HomeMy WebLinkAboutAgenda Report - August 17, 1991• •
CIN OF LODI
COUNCIL COMMUNICATION
•
AGENDA TITLE: Development Agreement Proposal for Minton Property,
400 South Beckman Road
MEETING DATE: August 16 i 17, 1991
PREPARED BY: City Attorney
RECOMMENDED ACTION: Council consideration and possible rr... sl of
attached imp.., t agreement.
BACKGROUND INPORMATION: Pursuant to the direction of the City Council, staff.
has been negotiating with R. E. Service Corporation of
•Sunnyvale for an Improvement Agreement on the old .
Minton Door Company property. Specifically, the proposal centers on the City
advancing chats of offsite improvements (curbs, gutters, sidewalks, street
lights, etc.) in exchange for guarantees from R. R. Service Company, Inc. of
certain employment levels. This is a fairly traditional form of economic
development.
The attached agreement (which has been the subject of negotiations over the
past few weeks between the City and R. E. Service Company, Inc.) reflects a
"baseline" employment figure of 80 positions, equalling an annual payroll of
$1.3 million. If R. R. Service Company, Inc. maintains that employment level
for five years, the costs advanced by the City for the offsite improvements
would be forgiven at a rate of 20% per year for each of the five years.
Although the City originally wanted guarantees of 160 employees (average) for 5
years, RES has strongly maintained its position that 80 employees should
justify forgiveness of coats. The appropriateness of these figures ie a
question for the Council, but the agreement has been drafted showing RES'
proposed number.
RES has also proposed that if its payroll equals 160 full time jobs for any
single year during the agreement period, all remaining sums would be forgiven.
Conversely, if employment is less than the baseline proposed, the draft
agreement provid.ss RES would be liable for improvement costs on a pro rata
basis. A representative of RES will be present to address furLaer questions.
FUNDING: To be determined.
SM:pn
L.1..K6SOKV . Alin—i /A1N. U1 V
APPROVED:
61,
Respectfully submitted,
uuctikii
Bob McNatt
City Attorney
THOMAS A. PETERSON
City Mnnagor
1
City of Lodi - Industrial Project Cost/Benefit Analysis Exhibit B
Summary of Fiscal Analysis for,
Minton Property Reuse
400 S. Beckman Road
Total employment': 80 incl. 26 new City resident employees
Total Payroll': $1,480,000
Total Cost of Requested City Participation: 5275,250 (excludes 893,000 for north side of Thurman SL already committed by City)
Annual Direct Tax Revenue to City': $18,124 breakdown:
Payback time based on direct tax revenue:
Total annual revenue for 5 year payback":
15 years
$57,040 or
1
• figures based on buildout expected to occur in approximate3.y
approximate!'
" payback time allows for reduced revenue in early years of project.
89,000 Electric Revenue contribution to General Fund
$2,453 Sales Taxes from employees
$2.988 Property Taxes from development
82,892 Property Taxes from employees
8312 Wastewater Revenue contribution to General Fund
8200 Sales Taxes from operations
8182 Water Revenue contribution to General Fund
$97 Business License Tax
818,124 Total
3.1 times direct revenue
Page 1 of 5 &15104 ECOIt✓,-RE2XLS
City of Lodi - Industrial Project Cost/Benefit Analysis
Summary of Fiscal Analysis for.
Minton Property Reuse
400 S. Beckman Road
Total employment*: 160 incl. 26 new City resident employees
Total Payroll': $2,780,000
Total Cost of Requested City Participation: $275.250 (excludes $03,000 for north side a Thurman St already =mad by city)
Annual Direct Tax Revenue to City: $29,516 breakdown:
Payback time based on direct tax revenue: 9 years
Exhibit B
$18,000 Electric Revenue contribution to General Fund
$4,110 Sales Taxes from employees
$2,988 Propeay Taxes from development
$2,892 Property Taxes from employees
$624 Wastewater Revenue contribution to General Fund
6400 Sales Taxes from operations
6365 Water Revenue contribution to General Fund
$137 Business license Tax
929,516 Total
Total annual revenue for 5 year payback": $64.065 or 2.2 times direct revenue
• figures based on buildout expected to occur In approximately 2 to 3 years
•• payback time allows for reduced revenue in early years of project.
