Loading...
HomeMy WebLinkAboutSurf City Auto Group II, Inc. - 2017-07-17 2000 Main Street. Huntington Beach CA 92648 City of Huntington Beach 10WoyED 7 -o File #: 22-373 MEETING DATE: 5/3/2022 REQUEST FOR CITY COUNCIL ACTION SUBMITTED TO: Honorable Mayor and City Council Members SUBMITTED BY: Sean Joyce. Interim City Manager VIA: Ursula Luna-Reynosa. Director of Community Development PREPARED BY: Robert Ramirez, Economic Development Project Manager Subject: Public Hearing to consider acceptance of the Five-Year Economic Development Subsidy Report for Surf City Auto Group ll, Inc. Sales Tax Sharing Agreement Statement of Issue: Government Code Section 53083 mandates certain requirements of local agencies prior to approving economic development subsidies, as well as during the term of such subsidies. One requirement is that not less than five years after the approval of an economic development subsidy. a report (the "Five-Year Subsidy Report") containing specific information shall be made available to the public via the City's website and at a City Council public hearing. In July 2017, the City approved a Sales Tax Sharing Agreement (the "Agreement") with Surf City Auto Group II. Inc. The Five-Year Subsidy Report is attached. Financial Impact: A fiscal impact was associated with the original action to approve the Agreement. However, there is no fiscal impact to receive and file this Five-Year Subsidy Report. Recommended Action: A) Open the public hearing and receive written and oral testimony: and, B) Receive and file the "Five-Year Economic Development Subsidy Report Pursuant to California Government Code Section 53083 for a Sales Tax Sharing Agreement by and Between the City of Huntington Beach and Surf City Auto Group II, Inc.," in compliance with Government Code Section 53083. Alternative Action(s): Do not receive and file the Five-Year Subsidy Report. Analysis: The City has used sales tax sharing agreements as an economic incentive to help attract new City of Huntington Beach Page t of 3 Pnnled on 4/27/2022 352 File #: 22-373 MEETING DATE: 5/3/2022 businesses and retain existing businesses. Surf City Auto Group II, Inc. (Surf City Auto) approached the City in 2017 expressing interest in expanding the existing Chrysler, Jeep, Dodge, Ram dealership located at 16555 Beach Boulevard, and building a new stand-alone Jeep dealership at 16701 Beach Boulevard to accommodate growing sales of Jeep vehicles. To help facilitate the expansion that would in turn increase car sales, the City negotiated a sales tax sharing agreement (Agreement) with Surf City Auto. The Agreement established that the sales tax of all Surf City Auto sales are retained by the City up to an annual base sales tax amount of $1,681,797, increasing by 1% each subsequent year. Any additional sales tax above the base is split 50% to the City and 50% to Surf City Auto. The subsidy was approved in July 2017 and the Agreement commenced in December 2018 following the opening of the new Jeep dealership. The economic subsidy enabled Surf City Auto to expand operations at its original location and build a new stand-alone Jeep dealership with a private investment of $3.3 million. This investment went toward design, construction, furnishing, and signage. Car dealerships are the largest sales tax generators in the City with annual sales tax revenue estimated to be between $8-9 million. Despite unprecedented changes to car purchases as a result of COVID-19, chip shortages, and low inventory, the Agreement has been revenue positive with Surf City Auto generating over $220 million of annual gross sales, which amounts to $2.2 million of annual sales tax. From 2018 through 2021, the City received approximately $7.2 million of sales tax revenue from Surf City Auto, of which approximately $6.4 million has been retained by the City and almost $785,000 has been rebated to Surf City Auto. On January 1, 2014, the State approved Assembly Bill 562 (AB 562), a law that requires local agencies to disclose certain information, make it available to the public, and conduct a public hearing prior to approving an economic development subsidy. The bill was codified as Section 53083 of the Government Code and requires the following information, as applicable: 1) The name and address of all corporations or any other business entities, except for sole proprietorships, that are beneficiary of the economic development subsidy. 2) The start and end dates and schedule for economic development subsidy. 3) A description of the economic development subsidy, including the estimated total amount of the expenditure of public by, or of revenue lost to, the local agency as a result of the economic development subsidy. 4) The net tax revenue accruing to the local agency as a result of the economic development subsidy. 5) The number of jobs created by the economic development subsidy, broken down by full -time, part-time, and temporary positions. In 2017, before approving the Agreement with Surf City Auto, the Council held a public hearing and disclosed the information above. The staff report, the Agreement, and the original subsidy report from that public hearing are attached (Attachment #1). An additional requirement of the law is that a local agency that approved an economic development subsidy prepare a report and make it available to the public via the City's website and at a public City of Huntington Beach Page 2 of 3 Printed on 427/2022 p wert353 Lepstar- File #: 22-373 MEETING DATE: 5/3/2022 hearing within five years of the approval of the economic development subsidy. The report must include the items listed above. The City has prepared the Five-Year Subsidy Report (Attachment #2) which includes the following key points: • The Agreement term is for twenty years (through November 30, 2038) or can be terminated any time after ten years upon written notice by Surf City Auto; • The City has retained $6,436,646 of total sales tax revenues; • The City has provided Jeep with $784,694 of sales tax rebates; • A total of 25 full-times jobs and 75 temporary construction jobs were created in association with the economic subsidy. Environmental Status: Pursuant to CEQA Guidelines Section 15378(b)(4), government fiscal activities that do not result in a physical change in the environment and do not commit the lead agency to any specific project, do not constitute a project. Therefore, these activities are exempt in accordance with CEQA Guidelines Section 1506(c)(3). Strategic Plan Goal: Economic Development & Housing Attachment(s): 1 . Original Staff Report, Subsidy Report, and Sales Tax Agreement Between the City of Huntington Beach and Surf City Auto Group, II, Inc. 2. Five-Year Economic Development Subsidy Report Pursuant to Government Code Section 53083 for Sales Tax Sharing Agreement by and Between the City of Huntington Beach and Surf City Auto Group, II, Inc. City of Huntington Beach Page 3 of 3 Printed on 4/27/2022 po ert354 Leg,star' Dept. ID ED 17-17 Page 1 of 1 Meeting Date: 7/1 712 0 1 7 CITY OF HUNTINGTON BEACH REQUEST FOR. CITY COUNCIL ACTION MEETING DATE: 7/17/2017 SUBMITTED TO: Honorable Mayor and City Council Members SUBMITTED BY: Fred A. Wilson, City Manager PREPARED BY: Kellee Fritzal, Deputy Director, Business Development SUBJECT: Approve and authorize execution of a Sales Tax Sharing Agreement between the City and Surf City Auto Group II, Inc., for the opening of a new stand alone Jeep dealership Statement of Issue: The City Council is asked to approve a Sales Tax Sharing Agreement with Surf City Auto Group II, Inc. (Pete Shaver), for the development and opening of a stand-alone Jeep Dealership at 16701 Beach Boulevard. The Agreement will incentivize Surf City Auto Group Il, Inc., to construct the car dealership, parking structure, and other site improvements. The Agreement establishes that the sales tax portion after the current base in gross car sales from Surf City Auto Group II, Inc. is J retained fully by the City. After the base is exceeded, the sales tax is split 50% to the City and 50% to Surf City Auto Group II, Inc. ("Surf City'). The base sales tax will increase 1% annually. Financial Impact: 7~ The proposed agreement is revenue positive for the City. The new stand-alone Jeep dealership is estimated to generate an additional $139 million in annual sales. The base sales tax received from the new Jeep Dealership will 100% remain with the City. The base sales tax was derived by the current Jeep sales at the combined dealership in 2016. Once the new dealership is completed and operating, the base amount will increase 1% annually. The City will see an annual increase after the base of sales tax generated. Based upon this estimate, Surf City Auto Group II and the City are projected to share $783,975 each per annum. Recommended Action: A) Approve and authorize the Mayor and City Manager to execute the "Sales Tax Agreement Between the City of Huntington Beach and Surf City Auto Group II, 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. AnalVsis: Rick Evans owned and operated the Chrysler Jeep Dodge Ram (CJDR) dealership on Beach Boulevard for 25 years. In 2013, Pete Shaver joined Rick Evans as owner of the CJDR dealership. HB -147- Item513. - 1 Dept.ID ED 17-17 Page 1 of 1 Meeting Date:7/172017 The CJDR dealership operates out of a newly renovated facility at 16555 Beach Boulevard, as well as the four-acre site at 16701 Beach Boulevard, owned by Rick Evans, due to the large volume of new vehicle inventory. In addition, the CJDR dealership leases offsite parking for additional new vehicle inventory. Surf City Auto Group II, Inc. has the opportunity to add a stand-alone Jeep dealership at the site. This will require a $3 million renovation to the current site to meet Jeep's dealership image and space guidelines and a $25 million parking garage, which will be constructed half on the site and half on 16555 Beach Boulevard. Additionally, the Jeep dealership will be obligated to add 5,400 new Jeep sales over a three-year period. Surf City Auto Group II, Inc. has requested to enter into the Agreement to assist in defraying the significant cost of remodeling the dealership and moving the Chrysler, Dodge and Ram components of the existing dealership to the 16555 Beach Boulevard site. Operations of the new dealership are expected to generate significant sales activity, projected at an average of $139 million a year for the first five years, and to increase sales tax to the City by approximately $31,359,000 over the term of the proposed Agreement. The current assessed value of the Site is $5,740,000 and it is projected that the value of the Site will have an assessed value of $21,240,000, or a $15,500,000 increase. Increased property tax benefits the City was well as other taxing entities (such as schools) based on the completed improvements. The Economic Development Committee reviewed the request for a Sales Tax Sharing Agreement at the June 14 meeting and recommended approval. 