HomeMy WebLinkAbout12/15/1999 - STAFF REPORTS DATE: DECEMBER 15, 1999
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TO: COMMUNITY REDEVELOPMENT AGENCY C•� �� /+ j >C�
FROM: DIRECTOR OF MANAGEMENT&BUDGET
APPROVAL OF A DISPOSITION AND DEVELOPMENT AGREEMENT WITH VIP
MOTOR CARS,`INC., 4095 EAST PALM CANYON DRIVE, AND FDH ENTERPRISES,
INC., TO PROVIDE FINANCIAL ASSISTANCE FOR THE RENOVATION AND
EXPANSION OF THE AUTO DEALERSHIP
RECOMMENDATION:
That the Community Redevelopment Agency of the City of Palm Springs("CRA")
approve a Disposition and Development Agreement("DDA")with VIP Motor Cars, Ltd.
and FDH Enterprises,Inc., providing tax increment financing•assistance for the
rehabilitation and expansion of the automobile dealership in the amount of$1,000,000.
BACKGROUND:
Since June, staff has been working with VIP Motor Cars to help facilitate a significant
expansion of their facility in Palm Springs and preserve the sales tax revenue of one of the
largest generators in the city. The dealer is under new ownership(since October 1998)
and has an aggressive growth plan, which is good for the entire community. VIP had
originally requested a loan of$1 million, to be repaid through a portion of the additional
sales tax they produce, and has proposed the creation of about 30 jobs. (The job creation
count made them eligible for a HUD 108 loan of about$1,000,000, based on HUD's"one
job per$35,000 in assistance" dictum.) The City Council approved a HUD 108
application on VIP Motors' behalf at the September 15 meeting.
However,the HUD 108 loan would have brought Davis-Bacon requirements(federal
prevailing wage law)to the project,which was estimated to increase the$2,000,000 rehab
project cost by as much as 200/e, thereby wiping out any financial benefit the HUD 108
loan would have brought to the project through lower interest rates or more favorable
terms. Additionally,the real benefit to the dealership was to come with the agreement
with the Community Redevelopment Agency that would have repaid the HUD 108 loan
(about half the construction cost)through the increase in sales tax generated by the
expansion of the dealership. Because of the Davis-Bacon problem and the lack of direct
benefit from the loan, the developer asked to withdraw the HUD 108 application prior to
City staff sending it on to HUD.
There were a number of issues that needed to be ironed out in the drafting of the DDA
prior to the Agency considering it for approval. The first was the issue of how the Agency
could reimburse the developer for improvements to private property under California
Redevelopment Law("CRL"). Most of the tax increment rebate agreements that the
Agency has negotiated over the past several years have reimbursed developers for their
cost of constructing public improvements, such as streets, sidewalks, curbs and gutters.
As a percentage of the overall project cost in this project, however, offsite improvements
are relatively small — probably no more than $50,000 total. Another way to provide a
financial benefit to a project is to write down the land costs by purchasing the land and
then reselling it at a lower(incentive)price, but that would have involved the purchase and
resale of the real property that comprises the dealership, which would have been a lengthy
and complicated process.
CRL does allow agencies to pay for improvements on properties they lease, though, which
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leads to the structure of this DDA: the agreement proposes that the Agency lease the real
property from FDH Enterprises, Inc., the property owner, and then sublease it to VIP
Motor Cars,Ltd. at the same lease rate, minus an amount equal to the sales tax .
"increment"(the amount of sales tax the dealership generated over a base amount
determined by the Agency). The reduced rent to VIP works as a tenant improvement
allowance; in this can the subtenant(VIP)will have performed the improvements on the
property and will be reimbursed a portion of their cost by the tenant(the Agency).
Currently,the aggregated lease(there are three separate properties that comprise the
dealerships)will be$58,250 per month, and will increase by an amount no more than the
Consumers Price Index. This amount will be paid to the Agency by VIP, and then passed
through to FDH by the Agency. The rebate will be a separate calculation and payment,
and will be paid on an annual(not monthly)basis to the dealer.
