HomeMy WebLinkAbout7.6 Regency Ctr Sales Tax Reimbor
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DATE:
TO:
FROM:
STAFF REPORT
CITY COUNCIL
July 16, 2013
Honorable Mayor and City Councilmembers
Joni Pattillo City Manager""'
CITY CLERK
File #600 -30
SUBJECT: Request by Regency Centers to Participate in the Sales Tax Reimbursement
Program
Prepared by Linda Smith, Economic Development Director and Public Information
Officer
EXECUTIVE SUMMARY:
The City Council, by motion on June 18, 2013, authorized Staff to prepare a Sales Tax
Reimbursement Agreement with Regency Centers, a real estate development company that is
in contract to purchase a 14 -acre site from the Alameda County Surplus Property Authority at
the southwest corner of Hacienda Drive and Dublin Blvd. for the development of a commercial
retail center. Staff has prepared the Agreement for the City Council's consideration.
FINANCIAL IMPACT:
Under the terms of the proposed Agreement, Regency Centers would be eligible to receive up
to $3.15 million over a 10 -year period, based on the taxable revenue generated from the project
of $50 million or more annually. The amount of reimbursement is dependent on the
performance of the shopping center and would not exceed 50 percent of the center's sales tax
revenue in a given year. As proposed, the Agreement would be revenue positive to the City.
RECOMMENDATION:
That the City Council adopt the proposed Resolution approving an Agreement for
Reimbursement of Sales and Use Tax Revenue with Regency Centers.
Submitted By Reviewed By
Economic Development Director Assistant City Manager
Page 1 of 3 ITEM NO. 7.6
DESCRIPTION:
Background
On January 6, 2009, the City Council adopted Resolution 09 -09 approving the Sales Tax
Reimbursement Program. The Program was later amended on October 6, 2009 by Resolution
149 -09 and then again on July 17, 2012 by Resolution 135 -12 to meet the current economic
development needs for the City. The July 17, 2012 modifications added a new section to
provide Staff with the flexibility to consider extending of sales tax reimbursement relief for
improvements related to the construction of new buildings and structures and extended the
Program's sunset period to January 5, 2015.
In summary, the Sales Tax Reimbursement Program assists developers, property owners
and /or business owners to help offset costs associated with improvements to the property or
improvements relating to construction of new or existing buildings and structures.
For businesses generating $100,000 or more in new sales tax revenue to the City annually, the
Program allows a reimbursement for the improvement costs of up to 50 percent of that annual
revenue. This amount is payable for up to five years but for no more than the amount of the
eligible improvement costs.
For a business generating $500,000 in new sales tax revenue to the City annually, the Program
allows reimbursement for the improvement costs of up to 50 percent of that annual revenue for
a period of 10 years.
Agreement with Regency Centers
At the June 18, 2013 City Council meeting, Staff was authorized to negotiate a Sales and Use
Tax Agreement with Regency Centers, a real estate development company that is in contract to
purchase a 14 -acre site from the Alameda County Surplus Property Authority at the southwest
corner of Hacienda Drive and Dublin Blvd. for the development of a commercial retail center.
Regency estimates that their current shortfall to build a successful and thriving center is
approximately $3.15 million. Under the City's Program, Regency would be eligible to participate
in a 10 -year reimbursement period, as taxable sales generated at the site are estimated to be in
excess of $50 million annually. Absent the Program, Regency would be unable to develop the
proposed retail center.
Staff and Regency have negotiated an Agreement for the City Council's consideration. Under
the proposed Agreement, between the City of Dublin and Regency, the City would provide
payments from sales tax revenue attributable to the retail center in order to reimburse Regency
for certain building and exterior improvements within the proposed center.
The proposed Agreement (Exhibit A to Attachment 1) would provide Regency Centers with fixed
annual payments based on the shopping center's performance within a certain taxable revenue
range. For example, if the shopping center annually generates an amount between $50 -$55
million in taxable sales ($500,000 to $550,000 of taxable revenue to the City), Regency will
receive a reimbursement of $250,000. This amount is equivalent to 50 percent of the City's
share of sales tax revenue at the bottom end of the taxable revenue range. The Agreement
establishes these fixed payment amounts at every additional $5 million of taxable sales.
Page 2 of 3
The proposed Agreement would exclude from the calculation of sales tax attributable to the
retail center any sales tax generated by a business that has relocated to the center less than six
months after closing another location within the Tri- Valley Area.
