Motors Huntington Beach, Inc_
Deputy Director of Business Development Attn: Daniel J. McKenna III
City of Huntington Beach 18711 Beach Blvd.
2000 Main Street Huntington Beach, CA 92648
Huntington Beach, CA 92648
16-5513/146896/DKO
With copies to (which shall not constitute Notice):
Michael E. Gates, City Attorney
City of Huntington Beach
2000 Main Street
Huntington Beach, CA 92648
and
Fred Wilson, City Manager
City bi: Huntington Beach
2000 Main Street
Huntington Beach, CA 92648
Either City or McKenna may change its respective address by giving written notice to the
others in accordance with the provisions of this Section.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed on the dates hereinafter respectively set forth.
McKenna MotorsZ
;ton Beach, Inc., a
California comora
13v:
print name
ITS: (circle one) C;hairmanlP
ice E'resid en(n
l t J: ('cirele cave) Sccret)ry!Chicf-Financial Officer/Asst.
Secretary — Treasurer
COUNTERPART
9
16-55131146896/DKO
CITY OF HUNTINGTON BEACH,
a municipal corporation of the State
of California
Mayor
APPROVED AS,T-6,,I'.QI-YI:
—CltyAttorney t)\6* 1 �) `(o �,.uV
INI'I`IlATED AND APPROVED:
Deputy Director of Business Development
REVIEWED AND APPROVED:
City Manager
With copies to (which shall not constitute Notice);
Michael E. Gates, City Attorney
City ofHuntington `Beach
2000 Maiii Street
Huntington Beach.. CA 92648
and
Fred Wilsop., City Manager
City of Huntington .Bead]
2000 Main Street
Huntington Beach, CA 92648
Either City or McKenna=y change its respective address by giving written notice to the
others in accordance with the .provisions -of this Section,
IN WITNESS WHEREOF; the,parties hereto, have caused this Agreement to be
executed on the dates hereinafter respectively set forth:
McKenna Motors
California; carport
By:
print name
ITS: (circle one) Chairman/F
Beach, Inc.j a CITY OF HUNTINGTON BEACH,
a municipal corporation of e State
of California
—Mayor ti
y �1( �
db
! I J: (circle om) Secretary/Chief Financial Officer/Asst.
Secretary — Treasurer
f
9
16-5513/1 Q6896/DKO
APPROVED AS T-X :
INI'ITATED A APPROVED -
Deputy Directo.rof usiness Development
iZEVI D APPROVED:
Y WaAager
ATTACHMENT NO. 1
McKenna Motors Huntington Beach. Inc.'s Certificate
Bate:
McKenna Motors Huntington Beach. Inc., hereby requests a sales tax rebate in the
amount, and on the date, set forth below, pursuant to that certain Sales 'Fax Sharing
Agreement between the City of Huntington Beach and McKenna Motors Huntington
Beach. Inc. Capitalized terms used and not otherwise defined herein shall have the
meanings set forth for them in the Agreement.
REQUESTED AMOUNT:
McKenna Motors Huntington Beach, Inc., hereby represents and warrants to City
that:
On McKenna Motors Huntington Beach,
Inc., paid Sales Taxes for the to fiscal year
quarter [month] to the California Board of Equalization in the amount of
$ . Attached hereto is a true and complete photocopy of our
quarterly f monthly] filings or other poof of payment.
McKenna Motors Huntington Beach, Inc.
PAYMENT APPROVED
City Representative
16-5 513/ 146896/DKO
Recorded in Official Records, Orange County
Hugh Nguyen, Clerk -Recorder
III II II 111111 II IR I I 1111 II NO FEE
*$ R 0 0 0 8 9 0 7 5 8 9$
2016000618941 11:54 am 12/07/16
90 SCS Dot 6
RECORDING REQUESTED BY ) 0.00 0.00 0.00 0.00 15.00 0.00 0.00 0.00
AND WHEN RECORDED MAIL TO: )
City of Huntington Beach )
2000 Main Street )
Huntington Beach, CA 92648 )
Attn: City Clerk )
}
(Space above for Recorder's use)
This document is exempt from recording
fees pursuant to Government Code Section
27383.
AGREEMENT DECLARING CONDITIONS, COVENANTS
AND RESTRICTIONS FOR PROPERTY
(NEW AUTO SALES)
This Agreement Declaring Conditions, CovWonz=__
estrictions for Property -
New Auto Sales (the "Declaration") is made as of _, 2016by
and between McKENNA MOTORS HUNTINGTON BEACH, INC., a California
corporation (the "Covenantor"), and THE CITY OF HUNTINGTON BEACH, a
California municipat corporation (the "City").
RECITALS
A. Covenantor is the owner of record of that certain real property generally
located at 18711 Beach Blvd., Huntington Beach, California and legally described in the
attached Exhibit "A" (the "Site'; and
B. On h , the City Council approved that certain Sales
Tax Sharing Agreement with Covenanto7 authorizing a sales tax rebate incentive for the
development of a new Subaru dealership on the Site; and
C. The Sales Tax Sharing Agreement requires that the use of the Site be
restricted to New Auto sales for a period of sixteen (16) years, and the execution and
recordation of this Agreement is intended to fully satisfy these conditions.
NOW, THEREFORE, the parties hereto agree and covenant as follows:
i . Use Restriction. Covenantor agrees for itself and its successors and
assigns, and every successor to Covenantor's interest in the Site, or any part thereof, that
the Site shalt be held subject to this Declaration for sixteen (I b) years from the first day
16-5513/146897/I)KQ
This dooxnent Is solety for the official
businesf of the City of Huntington
Basch, as contemplated under
Government Code Sec. 6103 and
M1otbs recorded free of charge.
of the month following Covenantor's opening of a new Subaru Auto Dealership on the
Site as follows:
(a) New Auto Sales QrilY. Covenantor agrees that the Site will be used for
purposes of New Auto sales only. As used in this Declaration, the term "Covenantor"
shall mean Covenantor, its successors and assigns, and every successor to Covenantor's
interest in the Project, or any part thereof.
(b) Duration. The terns of this agreement shall commence on the first day
of the month following Covenantors opening of a new Subaru Auto Dealership on the
Site and will continue for sixteen (16) years thereafter (the "Terra"). The covenant
contained in this Section l shall run with the land and shall automatically terminate and
be of no further force or effect upon the expiration of the Term.
2. Covenants for Benefit of City. All covenants without regard to technical
classification or designation shall be binding for the benefit of the City and such
covenants shall run in favor of the. City for the entire period during which time such
covenants shall be in force and effect, without regard to whether the City is or remains an
owner of any land or interest therein to which such covenants relate. The City, in the
event of any breach of any such covenants, shall have the right to exercise all the rights
and remedies and to maintain any such action at law or suits in equity or other proper
legal proceedings to enforce and to cure such breach to which it or any other beneficiaries
of these covenants may be entitled during the term specified for such covenants, except
the covenants against discrimination which may be enforced at law or in equity at any
time in perpetuity.
3. Binding on Successors and Assigns. The covenants and agreements
established in this Declaration shall, without regard to technical classification and
designation, be binding on Covenantor and any successor to Covenantor's right, title, and
interest in and to all or any portion of the Project, for the benefit of and in favor of the
City of Huntington Beach. All the covenants contained in this Declaration shall remain
in effect for the Term, and shall automatically terminate and be of no further force or
effect after such time. Upon expiration of the Affordability Period, City agrees to
cooperate with Covenantor, at no cost to City, in removing this Declaration of record
from the Site.
4. Counterparts_ This Agreement may be executed in a number of
counterparts, each of which shall be an original, but all of which shall constitute one and
the same document.
Applicable Law.
(a) if any provision of this Agreement or portion thereof, or the
application of any provision to any person or circumstances, shall to any extent be held
invalid, inoperative, or unenforceable, the remainder of this Agreement, or the
application of such provision or portion thereof to any other persons or circumstances,
16-55131146997/DKO 2
shall not be affected thereby and it shall not be deeded that any such invalid provision
affects the consideration for this Agreement; and each provision of this Agreement shall
be valid and enforceable to the fullest extent permitted by law.
(b) This Agreement shall be construed in accordance with the laws of
the State of California and all applicable City Codes.
IN WITNESS WHEREOF, the City and Covenantor have caused this instrument
to be executed on their behalf by their respective officers hereunto duly authorized as of
the date set forth above.
COVENANTOR: 1 CITY:
MCKENNA I RS HUNTINGTON CITY OF HUNTINGTON 81. AC:;II.
BEACH, IN lifornia corporation a California municipal corporation
By:
Mayor
prir t Milne
ITS: (circle onrl Chairman r ienUVicc President
AND City Clerk
By:
Ill U print name
ITS: (circle u e) Secretary/ChidFiitanciaf
Officer/Asst. Secretary — Treasurer
1 G-5513114689'7/UKO 3
APPROVED A
riy Attorney j1«� jq po�tL
INITIATED AND APPROVED:
Deputy Director of Economic Development:
REVIEWED AND APPROVED:
City Manager
shall not:be affected thereby and it shall not deeded that any such invalid provision
affects the consideration for this Agreement; acid each provision of this Agreement shall
bevalid.andenforceableto the fullest extent permitted by law:
(b) This Agreement shall be construed.in accordance with the laws of
the State of California and all applicable City Codes.
IN WITNESS WHERE -Of, the City and Covenantor have caused this instrument
to be executed on their behalf by their respective officers hereunto duty authorized as of
the date`setforth above.
COV.ENANTORc
CITY:
McKENNA RS HUNTINGTON CITY OF HUNTINGTON BEACH,
I31✓ACH;. IN liforiiiacorporation a Ca ifornia gnu 'cAQ
ipal gorporation
D nny McKenna
By:
hkkk3Vlyo ✓ate s Katapodis
prii t. 1 m
ITS: (ctrc=le=ore)lichairmal r' 1 ntNice (?resident
AND
City Clerk —Robin Estanislau
Dann McKenna
By:
ITS: (eiweAe) secretary Mef l:ina neial
Officer/Ass(. Secretary — Treasurer
INITIATED AN APPROVED:.