•
Page 1 of S ef1564 EC01IJtES.iU.s
When Recorded Return tog
City Clerk
City Hill
Lodi, CA 95240
400 Bogtb Beolo*an Road
Assessor's Parosi 049-070-50
T11t8 A r0 6, .► A....W , . L is mads and entered into by and between K.B.
SERVICE COMPANY, INC., hereinafter called "Buyer" and the CITY Or
LODI, a aunieipal corporation, hereinafter called.•City."
WH EAS, for commercial/industrial purposes, *hereon Buyer
intends to operate its business, and Buyer is presently in the
process of purchasing or acquiring that certain real property
located in the City of Lodi, County of San Joaquin, California
and described as follows:
400 South Beckman Road, Lodi, California 95240
and more particularly described as follows:
All that real property situated in the City of Lodi,
County of San Joaquin, State of California, described
as follow:
A parcel of land being a portion of the Northwest One
Quarter of Section 7, Township North, Range 7 East,
Mount Diablo Base and Meridian, more particularly
described as follows:
The 19.91 acre parcel as shown on that record of
Survey filed for record on September 25, 1987, in Hook
29 of surveys at Page 140, San Joaquin County Records.
For tae purposes of this agreement, the portion of the
above described property fronting the planned Thurman Street is
divided into two parcels as follows:
Parcel A consists of the developed Northwest portion of the
property as shown on the building site plans on file at the City
Building Department.
Parcel B consists of the entire remaining portion of the
property other than Parcel A.
N1SERzs, City crdinanoea and policies, including but not
limited to Chapter '5.44 of the Lodi Municipal Code establish
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AUG -15-1994 15:56
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certain requirement* for offsite improvements associated with the
use of said premises; and
WHEREAS, City, for the purposes of encouraging local
economic development, generating additional tax revenues end
increasing employment opportunities for residents of Lodi, is
amenable to assisting Buyer by financially participating in the
payment of fees and construction of certain publicly owned
off.ite infrastructure end facilities necessary to serve such
uses, end
WHEREAS, it is the intent and purpose of this agreement to:
1. Provide a methodology and criteria for Buyer to
be forgiven oasts of tees and constructing such
offsite iaprovments, which costs will bo
edvanoed by the City,
2. Set forth certain other rights, duties and
obligations of the parties;
NOW, THEREFORE, BE IT AGREED BETWEEN THE PARTIES HERETO AS FOLLOWS:
1. This agreement and all of the teras, conditions,
rights and duties thereunder shall become valid and
enforceable if and only if Buyer shall purchase and
close escrow on the subject property, referred to
above, taking title on or before September 30, 1994.
Should Buyer fail or refuse to complete the purchase
transaction by said date, thie agreement shall be null
and void and the Improvement Deferral Agrssment dated
Nove*ber 12, 1946 (San Joaquin County Recorder's
Instrument No. 86104275) shall remain in full force
and effect.
2. Upon close of escrow on the subject property by Buyer
on or before September 30, 1994, the above referenced
Improvement Deferral Agreement dated November 12, 1986
shall become null and void and the City shall waive
all duties imposed on the property owner at 400 South
Bookman road arising under San Joaquin County Re-
corder'. Instrument 110. 86104275.
3. A notarised copy of this agreement shall be provided
to Buyer's escrow company, Chicago Title Company, 4612
McCaw Street, Stockton, California with instructions
from the Buyer that this instrument is to be recorded
in the deed for the subject property.
4. City shall a construction of the paragraph 7
improvements as soon as reasonably possible after the
close of Buyer's escrow and the City will use its
best efforts to complete construction of the improve-
ments described below in Paragraph 7 as soon as
possible, but in any event such improvements shall be
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AUG -15-1994 15: 7
r.
completed on or before February 21, 1995, subject only
to delay for circumstances beyond City's control
including but not limited to wean, firs, or natural
disaster.