The Sales Tax Reimbursement Program is designed to ensure that the sales tax reimbursement
agreements will benefit the public. The City will be receiving a new, ongoing source of sales tax
revenue that is likely to persist beyond the time -frame of the proposed Agreement. Additionally,
the improvements to the property will result in a reassessment of the property's value,
increasing the City's property tax revenue.
In addition to the tax revenue benefits to the City and its residents, this Agreement will also
result in development that enhances the appearance and character of the Hacienda and Dublin
Blvd. area, to the benefit of City residents. Finally, the Regency Center project will generate
several hundred permanent jobs in the City, along with the construction jobs resulting from its
development. Both temporary and permanent employees are likely to spend money at other
business establishments in the City, thus generating additional sales tax revenue for the City.
NOTICING REQUIREMENTS /PUBLIC OUTREACH:
1101
ATTACHMENTS: 1. Resolution Approving an Agreement for Reimbursement of Sales
and Use Tax Revenue with Regency Centers
2. Exhibit A to Attachment 1 — Sales and Use Tax Reimbursement
Agreement with Regency Centers
Page 3 of 3
RESOLUTION NO. -13
A RESOLUTION OF THE CITY COUNCIL
OF THE CITY OF DUBLIN
APPROVING THE SALES TAX REIMBURSEMENT AGREEMENT WITH
REGENCY CENTERS
WHEREAS, the City Council of the City of Dublin adopted Resolution No.
9 -09 on January 6, 2009 establishing a Sales Tax Reimbursement Program
( "Program ") for a period of two years; and
WHEREAS, the City Council adopted Resolution No. 149 -09 on October
6, 2009, revising and restating the Program to permit the option of a ten (10) year
reimbursement period for participants that generate $500,000 in sales tax
revenue for the City each year; and
WHEREAS, the City Council adopted Resolution No. 135 -12 on July 17,
2012, revising and restating the Program to include improvement costs made by
businesses that are constructing new structures on undeveloped property sites or
that may be tenants in such new structures, and extending the term of the
Program until January 5, 2015; and
WHEREAS, the Program authorizes the City of Dublin to enter into
agreements with property owners and businesses, in certain circumstances,
wherein the City agrees to reimburse the owner or business for the actual costs
of certain pre- approved improvements to business properties utilizing sales tax
revenue attributable to the businesses operating on the property; and
WHEREAS, the Program provides for reimbursements to be made in
annual payments over five (5) or ten (10) years or until the owner or business
has recouped the maximum payment amount to which it is entitled, whichever
comes first; and
WHEREAS, the annual reimbursement payment is capped at fifty percent
(50 %) of the sales and use tax revenue (hereafter "sales tax ") generated by the
business in the preceding four quarter year; and
WHEREAS, at the June 18, 2013 City Council meeting, the Council
authorized Staff to negotiate a Sales and Use Tax Agreement with Regency
Centers, a real estate development company, who is in contract to purchase a
14 -acre site from the Alameda County Surplus Property Authority at the
southwest corner of Hacienda Drive and Dublin Blvd. for the development of a
commercial retail center; and
WHEREAS, Regency wishes to perform building and exterior
improvements, and to avail itself of the benefits of the Program by entering into
an agreement with the City to receive reimbursement from the City to be based
on based on sales tax revenue generated; and
WHEREAS, under the City's Program, Regency is eligible to participate in
a 10 -year reimbursement period, as taxable sales generated at the site are
estimated to be in excess of $50 million annually; and
WHEREAS, but for the existence of this Agreement, Regency would not
be able to develop the retail center; and
WHEREAS, calculation of any reimbursement payments to Regency
under the Agreement would exclude sales tax revenue attributable to businesses
that have simply relocated from other locations within the City; and
WHEREAS, the City Council finds that it is in the public interest to enter
into this agreement because the City and its residents will benefit from increased
revenue received from both sales tax revenue that it may not otherwise receive,
and from the increase in property taxes resulting from an increase in the value of
the property attributable to the development of the retail center; and
WHEREAS, the City Council finds that it is in the public interest to enter
into this Agreement because the City and its residents will benefit from the
aesthetic improvements of the Hacienda Dr. and Dublin Blvd. area; and
WHEREAS, the City Council further finds that it is in the public interest to
enter into this Agreement because the City and its residents will also benefit from
the creation of new jobs in the City resulting from the development of this
commercial center.