Depu Director of onomic Development
REVI P � A l APPROVED:
City �4anager
16-5513I146897/DKQ 3
ALL-PURPOSECALIFORNIA •WLEDGMENT CIVIL CODE § 1189
A notary public or other officer completing this certificate verifies only the identity of the individual who signed the
document to which this certificate is attached, and not the truthfulness, accuracy, or validity of that document.
State of California )
County of --� /one � )
OnNN?X 1ViCJ,-7ZiZO1LP before me, J1C' �YCiVI � �r
Date �^ Here Insert Name and title of the Office
personally appeared t l�(1 �C. VAC--C�ciclk
Name(s) of Signer(s)
who proved to me on the basis of satisfactory evidence to be the person(s) whose name(s) is/are
subscribed to the 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),
or the entity upon behalf of which the person(s) acted, executed the instrument.
I certify under PENALTY OF PERJURY under the laws
of the State of California that the foregoing paragraph
is true and correct.
WITNESS my hand and ffZ
W. JHS A JIRON
Commission # 2072482
z •'� Notary Public - California z Signature
Los Angeles County ' SignatuPublic
My Comm. Expires Jun 24, 2018
Place Notary Seal Above
OPTIONAL
Though this section is optional, completing this information can deter alteration of the document or
fraudulent reattachment of this form to an unintended document.
Description of Attached Document
Title or Type of Document: Document Date:
Number of Pages: Signer(s) Other Than Named Above:
Capacity(ies) Claimed by Si ner( )
Signer's Name: c--e-461
'E_korporate Officer —t1-
❑ Partner — ❑ Limited ❑ General
❑ Individual ❑ Attorney in Fact
❑ Trustee ❑ Guardian or Conservator
❑ Other:
ner Is Representi
Signer's Name:
❑ Corporate Officer — Title(s):
❑ Partner — ❑ Limited ❑ General
❑ Individual ❑ Attorney in Fact
❑ Trustee ❑ Guardian or Conservator
❑ Other:
Ir
Signer Is Representing:
02014 National Notary Association • www.NationalNotary.org • 1-800-US NOTARY (1-800-876-6827) Item #5907
A notary public or other officer completing this certificate verifies only the identity
of the individual who signed the document to which this certificate is attached, and
not the truthfulness, accuracy, or validity of that document.
ACKNOWLEDGMENT
STATE OF CALIFORNIA )
) ss
COUNTY OF ORANGE )
On November 29, 2016 before me, P. L. Esparza, Notary Public, personally
appeared Robin Estanislau and Jim Katapodis who proved to me on the basis of
satisfactory evidence to be the persons whose names are subscribed to the within
instrument and acknowledged to me that they executed the same in their authorized
capacities, and that by their signatures on the instrument the persons, or the entity
upon behalf of which the persons 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.
P. L. ESPARZA
WITNESS my hand and official seal. Commission # 20327so
i � Notary Public - California z
ZOrange County n
My Comm. Expires Aug 4, 2017
CL (Seal)
(Notary Signature) l/ (J
EXHIBIT "A"
(Legal Description)
Lot 10 in block H of Tract No. 7, in the City of Huntington Beach, County of Orange, State of California, as
shown on a map thereof recorded in book 9, page 8, miscellaneous maps, records of said Orange
County.
Excepting therefrom the easterly 14 feet as described in deed to the State of California recorded
September 18, 1952 in book 2384, page 376, official records.
The south 100 feet of lot 9 in block H of Tract No. 7, in the City of Huntington Beach, County of Orange,
State of California, as shown on a map thereof recorded in book 9, page 8, miscellaneous maps, records
of said Orange County.
Excepting therefrom the easterly 14.00 feet as described in deed to the State of California recorded
August 6, 1952 in book 2365, page 474, official records.
Lots 8 and 9 in block H of Tract No. 7, in the City of Huntington Beach, County of Orange, State of
California, as shown on a map thereof recorded in book 9, page 8, miscellaneous maps, records of said
Orange County.
Excepting from said lot 8 the north 100 feet thereof.
Also excepting from said lot 9 the south 100 feet thereof.
Also excepting therefrom the easterly 14 feet as described in the deed to the State of California,
recorded July 29, 1952 in book 2362, page 324, official records.
APN: 159-102-08
The land referred to herein below is situated in the City of Huntington Beach, in the County of Orange,
State of California, and is described as follows:
Parcel A:
Parcels 1 and 2, as shown on a map filed in book 30, page 44 of parcel maps, in the office of the county
recorder of Orange County, California.
Parcel B:
The north 100.00 feet of lot 8, in block H of Tract No. 7, in the City of Huntington Beach, County of
Orange, State of California, as per map recorded in book 9, page 8, miscellaneous maps, in the office of
the county recorder of said county.
Excepting therefrom the easterly 14.00 feet.
Also excepting all oil, gas, minerals and other hydrocarbon substances, lying below a depth of 500 feet,
but without the right to surface entry to take, market, mine, explore or drill for same, as reserved in
deed recorded July 24, 1964 in book 7148 page 399 pf official records.
APN: 159-102-06 and 159-102-07
ATTACHMENT #2
* r . .. :.
s / €sv €
A
October 31, 2016
VIA E-MAIL AND U.S. MAIL
Ms. Kellee Fritzal
Deputy Director of Economic Development
City of Huntington Beach
2000 Main Street
Huntington Beach, CA 92648
Re: Sales Tax Sharing Agreement
McKenna Motors Huntington Beach, CA
Dear Ms. Fritzal:
Since 1978, I have owned and operated McKenna Motors Huntington Beach, Inc. dba McKenna
Volkswagen Huntington Beach, Inc. dba McKenna Volkswagen Huntington Beach ("McKenna
VW") on Beach Boulevard. I also own the property adjacent to McKenna VW which houses the
majority of the Car Pros Kia Huntington Beach dealership.
In the last two years, McKenna V W's future has been in question due to the high -density urban
housing project, the Urban Art Loft Project ("Lofts") that had been planned next door to
McKenna. In addition, the Volkswagen brand has been rocked by several public scandals and
continues to suffer through bad business decisions by the manufacturer. In order to continue my
business as -is, I had to purchase the land where the .Art Lofts were to have -been developed or
risk selling the dealership to an apartment developer. Consequently, as the Art Loft was already
in planning approval process, the land was valued at significantly higher than market rate.
Recently, I had the opportunity to purchase a Subaru dealership that would operate and share the
same location as McKenna VW. This venture is extremely costly and as such, I am requesting
assistance from the City as per the details below. The purchase price for the Subaru franchise
goodwill was $6,000,000.00, which did not include the cost of a new showroom, maintenance
facility, and retail store to meet Subaru's dealership image, space guidelines, and land acquisition
requirements.
In order to make this opportunity viable, I ask the City of Huntington Beach ("City") provide
assistance to the new McKenna Subaru dealership with assistance. More specifically, I request
the City to make available to 45% of the City's share of the sales tax generated by McKenna
Volkswagen and McKenna Subaru operations over the next 16 years. Given the current sales tax
Fwy 0 Beach • 18711 Beach Boulevard, Huntington Roach ('nlifornia 92648 f (714) 842-2000 • (800) 954-4269
Item 13. - 17
www.mc H B -826- -'.Om
base the City is receiving, I ask only to share the new sales tax dollars. I believe this request to be
in the City's best interests due to the benefits the City shall procure from adding another fast-
growing new car franchise to its tax and employment base.
As per our previous discussions, here are some additional detail points:
(1) The entity that will enter into the Sales Tax Sharing Agreement shall be McKenna
Motors Huntington Beach, Inc. (dba McKenna Volkswagen Huntington Beach, McKenna
Subaru), or any future affiliated entities located at 18783, 18771, 18751, 18711, 18655,
and 18651 Beach Blvd.
(2) The scope of the project is to:
a. Acquire South Coast Subaru for $6,060,000.00 and relocate the operations to
Huntington Beach as McKenna Motors Huntington Beach, Inc. dba McKenna
Subaru
b. Acquire the Lofts located at 18651 and 18665 Beach BIvd for $6,750,000.00.
c. Build a new showroom that corresponds with Subaru's image and facility
requirements for approximately $4,500,000.00 — $5,000,000.00
d. Continue negotiations and extend the lease with Car Pros Kia Huntington Beach
(3) McKenna Subaru will temporarily operate at 18711 Beach Blvd.
(4) The City's responsibilities shall be to help:
a. Assist with obtaining the necessary requirements and permits for storage and
parking for Subaru and Volkswagen vehicles at 18651 and 18665 Beach Blvd.
b. Assist with obtaining the necessary requirements and permits of the new car
showroom located at 18783, 18771, and 18751 Beach Blvd.
c. Provide McKenna Motors Huntington Beach, Inc. the 45% tax sharing
arrangement required so McKenna can afford to continue this mutually beneficial
proj ect.
(5) Property values of the vacant site at 18651 and 18665 Beach Blvd., as well as McKenna
VW at 18711 Beach Blvd. will increase due to the improvements
(6) McKenna's investment shall be $6,000,000.00 to acquire the Subaru franchise. McKenna
is then required to design and build the renovated McKenna Subaru dealership. Although
all details are not yet available, the cost is estimated at $4,5000,000.00 to $5,000,000.00.
Further, the cost of acquisition of vacant land is valued at $6,750,000.00
405 Fwy @ Beach - 18711 Beach Boulevard, Huntington Beach. California 92648 - (714) 842-2000 - (800) 954-4269
www.rrHB-827-.com Item 13. - 18
(7) Currently, there are 73 employees at McKenna VW, and an estimated 85 new employees
at McKenna Subaru for a total of 158 employees
(8) Current estimates project taxable sales of $27,000,000.00 per year for McKenna VW.