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 Surf City Auto Group II, Inc. 2. Letter from Pete Shaver 3, Subsidy Report - Government Code Section 53083 Item 13. - 2 HB -148- 356 ECONOMIC DEVELOPMENT SUBSIDY REPORT PURSUANT TO GOVERNMENT CODE SECTION 53083 FOR A SALES TAX SHARING AGREEMENT BY AND BETWEEN CITY OF HUNTINGTON BEACH AND SURF CITY AUTO GROUP II, 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 Surf City Auto Group II, Inc. ("Agreement"). Notice was published on the City's website for a public hearing to be held on July 17, 2017. 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 Surf City Auto Group II, Inc., who will construct, own and operate a new Jeep dealership that will benefit from the economic development subsidy: Surf City Auto Group II, Inc. 16701 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 be on or around August 1, 2017 (or when the dealership opens) and the end date will be no later than 20 years after the start date, on or around August 1, 2037. The economic development subsidy will be paid quarterly,within 30 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 fifty percent (50%) of the sales tax revenue received by the City from Surf City Auto Group II, Inc., after the existing base sales tax received by the City. The existing base sales tax is defined as those Jeep sales for the City's fiscal year 2016, which is estimated at $1,681,797, and increased by 1% per year. City of Huntington Beach 1 July 10, 2016 357 4. A statement of the public purpose for the economic development subsidy. Rick Evans has owned and operated the Chrysler Jeep Dodge Ram (CJDR) dealership on Beach Boulevard for 25 years. In 2013, Pete Shaver joined Rick Evans as owner of the CJDR dealership. The GDR dealership operates out of a newly renovated facility at 16555 Beach Boulevard as well as the 4 acre site at 16701 Beach Boulevard (Site), owned by Rick Evans, due to the large volume of new vehicle inventory . In addition, the UDR dealership leases offsite parking for additional new vehicle inventory. Surf City Auto Group II, Inc. has the opportunity to add a stand-alone Jeep dealership at the Site. This will require a $3 million renovation to meet Jeep's dealership image and space guidelines and a $25 million parking garage, which will be constructed half on the 16555 Beach Boulevard and half on the Site. Additionally, the Jeep dealership will be obligated to add 5,400 new Jeep sales over a three year period. Surf City Auto Group II, Inc. has requested to enter into the Agreement to assist in defraying the significant cost of remodeling the dealership and moving the Jeep component of the existing dealership to the 16701 Beach Boulevard site Operations of the new dealership are expected to generate significant incremental sales activity, projected at an average of$139 million a year for the first five years, and to increase sales tax to the City by approximately$31,359,000 over the term of the proposed Agreement. The current assessed value of the Site is $5,740,000 and it is projected that the value of the Site will have an assessed value of$21,240,000, or a $15,500,000 increase. S. The projected tax revenue to the local agency as a result of the economic development subsidy. Projections indicate that, over the 20 year period of the sales tax sharing agreement, roughly $16,058,000 in present value dollars in additional sales tax revenue could be received by the City. Of this amount, the City would pay Surf City Auto Group II, Inc. approximately$8,029,000 in present value terms. 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 50 full- and part-time jobs and approximately 60 temporary new jobs during the construction. City of Huntington Beach 2 July 10, 2016 358 SALES TAX SHARING AGREEMENT BETWEEN THE CITY OF HUNTINGTON BEACH AND SURF CITY AUTO GROUP 11, INC. THIS SALES TAX SHARING AGREEMENT("Agreement") dated as of 2017, is entered into by and between the CITY OF HUNTINGTON BEACH, a municipal corporation of the State of California ("City"), and SURF CITY AUTO GROUP II, INC., a California corporation ("Surf City Auto"). RECITALS A. Surf City Auto in the business of selling motor vehicles. Surf City Auto's point of sale for purposes of the Uniform Local Sales and Use Tax Law is located at 16701 Beach Blvd., Huntington Beach, California 92647. B. Surf City Auto is contemplating opening a stand alone Jeep Dealership at 16701 Beach Blvd., in Huntington Beach. C. City recognizes that the expansion of Surf City Auto 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 Surf City Auto to open a stand alone Jeep Dealership in Huntington Beach, the City is willing to provide incentive to Surf City Auto 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 Surf City Auto 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 Surf City Auto's future place of business to ensure Jeep 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, Surf City Auto and City agree as follows: 17-5861/160336/DKO 1 359 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 following Surf City Auto's opening of a stand alone Jeep Dealership at 16701 Beach Blvd. 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 I 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 on the earlier of, (a) twenty (20) years later, or (b) any time after ten years, upon the written notice of termination by Surf City Auto. 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 py the City of Huntington Beach from the imposition of the Bradley Burns Umrm 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. 17-5861/160336/DKO 2 360 i 1.10 "Site" refers to 16701 Beach Blvd., Huntington Beach, California 92647, only, the property within the City of Huntington Beach where Surf City Auto will establish a stand alone Jeep Dealership. 1.1 1 "Sales Tax" means the tax derived from Surf City Auto'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. 1.12 "Surf City Auto Group 11, Inc." refers to the stand alone Jeep Dealership at 16701 Beach Blvd. in Huntington Beach. 2. THE PARTIES 2.1 Surf City Auto Group 11, Inc., a California corporation, whose mailing address for purposes of this Agreement is: 16701 Beach Blvd., Huntington Beach, California 92647. Wherever the term Surf City Auto is used in this Agreement, the term shall be deemed to refer to Surf City Auto Group 11, Inc. By executing this Agreement, Surf City Auto 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 Surf City Auto have been duly obtained. 2.2 The City is a Municipal Corporation, duly organized and existing pursuant to its City Charter. 3. OBLIGATIONS OF SURF CITY AUTO 3.1 Agreement. Surf City Auto hereby covenants and agrees that as soon as practicable following execution of this Agreement, it will have opened a stand alone Jeep Dealership and will commence selling new Jeep vehicles and used vehicles at the Site within, and to continue to use the Site as its primary Jeep Dealership business location during the Operating Period, but no later than one (1) year after execution of the Agreement, unless otherwise agreed upon in writing by the City. 3.2 Site and Restrictions. Surf City Auto shall, within a reasonable time, not to exceed two years from approval of this document by the City Council of the City of Huntington Beach, establish a stand alone Jeep Dealership at the Site. The Agreement for the Site by Surf City Auto shall result in a deed restriction on the Site, good and lasting for 20 years, which restricts the use of the Site and underlying property for new and used Auto Sales only. 3.3 Maximize Sales "fax. During the Operating Period, Surf City Auto 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. 17-5861/160336/DKO 3 361 3.4 Indemnification. From the Commencement Date of this Agreement through the termination date, Surf City Auto 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 Surf City Auto or its business; provided, however, that the aforesaid obligations of Surf City Auto 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, Surf City Auto, upon City's request, will, at Surf City Auto's expense, defend such action, suit or proceeding at its sole cost. 3.5 Insurance. Surf City Auto shall take out and maintain in effect through the Operating Period, at Surf City Auto'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. Surf City Auto shall use best efforts to carry out the operation of the business in conformity with all applicable local, State and Federal laws. 3.7 Anti-discrimination. Surf City Auto shall use best efforts to 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 Surf City Auto's Representations and Warranties. Surf City Auto 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 Surf City Auto 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 Surf City Auto's knowledge, Surf City Auto 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 Surf City Auto from performing its obligations hereunder. 