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January 18, 2022
ITEM TITLE
Public Hearing to Accept and File an Economic Development Subsidy Report Pursuant to Government Code Section 53083 for Sunroad BCV Holding to Construct a BMW Auto Dealership Report Number: 21-0239
Location: 3.85 acres of vacant real property located south of Main Street, east of Brandywine Avenue, and west of Maxwell Road.
Department: Economic Development
Environmental Notice : The Project was adequately covered in previously adopted Mitigated Negative Declaration IS-02-010 for the Chula Vista Auto Park East Specific Plan.
Recommended Action
That City Council hold the public hearing and consider any written or oral comments on the information contained in the economic development subsidy report pursuant to Government Code 53083, et seq. and subsequently accept and file the report.
SUMMARY
On December 15, 2015 the Chula Vista City Council approved an Owner Participation Agreement (“Agreement”) by and between the City of Chula Vista and Sunroad BCV Holdings, Inc. (“Sunroad”), which provides an economic development subsidy for the construction and operation of a BMW Auto Dealership in Chula Vista. Subject to certain conditions set forth in the Agreement, including development and operation of the Dealership for a twenty (20) year period , the Agreement requires the City to pay the Participant an amount equal to 50% of the sales and use tax (excluding Measure A and Measure P revenues) generated by the operation of the Dealership at the Site, less the amount of any third party costs incurred by the City to calculate such payments, and limited to a cumulative maximum amount of $3,300,000. Pursuant to Government Code Section 53083(d), the City is required to prepare a report within the term of the economic development subsidy containing various information regarding the Agreement and the economic development subsidy set forth in the Agreement. Although Sunroad has not yet constructed the BMW Auto Dealership, a report is nonetheless required. The report concludes that the economic subsidy has not been provided, the project has not generated sales and use tax revenue, and no jobs have been created. The City Manager has extended the Agreement to allow for the economic subsidy if the BMW Auto Dealership is constructed and operational by July 1, 2023.
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ENVIRONMENTAL REVIEW
The Director of Development Services has reviewed the proposed project for compliance with the California Environmental Quality Act (CEQA) and has determined that the project was adequately covered in previously adopted Mitigated Negative Declaration IS-02-010 for the Chula Vista Auto Park East Specific Plan. Thus, no further environmental review is required.
BOARD/COMMISSION/COMMITTEE RECOMMENDATION
Not applicable
DISCUSSION
The City has proactively planned for the development of an auto park along the Main Street corridor east of I-805 freeway between Brandywine Avenue and Maxwell Road. As part of those planning activities, City staff has worked closely with existing auto dealerships, prospective dealerships, and master developers to coordinate and assemble many moving parts that comprise the auto park in Chula Vista, including:
Specific plans for two auto parks—North and East.
Environmental (CEQA) review.
Master Owner Participation Agreements with master developers. Establishment of a dealership owners association through a business improvement district , comprised of all existing and future dealerships, with association governed covenants, conditions and restrictions (CC&Rs).
Individual Owner Participation Agreements with individual property owners and dealerships.
The following establishes a timeline of events pertaining to the BMW Auto Dealership property:
On June 1, 2004, the City adopted a Mitigated Negative Declaration (IS-02-010) for the Auto Park East project and specific plan, including all future dealership -specific projects (including the proposed BMW Dealership).
On June 8, 2004, the City adopted Ordinance No. 2965, approving a specific plan (PCM-02-10) for the Auto Park East property. The Specific Plan establishes the City’s land use policies and entitlements that govern the 29-acre Auto Park East property and all future auto dealerships therein. On August 24, 2004, the City Council approved the Master Owner Participation Agreement (“Master OPA”) with Fred Borst, Borst Family Trust, Fask Land, Inc., establishing development standards and performance requirements for the 29 acres of land within the Auto Park East Specific Plan. The Master OPA sets forth a number of developer obligations of both the master developer and future individual property owners and dealership owners, such as Sunroad and the BMW Auto Dealership.
The Master OPA and the Sunroad OPA will concurrently guide the development, maintenance and operation of the Sunroad property as a “first quality, first class” auto dealership. On December 15, 2015 the City entered into an Owner Participation Agreement with Sunroad which required the BMW Auto Dealership to be operational by December 31, 2018. On May 17, 2018 the City and Sunroad agreed to extend the date for which the BMW Auto Dealership must be operational to December 31, 2019.
On December 7, 2021 the City and Sunroad once again agreed to extend the date for which the BMW Auto Dealership must be operational to July 1, 2023.
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The Agreement ensures a “first quality, first class” BMW Dealership through the imposition and purchase by the City of restrictive and limiting operating covenants on the property and dealership, including specified development obligations, maintenance requirements, non -discrimination covenants, and restrictive operating covenants.
Subject to certain conditions set forth in the Agreement, including development and o peration of the Dealership for a twenty (20) year period, the Agreement requires the City to pay the Participant an amount equal to 50% of the sales and use tax generated by the operation of the Dealership at the Site, less the amount of any third party co sts incurred by the City to calculate such payments, and limited to a cumulative maximum amount of $3,300,000.
Pursuant to Government Code Section 53083(d), the City is required to prepare a report within the term of the economic development subsidy conta ining various information regarding the Agreement and the economic development subsidy set forth in the Agreement. Although Sunroad has not yet constructed the BMW Auto Dealership, a report is nonetheless required. The report (Attachment 1) concludes that the economic subsidy has not been provided, the project has not generated sales and use tax revenue, and no jobs have been created.
To ensure a “first quality, first class” BMW Auto Dealership is constructed on the site, the City Manager has extended the Agreement to allow for the economic subsidy if the BMW Auto Dealership is constructed and operational by July 1, 2023. Sunroad BCV Holdings, Inc. anticipates submitting a permit application to the City in early 2022. Construction is expected to begin by fall 2022 with the BMW Auto Dealership having been constructed and operational by July 1, 2023.
DECISION-MAKER CONFLICT
Staff has reviewed the property holdings of the City Council members and has found no property holdings within 1,000 feet of the boundaries of the property which is the subject of this action. Consequently, this item does not present a disqualifying real property -related financial conflict of interest under California Code of Regulations Title 2, section 18702.2(a)(7) or (8), for pu rposes of the Political Reform Act (Cal. Gov’t Code §87100, et seq.).
Staff is not independently aware, and has not been informed by any City Council member, of any other fact that may constitute a basis for a decision-maker conflict of interest in this matter.
CURRENT-YEAR FISCAL IMPACT
There is no current year fiscal impact by adoption of this resolution.
ONGOING FISCAL IMPACT
The ongoing fiscal impact of the Agreement will be an amount equal to fifty percent (50%) of the City’s Sales and Use Tax Revenu e generated by the operation of the approved Dealership, less the verification costs actually paid by the City, up to an amount of the Operating Covenant Purchase Price of three million, three- hundred thousand dollars ($3,300,000). Disbursements will be distributed each quarter, commencing with the second quarter after Participant has commenced operations. Disbursement amount will be calculated as a percentage portion of the City’s share of sales tax revenues generated by Participant.
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ATTACHMENTS
1. Report Required Pursuant to Government Code Section 53083(d) Staff Contact: Eric Crockett, Deputy City Manager
Kevin Pointer, Senior Economic Development Specialist