5. buyer agrees to repay City the costs of the Lip-. 1
moots described in paragraph 7 on the nue Date.
subject to tbs forgiveness provisions below. 8owever,
Buyer's actual liability tor such improvement costs
shall not exceed one -hundred fifteen peroent (115%)
(including engineering fees) of the estimated cost of
each item set forth in Paragraph 7. Buyer's obliga-
tion is not personal to Buyer but is a lien on the
land.
6. City agrees that tba indebtedness evidenced by this
agreement in Paragraph 7 below shall be forgiven, on a
pro rata basis of twentypercent (20*) per year, if
Guyer gives to city satsfactory evidence of certain
performance criteria as follows:
A. Forgiveness is premised on yearly payroll for
Buyer's employees. The baseline assumption for
calculating forgiveness is the equivalent payroll
for eighty (80) hill tie* positions (15 salaried
and 65 hourly positions) representing an annual
payroll of $1,300,000.00. It in any of the
twelve month increments referred to in this
agreement, Buyer's payroll amounts to $1.3
million, twenty percent (20%) of the total
repayment due shell be forgiven, representing
one-fifth of Buyer's total obligations hereunder.
B. Reployaent levels translating to payroll over or
under the baseline for any twelve month increment
shall be pro rated and carried forward. For
example, if total iaproveaent costs to be
forgiven under this agreement are $500,000.00
($500,000 X 20% •. $100,000.00 per year for five
years) and the first year's employment level was
equivalent to forty positions or a payroll of
$650,000.00, buyer's first year forgiveness would
be $50,000.00 ($650,000/$1,300,000 - 50; of that
year's increment). If for all remaining years,
payroll equaled eighty positions for each of the
years, at the end of the five year period, April
1, 2000, the Buyer would owe city $50,000.00
cash, payable on or before May 1, 2000, the Due
Date.
Conversely, if during the first year payroll
equaled 100 positions (or 1251 of baseline
assumptions, amounting to $1.625 million in
payroll) Buyer's firstoar forgiveness would be
$125,000.00 (125% X $100,000). if Buyer's
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MG -15-1994 15:50 P.04
•
sanployMent/ ayroll levels ruined constant over
the suoc.silng years, Buyer's obligation would b.
extinguished in four (4) years, (4 X 0125,000 $500,000).
C. To provide incentive for in . mood employment, if
at any time Buyer's regular payroll for any
twelve month increment (excluding bonuses or one
time paymente to employees or officers) equals
160 lull time positions (or $2,600,000.00 annual
payroll) all further obligations hereunder shall
cease and all remaining amounts owed shall be
forgiven.
U. The first twelve month increment for calculating
forgiveness hereunder shall commence on April 1,
199B. Proof of payroll/employee equivalences
shall be provided to City by Buyer not later than
Nay 1 of each year for the previous twelve month
increment. If net provided by May 10th of each
year, City shall notify'&uyer in writing of much
failure. Should Buyer fail or refuse to provide
such information within seven (7) calendar days
after notice, City may declare Buyer in material
breach and deny forgiveness of ail suss for that
year's increment.
S. Buyer agrees that in or.ier to authenticate such
employment or payroll, City shall be given
reasonable access to auyer's records. Such
inspection authorisation shall not be deemed a
waiver of privacy rights of any individual
employee and shall be for the role purpose of
confirming employment or payroll figures.
r. buyer shall not be relieved of duties hereunder
by reason of any strike, work stoppage, nor by
layoffs, closure or cutback not occasioned by
flood, fire or other widespread catastrophe or
act of Ood.
G. should Buyer sell, transfer or dispose of
property referred to as Parcel b, described
above, no allowance e.`ta11 be made in calculating
espluyaont/payroll figures for determining
forgiveness for any employee or payroll assoc-
iated with other enterprises not owned by Buyer
which are conducted on Parcel B.
