TITLE
Recommendation to authorize City Manager to amend the Sales Tax Incentive Agreement with Marina Pacifica LLC, allowing for a five-year extension and a maximum payout of $980,000. (District 3)
DISCUSSION
Approval is recommended to amend an existing Sales Tax Incentive Agreement (Agreement) with Marina Pacifica LLC (Marina Pacifica). The existing 15-year Agreement, which went into effect in the fourth calendar quarter of 1996, expires in the third calendar quarter of 2011. Marina Pacifica continues to request the City's assistance in the form of a Sales Tax Sharing Agreement, beginning with the fourth quarter of calendar 2011, which is the start of the amended period. The Agreement is contingent upon Marina Pacifica executing a minimum 10-year lease with Best Buy Co., Inc. (Best Buy) for space at 6310 East Pacific Coast Highway in Long Beach, California.
Marina Pacifica has requested the City's assistance to partially offset the cost of a reduced rental rate required to attract Best Buy. The rental rate Best Buy is willing to pay is below that which returns an adequate return on investment. The City's investment of shared sales tax will assist in securing a national retailer, stabilizing the tenancy, enhancing overall business at Marina Pacifica, and augmenting sales tax revenue.
On March 17, 1992, the City Council approved a Sales Tax Incentive Program (Program) to encourage large-scale retail development, stimulate private investment in the retail sector, and enhance sales tax revenue in the City. A copy of that action is attached as Exhibit A. New retail businesses or existing businesses planning to expand, which generate more than $5 million in annual sales, may be eligible for the Program. For an expanding business, the City may return up to 50 percent of the sales tax generated in excess of an agreed-upon base.
On June 6, 1995, the City Council authorized a 15-year Sales Tax Incentive Agreement to provide financial assistance for capital improvements to rebuild Marina Pacifica. The initial agreement was subsequently modified a number of times. A summary of the agreement is attached as Exhibit B.
As a strategic tool, the Program has been used successfully at Marina Pacifica. The Program was used to assist in rebuilding a distressed shopping center, protecting it during a period of economic challenge for one of its primary retailers, and to improve it so that it now houses theaters, retailers and restaurants. Current tenants include AMC, Barnes and Noble, Ralphs, Pier 1 Imports, Sportmart, Loehmann's, Acapulco and Tantalum. Sales tax revenue to the City increased from $62,062 in calendar 1995 before the current agreement went into effect, to $277,763 in 1997 when it was fully operational. For calendar 2006, sales tax revenue retained by the City was $298,775.
This item was reviewed by Assistant City Attorney Heather A. Mahood on June 11, 2007, and Budget and Performance Management Bureau Manager David Wodynski on June 7, 2007.
TIMING CONSIDERATIONS
City Council action is requested on June 19, 2007 to expedite the attraction of Best Buy to Marina Pacifica.
FISCAL IMPACT
The proposed amendment is expected to have no fiscal impact in the 2007 fiscal year, but a positive impact in the 2008 fiscal year in the approximate amount of $69,000.
SUGGESTED ACTION
Approve recommendation.
Respectfully Submitted,
PATRICK H. WEST
DIRECTOR OF COMMUNITY DEVELOPMENT
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APPROVED: |
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GERALD R. MILLER |
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CITY MANAGER |