CITY OF CHINO
ECONOMIC DEVELOPMENT SUBSIDY REPORT PURSUANT TO GOVERNMENT CODE SECTION 53803
CHINO CITY COUNCIL PUBLIC HEARING
SEPTEMBER 5, 2023
Legislative Intent
California Government Code Section 53083 is intended to promote transparency and accountability in economic development subsidies, similar to annual financial reporting and local fiscal decisions. The legislation requires that subsidies to local businesses in the amount of $100,000 or more – those intended to increase employment, enhance the local tax base, and attract or retain desirable businesses – be detailed in a written report and placed on an agenda for a public hearing at a regularly scheduled meeting. The proposed Third Amendment to Operating Covenant and Restrictive Covenants Affecting Interests in Real Property (“Amendment”) by and between the City of Chino (“City”) and Creative Bus Sales, Inc. (“Creative Bus”) would result in a subsidy to Creative Bus based on a refund of a portion of the City’s sales tax to be generated, in an amount estimated to exceed $100,000 for a six (6) year initial period, with the option to extend by mutual agreement of the City and Creative Bus for two (2) additional two (2)-year periods. Therefore, this report is intended to satisfy the requirements of Government Code 53083, and is being made available to the public prior to consideration of the proposed Agreement and authorization of the economic development subsidy.
Legal Requirements
In accordance with Government Code Section 53083, the following elements must be addressed in written form, and be made available to the public (including posting on the City’s website) prior to the approval of the proposed economic development subsidy:
The name and address of all corporations or any other business entities, except for sole proprietorships, that are the beneficiary of the economic development subsidy, if applicable.
The start and end dates and schedule, if applicable, for the economic development subsidy.
A description of the economic development subsidy, including the estimated total amount of the expenditure of public funds by, or of revenue lost to, the local agency as a result of the economic development subsidy.
A statement of the public purposes for the economic development subsidy.
Projected tax revenue to the local agency as a result of the economic development subsidy.
Estimated number of jobs created by the economic development subsidy, broken down by full-time, part-time, and temporary positions.
Proposed Amendment
The City, in an effort to generate additional sales tax revenue, create additional local jobs, and enhance economic vitality, proposes to provide the type of subsidy included in Government Code Section 53083. The City and Creative Bus intend to enter into the Amendment. The Amendment extends the original Operating Covenant and Restrictive Covenants Affecting Interests in Real Property dated December 1, 2001, by and between the City and the predecessor to Creative Bus, T&T Investments, LLC (“T&T”), subsequently amended on or about January 7, 2003 and then again on or about October 1, 2012 (collectively, “Agreement”). On or about May 1, 2015, Creative Bus began leasing the entire site described in the Agreement and consisting of approximately 4.66 acres of land in the City of Chino (“Site”) from T&T. City wishes to consent to the assignment of the Agreement by the Amendment. Additionally, the Covenant expired as of October 1, 2022 and the City and Creative Bus now wish to provide for the retroactive extension of the Agreement to May 1, 2022, establish new payment periods and set the terms for the City consideration of same. The Agreement, as extended by the Amendment requires Creative Bus to maintain the City of Chino as a point of sale and continuously conduct operations for the sale, leasing, resale, servicing, and repair of buses and shuttle vehicles and other ancillary uses commonly associated with bus dealerships on the Site during the entire operating period as defined in the Agreement. With the new business model of Creative Bus and their ability to take advantage of California’s goal of an all-electric bus fleet, it is the City’s best interest to retain the business through the Amendment. Creative Bus has operations in Northern California, which gives it options to move if it so desires.
The name and address of all corporations or any other business entities, except for sole proprietorships, that are the beneficiary of the economic development subsidy.
The Agreement is with Creative Bus Sales, Inc., an Indiana Corporation. Creative Bus is the sole beneficiary of the economic development subsidy.
The start and end dates and schedule, if applicable, for the economic development subsidy.
Upon City Council approval, the Agreement is effective retroactive to May 1, 2022 and continuing for 6 years, with 2 extension options of 2 years each upon the mutual approval of the parties, for a total potential additional term of 10 years, ending May 2032.
A description of the economic development subsidy, including the estimated total amount of the expenditure of public funds by, or of revenue lost to, the local agency as a result of the economic development subsidy.
The economic development subsidy is for the City to maintain the right to receive the first $75,000 of sales tax revenue and a tiered sharing structure over a 6 year period from 40% in years 1 and 2 to 35% in years 3 and 4 and 30% in years 5 and 6. Revenues are dependent on sales volumes, with no minimum or maximum amount of subsidy to be paid beyond the aforementioned sales tax revenue sharing percentage.
Obligations of Creative Bus.
Continuously operate, or cause and allow for the continuous operation of Creative Bus at the Site throughout the term of the Amendment, as may be extended.
Operate with inventory and sales personnel sufficient to satisfy and respond to customer demand and, in compliance with Government Code Section 53084.5, shall designate said property on its sales tax statements as the point-of-sale for all sales transactions generated from or arising out of the business conducted on the subject property.
Maintain, or cause maintenance of said property to the standards and regulations of the Chino Municipal Code, at the company’s own expense.
Carry out the operation of the business of the sale, leasing, resale, servicing, and repair of buses and shuttle vehicles and other ancillary uses commonly associated with bus dealerships in substantial conformity with applicable laws, ordinances, statutes, codes, rules, regulations, orders and decrees of the United States, the State of California, San Bernardino County, and the City of Chino.
Maintain continued possession of valid City of Chino Business License, and Sales & Use Tax Permit from the State of California Board of Equalization.
A statement of the public purposes for the economic development subsidy.
The proposed Amendment is consistent with City’s economic development goals and objectives, and is in the best interest of the general public. Specifically, the following public purposes are achieved:
Retaining a sales tax revenue producer in the City of Chino, increased sales tax revenue to the City, which ultimately funds essential City services while securing the City’s long-term financial stability.
Creating and/or retaining jobs in the community, thereby stimulating further generation of sales tax revenue and increased demand for local housing, goods, and services.
Provide enhanced and increased vitality to property along a commercial corridor, making it a more appealing, economically-vital destination for buyers of the products or services provided by Creative Bus.
The proposed Amendment will encourage the long-term viability of a significant bus sales and repair business in the City and a significant producer of sales tax revenue. That revenue will support the City’s General Fund, from which the City funds essential services such as public safety, recreation, infrastructure, etc. Since the dissolution of Redevelopment Agencies throughout the State of California since 2012, the City has been forced to be increasingly creative in its attempts to attract, retain or expand new revenue-generating businesses to the community. The proposed Amendment, through a covenant retaining an important sales tax generating use and creation of additional on-site employment, advances the City’s economic development goals and thus achieves a considerable public purpose.
The projected tax revenue to the local agency as a result of the economic development subsidy.
The City anticipates that the retention of Creative Bus within the City will result in an approximate retention of annual sales tax revenue in the amount of $200M through the initial term of the Amendment. The City will also continue to receive approximately $1,254.00 in business license tax from Creative Bus.
The estimated number of jobs created by the economic development subsidy, broken down by full-time, part-time, and temporary positions.
The retention of Creative within the City is anticipated to result in the retention of 75 jobs currently at the dealership over the term of the agreement. 01225.0045/919345.1 Page 1 of 4