NOW, THEREFORE BE IT RESOLVED that the City Council of the City of
Dublin approves the Sales Tax Reimbursement Agreement, attached hereto as
Exhibit A, and titled "Agreement for Reimbursement of Sales and Use Tax
Revenue between the City of Dublin and Regency Centers, LLC."
BE IT FURTHER RESOLVED that the City Manager is authorized to
execute the Agreement substantially in the form attached hereto and to
undertake such further action as may be necessary and desirable to carry out the
intent of this Resolution.
PASSED, APPROVED AND ADOPTED this 16th day of July, 2013, by
the following vote:
AYES:
NOES:
ABSENT:
ABSTAIN:
ATTEST:
City Clerk
Mayor
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THIS AGREEMENT is made and entered into this — day of _, by and
'sietween the City of Dublin ("City"), a municipal corporation, and Regency Centers, L.P., ("Regency") a
kelaware limited partnership, collectively referred to as "the Parties."
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years; and
WHEREAS, the City Council adopted Resolution No, 149-09 on October 6, 2009, revising and
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restating the Program to permit the option of a ten (10) year reimbursement period for participant!
the Program of January 5, 2011; and
WHEREAS, the City Council adopted Resolution No. 172-10 on December 7, 2010, whi
Resolution provided that the Program shall terminate on January 9, 2013;and I
WHEREAS, the City Council adopted Resolution Ro. 135-12 on July 17, 2012, revising and
restating the Program to include improvement costs made by businesses that are constructing new
21SO provided that the Program shall terminate on January 5, 2015; and
WHEREAS, the City of Dublin Sales Tax Reimbursement Program is a City-wide program
designed to encourage the development of additional desirable commercial development within the City,
with improved aesthetics and physical appearances, and well developed site improvements, to benefit the
citizets of Dublin.
WHEREAS, provided certain circumstances are met, the Program allows businesses to recover,
over time o4n ofthicostss oof interior exterior and s te im rovements made to their Propertv throuqh
WHEREAS, Regency has an option to buy certain real property located at the northwest
corner of=Dublin Boulevard and Hacienda Drive-(APN: 986-0033-007), ("the Property"), located in the
City-, and
WHEREAS, the Property to be occupied by Regency's development has a total area of
approximately 14.32 acres and is anticipated to be approximately 150,000 square feet leasable space
ancIored by a grocery store, and Regency.has furnished the City with documentation establishing thal
the Project-is expected to have at least fifty million dollars ($50,000,000) in annual retail sales
transactions, which would result in at least five hundred thousand dollars ($500,000) • sales tax for the
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1.2 "Exterior Improvements' means all improvements made to the exterior • the physical
structure of the building identified in Exhibit A-of this Agreement.
1,3 'Improvements" means all Exterior Improvements and Interior Improvements identified in
Exhibit A.
1.4 "Interior Improvements" means all improvements made to the interior space to be occupi&V
• Re•ency's tenants and identified in Exhibit A-of this Agreement.
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LEMAIMMEMM
2.1 Regency wishes to perform certain Improvements substantially as described in Exhibit A-of
this Agreement.
2.2 Prior to commencement of construction of the improvements or any portion thereof,
Regency shall submit to City all plans, specifications and cost estimates for the
Improvements for City review and approval. Nothing in this Agreement shall affect the need
for Regency to obtain any approvals from the City for the Improvements as required by any
City rules, regulations, ordinances • resolutions.
2.4 Regency shall provide the City with all bills and evidence of payment for the Improvements,
in a form acceptable to City within sixty (60) days of Regency's final payment for the
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Improvements. A form acceptable to the City could include a summary of the original
-t-A and final amount -taid to each vendor. This summarkj would also revuire covdes of
receipts and paid invoices as an attachment to the summary.
2.5 The actual cost of the Improvements paid by Regency, as indicated by City in the written
Notice of Maximum Amount provided to Regency by the City pursuant to Section 3.2 of this
Agreement shall constitute the Maximum Compensation Amount. In no event shall said
Maximum Compensation Amount exceed the Eligible Compensation Amount of three million
one-hundred fifty thousand dollars ($3,150,000).
2.6 A representative
• the City shall have the right, at the City's sole discretion, to inspect all
Improvement work performed to ensure that said work was performed substantially as
approved by the City pursuant to Section 3.1 of this Agreement. This right of inspection
shall be in addition to any inspection performed by City staff as required or permitted by any
other City rules, regulations, ordinances or resolutions.
