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HomeMy WebLinkAbout1990-08-14 - AGENDA REPORTS - EXCLUSIVE NEG AGMT PRICE CLUB (2)r AGENDA REPORT City Manager Approval Item to be presented NEW BUSINESS George Caravalho DATE: August 14, 1990 SUBJECT: AGREEMENT TO NEGOTIATE EXCLUSIVELY Resolution Number: 90-161 DEPARTMENT: City Manager BACKGROUND For the -past two years the City has been attempting to secure a location and an agreement with the Price Club to locate a facility within the City. We have met with various real estate brokers, property owners and developers: From the beginning, we attempted to find a location which would maximize the value of a Price Club by having it become an anchor for other retailers, something in excess of 30 acres. After considerable negotiations, we are pleased to announce to the Council that with its approval we are now prepared to negotiate the terms and conditions.of an Annexation and Development Agreement. The property we have located is a 35 acre site owned by First Financial Group, Inc., located on Via Princessa between the freeway and Sierra Highway. It is zoned commercially but requires annexation to the City which we do not anticipate will be a problem. We have developed an "Agreement to Negotiate Exclusively" which all parties must sign in order to negotiate an Annexation and Development Agreement. That Agreement gives us: 60 days to negotiate an ADA that will develop a minimum 100,000 square feet building with parking for 850 vehicles; the remainder of the Site will also be developed for commercial use; that the Price Company will purchase the property for $11.50 per square foot from First Financial, and the City will acquire public improvements from First Financial in the amount of approximately $2.7 million; the financial obligation of the City will be paid entirely from sales tax revenues generated from the Price Club and will not be paid from any current or existing revenue source; Price Company agrees to stay a minimum of 5 years on that site or pay to the City any shortfall differential between what the City has collected in sales tax and the $2.7 million. It is estimated that the amount of sales tax generated to the City from the Price Club over that five-year period will be over $4 million and from the entire development, over $6.5 million. That the City Council approve Resolution No. 90-161, which is an Agreement to Negotiate Exclusively (described in "Exhibit A") with the Price Company and First Financial Group, Inc. in an effort to enter into an Annexation and Development Agreement. ATTACHMENT: Report on the PrAcdoOedAg e rnt to Negotiate Exclusively Agenda Item: P REPORT ON THE PRICE CLUB AGREEMENT TO NEGOTIATE EXCLUSIVELY The City Council has indicated its interest in expanding its sales tax base and has directed the City Manager, through the City's Economic Development activity to carry out that desire. Toward that end, last March the City contracted with Stan Greene to provide economic development services for the City to specifically secure an agreement with the Price Club. Scope of Project Since that time Greene has met with the Price Company to determine both their desire and under what conditions they would locate a facility within the City, which were: o approximately 15 acres o land cost not to exceed $10 per square foot o construct 100,000 square foot concrete tilt -up building o freeway access or at least close proximity to freeway Land Assembly Once the scope of the project was determined, Greene began an investigation as to the availability of property for such a development. He met with various real estate brokers, property owners and developers. From the beginning, we attempted to find a location which would maximize the value of a Price Club by having it become an anchor for other retailers. Since the Price Club requires approximately 15 acres, we looked for something in excess of 30 acres. While a few were located, problems of access, costs relating to the property or offsite improvements, and timing for development, continually became a factor in locating the right property.: However, after considerable negotiations, we are pleased to announce to the Council that with its approval we are now prepared to negotiate the terms and conditions of an Annexation and Development Agreement. 2 First Financial Property The property we have located is an approximate net 35 acre site owned by First Financial Group, Inc., located on Via Princessa between the freeway and Sierra Highway. It is zoned commercially but requires annexation to the City, Since it lies west of the Freeway and is substantially surrounded by the City, it is not anticipated that annexation will be a problem. While the property has a market value of $18 per square foot, we were able to negotiate the price to $15.50 per square foot. At the same time, we were able to negotiate the Price Company up from their requirement of $10, to $11.50 per square foot. Aoreement to Ne0otiate Exclusively Together with the assembling of the land for the Price Company, the City, the Price Company and First Financial have developed an "Agreement to Negotiate Exclusively" which all parties must sign in order to negotiate an Annexation and Development Agreement. The conditions of that Agreement are: 1. A 60 -day period to negotiate an agreement regarding the annexation, acquisition, and development of the Site. 2. A minimum 100,000 square foot building will be constructed with available parking for 850 vehicles for the purposes of a Price Club. 3. That a substantial portion of the remainder of the Site will be developed for commercial use. 4. Within 30 days the Price Company will submit a Site Plan and provide information regarding averageannual sales at Price Clubs. 