17-5861/160336/DKO 4 362 3.8.2 Authority. Surf City Auto has complied with all governmental requirements concerning its organization, existence and transactions. Surf City Auto has the right and power to own and operate its business as contemplated in this Agreement. 3.8.3 No Breach. To Surf City Auto'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 Surf City Auto is bound or regulated. 3.8.4 Warranty Against Payment of Consideration for Agreement. Surf City Auto 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 Surf City Auto, or any successor in interest of Surf City Auto, in the event of any default or breach by the City or for any amount which may become due to Surf City Auto or its successors, or on any obligations under the terms of this Agreement. Surf City Auto 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 Surf City Auto or its successors, or on any obligations under the terns of this Agreement. MO Reports. Within ten (10) days of filing each report with the State Board of Equalization, Surf City Auto shall provide to the City true and correct copies of all reports filed by Surf City Auto with the State Board of Equalization in order to allow the City to preliminarily determine the amount of Sales Tax paid by Surf City Auto 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 14UNTINGTON BEACH 4.1 Tax Rebate. Within thirty (30) days after the City confirms its receipt of Sales "Tax paid by Surf City Auto on account of sales from the Site during the Operating Period, the City shall pay to Surf City Auto on a quarterly basis financial assistance in an amount equal to fifty percent 5�°/�,of annual Sales Tax Increment generated by Surf City Auto within the City of Huntington Beach and actually received by the City, after the existing base sales tax received by City is ear ie in 1ty receive sa es tax. he existing base sales lax are those Jeep sales for the City's fiscal year 2016, which the parties agree is$1,681,797. City retains all sales tax of the first base in City received sales tax, which is increased by l% annually. 4.2 City's Obligation to Provide Assistance Conditional on Sales Tax Increment. The City's obligation to provide Surf City Auto with assistance pursuant to 17-5861/160336/DK0 5 363 i 4.1 is conditioned upon Surf City Auto producing Sales Tax Increment each Fiscal Year. To the extent Surf City Auto does not produce Sales Tax Increment, then the tax rebate obligations herein shall be reduced to zero. 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 Surf City Auto 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 Surf City Auto 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, Surf City Auto shall pay the amount of the unapplied excess to the City upon demand. 4A Legal Challenge. Should any third party successfully challenge the validity of this Agreement through a taxpayer suit which results in a final judgment, either party may terminate this Agreement upon thirty (30) days written notice. The foregoing notwithstanding, the City agrees to vigorously defend any such legal challenges, including appeals of adverse court rulings where appropriate. 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 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 following shall initiate the default sequence: (a) If Surf City Auto materially breaches any of its obligations under Sections 3.1 through 3.7 of this Agreement. (b) If Surf City Auto's management is found by a trier of fact, after final judgment, to be in violation of any Local, State or Federal law in which scienter is an element. (c) If Surf City Auto's management is found by a trier of fact, after hearing, in a final, non-appealable order orjudgment, either to be in violation of any anti- discrimination regulation or to be liable in a suit for discrimination. 1 7-5 86 1/160336/DKO 6 364 (d) If Surf City Auto fails to provide the City with copies of the quarterly (or, if applicable, monthly) Board of Equalization reports filed by Surf City Auto. (e) If City fails to timely pay its obligations hereunder. When any of the initiating events described in this Section 5.1 occur, City or Surf City Auto 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 Surf City Auto, as appropriate, may terminate this Agreement and/or 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 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. 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. 1 7-5 86 1/1 603 3 6/DKO 7 365 6.7 Severability. If anyone 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. 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 Surf City Auto; or cause City or Surf City Auto 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 Surf City Auto 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 Surf City Auto 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 mailing via Federal Express or other similar reputable overnight delivery service. Any notice shall be addressed as set forth below: 17-5861/160336/DKO 8 366 I If to City: If to Surf City: Kellee Fritzal Surf City Auto Group 11, Inc. Deputy Director of Business Development Attn: Pete Shaver City of Iluntington Beach 16555 Beach Blvd. 2000 Main Street Huntington Beach, CA 92647 Huntington Beach, CA 92648 With copies to (which shall not constitute Notice): Michael E. Gates, City Attorney Alton G. Burkhalter, Esq City of Huntington Beach Burkhalter Kessler Clement& George UP 2000 Main Street 2020 Main Street, Suite 600 I Huntington Beach, CA 92648 Irvine, CA 92614 and Fred Wilson, City Manager City of Huntington Beach 2000 Main Street Huntington Beach, CA 92648 Either City or Surf City Auto may change its respective address by giving written notice to the others in accordance with the provisions of this Section. 17-5861/160336/DKO 9 367 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed on the dates hereinafter respectively set forth. Surf City Auto Group II, Inc., a CITY OF HUNTINGTON BEACH, Cali fomi orporation a municipal corporation of the State of California By: Peter E. Shaver Mayor ITS: President ATTEST: City Clerk COUNTS""T APPROVED A, ,1.0 FORM: City Attorney n140 -7�01� �/ PA'r' 4TIATED AND APPROVED: Deputy Director of Business Development REVIEWED AND APPROVED: City Manager 17-5861/160336[DKO 10 368 IN WITNESS WHEREOF, the parties hereto have caused this Agrecment to be executed on the dates hereinafter respectively set forth. Surf City Auto Group 11, Inc., a CITY OF HUNTINGTON BEACH, California corporation a municipal corporation of the State of Cal mia By: Peter E. Shaver Mayor ITS: President ATTEST: Qo�a, City C irk APPROVED A 'FORM: COUNTERPART Cit3 Attorney 0F`0 '7�\lll� �� ZITIATED AND APPROVED: Dep ty Director o usiness Development REV koD APPROVED: (lKRVYanager 17-5861/160336/DKO 10 369 FIVE-YEAR ECONOMIC DEVELOPMENT SUBSIDY REPORT PURSUANT TO GOVERNMENT CODE SECTION 53083 FOR A SALES TAX SHARING AGREEMENT BY AND BETWEEN THE CITY OF HUNTINGTON BEACH AND SURF CITY AUTO GROUP II, INC. The following Five Year Report has been prepared pursuant to California Government Code Section 53083. Section 53083 requires that for economic development subsidy agreements approved on or after January 1, 2014, the City must hold a public hearing within five years to provide an update on the project. As required, this report reiterates details of the sales tax sharing agreement (Agreement) between the City of Huntington Beach and Surf City Auto Group II, Inc. and provides information on subsidy payments to date. 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. Surf City Auto Group II, Inc. (Surf City Auto) Pete Shaver, President 16555 and 16701 Beach Blvd. Huntington Beach, CA 92647 2. The start and end dates and schedule, if applicable,for the economic development subsidy. The agreement was executed on July 17, 2017, but reimbursement did not commence until December 2018, shortly after the completion of the stand-alone Jeep dealership. The subsidy is for 20 years and terminates on November 30, 2038, or it can be terminated any time after ten years upon written notice by Surf City Auto. 3. A description of the economic development subsidy, including the estimated total amount of the expenditures 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 fifty percent (50%) of the sales tax revenue received by the City from Surf City Auto in excess of$1,681,797 (base amount) for the first year, increasing by 1%each subsequent year. To date, the full amount paid by the City to Surf City Auto as part of the economic development subsidy is $784,694 over the past 4.25 years. 4. The net tax revenue accruing to the local agency as a result of the economic development subsidy. The Agreement has resulted in substantial sales tax revenue for the City. Annual taxable sales for Surf City Auto since 2017 is $722,134,018. Thus far, Surf City Auto has generated $7,221,340 370 in sales tax revenue. As shown below, the City has retained $6,436,646 of the total sales tax revenue. Fiscal Year* Sales Tax Sales Tax city Revenue Rebate Revenue'* FY 2018-2019 $1,645,215 $0 $1,645,215 FY 2019-2020 $2,392,231 $338,315 $2,OS3,916 FY 2020-2021 $2,625,515 $446,379 $2,179,136 FY 2021-2022*** $558,379 TBD $558,379 TOTAL $7,221,340 $784,694 $6,436,646 * Q1 (Oct-Dec), Q2 (Jan-Mar), Q3 (Apr-Jun), Q4 (Jul-Sep) " Includes annual base of$1,681,797 (increases 1%annually) *** Payments for Q2, Q3, and Q4 not yet reported Additionally, the property value has increased due to site improvements, with an assessed value greater than $8.1 million. The City's share of property taxes received by the County of Orange increased from $9,762 (FY 2017-18)to $12,221 (FY 2021-22), a difference of$2,459. 5. The number of jobs created by the economic development subsidy, broken down by full-time, part-time, and temporary positions. Surf City Auto has hired 25 full-time workers since completing the stand-alone Jeep dealership and approximately 75 workers were hired during construction. 