TITLE
Recommendation to authorize City Manager to execute all documents necessary to implement a 15-year Sales Tax Incentive Agreement with HTL Automotive, Inc., dba Hooman Toyota of Long Beach, for the relocation and development of a Toyota dealership to be located at 3399 East Willow Street. (District 5)
DISCUSSION
Approval is recommended to enter into a Sales Tax Incentive Agreement (Agreement) with HTL Automotive, Inc., dba Hooman Toyota of Long Beach (Hooman) to support the relocation and development of a Toyota dealership located at 3399 E. Willow Street. In 2008, Hooman acquired Beach Toyota located at 4401 Pacific Coast Highway, which included a Sales Tax Incentive Agreement, which expired in September, 2013. In order to expand and continue operation in the City of Long Beach, Hooman has acquired the former Coast Cadillac property at the northwest corner of Redondo Avenue and Willow Street. It is the intention of Hooman to relocate its Toyota dealership to the Willow Street location and has requested that the expired Sales Tax Incentive Agreement be renewed to assist in the costs of acquisition and renovation of the site.
On March 17, 1992, the City Council approved a Sales Tax Incentive Program (Program) to encourage large-scale development, stimulate private investment in the retail sector, and enhance sales tax revenue to the City of Long Beach (City). New or existing retail businesses planning to expand, that generate more than $5 million in taxable sales, may be eligible for the Program. For expanding businesses, the City may agree to share up to 50 percent of the sales tax generated in excess of a predetermined sales tax base.
In 1992, the City Council approved a Sales Tax Incentive Agreement with Beach Toyota which included a sharing of sales tax above a base of $135,000. Since 2008, when Hooman acquired Beach Toyota, sales tax revenues have been consistently and significantly above the base amount, providing benefits for both the City and Hooman.
Hooman has submitted conceptual plans for the relocation and expansion of its dealership to be located at 3399 E. Willow Street. The total cost of the proposed improvement and expansion is estimated at $4.2 million. Hooman has requested that the 1992 Sales Tax Incentive Agreement that expired last year be reinstated to assist in defraying the significant costs of acquisition and renovation.
Staff proposes that the City enter into a Sales Tax Incentive Agreement with Hooman to facilitate the upgrade and expansion of this new location. The Agreement will terminate in 15 years or when a cumulative maximum of $4.2 million is paid to Hooman from sales tax generated at the site, whichever first occurs. During the term of the Agreement, the City will share 50 percent of the sales tax generated by the dealership in excess of an annual base amount of $270,826, which is double that of the prior base amount of $135,000 under the previous Agreement. The Agreement will commence no later than January 1, 2015, and all sales tax generated by Hooman starting on this date would be subject to the Agreement. Quarterly payments will commence and continue without interruption for the term of the Agreement, but are contingent upon Hooman obtaining a Certificate of Occupancy for its development within two years of the start of the Agreement. If a final Certificate of Occupancy is not obtained by January 1, 2017, the Agreement will terminate and all payments made to Hooman since the inception of the Agreement must be re-paid in full to the City.
Based on current projections, the cumulative total of local sales tax generated during the 15-year term of the Agreement is estimated to be $12 million. Of this amount, a maximum of $4.2 million will be paid to Hooman, while the City would receive the remainder.
This matter was reviewed by Deputy City Attorney, Richard F. Anthony on September 26, 2014 and by Budget Management Officer Victoria Bell on October 3, 2014.
TIMING CONSIDERATIONS
City Council action is requested on October 21, 2014, to expedite implementation of the proposed Agreement.
FISCAL IMPACT
After the relocation to the larger site and the planned expansion of the dealership, there will be additional net revenue received by the City. Current City projections do not anticipate significant annual growth above the base amount until after the relocation in 2017 or thereafter. Projections indicate that, over the 15-year term of the Agreement, roughly $12 million in local sales tax revenue could be generated, and the City would pay the dealership a maximum of $4.2 million. This could result in approximately $8 million of net sales tax revenue retained by the City over the 15-year term.
The Agreement will assist in retaining a local business while preserving approximately 138 existing jobs, with the expectation that the number of jobs would grow to over 300 when the site is fully operating and staffed.
SUGGESTED ACTION
Approve recommendation.
Respectfully Submitted,
MICHAEL P. CONWAY
DIRECTOR OF ECONOMIC AND PROPERTY DEVLEOPMENT
JOHN GROSS
DIRECTOR OF FINANCIAL MANAGEMENT
APPROVED:
PATRICK H. WEST
CITY MANAGER