Additionally, estimated projections of taxable sales are over $50,000,000.00 combined
for McKenna VW and McKenna Subaru.
As always, thank you for your continued assistance on this exciting new opportunity. Should you
need more information, please let me know.
Very
Danic
cc: Aaron Jacoby, Esq. (via e-mail)
Mr. Ken Domer (via e-mail)
Mr. Mark Malbon (via e-mail)
1—"'� 1wy @ Beach • 18711 Beach Boulevard, Huntingtnn Rpnnh. California 92648 a (714) 842-2000 • (800) 954-4269
Item 13. - 19 wWW.M4HB -828-ram
ATTACHMENT #3
ECONOMIC DEVELOPMENT SUBSIDY REPORT
PURSUANT TO GOVERNMENT CODE SECTION 53083
FOR A SALES TAX SHARING AGREEMENT
BY AND BETWEEN CITY OF HUNTINGTON BEACH
AND MCKENNA MOTORS HUNTINGTON BEACH, INC.
Pursuant to Government Code Section 53083, the City Council of the City of Huntington Beach must
hold a noticed public hearing and, prior to the public hearing, provide all of the following information in
written form and available to the public and through the City's website regarding a proposed economic
development subsidy to be provided by the City pursuant to a Sales Tax Sharing Agreement by and
between the City of Huntington Beach and McKenna Motors Huntington Beach, Inc. ("Agreement").
Notice was published on the City's website for a public hearing to be held on November 21, 2016.
The purpose of this report is to provide the information required pursuant to Government Code Section
53083 in regards to the Agreement. This report shall remain available to the public and posted on the
City's website until the end date of the economic development subsidy, as further described in Number
2 below.
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.
The Agreement is with McKenna Motors Huntington Beach, Inc. who will construct, own and
operate a new Subaru dealership that will benefit from the economic development subsidy:
McKenna Motors Huntington Beach, Inc.
18711 Beach Boulevard
Huntington Beach, CA 92647
2. The start and end dates and schedule, if applicable, for the economic development subsidy.
If the Agreement is approved by the City Council, the start date of the economic development
subsidy will commence on January 1, 2017 and the end date will be no later than 16 years after the
start date, on December 31, 2033. The economic development subsidy will be paid quarterly, within
60 days of the end of each quarter.
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 economic development subsidy is equal to forty-five percent (45%) of the sales tax revenue
received by the City for the VW and Subaru dealerships in excess of $150,800 (base year) for each
year of the term. The term of the subsidy is 16 years and the estimated total amount of revenue
lost to the City is estimated at $1.94 million ($121,250 average per year) in nominal dollars or
approximately $987,000 in present value terms, assuming an 8% discount rate.
City of Huntington Beach 1 November 2, 2016
HB -829- Item 13. - 20
4. A statement of the public purpose for the economic development subsidy.
Danny McKenna owns and operates the McKenna VW on Beach Boulevard, he also owns the
property that a majority of the Kia Dealership is also located and operated from. Due to concerns
over a pending residential project adjacent, dealership's future had been in question (both VW and
Kia). In order to continue his auto dealers business, he purchased the adjacent land (former
McDonald's site) from the residential developer for $6.75 million. However, due to the residential
project being in the planning application process, the property was valued much higher than a
vacant parcel. With the purchase of the land, Mr. McKenna was presented with the opportunity to
buy a Subaru dealership, which he has done, in order to sell Subaru's from the McKenna VW lot.
Mr. McKenna would like to expand and use the two parcels adjacent to the MCKenna VW lot (Site —
parcels 159-102-06 and 159-102-07), of which he is the now the owner, to construct a new
showroom/retail store and maintenance facility to meet Subaru's dealership image and space
guidelines. The opportunity is expensive and he is asking for assistance from the City. Mr.
McKenna will be investing an additional $4.5 to $5 million to construct the new dealership in
addition to the purchase of the land ($6.75 million) and the purchase of the Subaru franchise ($6
million), for a total private investment by Mr. McKenna of over $17 million.
The proposed economic development subsidy will enable Mr. McKenna to expand the operations of
both the VW and Subaru dealerships, with annual combined sales revenues of approximately $58
million per year and potentially increasing the annual sales tax revenues to the City by an average of
$148,000 per year over the existing base of $150,800 per year, or approximately by 100%.
5. The projected tax revenue to the local agency as a result of the economic development subsidy.
Operations of the new dealership are expected to generate significant sales activity and to increase
the sales tax generated by the VW and Subaru dealerships by approximately $4.32 million over the
term of the proposed Agreement plus the $150,800 per year that is currently being received by the
City from the existing facility. The current assessed value of the Site is $5,137,000 and it is projected
that the Site will have a projected assessed value of $9,934,000 after the proposed improvements
are completed, or a $4,797,000 increase.
Projections indicate that, over the 16 year period of the sales tax sharing agreement, the City will
receive approximately $2.37 million in additional sales tax revenue, or $1.21 million in present value
dollars, assuming an 8% discount rate, as a result of the economic development subsidy. In
addition, the City is projected to receive approximately $894,000 in additional property taxes during
the term of the agreement, or $479,000 in present value terms. Therefore, it is estimated that the
City will receive an estimated $1.69 million in projected present value tax revenue after the
estimated $987,000 in present value terms is provided to the dealership as an economic
development subsidy.
Citv of Huntington Beach 2 November 2, 2016
Item 13. - 21 HB -830-
6. The estimated number of jobs created by the economic development subsidy, broken down by
full-time, part-time and temporary positions.
The City anticipates the construction and operation of the new dealership will yield a minimum of 85
full- and part-time jobs and approximately 50 temporary new jobs during the construction.
City of Huntington Beach 3 November 2, 2016
H B -8; i - Item 13. - 22
�. of a- ////D 1/6
NOTICE OF PUBLIC HEARING
Pursuant to Section 53083(a)(6)(b) of the California Government Code (AB 562), the City of Huntington
Beach shall provide public notice and a hearing prior to granting of proposed economic development subsidy.
NOTICE IS HEREBY GIVEN that the City of Huntington Beach will hold a public hearing in the Council
Chambers of the Huntington Beach Civic Center, 2000 Main Street on Monday November 21, 2016 at 6:00
p.m., unless otherwise changed by the City Manager, to consider the following item:
Applicant: McKenna Motors Huntington Beach, Inc. (dba McKenna Subaru): Danny McKenna, President
Project Location: 18711 Beach Boulevard, Huntington Beach, California 92648
Agreement:
The City of Huntington Beach desires to create jobs and employment within the City. The City has the ability to
implement the provisions of AB 562, a statewide economic development tool passed by Governor Brown in late 2013
for the purpose of allowing local jurisdictions to induce economic development for the creation and maintenance of
jobs. The City of Huntington Beach and McKenna Motors Huntington Beach, Inc. are proposing to enter into an
agreement that encourages the creation of a new Subaru dealership within Huntington Beach. The City is proposing
to provide financial assistance in the form of an economic development subsidy to McKenna Motors Huntington
Beach, Inc. as described in the Operating Covenant Agreement. Pursuant to Section 53083 of the California
Government Code (AB 562) the following information will be posted on the City's Web Site.
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.
McKenna Motors Huntington Beach, Inc.: Danny McKenna, President, a California Corporation, 18711
Beach Boulevard, Huntington Beach, California 92648
2) The start and end dates and schedule, if applicable, for the economic development subsidy.
Commencing January 1, 2017 for 16 years.
3) A description of the economic development subsidy, including the estimated total amount of expenditure of public
funds, or of revenue lost to, the local agency, as a result of the economic development subsidy.
The proposed Operating Covenant Agreement provides for participation of revenues generated from
McKenna Motors Huntington Beach, Inc. operations within the City with the City of Huntington Beach. The
Agreement provides that McKenna Motors Huntington Beach, Inc. will retain 45% of revenues generated to
the City over the current base year of $150,800; payment will be made on a quarterly basis. It is estimated,
that McKenna Motors Huntington Beach, Inc. will generate approximately $303,000 first year to the City in
revenue. Based upon this estimate, McKenna Motors Huntington Beach, Inc. is projected to receive
approximately $68,500 per annum and the City approximately $235,000 per annum. The amounts will
increase, with increased sales.
4) A statement of the public purposes for the economic development subsidy.
To continue to expand and enhance economic opportunities for businesses in the City, continue to expand
the City's employment base, and continue to generate hereinafter defined Sales Tax that the City can utilize
to fund general governmental services such as police, fire, street maintenance, and parks and recreation
programs.
5) Projected tax revenue to the local agency as a result of the economic development subsidy.
The City of Huntington Beach will receive approximately $230,000 per year in sales tax revenue.
6) Estimated number of jobs created by the economic development subsidy, broken down by full-time,
part-time and temporary positions.
The City and McKenna Motors Huntington Beach, Inc. have estimated that the Agreement creates 85 full time
jobs in the City. Part time jobs created will be determined. The construction Project will create a minimum of
50 full-time positions.
All interested persons are invited to attend this hearing and express opinions upon the items listed above.
The Operating Covenant Agreement is available for review at Huntington Beach City Hall from November 1,
2016 through November 21, 2016. Any written materials to be submitted to the City Clerk at least twenty-four (24)
hours prior to the hearing City of Huntington Beach, 2000 Main Street, Huntington Beach, CA 92648. Further
information on these items may be obtained at the City of Huntington Beach, Attn: Kellee Fritzal, Deputy Director
Business Development, 2000 Main Street, Huntington Beach, .CA 92648 or by telephone: (714) 374-1519.