371 5/2/2022 NP0R � Five-Year Economic \N�ORPORA TfO Development Subsidy Report Pursuant to Government = Code Section 53083 _ = Sales Tax Sharing Agreement with j �"li Surf City Auto Group II, Inc. F May 3, 2022 6 17, 19U9. p' �� �ouNTy cP`� Background • Surf City Auto Group II. Inc approached City in 2017 G H R Y 5 L E R for assistance with the expansion of their Chrysler, Jeep. Dodge. Ram dealership and the construction of a new stand-alone Jeep Dealership • To help facilitate the expansion that would in turn increase car sales. the City provided an economic development subsidy in the form a sales tax sharing agreement — Subsidy provides a 50/50 split of sales tax revenue received by the City in excess of $1 ,681 ,797 (base amount). increases 1% each subsequent year RAM SUPPLEMENTAL COMMUNICATION Meeting Dam: 6 L;V 2�2- i Agenda Nam No.: ay (22 -3 23) 5/2/2022 AB 562 — Section 53083 • Enacted January 1. 2014 • Requires local agency to provide specified information to the public and review, hold hearings, and report at specific intervals • Economic Development Subsidy — any expenditure of public funds or loss of revenue — ($100,000 or more) for the purpose of stimulating economic development 5 Year Report - Key Points Fiscal Year Sales Tax Revenue Sal"Tax Rebate City's Revenue FY 2018-2019 $1.645216 SO $1.645.216 FY 2019-2020 S2.392.231 S338.315 S2.053.916 FY 2020-2021 S2.625.515 $446 379 S2,179.136 FY 2021-2022 $558 379 TBD $558.379 TOTAL $7,221.340 $784.694 $6.436.646 • Term through 2038 (or can be terminated after 10 years by Surf City Auto) • $7,221,340 in Sales Tax Revenue o City has retained $6,436,646 o Surf City Auto provided with $784,694 • 25 full-time jobs. 75 temp. construction jobs 2 5/2/2022 New Stand-Alone Jeep Dealership 000u Jeep. I r Questions? Vki T . �o Dept. ID ED 17-17 Page 1 of 2 Meeting Date: 7/17/2017 CITY OF HUNTINGTON BEACH r REQUEST FOR. CITY COUNCIL ACTION MEETING DATE: 7/17/2017 SUBMITTED TO: Honorable Mayor and City Council Members SUBMITTED BY: Fred A. Wilson, City Manager PREPARED BY: Kellee Fritzal, Deputy Director, Business Development SUBJECT: Approve and authorize execution of a Sales Tax Sharing Agreement between the City and Surf City Auto Group II, Inc., for the opening of a new stand alone Jeep dealership Statement of Issue: The City Council is asked to approve a Sales Tax Sharing Agreement with Surf City Auto Group II, Inc. (Pete Shaver), for the development and opening of a stand-alone Jeep Dealership at 16701 Beach Boulevard. The Agreement will incentivize Surf City Auto Group II, Inc., to construct the car dealership, parking structure, and other site improvements. The Agreement establishes that the sales tax portion after the current base in gross car sales from Surf City Auto Group ll, Inc. is retained fully by the City. After the base is exceeded, the sales tax is split 50% to the City and 50% to Surf City Auto Group II, Inc. ("Surf City"). The base sales tax will increase 1% annually. Financial Impact: The proposed agreement is revenue positive for the City. The new stand-alone Jeep dealership is estimated to generate an additional $139 million in annual sales. The base sales tax received from the new Jeep Dealership will 100% remain with the City. The base sales tax was derived by the current Jeep sales at the combined dealership in 2016. Once the new dealership is completed and operating, the base amount will increase 1% annually. The City will see an annual increase after the base of sales tax generated. Based upon this estimate, Surf City Auto Group II and the City are projected to share $783,975 each per annum. Recommended Action: A) Approve and authorize the Mayor and City Manager to execute the "Sales Tax Agreement Between the City of Huntington Beach and Surf City Auto Group II, 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: Rick Evans owned and operated the Chrysler Jeep Dodge Ram (CJDR) dealership on Beach Boulevard for 25 years. In 2013, Pete Shaver joined Rick Evans as owner of the CJDR dealership. HB -147- Item 13. - 1 Dept. ID ED 17-17 Page 2 of 2 Meeting Date:7/17/2017 The CJDR dealership operates out of a newly renovated facility at 16555 Beach Boulevard, as well as the four-acre site at 16701 Beach Boulevard, owned by Rick Evans, due to the large volume of new vehicle inventory. In addition, the CJDR dealership leases offsite parking for additional new vehicle inventory. Surf City Auto Group II, Inc. has the opportunity to add a stand-alone Jeep dealership at the site. This will require a $3 million renovation to the current site to meet Jeep's dealership image and space guidelines and a $25 million parking garage, which will be constructed half on the site and half on 16555 Beach Boulevard. Additionally, the Jeep dealership will be obligated to add 5,400 new Jeep sales over a three-year period. Surf City Auto Group II, Inc. has requested to enter into the Agreement to assist in defraying the significant cost of remodeling the dealership and moving the Chrysler, Dodge and Ram components of the existing dealership to the 16555 Beach Boulevard site. Operations of the new dealership are expected to generate significant sales activity, projected at an average of $139 million a year for the first five years, and to increase sales tax to the City by approximately $31,359,000 over the term of the proposed Agreement. The current assessed value of the Site is $5,740,000 and it is projected that the value of the Site will have an assessed value of $21,240,000, or a $15,500,000 increase. Increased property tax benefits the City was well as other taxing entities (such as schools) based on the completed improvements. The Economic Development Committee reviewed the request for a Sales Tax Sharing Agreement at the June 14 meeting and recommended approval. 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 Surf City Auto Group II, Inc. 2. Letter from Pete Shaver 3. Subsidy Report— Government Code Section 53083 Item 13. - 2 HB -148- ATTACHMENT # 1 11 SALES TAX SHARING AGREEMENT BETWEEN THE CITY OF HUNTINGTON BEACH AND SURF CITY AUTO GROUP II, INC. THIS SALES TAX SHARING AGREEMENT ("Agreement") dated as of 2017, is entered into by and between the CITY OF HUNTINGTON BEACH, a municipal corporation of the State of California("City"), and SURF CITY AUTO GROUP II, INC., a California corporation ("Surf City Auto"). RECITALS A. Surf City Auto in the business of selling motor vehicles. Surf City Auto's point of sale for purposes of the Uniform Local Sales and Use Tax Law is located at 16701 Beach Blvd., Huntington Beach, California 92647. B. Surf City Auto is contemplating opening a stand alone Jeep Dealership at 16701 Beach Blvd., in Huntington Beach. C. City recognizes that the expansion of Surf City Auto 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 Surf City Auto to open a stand alone Jeep Dealership in Huntington Beach, the City is willing to provide incentive to Surf City Auto 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 Surf City Auto 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 Surf City Auto's future place of business to ensure Jeep 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, Surf City Auto and City agree as follows: 17-5861/160336/DKO 1 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 following Surf City Auto's opening of a stand alone Jeep Dealership at 16701 Beach Blvd. 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 on the earlier of. (a)twenty (20) years later, or (b) any time after ten years, upon the written notice of termination by Surf City Auto. 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 Burns 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. 17-5861/160336/DKO 2 1.10 "Site" refers to 16701 Beach Blvd., Huntington Beach, California 92647, only, the property within the City of Huntington Beach where Surf City Auto will establish a stand alone Jeep Dealership. 1.11 "Sales Tax" means the tax derived from Surf City Auto'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. 1.12 "Surf City Auto Group I1, Inc." refers to the stand alone Jeep Dealership at 16701 Beach Blvd. in Huntington Beach. 2. THE PARTIES 2.1 Surf City Auto Group II, Inc., a California corporation, whose mailing address for purposes of this Agreement is: 16701 Beach Blvd., Huntington Beach, California 92647. Wherever the term Surf City Auto is used in this Agreement, the term shall be deemed to refer to Surf City Auto Group lI, Inc. By executing this Agreement, Surf City Auto 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 Surf City Auto have been duly obtained. 2.2 The City is a Municipal Corporation, duly organized and existing pursuant to its City Charter. 3. OBLIGATIONS OF SURF CITY AUTO 3.1 Agreement. Surf City Auto hereby covenants and agrees that as soon as practicable following execution of this Agreement, it will have opened a stand alone Jeep Dealership and will commence selling new Jeep vehicles and used vehicles at the Site within, and to continue to use the Site as its primary Jeep Dealership business location during the Operating Period, but no later than one (1) year after execution of the Agreement, unless otherwise agreed upon in writing by the City. 3.2 Site and Restrictions. Surf City Auto shall, within a reasonable time, not to exceed two years from approval of this document by the City Council of the City of Huntington Beach, establish a stand alone Jeep Dealership at the Site. The Agreement for the Site by Surf City Auto shall result in a deed restriction on the Site, good and lasting for 20 years, which restricts the use of the Site and underlying property for new and used Auto Sales only. 3.3 Maximize Sales Tax. During the Operating Period, Surf City Auto 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. 