VIP Motors and FDH Enterprises have overlapping,but not identical, ownership. They
are separate corporations.
The amount of rent rebate will be calculated based on the dealership's sales tax
performance,but will be paid from the(property)tax increment that flows to the Agency.
Sales tax, which flows to the City's General Fund,then becomes the index for the payment
but not the source. In this case, the tax increment generated by this project will only
represent about half the amount of the rebate paid to the dealer over the term of the lease;
the other half will come from the gross tax increment revenue of the project area This
structure preserves a major sales tax source for the General Fund, as well as allowing the
General Fund to keep the growth in sales tax revenue. t
The dealership has asked for assistance in the amount of$1,000,000. This amount
actually represents about 12.5%of their overall financial commitment to the project,
including acquisition and rehab costs.
A spreadsheet is attached that describes the deal points, as well as the Disposition and
Development Agreement.
JOHN YMOND Q b f�/
Di or Manageme Budget APPRti"
APPROVED: Z440M � _ !_l DECLINF1
&c ., City M nager
ATTACHMENTS::
1. Resolution
2. Spreadsheet
3. Disposition and Development Agreement—to be provided at meeting
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,RESOLUTION NO.
OF THE COMMUNITY REDEVELOPMENT AGENCY OF
THE CITY OF PALM SPRINGS,CALIFORNIA, APPROVING
A DISPOSITION AND DEVELOPMENT AGREEMENT WITH
VIP MOTOR CARS,LTD. AND FDH ENTERPRISES, INC.
PROVIDING REHABILITATION ASSISTANCE IN THE
AMOUNT OF $1,000,000 FOR PROPERTY IMPROVEMENTS
AT AN AUTOMOBILE DEALERSHIP AT 4095 EAST PALM
CANYON DRIVE,PROJECT AREA#9 G
WHEREAS, the Community Redevelopment Agency of the City of Palm Springs, California
("Agency") is constituted under the Community Redevelopment Law (California Health and
Safety Code Section 33000 g1,.=J to carry out the purpose as the redevelopment in the City
of Palm Springs ("the City"); and
WHEREAS, VIP Motor Cars, Ltd. has requested Agency financial assistance in their efforts to
expand and upgrade their automobile dealership at 4095 East Palm Canyon Drive, in order to
retain the business in Palm Springs, make it a more profitable facility for the dealer and the City,
and increase the level of employment;and
WHEREAS, expansion of the dealership will create additional sales tax revenue for the City, as
well as create additional on-site jobs for documented low and moderate income households,
therefore improving the City's ability to provide services to all its residents, as well as overall
living conditions for low and moderate income households in the City; and .
WHEREAS, Section 33430 of the Community Redevelopment Law allows that an agency may,
"for purposes of redevelopment, sell, lease, for a period not to exceed 99 years, exchange,
subdivide, transfer, assign, pledge, encumber by mortgage, deed of trust, or otherwise, or
otherwise dispose of any real or personal property or any interest in property;"and
WHEREAS, Community Redevelopment Law allows agencies to use tax increment to pay for
improvements on properties which the agency owns or leases; and
WHEREAS, Section 33432 of the Community Redevelopment Law requires that any such lease
shall be conditioned on the redevelopment and use of the property in conformity with the
redevelopment plan;and
WHEREAS, a Notice of Public Hearing concerning the Disposition and Development
Agreement was published in accordance with applicable law; and
WHEREAS, the California Redevelopment Law requires certain findings before the Agency
can enter into this Amendment, as follows:
a) Section 33421.1 - that the City Council find that the provision of such
improvements will effectuate the Redevelopment Plan;
b) Section 33445 - that the City Council find that the improvements benefit the
Project Area; that no other means of financing the improvements are available;
that payment of the funds will assist in eliminating blight, and that assistance to
the project is consistent with the Agency's adopted Five Year Implementation
Plan.
CY44-1
WHEREAS, the Agency has considered the staff report, and all the information, testimony and
evidence provided during the public hearing on December 15, 1999.
NOW, THEREFORE, BE IT RESOLVED by the Community Redevelopment Agency of the
City of Palm Springs as follows:
SECTION 1. The above recitals are true and correct and incorporated herein.