Robin Estanislau, City Clerk
City of Huntington Beach
2000 Main Street, 2nd Floor
Huntington Beach, California 92648
(714) 536-5227
http://huntingtonbeachca.gov/HBPublicComments/
NOTICE OF PUBLIC HEARING
Pursuant to Section 53083(a)(6)(b) of the California Government Code (AB 562), the City of Huntington
Beach shall provide public notice and a hearing prior to granting of proposed economic development subsidy.
NOTICE IS HEREBY GIVEN that the City of Huntington Beach will hold a public hearing in the Council
Chambers of the Huntington Beach Civic Center, 2000 Main Street on Monday November 21, 2016 at 6:00
p.m., unless otherwise changed by the City Manager, to consider the following item:
Applicant: McKenna Motors Huntington Beach, Inc. (dba McKenna Subaru): Danny McKenna, President
Project Location: 18711 Beach Boulevard, Huntington Beach, California 92648
Agreement:
The City of Huntington Beach desires to create jobs and employment within the City. The City has the ability to
implement the provisions of AB 562, a statewide economic development tool passed by Governor Brown in late 2013
for the purpose of allowing local jurisdictions to induce economic development for the creation and maintenance of
jobs. The City of Huntington Beach and McKenna Motors Huntington Beach, Inc. are proposing to enter into an
agreement that encourages the creation of a new Subaru dealership within Huntington Beach. The City is proposing
to provide financial assistance in the form of an economic development subsidy to McKenna Motors Huntington
Beach, Inc. as described in the Operating Covenant Agreement. Pursuant to Section 53083 of the California
Government Code (AB 562) the following information will be posted on the City's Web Site.
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.
McKenna Motors Huntington Beach, Inc.: Danny McKenna, President, a California Corporation, 18711
Beach Boulevard, Huntington Beach, California 92648
2) The start and end dates and schedule, if applicable, for the economic development subsidy.
Commencing January 1, 2017 for 16 years.
3) A description of the economic development subsidy, including the estimated total amount of expenditure of public
funds, or of revenue lost to, the local agency, as a result of the economic development subsidy.
The proposed Operating Covenant Agreement provides for participation of revenues generated from
McKenna Motors Huntington Beach, Inc. operations within the City with the City of Huntington Beach. The
Agreement provides that McKenna Motors Huntington Beach, Inc. will retain 45% of revenues generated to
the City over the current base year of $150,800; payment will be made on a quarterly basis. It is estimated,
that McKenna Motors Huntington Beach, Inc. will generate approximately $303,000 first year to the City in
revenue. Based upon this estimate, McKenna Motors Huntington Beach, Inc. is projected to receive
approximately $68,500 per annum and the City approximately $235,000 per annum. The amounts will
increase, with increased sales.
4) A statement of the public purposes for the economic development subsidy.
To continue to expand and enhance economic opportunities for businesses in the City, continue to expand
the City's employment base, and continue to generate hereinafter defined Sales Tax that the City can utilize
to fund general governmental services such as police, fire, street maintenance, and parks and recreation
programs.
5) Projected tax revenue to the local agency as a result of the economic development subsidy.
The City of Huntington Beach will receive approximately $230,000 per year in sales tax revenue.
6) Estimated number of jobs created by the economic development subsidy, broken down by full-time,
part-time and temporary positions.
The City and McKenna Motors Huntington Beach, Inc. have estimated that the Agreement creates 85 full time
jobs in the City. Part time jobs created will be determined. The construction Project will create a minimum of
50 full-time positions.
All interested persons are invited to attend this hearing and express opinions upon the items listed above.
The Operating Covenant Agreement is available for review at Huntington Beach City Hall from November 1,
2016 through November 21, 2016. Any written materials to be submitted to the City Clerk at least twenty-four (24)
hours prior to the hearing City of Huntington Beach, 2000 Main Street, Huntington Beach, CA 92648. Further
information on these items may be obtained at the City of Huntington Beach, Attn: Kellee Fritzal, Deputy Director
Business Development, 2000 Main Street, Huntington Beach, .CA 92648 or by telephone: (714) 374-1519.
Robin Estanislau, City Clerk
City of Huntington Beach
2000 Main Street, 2nd Floor
Huntington Beach, California 92648
(714) 536-5227
http://huntingtonbeachca.gov/HBPublicComments/
Esparza, Patty
From: David Ward [dward@ocregister.com]
Sent: Tuesday, November 01, 2016 10:17 AM
To: Esparza, Patty
Subject: Re: Legal ad for HB Wave, Nov. 10th - McKenna
Good morning Patty.
I hope you had a good evening.
Your notice is all set and ready to go.
Have a great day!!!
A&10212245 �,
Run -Date 11710 ;
Cost $234.00
PROOF %�
NOTICE OF PUBLIC NEAMING
Pursuant to Section 53083(a)(6)(b) of the California Government Code (AB 562), the City of
Huntington Beach shatl provide public notice and a hearing prior to granting of proposed
economic development subsidy.
NOTICE IS HEREBY GIVEN that the City of Huntington Beach will hold a public hearing in
the Council Chambers of the Huntington Beach Civic Center, 20W Main Street on Moncla
November 21, 2016 at 6.00 pm., unless otherwise changed by the City Manager, to consly-
er the following item:
Applicant: McKenna Motors Huntington Beau, Inc. (d4a McKenna Subaru),, Danny
cKepria, President
Project Location: 18711 Beach Boulevard, Huntington Beach, California 92648
Agreement:
The City of Huntinc jton Beach desires to create jobs and employment,within the City. The
City has,the ability to implement the provisions of AB 662, a statewide economic develop-
ment tool passed by Governor Brown in late 2013 for the purpose of allowing local judsdc-
tims to induce economic development for the creation and maintenance of jobs. The City
of Huntington Reach and McKenna Motors Huntington Beach, Inc, are pro resin to enter
into an agreement that encourages the creation of a new Subaru dealership Uthin Hun-
tington Beach. The City is proposing to provide financial assistance in the form of an eco-
nomic development subsidy to McKenna Motors Huntington Beach, Inc. as described in
the Operatin Covenant A reement. Pursuant to Section 53083 of the California Govern.
merit Code (9B 5621 the folEwing information will be posted on the City's Web Site,
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 applica-
ble.
McKenna Motors Huntington Beach, Inc.: Danny McKenna, President, a California Cor-
poration, 18711 Beach Bouli�warcl, Huntington Beach, California 92648
2) The start and end dates and schedule, d applicable, for the economic development sub-
sid 8ommencing January 1, 2017 for 16 years,
3) A description of the economic development subsidy, including the estimated total
amount of expenditure of public funds, or of revenue lost to, tie local agency, as a result
of the economic development subsidy.
The proposed Operating Covenant Agreement provides for participation of revenues,
generated from McKenna Motors Huntington Beach, Inc. operations within the City with
the City of Huntington Beach.' The Agreement provides that McKenna Motors Huntington
Beach, Inc, will retain 45% of revenues generated to the City over the current base year
of S150,800, payment will be made on a quarte4 basis. It is estimated, that McKenna
Motors Huntington Beach,, Inc. will generate approximatft$303,000 first year to the City
in revenue, Based upon this estimate, McKenna Motors unbngton Beach, Inc. is pro-
jected to, receive' approximately S68,500 per annurn and the City approximately
$235,000 per annum. The amounts will increase, with increased sales.
4) A statement of the public purposes for the economic development subsidy.
To continue to expand and enharvc* economic opportunities for businesses in the City,
continue to expand the CAty's employment base, and continue to generate hereinafter
defined Sales Tax that the City can utilize to fund general governmental services such as
olice, fire, street maintenance, and parks and recreation programs. 5) Projected tax revenue to the local agency as a result of the economic development sub-
sid The City of Huntington Beach will receive approximately $230,000 per y rr in sales tax
revenue.
6) Estimated number of jobs created by the economic development subsidy, broken down
by full-time, part-time and temporary positlons.
The City and McKenna Motors Huntington Beach, Inc. have estimated that the Agree-
ment creates 65 full time jobs in the City. Part time jobs created will be determined. The
construction Proiieot will create a minimuim of 50 full-time ocisitions.
All interested persons are invited to attend this hearing and express opinions upon the
items listed above. The Operating Covenant Agreement is available for review at Hunting-
ton Beach City Hall from November 1. 2016 through November 21, 2016. Any written mate-
rials to be submitted to the City Clerk at least twenty-four (24) hours prior to the hearing
City of Huntington Beach, 2000 Main Street, Huntington Beach, CA 926443. Further infor-
mation on these items may be obtained at the City of Huntington Beach, Attn: Kellee
Fritzal, Deputy Director Business Development, 2000 Main Street, Huntington Beach, CA
92648 or by Wephone, (714) 374-1519.
Robin Estanislau, City Clerk
City of Huntington Beach
2000 Main Street, 2nd Floor
Huntington Beach, California 92648
(714) 536-5227
AFFIDAVIT OF PUBLICATION
STATE OF CALIFORNIA, )
) SS.
County of Orange )
I am a citizen of the United States and a resident
of the County aforesaid; I am over the age of
eighteen years, and not a party to or interested in
the above entitled matter. I am the principal clerk
of the Huntington Beach Wave, a newspaper
that has been adjudged to be a newspaper of
general circulation by the Superior Court of the
County of Orange, State of California, on July 1,
1998, Case No. A-185906 in and for the City of
Huntington Beach, County of Orange, State of
California; that the notice, of which the annexed
is a true printed copy, has been published in each
regular and entire issue of said newspaper and
not in any supplement thereof on the following
dates, to wit:
November 10, 2016
"I certify (or declare) under the penalty of
perjury under the laws of the State of California
that the foregoing is true and correct":
Executed at Santa Ana, Orange County,
California, on
N vember 90, 2016
Signature
Huntington Beach Wave
625 N. Grand Ave.
Santa Ana, CA 92701
(714) 796-2209
Proof of Publication
NOTICE OF PUBLIC NEARING
Pursuant to Section 53083(a)(6)(b) of the California Government Code (AB 562), the City of
Huntington Beach shall provide public notice and a hearing prior to granting of proposed
economic development subsidy.