17-5861/160336/DKO 3 3.4 Indemnification. From the Commencement Date of this Agreement through the termination date, Surf City Auto 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 Surf City Auto or its business; provided, however, that the aforesaid obligations of Surf City Auto 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, Surf City Auto, upon City's request, will, at Surf City Auto's expense, defend such action, suit or proceeding at its sole cost. 3.5 Insurance. Surf City Auto shall take out and maintain in effect through the Operating Period, at Surf City Auto'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. Surf City Auto shall use best efforts to carry out the operation of the business in conformity with all applicable local, State and Federal laws. 3.7 Anti-discrimination. Surf City Auto shall use best efforts to 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 Surf City Auto's Representations and Warranties. Surf City Auto 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 Surf City Auto 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 Surf City Auto's knowledge, Surf City Auto 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 Surf City Auto from performing its obligations hereunder. 17-5861/160336/DKO 4 3.8.2 Authority. Surf City Auto has complied with all governmental requirements concerning its organization, existence and transactions. Surf City Auto has the right and power to own and operate its business as contemplated in this Agreement. 3.8.3 No Breach. To Surf City Auto'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 Surf City Auto is bound or regulated. 3.8.4 Warranty Against Payment of Consideration for Agreement. Surf City Auto 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 Surf City Auto, or any successor in interest of Surf City Auto, in the event of any default or breach by the City or for any amount which may become due to Surf City Auto or its successors, or on any obligations under the terms of this Agreement. Surf City Auto 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 Surf City Auto 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, Surf City Auto shall provide to the City true and correct copies of all reports filed by Surf City Auto with the State Board of Equalization in order to allow the City to preliminarily determine the amount of Sales Tax paid by Surf City Auto 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 Surf City Auto on account of sales from the Site during the Operating Period, the City shall pay to Surf City Auto on a quarterly basis financial assistance in an amount equal to fifty percent (50%) of annual Sales Tax Increment generated by Surf City Auto within the City of Huntington Beach and actually received by the City, after the existing base sales tax received by City is earned in City received sales tax. The existing base sales tax are those Jeep sales for the City's fiscal year 2016, which the parties agree is $1,681,797. City retains all sales tax of the first base in City received sales tax, which is increased by 1% annually. 4.2 City's Obligation to Provide Assistance Conditional on Sales Tax Increment. The City's obligation to provide Surf City Auto with assistance pursuant to 17-5861/160336/DKO 5 4.1 is conditioned upon Surf City Auto producing Sales Tax Increment each Fiscal Year. To the extent Surf City Auto does not produce Sales Tax Increment, then the tax rebate obligations herein shall be reduced to zero. 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 Surf City Auto 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 Surf City Auto 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, Surf City Auto 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 which results in a final judgment, either party may terminate this Agreement upon thirty (30) days written notice. The foregoing notwithstanding, the City agrees to vigorously defend any such legal challenges, including appeals of adverse court rulings where appropriate. 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 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 following shall initiate the default sequence: (a) If Surf City Auto materially breaches any of its obligations under Sections 3.1 through 3.7 of this Agreement. (b) If Surf City Auto's management is found by a trier of fact, after final judgment, to be in violation of any Local, State or Federal law in which scienter is an element. (c) If Surf City Auto's management 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. 17-5861/160336/DKO 6 (d) If Surf City Auto fails to provide the City with copies of the quarterly (or, if applicable, monthly) Board of Equalization reports filed by Surf City Auto. (e) If City fails to timely pay its obligations hereunder. When any of the initiating events described in this Section 5.1 occur, City or Surf City Auto 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 Surf City Auto, as appropriate, may terminate this Agreement and/or 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 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. 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. 17-5861/160336/DKO 7 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. 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 Surf City Auto; or cause City or Surf City Auto 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 Surf City Auto 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 Surf City Auto 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 mailing via Federal Express or other similar reputable overnight delivery service. Any notice shall be addressed as set forth below: 17-5861/160336/DKO 8 If to City: If to Surf City: Kellee Fritzal Surf City Auto Group II, Inc. Deputy Director of Business Development Attn: Pete Shaver City of Huntington Beach 16555 Beach Blvd. 2000 Main Street Huntington Beach, CA 92647 Huntington Beach, CA 92648 With copies to (which shall not constitute Notice): Michael E. Gates, City Attorney Alton G. Burkhalter, Esq City of Huntington Beach Burkhalter Kessler Clement & George LLP 2000 Main Street 2020 Main Street, Suite 600 Huntington Beach, CA 92648 Irvine, CA 92614 and Fred Wilson, City Manager City of Huntington Beach 2060 Main Street Huntington Beach, CA 92648 Either City or Surf City Auto may change its respective address by giving written notice to the others in accordance with the provisions of this Section. 17-5861/16033 6/DKO 9 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed on the dates hereinafter respeetively set forth. Surf City Auto Group Il, Inc., a CITY OF FlUNTINGTON BEACH, Califomi orporation a municipal corporation of the State / 4 of California By: Peter E. Shaver Mayor ITS: President ATTEST: City Clerk COUNTS A T APPROVED A, A"() FORM: City4 ttorney U,,A3 -t i 1N17'IATED AND APPROVED: Deputy Director of Business Development REVIEWED AND APPROVED: City Manager 17-5861/160336/DKO ]0 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed on the dates hereinafter respectively set forth. Surf City Auto Group II, Inc., a CITY OF HUNTINGTON BEACH, California corporation a municipal corporation of the State of California LAAlk Nutijo By: Peter E. Shaver Mayor ITS: President ATTEST: w lam? City C irk APPROVED AS.TO FORM: COUNTERPART i Cit ttorney 7 1-7 eke", INITIATED AND APPROVED: 11'JI�0�4� Deputy Director o0 usiness Development REV[4// D APPROVED: Pa�yanager 17-5861/160336/DKO 10 ATTACHMENT NO. 1 Surf City Auto Group II, Inc.'s Certificate Date: Surf City Auto Group II, Inc., hereby requests a sales tax rebate in the amount, and on the date, set forth below, pursuant to that certain Sales Tax Sharing Agreement between the City of Huntington Beach and Surf City Auto Group II, Inc. Capitalized terms used and not otherwise defined herein shall have the meanings set forth for them in the Agreement. REQUESTED AMOUNT: Surf City Auto Group II, Inc., hereby represents and warrants to City that: On , Surf City Auto Group II, 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 [monthly] filings or other poof of payment. Surf City Auto Group II, Inc. PAYMENT APPROVED: City Representative 17-5861/160336/DKO 1 1 DATE(MMIDD/YYYY) '`silk � CERTIFICATE OF LIABILITY INSURANCE 7/20/2017 THIS CERTIFICATE IS ISSUED AS A MATTER OF INFORMATION ONLY AND CONFERS NO RIGHTS UPON THE CERTIFICATE HOLDER. THIS CERTIFICATE DOES NOT AFFIRMATIVELY OR NEGATIVELY AMEND, EXTEND OR ALTER THE COVERAGE AFFORDED BY THE POLICIES BELOW. THIS CERTIFICATE OF INSURANCE DOES NOT CONSTITUTE A CONTRACT BETWEEN THE ISSUING INSURER(S), AUTHORIZED REPRESENTATIVE OR PRODUCER,AND THE CERTIFICATE HOLDER. IMPORTANT: If the certificate holder is an ADDITIONAL INSURED, the policy(ies) must be endorsed. If SUBROGATION IS WAIVED, subject to the terms and conditions of the policy,certain policies may require an endorsement. A statement on this certificate does not confer rights to the certificate holder in lieu of such endorsement(s). PRODUCER CONTACT Carmencita Josef NAME: Hays Companies AICONN Ex : (909)243-8200 FAAic No: 4200 Concours, Suite #350 AIL ADDRESS:cjosef@hayscompanies.com INSURER(S)AFFORDING COVERAGE NAIC# Ontario CA 91764 INSURERANationwide Mutual Insurance Co!npany 23787N INSURED INSURER B: Surf City Auto Group, Inc. INSURER C: 16701 Beach Blvd. INSURER D: INSURER E: Huntington Beach CA 92647 INSURER F: COVERAGES CERTIFICATE NUMBER:CL1761941686 REVISION NUMBER: THIS IS TO CERTIFY THAT THE POLICIES OF INSURANCE LISTED BELOW HAVE BEEN ISSUED TO THE INSURED NAMED ABOVE FOR THE POLICY PERIOD INDICATED. NOTWITHSTANDING ANY REQUIREMENT, TERM OR CONDITION OF ANY CONTRACT OR OTHER DOCUMENT WITH RESPECT TO WHICH THIS CERTIFICATE MAY BE ISSUED OR MAY PERTAIN, THE INSURANCE AFFORDED BY THE POLICIES DESCRIBED HEREIN IS SUBJECT TO ALL THE TERMS, EXCLUSIONS AND CONDITIONS OF SUCH POLICIES.LIMITS SHOWN MAY HAVE BEEN REDUCED BY PAID CLAIMS. INSR TYPE OF