2.7 Regency shall provide written notices to City: a) no later than thirty (30) days after the fiti
tenant receives approval to occupy a space at the Property from the City; and b) no later
than thirty (30) days after the Project reaches ninety-five percent (95%) occupancy based
• the overall leasable square footage of the Project.
2.9 In the event that City determines, pursuant to Section 3.9 of this Agreement, that it
overpaid Regency due to a miscalculation or misallocation of sales tax payments, and if
City is not obligated to make any additional payments to Regency pursuant to this
Agreement, Regency shall pay to City the amount City overpaid within thirty (30) days of
notification by City of the overpayment.
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be paid to Regency under this Agreement, which amount shall reflect Regency's actual
costs for the Improvements, and which shall not exceed the Eligible Compensation Amount
of three million one hundred fifty thousand dollars ($3,150,000).
3.4 City shall verify the accuracy of all sales tax information submitted to City. Within two
hundred and forty (240) days,after receipt of the final sales tax information for each
Reporting Year, as that term is defined in Section 3.3, above, the City shall pay Regency ?
fixed amount based on the taxable sales attributable to the Property's tenants as follows:
Annual Taxable Sales
11-11"...... ..... . . .....
. . ........ . .
—
. ...........
Maximum Annual Payment
$50,000,000 - $55,000,000
— ------ - ------ —
- ---------
I
$250;000
$55,000,001 - $60,000,000
$275,000
$60,000,001 - $65,000,000
300,000 . . . ........ .
$65,000,001 - $70,000,000
$325,000
------ . ..... ---- ----------- — ----- ----- ----------------
$70,000,001 - $75,000,000
$350,000
- — --- - ------ — ------
$75,000,001 - $80,000,000
$375,000
— --------------------
$80,000,001 - $85,000,000
$400,000
— — ----------
$85,000,001 - $90,000,000
$425,000
$90,000,001 - $95,000,000
$450,000
$95,000,001 - $100,000,000
$475,000
$100, 000, 001 - v
$500,0 00
- - - . .........
rd
.n no-VIT MYne, in iff= W rM
-61roperty, taxable sales attributable to:
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C5 In no event shall City make any payment to Regency for any Reporting Year if any of
the following situations occurs:
2) The total sales tax attributable to sales at the Property is less than fifty million
dollars ($50,000,000);
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3.6 At no time shall the cumulative arnount of City's payments be more than the ffiaximum —
Compensation Amount that may be paid to Regency determined pursuant to Section 3.2 o?
this Agreement.
3.7 In no event shall City be obligated to pay Regency based on sales tax generated more
than ten (10) years after the first Reporting Year.
C.8 In the event that Regency sells the Property, the City's obligation to pay Regency shall be-
transferred to the Buyer of the Property, subject to the rules set forth in Section 6 of this
Agreement. The subsequent payment made by City pursuant to section 3.4 shall be
prorated, to the nearest calendar quarter, between Regency and the Buyer of the
Property.
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of overpayment or underpayment.
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Agreement, City shall adjust the subsequent payment to reflect any overpayment or
underpayment it may have made for the period in question.
If City is not obligated to make any additional payments to Regency pursuant to this
Agreement, but has determined that it underpaid Regency, City shall pay Regency the
amount it underpaid, provided that the sum total of payments to Regency do not then
n Amount, This taNment shall be made with i
of City's discovery of the amount of the underpayment.
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If City is not obligated to make any additional payments to Regency pursuant to this
Agreement, but has determined that it overpaid Regency, Regency shall pay City the
amount City overpaid in compliance with Section 2.9 of this Agreement.
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piarc-onnis e fe e ^r 'V 01,170071rerrTinre
signatory Parties.
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IN WITNESS WHEREOF, the Parties execute this agreement hereto on the day andd the year first written
above.
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REGENCYZ AT ' S, L.P., a Delaware Limited
By,
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The Eligible Contribution Amount under this Agreement is three million one hundred and fifty
thousand dollars ($3,150,000), Staff has reviewed and validated a letter submitted, via e-mail, by
Regency Centers L.P., dated June 26, 2013 separating the valuations for the shell and Regency
improvements for the proposed center. Based on this letter, which was reviewed and considered
re valid by the City's Building Official, the Regency improvement cost is $3,150,000.
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