NOTICE IS HEREBY GIVEN that the City of Huntington Beach will hold a public hearing in
the Council Chambers of the Huntington Beach Civic Center, 2000 Main Street on Mondeyy
November 21, 2016 at 6:00 p.m., unless otherwise changed by the City Manager, to consid-
er the following Rem:
Applicant: McKenna Motors Huntington Beach, Inc. (dba McKenna Subaru): Danny
McKenna, President
Project Location: 18711 Beach Boulevard, Huntington Beach, California 92648
Agreement:
The City of Huntington Beach desires to create jobs and employment within the City. The
City has the ability to implement the provisions of AB 562, a statewide economic develop-
ment tool passed by Governor Brown in late 2013 for the purpose of allowing local 'ur'ad
ic-
tions to induce economic development for the creation and maintenance of jobs. �he City
of Huntington Beach and McKenna Motors Huntington Beach, Inc. are proposing to enter
into an agreement that encourages the creation of a new Subaru dealership within Hun-
tington Beach. The City is proposing to provide financial assistance in the form of an eco-
nomic development subsidy to McKenna Motors Huntington Beach, Inc. as described in
the Operatingg Covenant Agreement. Pursuant to Section 53083 of the California Govern-
ment Code (AB 562) the following information will be posted on the City's Web Site.
1) The name and address of all corporations, or any other business entities, except for sole
pproprietorshipsle., that are the beneficiary of the economic development subsidy, 14 applica-
b
McKenna Motors Huntington Beach, Inc.: Danny McKenna, President, a California Cor-
poration, 18711 Beach Boulevard, Huntington Beach, California 92648
2) d
The start and end dates and schedule, if applicable, for the economic development sub -
Commencing January 1, 2017 for 16 years.
3) A description of the economic development subsidy, including the estimated total
amount of expenditure of public funds, or of revenue lost to, the local agency, as a result
of the economic development subsidy.
The proposed Operating Covenant Agreement provides for participation of revenues
generated from McKenna Motors Huntington Beach, Inc. operations within the City with
the City of Huntington Beach. The Agreement provides that McKenna Motors Huntington
Beach, Inc. will retain 45% of revenues generated to the City over the current base year
of $150,800; payment will be made on a quarterly basis. It is estimated, that McKenna
Motors Huntington Beach, Inc. will generate approximately $303,000 first year to the City
in revenue. Based upon this estimate, McKenna Motors Huntington Beach, Inc. is pro-
jected to receive approximately $68,500 per annum and the City approximately
$235,000 per annum. The amounts will increase, with increased sales.
4) A statement of the public purposes for the economic development subsidy.
To continue to expand and enhance economic opportunities for businesses in the City,
continue to expand the City's employment base, and continue to generate hereinafter
defined Sales Tax that the City can utilize to fund general governmental services such as
police, fire, street maintenance, and parks and recreation programs.
5) Projected tax revenue to the local agency as a result of the economic development sub -
aid Thyy.
e City of Huntington Beach will receive approximately $230,000 per year in sales tax
revenue.
6) Estimated number of jobs created by the economic development subsidy, broken down
by full-time, part-time and temporary positions.
The City and McKenna Motors Huntington Beach, Inc. have estimated that the Agree-
ment creates 85 full time jobs in the City. Part time jobs created will be determined. The
construction Project will create a minimum of 50 full-time positions.
All interested persons are invited to attend this hearing and express opinions upon the
items listed above. The Operating Covenant Agreement is available for review at Hunting-
ton Beach City Hell from November 1, 2016 through November 21, 2016. Any written mate-
rials to be subntitted to the City Clerk at least twenty-four (24) hours prior to the hearing
City of Huntington Beach, 2000 Main Street, Huntington Beach, CA 92648. Further infor-
matron on these items may be obtained at the City of Huntington Beach, Attn: Kellee
Fritzal, Deputy Director Business Development, 2000 Main Street, Huntington Beach, .CA
92648 or by telephone: (714) 374-1519.
Robin Estanislau, City Clerk
City of Huntington Beach
2000 Main Street, 2nd Floor
Huntington Beach, California 92648
(714) 536-5227
http://huntingtonbeachca.gov/HBPublicComments/
Published• The Huntington Beach Wave November 10. 201610212245
AFFIDAVIT OF PUBLICATION
STATE OF CALIFORNIA, )
) ss.
County of Orange )
I am a citizen of the United States and a resident
of the County aforesaid; I am over the age of
eighteen years, and not a party to or interested in
the above entitled matter. I am the principal clerk
of the Huntington Beach Wave, a newspaper
that has been adjudged to be a newspaper of
general circulation by the Superior Court of the
County of Orange, State of California, on July 1,
1998, Case No. A-185906 in and for the City of
Huntington Beach, County of Orange, State of
California; that the notice, of which the annexed
is a true printed copy, has been published in each
regular and entire issue of said newspaper and
not in any supplement thereof on the following
dates, to wit:
November 10, 2016
"I certify (or declare) under the penalty of
perjury under the laws of the State of California
that the foregoing is true and correct":
Executed at Santa Ana, Orange County,
California, on
ovembe 10, 2016
Signature
Huntington Beach Wave
625 N. Grand Ave.
Santa Ana, CA 92701
(714) 796-2209
Proof of Publication
NOTICE OF PUBLIC NEARING
Pursuant to Section 53083(a)(6)(b) of the California Government Code (AB 562), the City of
Huntington Beach shall provide public notice and a hearing prior to granting of proposed
economic development subsidy.
NOTICE 1§ HEREBY GIVEN that the City of Huntington Beach will hold a public hearing in
the Council Chambers of the Huntington Beach Civic Center, 2000 Main Street on Monday
Novemtiea 21, 2016 at 6:00 p.m., unless otherwise changed by the City Manager, to consid-
ehthe following item:
Applicant: McKenna Motors Huntington Beach, Inc. (dba,McKenna Subaru): Danny
McKenna, President
Project Location: 18711 Beach Boulevard, Huntington Beach, California 92648
Agreement:
The City of Huntington Beach desires to create jobs and employment within the City. The
City has the ability to implement the provisions of AB 562, a statewide economic develop-
ment tool passed by Governor Brown in late 2013 for the purpose of allowing local Jurisdic-
tions to induce economic development for the creation and maintenance of jobs. �he City
of Huntington Beach and McKenna Motors Huntington Beach, Inc. are proposing to enter
into an agreement that encourages the creation of a new Subaru dealership wtthin Hun-
tington Beach. The City is proposing to provide financial assistance in the form of an eco-
nomic development subsidy to McKenna Motors Huntington Beach, Inc. as described in
the Operating Covenant Agreement. Pursuant to Section 53083 of the California Govern-
ment Code (AB 562) the following information will be posted on the City's Web Site.
1) The name and address of all corporations, or any other business entities, except for sole
pre.
oprietorships, that are the beneficiary of the economic development subsidy, if applica-
bl
McKenna Motors Huntington Beach, Inc.: Danny McKenna, President, a California Cor-
poration, 18711 Beach Boulevard, Huntington Beach, California 92648
2) The start and end dates and Schedule, ,?oration,
for the economic development sub-
sidy.
Commencing January 1, 2017 for 16 years.
3) A description of the economic development subsidy, including the estimated total
amount of expenditure of public funds, or of revenue lost to, the local agency, as a result
of the economic development subsidy.
The proposed Opperating Covenant Agreement provides for participation of revenues
generated from MCKenna Motors Huntington Beach, Inc. operations within the City with
the City of Huntington Beach. The Agreement provides that McKenna Motors Huntington
Beach, Inc. will retain 45% of revenues generated to the City over the current base year
of $150,800; payment will be made on a quarterly basis. It is estimated, that McKenna
Motors Huntington Beach, Inc. will generate approximately $303,000 first year to the City
in revenue. Based upon this estimate, McKenna Motors Huntington Beach, Inc. is pro-
jected to receive approximately $68,500 per annum and the City approximately
$235,000 per annum. The amounts will ingrease, with increased sales.
4) A statement of the public purposes for the economic'development subsidy.
To continue to expand and enhance economic opportunities for businesses in the City,
continue to expand the City'a employment base, and continue to generate hereinafter
defined Sales Tax that the City can utilize to fund general governmental services such as
police, fire, street maintenance, and parks and recreation programs.
5) Projected tax revenue to the local agency as a result of the economic development sub -
aid The City of Huntington Beach will receive approximately $230,000 per year in sales tax
revenue.
6) Estimated number of jobs created by the economic development subsidy, broken down
by full-time, part-time and temporary positions.
The City and McKenna Motors Huntington Beach, Inc. have estimated that the Agree-
ment creates 85 full time jobs in the City. Part time jobs created will be determined. The
construction Project will create a minimum of 50 full-time positions.
All interested persons are invited to attend this hearing and express opinions upon the
items tiled above. The Operating Covenant Agreement is available for review at Hunting-
ton Bea h City.Hall from November 1, 2016 through November 21, 2016. Any written mate-
rial3to be Submitted to the City Clerk at least twenty-four (24) hours prior to the hearing
City of Huntington Beach, 2000 Main Street, Huntington Beach, CA 92648. Further infor-
mation on these items may be obtained at the City of Huntington Beach, Attn: Kailas
Fritzal, Deputy Director Business Development, 2000 Main -Street, Huntington Beach, .CA
92648 or by telephone: (714) 374-1519.
Robin Estanislau, City Clerk
City of Huntington Beach
2000 Main Street, 2nd Floor'
Huntington Beach, California 92648
(714) 536-5227
http:{/h untingtonbeachca.gov/HBPublicComments/
Publish • The Huntington Beach Wave November 10 2016 10?JR245
1.11 "Sales Tax" means the tax derived from McKenna's business conducted
on the Site and a portion of which is allocated to and received by the City pursuant to the
Uniform Local Sales and Use Tax Law, commencing with California Revenue and
Taxation Code Section 7200, et seq., as amended.