SECTION 2. Pursuant to the California Environmental Quality Act(CEQA), the
Community Redevelopment Agency finds as follows:
a) In connection with the approval of the DDA, the project is
Categorically Exempt because all the work is to occur on existing
facilities and there are no changes in the effects of the proposed
project or the circumstances in which it is being carried out
which require any modification of the Categorical Exemption.
b) The Agency finds that the Planning Commission adequately
discussed the potential significant environmental effects of the
proposed project(land use, traffic/circulation, parking, air
quality, noise, aesthetics, geology/soils, water quality, drainage,
public utilities, public safety, archaeological/historic resources
and light and glare). The Community Redevelopment Agency
further finds that the Categorical Exemption reflects its
independent judgment.
SECTION 3. The Developer proposes to add a new service drive; construct a new
two-story office addition to the west side of the Mercedes-Benz building;
construct streetscape improvements, additional landscaping, low screen
walls and display pads along East Palm Canyon Drive; and redesign and
install new exterior lighting. The Developer shall install at the BMW
dealership an enclosed "new car" delivery area and a new screen wall
west of the service drop-off area, with lighting and streetscape
improvements to match the Mercedes-Benz dealership along East Palm
Canyon Drive.
SECTION 4. The Developers are required to make certain street improvements in
keeping with City codes. Such offsite improvements are imperative to
this project, such as reconstructing curb, gutter and sidewalks along
Cherokee Road and East Palm Canyon Drive. This project improves a
blighted corner of Redevelopment Project Area#9G and will increase
tax increment to the Agency and sales tax collections to the City.
SECTION 5. The Agency proposes, through this Disposition and Development
Agreement, to lease the three separate dealership properties from FDH
Enterprises, Inc., the property owner, for an aggregated amount of
$58,250 in the first year, to increase annually by the Consumer Price
Index as published by the U.S. Department of Labor for the Los
Angeles-Anaheim-Riverside SMSA. VIP Motor Cars, Ltd. shall, in
turn, sublease the three properties from the Agency for an aggregated
amount of$58,250 in the first year, to increase annually by the
Consumer Price Index as published by the U.S. Department of Labor for
the Los Angeles-Anaheim-Riverside SMSA. The amount of payment for
the lease and sublease shall be the same. The sublessee shall construct
the improvements as described in Section 3 of this resolution, at a cost
of at least two million dollars ($2,000,000). Addition, the Agency shall
participate in the cost of the improvements, as the lessee's share, as
described in Section 3 of this resolution, by rebating annually to the
sublessee an amount up to one million dollars ($1,000,000) using tax
increment from Project Area Al9. The annual amount rebated for the cost
of the improvements shall be determined by the combined dealerships'
sales tax performance over a base amount determined in the DDA. The
agreement shall be for a period of twelve (12) years or until the
$1,000,000 is rebated, whichever is sooner.
SECTION 6. The Agency does hereby find and determine as follows:
(a) The property was originally developed in the 1950's and
was occupied by Palm Springs Ford until the 1970's when
it departed; however, while the dealership currently has
luxury brand names, the dealership itself has declined in
economic value over the past two decades due to aging
and obsolete facilities and poor visibility from East Palm
Canyon Driven. In 1998, the current owners acquired
VIP Motor Cars, Ltd. and began negotiating with the
manufacturers regarding the manufacturers' requirements
for the dealership's facilities.
(b) The DDA effectuates the purposes of the Community
Redevelopment Law by reversing or alleviating any
serious physical, social, and economic burden of the
Community which cannot reasonably be expected to be
reversed or alleviated by private enterprise acting alone,
in that the assistance will facilitate the redevelopment and
operation of the automobile dealership by causing the
reconstruction and upgrade of the property, placing the
property in the hands of a first class and experienced
operator, in order to maintain existing sales tax revenue
and attract additional commercial development within the
City and increase the City's tax base.
(c) The DDA effectuates the purposes of the Community
Redevelopment Law as it is intended to eliminate blight
and promote the health, safety and general welfare of the
people of Palm Springs.