INSURANCE ADDL SUER POLICY NUMBER MMIDD/YYYY MMPOLICY EFF L ICY EXP LTR DDIIYYYY LIMITS COMMERCIAL GENERAL LIABILITY EACH OCCURRENCE $ 1,000,000 DAMAGE RENT A CLAIMS-MADE X❑OCCUR PREM SESOE.occurrDence $ 100,000 ACP GLO 3008106028 4/1/2017 4/1/2018 MED EXP(Any one person) $ 5,000 PERSONAL&ADV INJURY $ 1,000,000 GEN'L AGGREGATE LIMIT APPLIES PER: GENERAL AGGREGATE $ 2,000,000 POLICY a JECT I— LOC PRODUCTS-COMP/OPAGG $ 2,000,000 OTHER: $ AUTOMOBILE LIABILITY MBINED SINGLE LIMIT EaCO accident $ ANY AUTO BODILY INJURY(Per person) $ ALL OWNED SCHEDULED BODILY INJURY(Per accident) $ AUTOS AUTOS NON-OWNED PROPERTY DAMAGE $ HIRED AUTOS AUTOS (Per accident $ UMBRELLA LIAB OCCUR EACH OCCURRENCE $ EXCESS LIAB CLAIMS-MADE AGGREGATE $ DED RETENTION$ $ WORKERS COMPENSATION PER OTH- AND EMPLOYERS'LIABILITY YIN STATUTE I ER ANY PROPRIETOR/PARTNER/EXECUTIVE NIA E.L.EACH ACCIDENT $ OFFICER/MEMBER EXCLUDED? (Mandatory in NH) E.L.DISEASE-EA EMPLOYE $ If yes,describe under DESCRIPTION OF OPERATIONS below E.L.DISEASE-POLICY LIMIT 1 $ DESCRIPTION OF OPERATIONS/LOCATIONS I VEHICLES (ACORD 101,Additional Remarks Schedule,may be attached if more space is required) Entities identified in the contract with the Named Insured are included as Addi rZd on the Insured's General Liability policy, subject to the policy terms and coGATF- nipi 8 GHAEL EpRNEYs GTT f A NGTON BEACH F HUN'n CERTIFICATE HOLDER CANCELLATION SHOULD ANY OF THE ABOVE DESCRIBED POLICIES BE CANCELLED BEFORE City Of Huntington Beach THE EXPIRATION DATE THEREOF, NOTICE WILL BE DELIVERED IN 2000 Main Street ACCORDANCE WITH THE POLICY PROVISIONS. Huntington Beach, CA 92648 AUTHORIZED REPRESENTATIVE W Mershon/LRIVER ©1988-2014 ACORD CORPORATION. All rights reserved. ACORD 25(2014/01) The ACORD name and logo are registered marks of ACORD INS0250m4011 Additional Named Insureds Other Named Insureds Huntington Beach Chrysler Dodge Jeep Ram and Huntington Beach Chrysler Jeep Surf City Auto Group, Inc. OFAPPINF(02/2007) COPYRIGHT 2007,AMS SERVICES INC ATTAC H M E N T #2 i C S 6_�F MMA '` Jeep " � MOPRR, Huntingt®n Beach Chrysler Dodge Jeep m #1 Chrysler Dodge Jeep Rarer Dealership in California June 14, 2017 Ms. Kellee Fritzal Deputy Director of Economic Development City of Huntington Beach 2000 Main Street Huntington Beach, California 92648 Re:Sales Tax Sharing Agreement Dear Ms. Fritzal: As you know, for the past 25 years Rick Evans has owned and operated the Chrysler Jeep Dodge Ram dealership on Beach Boulevard in Huntington Beach. I became his partner 4 years ago and since then we have grown the dealership such that it is now the#2 dealership in the United States. In 2015 and 2016, our CJDR dealership generated over $300 million in taxable sales, and it provided over 250 well paying jobs. Our CJDR dealership operates out of a newly renovated facility at 16555 Beach Boulevard, but due to the large volume of new vehicle inventory required to maintain its sales success, we must also utilize the 4 acres Rick owns at 16701 Beach Boulevard (where Rick formerly operated the dealership when it was only Chrysler and Jeep). In addition, we must lease offsite parking for our new vehicle inventory. In short, we are very tight on space. Rick and I have been presented with the opportunity to add a stand-alone Jeep dealership, but this opportunity is expensive and will place constraints on our existing CJDR operations unless we can obtain help from the City as detailed below. The opportunity to add the Jeep stand-alone will require us to remodel 16555 at a $3 million expense; we will be required to invest in expensive renovations to meet Jeep's dealership image and space guidelines. Additionally, we will be obligated by the agreement to add 5,400 new Jeep sales over a three year period. In order to make the Jeep dealership opportunity viable, we ask that the City of Huntington Beach provide our new Jeep Dealership with assistance. We ask the City to make available to the Jeep dealership 50% of the City's share of the sales tax generated by the new Jeep operations over the next 20 years. We believe this request to be in the City's best interests because of the following benefits that the City will derive from adding this fast growing new car franchise to its tax and employment base: Huntington Beach Chrysler Dodge Jeep Ram 16701 Beach Blvd.Huntington Beach,CA 92647 hbjeep.com I hbChrysler.com I hbDodge.com I hbRamTrucks.com Phone 714.841.3999 1 Fax 714.841.4848 HB -161- Item 13. - 15 Ms. Kellee Fritzal June 14, 2017 Page 2 1. Estimated $3 Billion in 'new" taxable vehicle and parts/service sales over the next 20 years. 2. Increased local employment by adding new full-time employees in the Jeep dealership. 3. Increased property values and property tax base. In answer to the questions posed in your email: 1. The entity that will enter into the Sales Tax Sharing Agreement will be Surf City Auto Group II, Inc., a California corporation. 2. The scope of the project will be to: a) acquire the stand alone Jeep dealership and dedicate Rick's property at 16555 Beach Boulevard exclusively to Jeep and b) invest to renovate that location such that it meets Jeep's image and facility requirements and c) utilize the vacated Chrysler Drive to improve new car display and customer parking. 3. The Jeep dealership will go into 16555 Beach Boulevard. 4. The existing condition of the site: the dealership building is over 40 years old and requires substantial renovation in order to meet Jeep's image and facilities guidelines. 5. The City's responsibilities will be to: Provide us with the 50%tax sharing arrangement required so that we can afford to take this mutually beneficial, substantial project on. We will be responsible for all other aspects of this project. 6. 16555 Beach Boulevard is currently assessed at a value of$6.5 million. We believe the property will increase in value by at least $5 million as a result of the facility improvements and the addition of the land resulting from the vacated Chrysler Drive. 7. Our investment will initially be $3 million to remodel. In addition, we will incur costs to incorporate the vacated Chrysler Drive into our dealership operations, at a cost $500,000. Last, increasing our infra-structure to support the business with a permanent parking solution in the form of acquiring vacant land or developing 16555 with above ground parking at an anticipated cost of$25 million plus. Our last renovation project kept over 60 trades people busy with various aspects of the construction project. 8. We know we will be hiring a lot of people to help in our Jeep operations, but we have not yet made those projections. I can tell you that our CJDR dealership generates $300 million in taxable sales annually and employs 280 employees. We expect Jeep to Item 13. - 16 H B -162- Ms. Kellee Fritzal June 14, 2017 Page 3 generate$160 million in taxable sales annually, and based on size comparisons may need as many as 70 employees. 10. We project taxable sales of$160 million per year in each of 2018, 2019, 2020 and 2021. We operate a business that exceeds any other dealer in the area. Our numbers speak for themselves. We are anxious to meet the City and design this mutually beneficial financial plan.Thank you for your anticipated assistance on this exciting new opportunity. Please let me know if you need any additional information. Since, ly, Pete Shaver cc: Mr. Ken Dormer, Deputy City Manager HB -163- Item 13. - 17 ATTACHMENT #3 1 ECONOMIC DEVELOPMENT SUBSIDY REPORT PURSUANT TO GOVERNMENT CODE SECTION 53083 FOR A SALES TAX SHARING AGREEMENT BY AND BETWEEN CITY OF HUNTINGTON BEACH AND SURF CITY AUTO GROUP II, 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 Surf City Auto Group II, Inc. ("Agreement"). Notice was published on the City's website for a public hearing to be held on July 17, 2017. 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 Surf City Auto Group II, Inc., who will construct, own and operate a new Jeep dealership that will benefit from the economic development subsidy: Surf City Auto Group II, Inc. 16701 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 be on or around August 1, 2017 (or when the dealership opens) and the end date will be no later than 20 years after the start date, on or around August 1, 2037. The economic development subsidy will be paid quarterly, within 30 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 fifty percent (50%) of the sales tax revenue received by the City from Surf City Auto Group II, Inc., after the existing base sales tax received by the City. The existing base sales tax is defined as those Jeep sales for the City's fiscal year 2016,which is estimated at$1,681,797, and increased by 1% per year. City of Huntington Beach 1 July 10, 2016 Item 13. - 18t�3 4. A statement of the public purpose for the economic development subsidy. Rick Evans has owned and operated the Chrysler Jeep Dodge Ram (CJDR) dealership on Beach Boulevard for 25 years. In 2013, Pete Shaver joined Rick Evans as owner of the CJDR dealership. The CJDR dealership operates out of a newly renovated facility at 16555 Beach Boulevard as well as the 4 acre site at 16701 Beach Boulevard (Site), owned by Rick Evans, due to the large volume of new vehicle inventory . In addition, the CJDR dealership leases offsite parking for additional new vehicle inventory. Surf City Auto Group II, Inc. has the opportunity to add a stand-alone Jeep dealership at the Site. This will require a $3 million renovation to meet Jeep's dealership image and space guidelines and a $25 million parking garage, which will be constructed half on the 16555 Beach Boulevard and half on the Site. Additionally, the Jeep dealership will be obligated to add 5,400 new Jeep sales over a three year period. Surf City Auto Group II, Inc. has requested to enter into the Agreement to assist in defraying the significant cost of remodeling the dealership and moving the Jeep component of the existing dealership to the 16701 Beach Boulevard site Operations of the new dealership are expected to generate significant incremental sales activity, projected at an average of$139 million a year for the first five years, and to increase sales tax to the City by approximately $31,359,000 over the term of the proposed Agreement. The current assessed value of the Site is $5,740,000 and it is projected that the value of the Site will have an assessed value of$21,240,000, or a $15,500,000 increase. 