2. THE PARTIES
2.1 McKenna, a California corporation, whose mailing address for/purposes of
this Agreement is: 18711 Beach Blvd., Huntington Beach, California 92648. Wherever
the term McKenna is used in this Agreement, the terra shall be deemed to4efer to
McKenna Motors Huntington Beach, Inc.
..._.-_._...__-_ _.-.__,.. _.__----------------
McKenna may not assign the rights and obligations of this Agreement to
any other person, entity, or organization without the express written consent of the City,
which consent may be withheld in City's so e, an ar solute. discre n.
By executing this Agreement, McKenna warrants and represents to City
that it has the full power and authority to enter into this Agreement and that all
authorizations and approvals required to make this Agrep;nent binding upon McKenna
have been duly obtained.
2.2 The City is a Municipal Corporatiom,/duly organized and existing pursuant
to its City Charter.
3. OBLIGATIONS OF McKENNA
3.1 Agreement. McKenna hereby covenants and agrees to open a Subaru
Dealership and sell vehicles at the Site within of the execution of
this Agreement, and to continue to use the Site as its primary Subaru Dealership business
location during the Operating Period, .
3.2 Site and Restriction`s. McKenna shall, within a reasonable time, not to
exceed from approval of this document by the City Council of the
City of Huntington Beach, estabflish a Subaru Dealership at the Site. The purchase of the
Site by McKenna shall resul�in a deed restriction on the Site, good and lasting for 16
years, which restricts the use of the Site and underlying property for new Auto Sales
only. If McKenna is unable to purchase the Site in Huntington Beach, MCKemla and the
City Manager or his or her designee shall help identify an alternative site within the City
of Huntington Beach. 4f said negotiations are unsuccessful, either party may terminate
this Agreement upon/thirty (30) days' written notice to the other party.
3.3 A�uimize Sales Tax. During the Operating Period, McKenna shall use its
best efforts, consistent with the requirements of law, to designate the Site as the point of
sale in all sales of its products.
ED
Z%ccn(OH
CT
l 6-55 t 33 /I4689b1DK� u
H
Leggy
RLS 7/5/16A 6-5338/13957FIPD
CITY OF HUNTINGTON BEACH
Interdepartmental Memo
TO: Honorable Mayor and City Council Members
VIA: Fred A. Wilson, City Manager
FROM: Ken Domer, Assistant City Manager
Kellee Fritzal, Deputy Director Business Development
DATE: November 21, 2016
SUBJECT: Administrative Public Hearing — McKenna Motors
Attached is a minor change to the Sales Tax Sharing Agreement between the City and
McKenna Motors. The modification is Section 2.1, second paragraph "The Parties". The
previous Agreement limited the assignment of rights and obligation of the Agreement
without the expressed written consent of the City, which could be withheld. The revised
section, allows McKenna to assign the rights, as long as the underlying business
operations as the location remain an automobile dealership.
In addition to the Agreement, the City also has a deed restriction on the property to
ensure that it remains a new car dealership for 16 years.
Please feel free to contact me if you have any questions.
SUPPLEMENTAL
COMMUNICATION
Meeting Date: _ // — ,�:R / - -1,4
Agenda Item No.,, 43
SALES TAX SHARING AGREEMENT BETWEEN
THE CITY OF HUNTINGTON BEACH
AND
McKENNA MOTORS HUNTINGTON BEACH, INC.
THIS SALES TAX SHARING AGREEMENT ("Agreement")'dated as of
, 20_-___, is entered into by and between the CITY OF HUNTINGTON
BEACH, a Municipal Corporation of the State of California ("Cityi'), and McKENNA
MOTORS HUNTINGTON BEACH, INC., a California corporation ("McKenna").
RECITALS
A. McKenna in the business of selling motor vehicles. McKenna's point of
sale for purposes of the Uniform Local Sales and Use Tax Law is located at 18711 Beach
Blvd., Huntington Beach, California 92648.
B. McKenna is contemplating opening a new Subaru Dealership at 18711
Beach Blvd., in Huntington Beach. 7
C. City recognizes that the expansion of McKenna to Huntington Beach will
contribute to the economic vitality of the City, provide additional jobs, expand the City's
tax base and otherwise improve economic and physical conditions in the City.
D. In order to induce McKenna to open a new Subaru Dealership in
Huntington Beach, the City is willing to provide incentive to McKenna as described in
this Agreement. f
E. By its approval of this Agreement, the City Council of the City of
Huntington Beach finds and determines that this Agreement serves a valid public purpose
through expanding economic opportunities for businesses in the City, expanding the
City's employment base, and generating Sales Tax that City can utilize to fund general
governmental services such as police, fire, street maintenance, and parks and.recreation
programs. City and McKenna have agreed that the respective considerations are a fair
exchange.
F. The City has found that it is of benefit to the City and its citizens that
certain obligations be imposed upon McKenna's future place of business to ensure
Subaru vehicle sales and the resulting sales -tax revenues to the City.
NOW, THEREFORE, based upon the foregoing Recitals and in consideration of
the mutual covenants and conditions hereinafter set forth, McKenna and City agree as
follows:
1 5-5513/ 3 46896/DKD
Item 13. - 3 HB -812-
DEFINITIONS.
The capitalized terms and words used in this Agreement shall have the following
meanings unless expressly provided to the contrary. %
1.1 "Commencement Date" means first day of the month foilowing McKenna
Motors Huntington Beach, Inc.'s opening of a Subaru Dealership in Huntington Beach.
1.2 "Event of Default" means any event so designated iri this Agreement.
1.3 "Fiscal Year" means the City's Fiscal Year of October I through
September 30. j
i
1.4 "Laws" means all California State Statutes, laws, Ordinances, regulations,
orders, writs, judgments, injunctions, decrees or awards of the United States or any state,
county, municipality or other Governmental Agency. j
1.5 "Operating Period" means the period beginning with the Commencement
Date and expiring sixteen (16) years later. f
1.6 "Party" means any party to this Agreement. The "Parties" shall be all
parties to this Agreement.
1.7 "Penalty Assessments" mean's penalties, assessments, collection costs and
other costs, fees or charges resulting from/late or delinquent payment of Sales Tax and
which are levied, assessed, or otherwise collected from the business on the Site owning or
obligated to pay Sales Tax.
1.8 "Person" means any entity, whether an individual, trustee, corporation,
partnership, trust, unincorporated organization, governmental agency or otherwise.
1.9 "Sales Tax Increment" means that portion of taxes derived and received
by the City of Huntington Beach from the imposition of the Bradley Bruns Uniform
Local Sales And Use Tax Law, commencing with Section 7200 of the Revenue and
Taxation Code of the State/of California, as amended, or its equivalent, arising from all
businesses and activities conducted on the Site. Sales Tax Increment shall not include
Penalty Assessments, any Sales Taxes levied by, collected for or allocated to the State of
California, the County/of Orange, a district or any other entity, notwithstanding that such
funds received by City are derived or measured by such other- entity based upon Sales
Taxes. The Sales Tax Increment shall not exceed one percent (1 %) upon taxable sales
and uses on the Site.
1.10 "Site" refers to 18711 Beach Blvd., Huntington Beach, California 92648,
the property within the City of Huntington Beach where McKenna will establish a Subaru
Dealership.
2
16-5513/I46896/DKo
FIB -813-
Item 13. - 4
1.11 "Sales Tax" means the tax derived from McKenna's business conducted
on the Site and a portion of which is allocated to and received by the City pursuant to the
Uniform Local Sales and Use Tax Law, commencing with California Revenue and
Taxation Code Section 7200, et seq., as amended.
2. THE PARTIES
2.1 McKenna, a California corporation, whose mailing address for purposes of
this Agreement is: 18711 Beach Blvd., Huntington Beach, California 92648. Wherever
the term McKenna is used in this Agreement, the term shall be deemed to refer to
McKenna Motors Huntington Beach, Inc.
1
McKenna may not assign the rights and obligations of this Agreement to
any other person, entity, or organization without the express written consent of the City,
which consent may be withheld in City's sole and absolute discretion.
By executing this Agreement, McKenna warrants and represents to City
that it has the full power and authority to enter into this Agreement and that all
authorizations and approvals required to make this Agreement binding upon McKenna
have been duly obtained. %
2.2 The City is a Municipal
to its City Charter.
OBLIGATIONS OF McKENNA
3.1 Agreement. McKenna
Dealership and sell vehicles at the Site
this Agreement, and to continue to use
location during the Operating Period. ;
duly organized and existing pursuant
covenants and agrees to open a Subaru
of the execution of
Site as its primary Subaru Dealership business
trictions! McKenna shall, within a reasonable time, not to
_ from approval of this document by the City Council of the
�stabiish a Subaru Dealership at the Site. The purchase of the
Site by McKenna shall result itYa deed restriction on the Site, good and lasting for 16
years, which restricts the use of the Site and underlying property for new Auto Sales
only. If McKenna is unable to purchase the Site in Huntington Beach, McKeruta and the
City Manager or his or hedesignee shall help identify an alternative site within the City
of Huntington Beach. If said negotiations are unsuccessful, either party may terminate
this Agreement upon thirty (30) days' written notice to the other party.
3.2 Site and
exceed
City of Huntington Beach,
3.3 Maximize Sales Tax. During the Operating Period, McKenna shall use its
best efforts, consistent with the requirements of law, to designate the Site as the point of
sale in all sales of it's products.