SECTION 7. The proposed project is consistent with the Implementation Plan
for this area, insofar as this project will increase tax increment
and will expand an already-existing successful business. It will
increase the City's commercial sector by expanding a major retail
business in the City, in order to capture a portion of the
significant sales tax leakage that occurs in Palm Springs.
SECTION 8. Based on foregoing reasons, this DDA is hereby approved and
incorporated herein by this reference.
C% Ra -G -�
SECTION 9. The Chairman of the Agency, and/or his designee, is authorized
to execute all necessary documents, in a form approved by the
Agency Counsel.
ADOPTED this day of , 1999.
AYES:
NOES:
ABSENT:
ATTEST: COMMUNITY REDEVELOPMENT AGENCY
CITY OF PALM SPRINGS, CALIFORNIA
By
Assistant Secretary Chairman
REVIEWED & APPROVED !�-
Proposed Benefit to VIP Motor Cars, Ltd.
through the
Disposition and Development Agreement
with the
Community Redevelopment Agency
Incremental Cumulative
Sales Tax Tax Increment Benefit to VIP
Fiscal (Tax over (Property Tax (sum of Sales
Year Year Base) paid to CPA) Tax Increment)
1 1999-00 0 0
2 2000-01 $72,059 $45,600 $72,059
3 2001-02 $77,679 $46,512 $149,737
4 2002-03 $104,484 $47,442 $254,222
5 2003-04 $111,182 $48,391 $365,403
6 2004-05 $118,133 $49,359 $483,537
7 2005-06 $125,348 $50,346 $608,884
8 2006-07 $132,834 $51,353 $741,718
9 2007-08 $140,600 $52,380 $882,318
10 2008-09 $148,656 $53,428 $1,030,974
11 2009-10 $157,011 $54,496 $1,187,985
12 2010-11 $165,676 $55,586 $1,353,661
Total $554,893 $1,353,661
4 4 "
NOTICE OF PUBLIC HEARING
NOTICE IS HEREBY GIVEN, that the Community Redevelopment Agency of the City of Palm
Springs and the City of Palm Springs will hold a Public Hearing in the City Council Chambers,
located at 3200 Tahquitz Canyon Way, Palm Springs, California 92262, beginning at 7:00 p.m.,
Wednesday, December 15, 1999, to consider the following:
An Owner Participation Agreement
With V.I.P.Motor Cars,Ltd.
And FDH Enterprises,Inc.
for Southwest corner of Cherokee Road and
Past Pahn Canyon Drive
Patin Springs, California M264
The Community Redevelopment Agency of the City of Palm Springs("Agency")proposes an
Owner Participation Agreement("OPA")with V.I.P.Motor Cars Ltd.and FDH Enterprises,Inc. To
approve this OPA,the Community Redevelopment Agency and the City of Palm Springs are required
to make certain findings pursuant to Health and Safety Code Sections 33421.1, 33433 and 33445 and
prior to malting those findings, a Public Hearing is held to receive public input on the matter.
The nature of the Amendment is that the Agency will lease the subject property from FDH
Enterprises, Inc. and sublease the property to VIP Motor Cars Ltd. in order to allow the Agency to
assist with the dealership with the cost of a substantial rehabilitation and expansion of the dealership,
such assistance to be provided over a period of up to twelve years.
All interested persons are invited to attend the Public Hearing and express opinions on the item
listed above. If you challenge the nature of the proposed action in court, you may be limited to
raising only those issues you or someone else raised at the Public Hearing described in this notice, or
in written correspondence delivered to the City Clerk, at the address listed above, at or prior to the
Public Hearing.
Members of the public may view this document and all referenced documents in the
Redevelopment Agency offices, City Hall, and submit written comments to the Community
Redevelopment Agency at or prior to the Community Redevelopment Agency Meeting at or prior to
the public hearing described in this notice.
Further information, including a copy of the Amendment and Resolution, prepared in
accordance with Health and Safety Code Section 33433, is available in the Office of the City Clerk,
at the above address.
OW of Pour ad wIS - PATRICIA A. SANDERS, City Clerk
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