5. The projected tax revenue to the local agency as a result of the economic development subsidy. Projections indicate that, over the 20 year period of the sales tax sharing agreement, roughly $16,058,000 in present value dollars in additional sales tax revenue could be received by the City. Of this amount, the City would pay Surf City Auto Group II, Inc. approximately$8,029,000 in present value terms. 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 50 full- and part-time jobs and approximately 60 temporary new jobs during the construction. City of Huntington Beach 2 July 10, 2016 HB -165- Item 13. - 19 7/-7112 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 July 17, 2017 at 6:00 p.m., unless otherwise changed by the City Manager, to consider the following item: Applicant: Surf City Auto Group 11, Inc., Pete Shaver, President Project Location: 16555 Beach Boulevard, Huntington Beach, California 92647 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 Surf City Auto Group II, Inc. are proposing to enter into an agreement that encourages the creation of a new Jeep dealership within Huntington Beach. The City is proposing to provide financial assistance in the form of an economic development subsidy to Surf City Auto Group II 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. Surf City Auto Group II, Inc.: Pete Shaver, President, a California Corporation, 16555 Beach Boulevard, Huntington Beach, California 92647 2)The start and end dates and schedule, if applicable, for the economic development subsidy. Commencing approximately on or around August 1, 2017 for 20 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 Surf City Auto Group 11, Inc. operations within the City of Huntington Beach. The Agreement provides that Surf City Auto Group II, Inc. will retain 50% of revenues generated to the City over the 2016 base year of Jeep sales, which will increase at 1% per year; payment will be made on a quarterly basis. It is estimated, that Surf City Auto Group 11, Inc. will generate approximately$1,568,000 per year to the City in revenue. Based upon this estimate, Surf City Auto Group II, Inc. is projected to receive approximately$783,975 per annum and the City approximately$783,975 per annum. 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$783,975 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 Surf City Auto Group II, Inc. have estimated that the Agreement creates 50 full and part time jobs in the City. The construction Project will create 60 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 July 3, 2017 through July 17, 2017. 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. PUBLISHED: Orange County Register July 7, 2017 POSTED AT CITY HALL AND ON CITY WEB SITE: July 3, 2017 Esparza, Patty From: Sandra Campos [scampos@scng.com] Sent: Wednesday, July 05, 2017 12:36 PM To: Esparza, Patty Cc: scampos@ocregister.com Subject: Re: Legal ad for OC Register- July 7, 2017 Hello, Below is the proof for your review, please make sure all is correct. If it is not please send the corrections and I will send a new proof with your corrections. Once the proof is approved you need to write back, "approved, ready to publish as is" Your ad will publish just as it was approved. Cost$1,381.62 /Ad# 10976790 to publish in the Orange County Register on July 7, 2017 PROOF: 1 ;Pursuant to Section 53083(a)(6)(b), of the California Government ,Code AB 562),the Cityof Huntington Beach shall provide public notice and a hearing prior to granting of, iproposecl economic development subsidy- MTICE IS HEREBY GIVEN that the City of HuntiryOon Beach will hold a public hearing in the Council iCharnbers of the Huntington Beach Civic Center, 2CO0 Poliain Street on Monday July 17,2017 at 6 M :p.m,, unless otl-ie rwise changed by the City Mkinager, to consider the -if o I lowi ng item; 'Applicant: Surf City Auto Group 11, Inc.,Pete Shaver,President Project Location. 1&555 Beacti Boulevard, Huntington Beach., ,Californla 92547 'Ac jree,men ;The City of Huntington Beachdesires to create jobs and employment NOthin the City. The City has theability to implement the provisions ,'of AB 5Q, a statewide economic cle-ielopment tool passed by Gover- nor Brown in late2013 for the purpose of allowing local jurisdictions -to induce economic development for the creation and maintenanceof- Jobs- The City of Huntington Beach and Surf City Auto Group I I., Inc, are proposing to enter into an agreement that encourages the crea- ntion of a new Jeep dealership v6thin Huntington Beach. The City is 'Proposing to provide financial assistance, in the form of an ecorjotinfc: "development subsidy to Surf Cit,, Auto Group II as described in the 10perating CovencintAgreenient. Pursuant to Section._53OMof the Cali- fornia Covernment Code (AB 562) the following information will be I Pos ted on the C i ty,s We b Site. j) The name and address of all corporations, or any other business *,entities, except for sole proprietorships, that are the benef iciari, of ;the economic development subsidy,.if applicable. Surf City Auto Group I I., Inc-: Pete Shaver,President,a California Corporation,16.555 Beach Boulevard, Huntington Beac Ii, Cal ifornia 92647 '2) The start and end dates and schedule., if applicable, for the economic development subsiciv- Commencing approximately on or around August 1, 2017 for 20 years. Q) A description of the economic development subsidy, including the ,es t irri a ted total a rn ou n t of ex pe nd i t u re of public funds, or of revenue lost to.. the local agenc Y,a s a res u I t of t he ec onom ic development su b- 'lsicly. The proposed operating Covenant Agreement provides for participation of revenyles generated from Surf City Auto Group 11, Inc, operations within the City of Huntington Becich. The Agreement provides that Surf City Auto Group 11, Inc- willretain 50% of revenues generated to the City over the 2016 base year of Jeep sales, which will increase at I O.-a per year; payment wfll be- made on a civarterly basis. It is estimated, that Surf City Auto Grou,p 11, 1 tic. wit I generate approxi nicjtel ' Si,,-5 ,000?er year to the City in revenue, Based upon this estimate, Sur City Auto Group 11, Inc. is proiected to receive approximately $783,97.5 per annum and the Ci N approximately 5783,97�1, per annurn, 14) A statement of the public purposes for the econiDmic development subsidy. To continue to expand and enhance economic opportunities for businesses in the City, continue to expand the City's em ploynnent base, and continue to generate hereinafter defined Sales Tax that the City can utilize to fund general governmental services such as i police, fire., street maintenance, and parks and recreation pro- a M S, 51 Projected tax revenue to the local agency cis a result of the onomic development subsidy. The City of Huntington Beach will receive approximately $783,97_ per year in sales tax revenue. Estimated number of jo b s created by the ec onom ic development is u b sidy, b ro ken claw n by f u I I-t i me., ;part t[m e a nd tem pora ry positions, 'All interested persons are invited to attend this hearing and express ,,'.opinions upon the items listed above. The Operating CovenantAgree- iment is available for review at Huntington Beach City Hall from July —3,2017 through July 17,2017. Any written materials to be submitted to �=.Jo thf eHuntington k aBea I ea is,t 2tCwO ftt'a if on uS r t r(e2e 4t,hHo uu nr st i Pi gr itoor n toB et cliie li i,e Ca Ar i n9g2 6C Further information on these items may be obtained at the City of, ,,,Development, Beach, Attn: Kellee Fritz-al, Deputy Director Business ,,,Development, 2000 Moin Street, Huntington Beach., CA 92648 or b telephone, (714)3 7�1519, lPublished: Orancie Count,,, RegIster Julv 7,2017 R-M6 10976790 2 On Wed, Jul 5, 2017 at 11:54 AM, Esparza, Patty <PEsparzana,surfcity-hb.org> wrote: Good morning Sandra: Attached is a Public Hearing notice that needs to be published in the legal section of the OC Register on Friday, July 7, 2017. Please confirm when possible. Thanks! Patty Esparza, C�MC Assistant City Clerk City of I funtington Beach 2000 Main Street 1-Iuntington Beach, CA 92648 (714) 536-5260 Sandra Campos Orange County Register 2190 Towne Centre Place Anaheim,CA 92806 Main Line: 714-796-2209 Direct Line: 714-796-6748 Email: scampos(a)scng.com PLEASE NOTE NEW EMAIL. ADDRESS x 3 AFFIDAVIT OF PUBLICATION STATE OF CALIFORNIA, ) PROOF OF PUBLICATION ) 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 NOTICE OF PUBLIC HEARING eighteen years, and not a party to or interested in Pursuant to Section 53083(o)(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; the above entitled matter. I am the principal clerk proposed economic development subsidy. NOTICE IS HEREBY GIVEN that the City of Huntington Beach will' of The Orange County Register, a newspaper hold a public hearing in the Council Chambers of the Huntington Beach Civic Center,2000 Main Street on of general circulation, published in the city of Monday uless otherwise changed by the City Manager,to consider the following item: Santa Ana, County of Orange, and which news- Applicant:Surf city Auto Group 11,Inc.,Pete Shaver,President Project Location: 16555 Beach Boulevard, Huntington Beach, paper has been adjudged to be a newspaper of California92647 Agreement: The City of Huntington Beach desires to create jobs and employment general circulation by the