5. Within 30 days First Financial will submit a Site Plan for the development of the remainder -of the property, a preliminary public improvement plan and a estimate of costs for each improvement. 6. That the Price Company will purchase the property for $11.50 per square foot from First Financial and the City will acquire public improvements from First Financial in the amount of $2.7 million. This equates to the $4.00 per square foot differential between the purchase price ($11.50) and the price that First Financial wants for the property ($15.50). 7. The financial obligation of the City will be paid entirely from sales tax revenues generated from the Price Club and will not be paid from any current or existing revenue source. A financing mechanism will be established, 3 8. Price Company agrees to stay a minimum of 5 years on that site. If they should cease operations prior to the end of the fifth year, they shall pay to the City any shortfall differential between what the City has collected in sales tax and the $2.7 million. 9. None of the parties will oppose annexation to the City. 10. The negotiated ADA will only become effective when the City Council considers and approves the Agreement after a public hearing. 11. This Agreement is not binding on any party but is merely an approval to enter into a period of exclusive negotiations for the purpose of entering into an ADA according to the terms and concepts presented in this Agreement. Impact on City In an effort to support our -ever-increasing service requirements, the City established a course to actively encourage businesses and industries which would benefit the community to locate here. Because of.the competition among all cities in this nation who are attempting to attract the same companies, success requires innovation, attitude and "one-upsmanship." This project reflects a well-balanced combination of those characteristics. Having a Price Club in our City will provide nearly 200 new jobs, and as a revenue generator, should bring in to the City Treasury well over $ 1 million a year after the City's participation in the project is fulfilled. There are very few activities that have the potential to generate such a large source of City revenue with such a minimal impact on the environment. Because of the benefit to the community, the City is proposing, in effect, to joint venture this project to entice the Price Company to Santa Clarita. What we propose is not unique to competing cities, in fact it appears to be the norm where land or development costs are extremely high as they are in Santa Clarita. We are proposing a financial incentive to the Price Company by buying down the price of the land by acquiring the off-site public improvements. This incentive of about $2.7 million will not come out of the City Treasury, but will come out of sales tax generated by that business—which would not otherwise come into the City, and will be recovered in less than 4 years. Sales Tax Estimates 1st Year 2nd Year 3rd year 4th Year 5th year Total Price Club 747,500 784,875 824,119 865,325 908,591 4,130,410 Other Retail 436.645 458.477 481.401 505.471 530.7452 2.412,739 Total income 1,184,145 1,243,352 1,305,520 1,370,796 1,439,336 6,543,149 (65% of Price Club sales are taxable) 4 It is our feeling that we have negotiated the best agreement in light of the .conditions and limitations of the various parties. We feel that both First Financial and the Price Company have stretched a great deal to make this project work. We hope this meets with your Council's approval and support. OWN -- _._...Oak RESOLUTION NO. 9d -/(Y A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF SANTA CLARITA, CALIFORNIA, APPROVING AN AGREEMENT TO NEGOTIATE EXCLUSIVELY BETWEEN THE CITY OF SANTA CLARITA, THE PRICE COMPANY'AND CP SHOPPING CENTER PARTNERS. THE CITY COUNCIL OF THE CITY OF SANTA CLARITA RESOLVES: SECTI I: The Council of the City of Santa Clarita approves the Agreement to Negotiate Exclusively between the City of Santa Clarita, the Price Company, and CP Shopping Center Partners. SECTION 2 The City Manager is authorized to execute the Agreement to Negotiate Exclusively on behalf of the City of Santa Clarita and the City Clerk shall attest to the City Manager's signature. SECTION 3 The City Clerk shall certify the adoption of this Resolution. ATTEST: PASSED, APPROVED AND ADOPTED this day of 14_. CITY CLERK MAYOR I HEREBY CERTIFY that the foregoing Resolution was duly adopted by the City Council of the City of SANTA CLARITA at a regular meeting thereof, held on the day of , 19_, by the following vote of the Council: AYES: COUNCILMEMBERS NOES: COUNCILMEMBERS ABSENT: COUNCILMEMBERS CITY CLERK APPROVED AS TO FORM AND CONTENT: CITY ATTORNEY dch:RES11237