7. Tne public improvements and financial participation by
City consists of tba following;
A. Parcel A improvements consist of the south side
of Thurman Street improvements and utiiitiee
Included in the agreement between the City of
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P.05
Lodi end the Minton Company (San Joaquin County
lseor'derie Instrument No. $6104275). These
impro enure Consist of . grading and paving, curb,
gutter and iEdewalk, cattb basins and .laterals'',.
streetlights, and extensions of'reterp'welstewater
and storm drains in the street. Tbs estimated
cost of these daps ovsmsnts including ten percent
(1e%) for engineering is 0114,000.000.
B. Parcel H improvements consist of they .as items
se for Parcel A plus water, wastewater and storm
drain services for Parcel B. The street will be
extended in accordance with the specific plan for
Thurman Street as approved by the Lodi City
Council to accommodate development of Parcel 23
and adjacent properties. In the event the City
Council approves termination of the street with a
cul-,de-sac, Buyer agrees to dedicate additional
right-or-way for said oul-ds-sac in accordance
with applicable standards for truck turn-arounds.
The eatiaated cost of these improvements,
including ten percent (10%) for engineering is
$103,000.00.
C. Completion of the North side of Thurman strut is
the responsibility of the City and will be done
in conjunction with the Parcel A and B improve-
ments at an estimated cost of $93,000.00.
Buyer shall have no responsibility for any costs
of improving the North side of 'Thurman Street.
D. The Bower Connection Pees for business(es)
located on Parcels A i D totaling 160 full time
employees (determined by equivalent payroll as
provided above) plus estimated industrial
discharge will be a maximum additional credit of
058,250 over and above the existing credit of
$21,304.85 for fees already paid by the current
owner. This actual sewer connection tee over the
existing credit, if any, will be added to the
total Parcel A and Parcel 5 improvements in
determining the amount subject to forgiveness
over rive years. It the Parcel A & 8 actual
costs ars as estimated, then this total will be
$114,000 t #103,000 plus however mush the Bever
connection fees se determined below ars due, if
any, in excess of the current 521,305 credit up
to the maxims additional credit of $58,250 based
on a 160 person equivalent payroll. If the
maximum additional sewer credit of $55,250 were
used, then the total subject to forgiveness would
be $270,250.
To the extant that U. c..it'rs $58,250 additional
credit is not "used" by Buyer during the term of
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FUG -15-1934 1 .: `.•`1 F'. Oh
this agreement then, at the time that another
enterprise other than Buyer which is located on
Parcel A or B wishes to connect to the sewer, the
Buyer shall have the option of assigning part or
all of such unused credit to such new enterprise
to reduce or eliminate its sewer connection fees.
B upon describedcompletion-and acceptance of the improve-
ments
agreement, City shall
provide Buyer a breakdown of actual construction
costs including or showing the ten percent (10%)
for engineering, which shall become the basis of
repayment under the terms of thiar agreement,
subject to the 115, limitation on each item as
shown above in Paragraph S. sewer connection
fess shall be calculated at the time of the
termination of this agreement.. •
F. should there occur any legal challenge to city's
action in forgiving the costs of public improve-
aants on Parcel B, described above in Paragraph
7(n), Buyer agrees at its sole expense to either;
1. Defend said action at its own cwt on behalf
of the City and to save, indemnify and hold
harmless City for all liability and costs
(including reasonable attorney's fees)
should such challenge or action succeed; OR
2. Deem the cost of improvements to Parcel B
to be a loan from City to Buyer. Should
Buyer choose this option, repayment shall
occur in five (5) equal yearly installments.
The first installment shall be due and
payable on the first anniversary date of
Buyers •lection to deem the amount a loan,
with subsequent installments due thereafter.
It Buyer chooses this option, it shall be
irrevocable.
In the event of such legal challenge, Buyer must
defense of the City in a timely banner
and before any default is entered. It during
such defense Buyer determines that it would
prefer to deem the Parcel B improvement amounts a
loan, under 7(F)(2) above, then buyer must pay
all costs of defense through termination of the
suit against the City, plus any costs of settle-
ment. In short, Buyer can use either option (1)
or (2) or (2) then (2) .