Superior Court of the within the City.The City has the ability to implement the provisions of AB 562,a statewide economic development tool passed by Gover- nor Brown in late 2013 for the purpose of allowing local jurisdictions County of Orange, State of California, under the to induce economic development for the creation and maintenance of jobs.The City of Huntington Beach and Surf City Auto Group 11,Inc. are proposing to enter into an agreement that encourages the crea- date of November 19, 1905, Case No. A-21046, tion of a new Jeep dealership within Huntington Beach. The City is proposing to provide financial assistance in the form of an economic development subsidy to Surf City Auto Group 11 as described in the that the notice, of which the annexed is a true Operating Covenant Agreement. Pursuant to Section 53083 of the Cali- fornia Government Code (AB 562) the following information will be printed copy, has been published in each regular 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 and entire issue of said newspaper and not in any the economic development subsidy,if applicable. Surf City Auto Group 11,Inc.: Pete Shaver, President,a California Corporation,16555 Beach Boulevard,Huntington Beach, supplement thereof on the following dates, to California 92647 2) The start and end dates and schedule, if applicable, for the economic development subsidy. wit: Commencing approximately on or around August 1, 2017 for 20 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 sub- July 7,2017 sidy. The proposed Operating Covenant Agreement provides for participation of revenues generated from Surf City Auto Group 11, Inc. operations within the City of Huntington Beach. The, "I certify (or declare) under the penalty of Agreement provides that Surf City Auto Group 11, Inc.will retain 50%of revenues generated to the City over the 2016 base year of Jeep sales, which will increase at 1%per year; payment will be perjury under the laws of the State of California made on a quarterly basis. It is estimated, that Surf City Auto; Group II, Inc. will generate approximately $1,568,000 per year to the City in revenue. Based upon this estimate, Surf City Auto that the foregoing is true and correct": Group 11, Inc. is projected to receive approximately $783,975 per annum and the City approximately$783,975 per annum. 4)A statement of the public purposes for the economic development' Executed at Santa Ana, Orange County, subsidy. To continue to expand and enhance economic opportunities for California, on businesses in the City, continue to expand the City'semployment base,and continue to generate hereinafter defined Sales Tax that the City can utilize to fund general governmental services such as DateJuly 7,2017 grams.pce, fire, street maintenance, and parks and recreation pro- : 5) Projected tax revenue to the local agency as a result of the economic development subsidy. The City of Huntington Beach will receive approximately $783,975 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 Surf City Auto Group 11,Inc.have estimated that the Agreement creates 50 full and part time jobs in the City. The construction Project will create 60 full-time positions. Al!interested persons are invited to attend this hearing and express opinions upon the items listed above.The Operating Covenant Agree- Signature ment is available for review at Huntington Beach City Hall from July 3,2017 through July 17,2017. 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. The Orange County Register Further information on these items may be obtained at the City of Huntington Beach, Attn: Kellee Fritzal, Deputy Director Business 625 N.Grand Ave. Development, 2000 Main Street, Huntington Beach, .CA 92648 or by Santa Ana,CA 92701 telephone:(714)374-1519. (714)796-2209 Published:Orange County Register July 7,2017 R-2086 10976790 AFFIDAVIT OF PUBLICATION STATE OF CALIFORNIA, ) PROOF OF PUBLICATION ) ss. County of Orange ) I am a citizen of the United States and a resident NOTICE OF PUBLIC HEARING Pursuant to Section 53083(a)(6)(b) of the California Government Code(AB 562),the City of Huntington of the County aforesaid; I am over the age of Beach shall provide public notice and a hearing Prior to granting of proposed economic development subsidy. eighteen years, and not a party to or interested in 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 the above entitled matter. I am the principal clerk Monday July 17,2017 at 6:00 p.m.,unless otherwise changed by the City Manager,to consider the of The Orange County Register, a newspaper following item: Applicant:Surf City Auto Group 11,Inc.,Pete Shaver,President Project Location: 16555 Beach Boulevard, Huntington Beach, of general circulation, published in the city of California92647 Santa Ana Count of Orange, and which news- Agreement: y g , The Agreement: nt Huntington,Beach desires to create jobs and employment within the City.The City has the ability to implement the provisions paper has been adjudged to be a newspaper of of AB 562,a statewide economic development Tool passed by G over nor Brown in late 2013 for the purpose of allowing local jurisdictions to induce economic development for the creation and maintenance of fobs.The City of Huntington Beach and Surf Cite Auto Group II,Inc. general circulation by the Superior Court of the are proposing To enter into an agreement that encourages the crea- tion of a new Jeep dealership within Huntington Beach. The Cite is County of Orange State of California, under the Proposing to provide financial assistance in the form economic development subsidy to Surf City Auto Group II as described bed in the Operaing Covenant Agreement. Pursuant to Section 53083 of the Cali t - date of November 19 1905 Case No. A-21046 fornfa Government Code (AB 562) the following information will be , posted on the City's Web Site. of which the annexed is a true The name and address of all corporations, or any other business that the notice, entities, except for sole proprietorships, That are The beneficiary of the economic development subsidy,if applicable. printed copy, has been published in each regular Surf oral Auto Group 11,Inc.:uPete Shaver,President,a California P PY P g Corporation,16555 Beach Boulevard,Huntington Beach, California 92647 and entire issue of said newspaper and not in an 2) The start and end dates and schedule, if applicable, for the y economic development subsidy. Commencing approximately on or around August 1, 2017 for 20 supplement thereof on the following dates, to 3)A description of the economic development subsidy, including the estimated total amount of expenditure of public funds,or of revenue wit: lost t a the local agency,as a result of the economic development sub- sidy. The proposed Operating Covenant Agreement provides for participation of revenues generated from Surf City Auto Group 11, Inc. operations within the City of Huntington Beach. The July 7 2017 Agreement provides that Surf City Auto Group 11, Inc.will retain 50%of revenues generated to the City over the 2016 base year of Jeep sales,which will increase at 1%per year; payment will be made on a quarterly basis. It is estimated, that Surf City Auto « Group II, Inc.will generate approximately $1,568,000 per year to I certify (or declare) under the penalty of the City in revenue. Based upon.this estimate, Surf City Auto annum and Inc.City approximately$783,9ve 75 approximately $783,975 $783,975 per perjury under the laws of the State of California 4)A statement of the public purposes for the economic development subsidy. that the foregoing is true and correct": To continue to expand and enhance economic opportunities for g g businesses in the City,continue to expand the city'semployment base,and continue to generate hereinafter defined Sales Tax that Executed at Santa Ana, Orange County, the City can utilize to fund general governmental services such as - g ty police, fire, street maintenance, and parks and recreation pro- California on ,grams. 5) Projected tax revenue to the local agency as a result of the economic development subside. The City of Huntington Beach will receive approximately$783,975 2017 per year sales tax revenue. Date: July 7 6) Estimated number of lobs created be The economic development subsidy,broken down by full-time, part-time and temporary positions. The City and Surf City Auto Group 11,Inc.have estimated that the art tim construction Project will cll and reaT 60 full-time positions.obs in City. The All interested persons are invited to attend this hearing and express opinions upon the items listed above.The Operating Covenant Agree- ment is available for review at Huntington Beach City Hall from July 3,2017 through July 17,2017. 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. Signature/ 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. The Orange County Register Published:Orange County Register July7,2017 R-2086 10976790 625 N. Grand Ave. Santa Ana,CA 92701 (714)796-2209 July 17 City Council Meeting SALES TAX SHARING AGREEMENT STAND ALONE JEEP DEALERSHIP Jeep Agreement - Pete Shaver ■ Site Upgrade - $3+ million ■ Construction of a new Parking Structure - $25 million (minimum) ■ Total Private Investment of $28 million Agreement ■ SalesTax Sharing Agreement ■ �o year deed restriction for auto sales (new and used) on property ■ Sales Tax Agreement can be terminated at 10 years ■ Base year sales (�016) $16.8 million to City (�1.68 million) • Base year is increased by 1% annually Financials ■ After base of $1.68 million —50% 7/18/2017 to City/5o% to Surf City Motors ■ Projected additional sales of $135 million annually (�1.35 million in SalesTax to City) after base, the share would be: City - $675,soo Surf City Auto - $675,Zoo Additional Benefits ■ Increased Property tax with the upgrades to site — by approximately $15.5 million ■ 5o newjobs at Jeep Dealership ■ 6o construction jobs for Dealership QUESTIONS