3
16-5513/ I46896/DKO
Item 13. - 5 1-113 -81 a-
3.4 Indemnification. From the Commencement Date of this Agreement
through the termination date, McKenna shall indemnify, defend, and hold harmless City
and its officers, employees and agents, from and against all liabilities, obligations, claims,
damages, penalties, causes of action, judgments, costs and expenses (including, without
limitation, reasonable attorneys' fees and expenses) (collectively "Claims"} imposed
upon or incurred by or asserted against City arising out of any act or omission of
McKenna or its business; provided, however, that the aforesaid obligations of McKenna
shall not apply to the extent any Claim results from the active negligence or intentional
misconduct of City or any of City's officers, employees, agents, or contractors. In the
event that any action, suit or proceeding is brought against City by reason of any such
occurrence, McKenna, upon City's request, will, at McKenna's expense, defend such
action, suit or proceeding at its sole cost.
3.5 Insurance. McKenna shall take out and maintain' in effect through the
Operating Period, at McKenna's sole cost and expense, the following insurance policies
in the minimum amounts specified and in the forn-is provided below:
(1) Comprehensive General Liability in an amount of not less than One
Million Dollars ($1,444,444) combined single limits for each occurrence for bodily
injury, personal injury, and property damage including,contractual liability.
(ii) Workers' Compensation as required by the Labor Code of the State of
California and Employers' Liability insurance in an amount not less than required by
California law.
3.6 Local, State and Federal Laws./ McKenna shall carry out the operation of
the business in conformity with all applicable local, State and Federal laws.
3.7 Anti -discrimination. McKenna shall not discriminate against any
employee or applicant for employment because of age, sex, marital status, race, handicap,
color, religion, reed, ancestry, or national origin.
3.8 McKenna's Representations and Warranties. McKenna makes the
following representations and warranties as of the date of this Agreement and agrees that
such representations and warranties shall survive and continue thereafter but shall not be
remade after the date of this Agreement.
3.8.1 No Litigation. There is no litigation, action, suit, or other
proceeding pending or threatened against McKenna or the Site that may adversely affect
the validity or enforceability of this Agreement or sale of vehicles at the Site. To the best
of McKenna's knowledge; is not in violation of any State Statute, Federal law,
regulation or Ordinance,/Or of any order of any court or governmental entity, the effect of
which would prohibit McKenna from performing its obligations hereunder.
i
4
16-551311468961DKO
HB -81 5-
Item 13. - 6
3.8.2 Authority. McKenna has complied with all governmental
requirements concerning its organization, existence and transactions. McKenna has the
right and power to own and operate its business as contemplated in this Agreement.
r
3.8.3 No Breach, To McKenna's knowledge, none of the f ndertakings
contained in this Agreement violate any applicable governrmental requirements, or
conflicts with, or constitutes a breach or default under, any agreement by which
McKenna is bound or regulated.
3.8.4 Warranty Against Payment of Consideration for Agreement.
McKenna warrants that it has not paid or given, and will not pay or,give, to any third
person, any money or other consideration for obtaining this Agreement, other than
normal costs of conducting business and costs of professional services such as
accountants and attorneys.
3.9 Release of City Officials. No member, official', agent, employee, or
attorney of the City shall be personally liable to McKenna, or any successor in interest of
McKenna, in the event of any default or breach by the City, or for any amount which may
become due to McKenna or its successors, or on any obligations under the terns of this
Agreement. McKenna hereby waives and releases any Claim it may have personally
against the members, officials, agents, employees, consultants, or attorneys of the City
with respect to any default or breach by the City or for any amount that may become due
to McKenna or its successors, or on any obligationseunder the terms of this Agreement.
3.10 Reports. Within ten (10) days of filing each report with the State Board of
Equalization, McKenna shall provide to the City true and correct copies of all reports
filed by McKenna with the State Board of Equalization in order to allow the City to
preliminarily determine the amount of Sales/Tax paid by McKenna on account of sales
from the Site; provided, however, that the City shall not be deemed to have received any
Sales Tax until the City's actual receipt thereof.
4. OBLIGATIONS OF CITY OF,HUNTiNGTON BEACH
4.1 Tax Rebate. Within thirty (30) days after the City confirms its receipt of
Sales Tax paid by McKenna on account of sales from the Site during the Operating
Period, the City shall pay to McKenna on a quarterly basis financial assistance in an
amount equal to forty-five percent (45%) of annual Sales Tax Increment generated by
McKenna within the City of Huntington Beach and actually received by the City, after
the first $150,800.00 in annual gross sales. City retains all sales tax of the first
$150,800.00 in annual gross sales.
p
I
4.2 City's Obligation to Provide Assistance Conditional on Sales Tax
Increment. The City's obligation to provide McKenna with assistance pursuant to 4.1 is
conditioned upon McKenna producing Sales Tax Increment each Fiscal Year. To the
extent McKenna does not produce Sales Tax Increment, then the tax rebate obligations
herein shall be reduced to zero.
' 5-5513/14b896/DKO
Item 13. - 7 HB -8 1 6-
4.3 Annual Adjustment. Promptly after each fiscal year of the City which
includes a portion of the Operating Period, the City shall determine with respect to that
fiscal year the aggregate amount of Sales Tax received by the City and the aggregate
amount of financial assistance payments made to McKenna pursuant to Section 4.1. If
for any reason (including but not limited to reporting errors or other adjustments) the
aggregate amount of payments by the City with respect to that fiscal year/is less than the
aggregate amount payable with respect to that fiscal year, the City sha�/pay to McKenna
an adjustment payment equal to the amount of deficiency; if for any reason (including but
not limited to reporting errors or other adjustments) the aggregate amount of payments by
the City with respect to that fiscal year is more than the aggregate/amount payable with
respect to that fiscal year, then the amount of the excess shall be applied against the next
payments due under Section 4.1, except that if any unapplied excess remains after the
Operating Period, McKenna shall pay the amount of the unapplied excess to the City
upon demand.
4.4 Legal Challenge. Should any third partyIsuccessfully challenge the
validity of this Agreement through a taxpayer suit or otherwise, either party may
terminate this Agreement upon thirty (30) days written notice.
4.5 Contingent Liability and Limitations. The tax rebate obligations of the
City of Huntington Beach shall be subject to the/provisions of City Charier Section 605,
regarding annual budget appropriations, and will not be payable for a period in excess of
the twenty-year Operating Period after relocation to the new site.
5. DEFAULTS AND REMEDIES
5.1 Events of Default. The fallowing shall initiate the default sequence:
(a) If McKenna materially breaches any of its obligations under
Sections 3.1 through 3.7 of this Agreement.
i
(b) If McKenna is found by a trier of fact, after hearing, to be in
violation of any Local, State or/Federal law.
(c) If McKenna is found by a trier of fact, after hearing, in a final,
non -appealable order or3udgment, either to be in violation of any anti -discrimination
regulation or to be liablelin a suit for discrimination.
(d) If McKenna fails to provide the City with copies of the quarterly
(or, if applicable, monthly) Board of Equalization reports filed by McKenna.
r
(e)' If City fails to timely pay its obligations hereunder.
6
16-55 l 3/ 146896/DKO
HB -81 %-
Item 13. - 8
When any of the initiating events described in this Section 5.1 occur, City or
McKenna may give the other written notice to cure. Where such act or omission is not
cured by the breaching Party within thirty (30) days after that Party's receipt of written
notice that such obligation was not performed, it shall constitute an Event of Default;
provided that, if cure cannot reasonably be effected within such 30-day period, such
failure shall not be an Event of Default so long as the Party promptly (in any event,
within 10 days after receipt of such notice) commences cure, and thereafter diligently (in
any event within 10 days after receipt of such notice) commences cure, and thereafter
diligently (in any event within a reasonable time after receipt of such notice) prosecutes
such cure to completion.
5.2 Remedies Upon Default. Upon the occurrence of any Event of Default,
and thirty (30) days after written notice of default, and after a reasonable opportunity to
cure such default, City or McKenna, as appropriate, may'terminate this Agreement and
file any action available in law or equity.
6. GENERAL PROVISIONS
6.1 Time of the Essence. Time is of the essence of this Agreement and all
Parties' obligations hereunder. j
6.2 Venue. In the event of any litigation hereunder, all such actions shall be
instituted in the Superior Court of Orange, State of California, or in an appropriate
municipal court in the County of Orange, State of California or an appropriate Federal
District Court in the Central District of California.
l
6.3 Applicable Law. The laws of the State of California shall govern the
interpretation and enforcement of this/`kgreement.
6.4 Execution in Counterparts. This Agreement may be executed in two or
more counterparts, each of which/shall be an original, but all of which shall constitute
one and the same instrument. /
6.5 Attach3nents Ificorporated. The Attachment to this Agreement is
incorporated herein by this -,reference.
6.6 Copies. Any executed copy of this Agreement shall be deemed an original
for all purposes. /
6.7 Severability. If any one or more of the provisions contained herein shall
for any reason be held to be invalid, illegal or unenforceable in any respect, such
invalidity, illegality or unenforceability, unless it affects the substantial rights of a party
or defeats the purpose of this Agreement, shall not affect any other provision of this
Agreement, but this Agreement shall be construed as if such invalid, illegal or
unenforceable provision has not been contained herein.
7
' 6-5513/ 146896/DKO
Item 13. - 9 11B -8 1 8-
6.8 Interpretation. The language in all parts of this Agreement shall in all
cases be construed as a whole according to its fair meaning, and not strictly for or against
any party. When the context of this Agreement requires, the neuter gender includes -the
masculine, the feminine, a partnership or corporation of joint venture or oilier entity, and
the singular includes the plural. f
6.9 No Partnership or Joint Venture. The parties hereto agree that' nothing
contained in this Agreement shall be deemed or construed as creating a partnership, joint
venture. or .association between City and McKenna; or cause City or McKenna to be
responsible in any way for the debts or obligations of the other, and no other provision
contained in this Agreement nor any acts the parties hereto shall be deemed to create any
relationship between City and McKenna other than that of contracting parties. Further,
nothing herein shall give or is intended to give any rights of any kind to any person not an
express party hereto.