G. The improvement costs for Parocl B addressed by
this agreement may not represent ell of the
Cites charges in connection with the development
of Parcel D. There say be impact or other
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AUG -15-1994 16:111 P.M
charges in connection with such development.
R. Should the City subsequently be ref aburs.d for
any of the costs of i r,.. 1..ents discussed in
paragraph 7 by the owners Of 4 . _ ty other than
Pergola A 8 e under such vehicles as Areas Of
Benefit or speoial assessment districts, all such
revenues reoovered shall belong exclusively to
the City.
e. This agreement Obeli be rsoorded with the Ban Joaquin
County Recorder's Office and shall run with the land.
This obligation is not personal to buys hereunder,
but shall Do applicable to the owner of such land,
including Ruyer's heirs, successors and assigns.
The rights and duties of the parties hereunder sbail
inure to the benefit of and shall bind caoh party's
sttCcessos'a•and assigns, and further that such agree-
ment shall constitute a lien on the property subordin-
ate only to the first mortgage thereon.
buyer's right to sell part or all of Parcel fl is
limited as provided for in paragraph 10.
After the effective date of this agreement, Guyer
agrees not to sell Parcel A nor encumber Parcel A with
any lien superior to the city's lien without the
advance written consent of the City. Tbs City's
consent shall not bei withheld if (1) the encumbrances
on Parcel A Which will be superior to the City's
unpaid lien on Parcel A after the sale or refinance
will be equal to or less than the enuunbrances
superior to the unpaid amount of the city's lien on
Parcel A prior to the sale or refinance, or (ii) the
equity in Parcel A after the sale or refinance over an
above the encumbrances on Parcel A which will be
senior to the city's lien will be 150t or more of the
remaining unpaid amount of the lien, whichever of (i)
or (ii) is less. The city shall be entitled to retain
its own appraiser at its own expanse in the event that
the City bas any concerns about the accuracy of the
Buyer's appraisal.
A transfer without approval frost City shall be deemed
a material breach of this agreement and shall result
in all remaining sums becoming immediately due and
payable, provided that the City shall grant or deny
approval within sixty days of submission to it of a
current appraisal of the property plus the detri]s of
the proposed sale or refinance. It the City fails to
expressly in writing approve or deny the Buyer's
request within that 6o day tie. period, the sale or
refinance will be automatically deemed approved. if
T
ALL --15-1 16:01
the City denies the request, Buyer may petition the
court to require the City's approval if the denial vas
not justified by therovisions of this agreement. If
the court agrees that the -city was not justified in
ite denial, then that decision of the court shall
entitle the Buyer to sell or refinance the property on
the terms (or better terms) approved by the Court and
the wrongful denial will be a brach of this agreement
by the City.
In Llan with any , ,,t,.. .1 or authorised sale or
refinance of Parcel A, the City will cooperate with
the Buyer and with any proposed new owner to release
the City's lien on Parcel A through escrow and re-
establish such lien through escrow provided that (i)
the total encumbrances and liens on Parcel A senior to
the City's lien after the close of escrow will be
equal to or loss then the total encumbrances senior to
the City's lien prior to the close of escrow, or (ii)
the equity in Parcel A after close of escrow over and
above liens and encumbrances which will be senior to
the City's unpaid lien amount will be 150% or more or
the City's unpaid lien amount, whichever of (i) or
(11) is less.
By way of example, assume that the City's lien amount
at the time of a proposed sale or refinance of Parcel
A is .200,000 and the total of all encumbrances senior
to the City's lien Is then 01.5 million dollars. If
the new encumbrances which will b. senior to the
city's lien after the sale or refinance would be $1.5
million dollars or less, then the sale or refinance
would be approved, or it the equity in the land
(appraised value less encumbrances eenior to the
City's lien) after the sale or refinance would be at
least $300,000, then the sale or refinance would be
approved.
At such time as all sums owing to the City under this
agreement have either been paid or forgiven, then
B uyer can freely sell and/or encumber the property.