6.10 Integration. This Agreement, including the Attachments attached hereto,
is the entire Agreement between and final expression of the parties, and there are no
agreements or representations between the parties except as expressed herein. All prior
negotiations and agreements between City and McKenna with respect to the subject
matter hereof are superseded by this Agreement. Except as othenvise provided herein, no
subsequent change or addition to this Agreement shall be binding.unless in writing and
signed by the parties hereto.
6.11 Nonwaiver. None of the provisions of this Agreement shall be considered
waived by any party except when such waiver'is given in writing. The failure of any
party to insist in any one or more instances upon strict performance of any of its rights
hereunder shall not be construed as a waiver of any such provisions or the relinquishment
of any such rights for the future, but thesame shall continue and remain in full force and
effect.
6.12 Notices. Any notice; approval, demand or other communication required
or desired to be given pursuant to,tlus Agreement shall be in writing and shall be
effective upon personal service (including by means of professional messenger service)
or, five (5) days after mailing via United States first-class mail or two (2) days after
mailing via Federal Express or other similar reputable ovemight delivery service. Any
notice shall be addressed as%set forth below:
If to City:
Kellee Fritzal
Deputy Director of Business Development
City of Huntington'Beach
2000 Main Street:'
Huntington Beach, CA 92648
If to McKenna:
McKenna Motors Huntington Beach, Inc.
Attn: Daniel J. McKenna III
18711 Beach Blvd.
Huntington Beach, CA 92648
16-5513/ 146S96/DKO
8
HB -8»-
Item 13. - 10
With copies to (which shall not constitute Notice):
Michael E. Gates, City Attorney
City of Huntington Beach
2000 Main Street
Huntington Beach, CA 92648
and
Fred Wilson, City Manager
City of Huntingdon Beach
2000 Main Street
Huntington Beach, CA 92648
Either City or McKenna may change its respective address by giving written notice to the
others in accordance with the provisions of this Section.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed on the dates hereinafter respectively set forth.
McKenna Motors Huntington Beach, Inc., a
California corporation
By:
print name
ITS: (circle one) Chairman;PresidenL'VicePresident
?t.
By:
print mane
i
ITS: (circle one) Secretary/Chief Financial Officer/Asst.
Secretary — Treasurer
r
1
r
a
9
CI'PY OF HUNTINGTON BEACH,
a, -municipal corporation of the State
of California
Mayor
APPROVED AST-6,F9RM:
Cit V Attorney DW I l«i1Ga ,Lei/
'"TED AND APPROVED:
Deputy Director of Business Development
REVIEWED AND APPROVED:
City Manager
I-<-»1 3!146896.rDKO
Item 13. - 11
HB -820-
ATTACHMENT NO. 1
McKenna Motors Huntington Beach. Inc.'s Certificate
Date:
McKenna Motors Huntington Beach, Inc., hereby requests a sales tax rebate in the
amount, and on the date, set forth below, pursuant to that certain Sales 'fax Sharing
Agreement between the City of Huntington Beach and McKenna Motors Huntington
Beach, Inc. Capitalized terms used and not otherwise defined herein shall have the
meanings set forth for them in the Agreement.
REQUESTED AMOUNT: /
I
McKenna Motors Huntington Beach, Inc.,;hereby represents and warrants to City
that:
i
On McKenna Motors Huntington Beach,
Inc., paid Sales Taxes for the i to fiscal year
quarter [month] to the California Board of,Equalization in the amount of
$ Attached hereto is a true and complete photocopy of our
quarterly [monthly] filings or other pouf of payment.
PAYMENT APPROVED:
City Representative
McKenna Motors Huntington Beach, Inc.
16-5513/146896[DKO
HB -821- Item 13. - 12
RECORDING REQUESTED BY }
AND WHEN RECORDED MAIL TO: )
City of Huntington Beach )
2000 Main Street ) j
Huntington Beach, CA 92648 )
Attn: City Clerk )
}
}
)
(Space above for Recorder's use)
This document is exempt from recording
fees pursuant to Government Code Section
27383.
AGREEMENT DECLARING CONDITIONS, COVENANTS
AND RESTRICTIONS FOR PROPERTY
(NEW AUTO SALES)
This Agreement Declaring Conditions, Covenants and Restrictions for Property -
New Auto Sales (the "Declaration") is•made as of , 20 by
and between McKENNA MOTORS HUNTINGTON BEACH, INC., a California
corporation (the "Covenantor"), and THE CITY OF HUNTINGTON BEACH, a
California municipal corporation (the "City").
RECITALS
A. Covenantor, is the owner of record of that certain real property generally
located at 18711 Beach Blvd., Huntington Beach, California and legally described in the
attached Exhibit "A" (the "Site"); and
B. On , the City Council approved that certain Sales
Tax Sharing Agreement with Covenantor authorizing a sales tax rebate incentive for the
development of anew Subaru dealership on the Site; and
C. /The Sales Tax Sharing Agreement requires that the use of the Site be
restricted to New Auto sales for a period of sixteen (16) years, and the execution and
recordation,of this Agreement is intended to fully satisfy these conditions.
N,OW, THEREFORE, the parties hereto agree and covenant as follows:
r
11. Use Restriction. Covenantor agrees for itself and its successors and
assigns, and every successor to Covenantor's interest in the Site, or any part thereof, that
the Site shall be held subject to this Declaration for sixteen (16) years from the first day
I (,-S 513/ 14689711)KO t
Item 13. - 13 HB -822-
of the month following Covenantor's opening of a new Subaru Auto Dealership on the
Site as follows:
(a) New Auto Sales Only. Covenantor agrees that the/ite will be used for
purposes of New Auto sales only. As used in this Declaration, the ,term "Covenantor"
shall mean Covenantor, its successors and assigns, and every successor to Covenantor's
interest in the Project, or any part thereof.
(b) Duration_ The term of this agreement shall commence on the first day
of the month following Covenantor's opening of a new Subaru Auto Dealership on the
Site and will continue for sixteen (16) years thereafter (the "Term")_ The covenant
contained in this Section 1 shall run with the land and shall automatically terminate and
be of no further force or effect upon the expiration of the Term.
2. Covenants for Benefit of Citv. All covenants without regard to technical
classification or designation shall be binding for the benefit of the City and such
covenants shall run in favor of the. City for the entire period during which time such
covenants shall be in force and effect, without regard to whether the City is or remains an
owner of any land or interest therein to which such covenants relate. The City, in the
event of any breach of any such covenants, shall have the right to exercise all the rights
and remedies and to maintain any such action at law or suits in equity or other proper
legal proceedings to enforce and to cure such breach to which it or any other beneficiaries
of these covenants may be entitled during the term specified for such covenants, except
the covenants against discrimination which may be enforced at law or in equity at any
time in perpetuity.
3. Binding on Successors and Assigns. The covenants and agreements
established in this Declaration shall, without regard to technical classification and
designation, be binding on Covenantor and any successor to Covenantor's right, title, and
interest in and to all or any portion of the Project, for the benefit of and in favor of the
City of Huntington Beach. All the covenants contained in this Declaration shall remain
in effect for the Terra, and shall automatically terminate and be of no further force or
effect after such time. Upon expiration of the Affordability Period, City agrees to
cooperate with Covenantor, at no cost to City, in removing this Declaration of record
from the Site_
4. Counterparts. This Agreement may be executed in a number of
counterparts, each of which shall be an original, but all of which shall constitute one and
the same document.
5. Applicable Law.
(a) If any provision of this Agreement or portion thereof, or the
application of any provision to any person or circumstances, shall to any extent be held
invalid., inoperative, or unenforceable, the remainder of this Agreement, or the
application of such provision or portion thereof to any other persons or circumstances,
16-5513/ 146997/DKO 2
HB -823-
Item 13. - 14
shall not be affected thereby and it shall not be deeded that any such invalid provision
affects the consideration for this Agreement; and each provision of this Agreement shall
be valid and enforceable to the fullest extent permitted by law.
(b) This Agreement shall be construed in accordance with the laws of
the State of California and all applicable City Codes,
IN WITNESS WHEREOF, the City and Covenantor have caused this instrument
to be executed on their behalf by their respective officers hereunto duly authorized as of
the date set forth above.
COVENANTOR: CITY:
McKENNA MOTORS HUNTINGTON CITY OF HUN'I'INGTON BEACH.
BEACH, INC.. a California corporation a California municipal corporation
By:
print name
ITS: (circle one) ChairmanTresidcntNice President
AND
By:
print name
ITS: (circle one) Secretary/Chief financial
Ofiicer'Asst. Secretary — Treasurer
Mayor
City Clerk
INITIATED AND APPROVED:
Deputy Director of Economic Development
REVIEWED AND APPROVED:
City Manager
468971,9aKO
Item 13. - 15 HB -824-
EXHIBIT "A"
Legal Description of 18711 Beach Blvd., Huntington Beach, California
(to be inserted)
US 7/5/16116-5338/139571/PD
Id B -825- Item 13. - 16
11/18/2016
November zi
City Council Meeting
SALES _TAX SHARING
,AGREEMENT
SUBA?,,/,RU DEALERSHIP
Agreement
® Sales Tax Sharing Agreement
® 16 year term
® First $27 million to City ($15o,800)
® After $z7 million —55% to
City/45% to McKenna Motors
® Estimated $54 million annually
Ong Dade• l / — J/ ` � � 116 --
1
Agenda Item No.•
11/18/2016
III Financials
° $54 million in sales annually
City - $234,500
McKenna - s68,500
® Increased Property tax with the
upgrades to building
® McKenna Motors will sign a long
term lease with Car Pros Kia to
keep Kia in the City
Subaru Agreement - McKenna
® Private Investment of $17
million
Land Purchase
Subaru franchise
ii Site Upgrade
2
11/18/2016
QUESTIONS