9. Prior to close of escrow, buyer shall provide to City
true copies of all sales contracts, mortgage
agreements, and appraisals on the subject property.
/Mould the total amount financed by a first mortgage,
when edged to the amount in Paragraph 7(A) end (B)
above, equal more than ninety-five percent (95%) of
tbe appraised value of the property, City may, in its
sole discretion, withdraw from this agreement without
penalty.
10. It is agreed that Buyer, in its sole discretion, may
at any time subdivide the Parcel A or Parcel B pro -
Wad that all other necessary approvals required for
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Btf-15-1994 1601 P.09
such subdivision are obtained. The Buyer has discus-
sed a subdivision et Parcel. B With the City and the
City agrees that it actin good faith to cooperate thy.
Buyer in connection with this subdiviiion-gmbild
fpan the Buyer understands that the City cannot
guarantee the approval of the subdivision.
In the event that a subdivision of Parcel H is
approved and thesells part or all of Parcel B,
the City's lien � this agreement, including any
lien under 7(T) Shall not apply to any portion of
Parcel d which is sold but shall be automatically
released tram any such portion of Parcel B which is
sold and the City's lien shall than only apply to to
the remaining portion of Parcel B still owned by Buyer
and also the lien will continue to apply to all of
Parcel A until paid or forgiven.
The foregoing not withstanding, Buyer nay not sell
any porton of Parcel B (or all of Parcel 5) unless
the portions of Parcel B still owned by Buyer (if any)
plus all of Parcel A (which Yarce1 A shall remain
subject to the City's lien) still shall appraise with
an aggregate value at least equal to or greater than
any regaining amounts than due to the city under this
agreement plus the unpaid balance of any encumbrances
senior to the City's unpaid lien amount.
Nothing herein shall be deemed a waiver by City of
Buyers need to obtain other approvals, maps or permits
necessitated by a subdivision application. Further,
nothing heroin shall relieve the Buyer, or its
successors in interest to Parcel A of the obligation
under Paragraph 7(t) above to defend City or declare
the improvement costs on Parcel H a loan. Should the
ownership of Parcel B and Parcel A be severed, such
obligation shall remain as a lien against Parcel A and
shall run with the land.
11. Buyer agrees to exercise its best efforts conaiatent
with prudent business practice to reduce water
consumption by recycling cooling rater and/or re-
cycling wash eater to the maximum extent practical
from a business standpoint and consistent with a
reasonable business cost/benefit analysis and based on
sound financial practices and generally available
technology.
12. to the event of any dispute over this agreement the
prevailing party shall be entitled to recover reason-
able attorney's fess and costs from the other party
in addition to any damages or other relief. Either
party may request mediation of any dispute hereunder.
Unless there are time constraints which would make
mediation detrimental, the parties will cooperate in
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CLX -1 S-1 9)4 1682 P.10
good faith in an attempt to mediete the dispute with
the costs ot. the .me4iator being equally divided by
the parties% In the event that the mediator fails to
timely bring the parties to a voluntary settlement of
the d , then either party may ,.,. 1 to litigate
the sat
13. This agreement constitutes the entire understanding
between the parties hereto. No oral modifications
shall be made. Both parties acknowledge that no other
representations, obligations or promises have been
made in connection herewith.
14. Any notioes required under this agreement shall be
addrassd se follows:
CITY: City Clerk
P.O. lox 9006
Lodi, California 95241-1910
BUYER:
Mark Prater, President
R.E. Service Company, Inc.
1150 Elko Drive
Sunnyvale, California 94089
IN WITNESS WHEREOF, the parties hereto have set their
1994.
hands this day of
CITY OF LODI, a municipal R.E. SERVICE COMPANY, INC.
corporation
THOMAS A. PETERSON
city !!tanager
Ay:
MARK PRATER
President
ATTEST: APPROVED AS TO PORK:
JENNIlER M. PERRIN DOD MaNATT
City Clerk City Attorney
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PM -15-1994 16:03 P. 11