City of Gonzales
COMMUNITY DEVELOPMENT DEPARTMENT
STAFF REPORT
TO: Honorable Mayor Rios and City Council
DATE: October 7, 2024
FROM: Taven Kinison Brown, Community Development Director THROUGH: Carmen Gil, City Manager
SUBJECT: Lease Agreement with Legacy Sign Company for the Construction and Use of an Offsite Advertising Billboard Sign on a City-Owned 6+Acre Parcel Adjacent to Highway 101 on Assessor’s Parcel Number 020-201-022-000.
RECOMMENDATION
It is recommended that the City Council of the City of Gonzales approve a 25-year Lease Agreement with Legacy Sign Company for the construction and use of an offsite advertising billboard sign on a Cityowned 6+acre parcel adjacent to Highway 101 on Assessor’s Parcel Number 020-201-022-000.
BACKGROUND
In November of 2022, staff came before the City Council to explore the idea of installing 1-2 digitalscreen(s) on city owned parcels facing the 101 Freeway. The sign(s) would/could display advertisements for national, regional and local businesses, civic messages, and emergency communications. Staff later followed up with the Council and gave a presentation addressing safety concerns expressed by several Council Members. The City Council then advised staff of its interest to entertain such a sign in the City and to potentially capture rent revenue from the lease of public property and to have increased opportunity to announce civic messages.
Staff took direction from the City Council and revised the City’s sign code to allow offsite advertising billboard signs. New Section 12.116.125. of the City of Gonzales Sign Code was written and the Planning Commission considered the new ordinance on April 8, 2024. The City Council had their first reading of the new ordinance on May 6, 2024; the second reading was May 20, 2024, with the ordinance becoming effective 30 days later.
AGENDA
ITEM
13 On June 12, 2024, Legacy Signs applied for a Use Permit to build and operate an offsite advertising digital billboard sign off of 875 S. Alta Street, Gonzales, adjacent to Highway 101.
On September 4, 2024, the Planning Commission considered the Conditional Use Permit for the sign in question, including a recommendation from a design review committee on the colors, materials, height and placement of the sign.
On June 12, 2024, Legacy Sign Company submitted a draft Lease Agreement, City Manager Gil, Community Development Director Kinison Brown, and City Attorney Rodriquez, have considered and refined the lease terms to present to the City Council, and are further described and analyzed ahead in this report.
REVIEW AND ANALYSIS
The attached Billboard Lease with Legacy Sign Company is 30 pages and is modeled after industry standard examples and customary points of negotiation.
• Article 2 addresses: Leasing of the Premises, Plans and Design Review, Conditional Use Permit Review, Caltrans Permit Review, Design and Construction and Access to the Site. • Article 3 addresses: the Term of the Lease, and Expiration of the Lease. • Article 4 addresses: Rent and Civic Promotions and Use. • Article 5 addresses: the Use of the Premises.
• Article 6 addresses: Construction and Operation of the Billboard, Plans and Specifications, Maintenance, Damage or Destruction, Utilities, Advertising, Removal, and Compliance with Law.
• Articles 7-12 are more standard fare and addresses: Events of Default, Taxes, Eminent Domain, Indemnification, Insurance and Miscellaneous matters.
The main takeaways as negotiated by the staff team include:
• Term: A term of 25 years, with two options to mutually extend the contract by 5 years each. • Rent: Legacy Sign Company will pay the City either $38,000 in base rent (Minimum Annual Guarantee - MAG) or 20% Share of the Annual Net Advertising Revenue, whichever is greater at the end of the year. The MAG will increase by 10% every 5 years. • Civic Promotions: The City is to receive a minimum of one spot on the sign at all times. Eight spots generally rotate through on a 64 second cycle.
• Graphic Design Services: Legacy Sign Company will provide the City with graphic design services for up to 25 creative executions per year.
• Gonzales Based Businesses: will receive a 25% discount on advertising space. • Public Safety Announcements. Legacy Sign Company will utilize the advertising space on the Digital Billboards for regional emergency announcements and alerts, including but not limited to Amber Alerts and “Wanted” criminal postings from law enforcement, without charge, as reasonably requested by the City, in accordance with applicable local, regional, and/or state protocols.
• Annual Reporting Requirement. Reports to be received by March 15th of each year.
The California Environmental Quality Act - CEQA
The City of Gonzales Planning Commission in their review and deliberation of the Conditional Use Permit for the offsite advertising digital billboard sign on September 4, 2024, determined that the sign qualified for an exemption under CEQA Guidelines Section 15303: New Construction or Conversion of Small Structures, Class 3. For context, other examples of how this CEQA exemption is applied include but are not limited to:
a) One single-family residence, or a second dwelling unit in a residential zone. In urbanized areas, up to three single-family residences may be constructed or converted under this exemption.
b) A duplex or similar multi-family residential structure totaling no more than four dwelling units. In urbanized areas, this exemption applies to apartments, duplexes, and similar structures designed for not more than six dwelling units. c) A store, motel, office, restaurant or similar structure not involving the use of significant amounts of hazardous substances, and not exceeding 2500 square feet in floor area. d) Water main, sewage, electrical, gas and other utility extension including street improvements of reasonable length to serve such construction.
Staff found that other municipal governments, such as the County of San Joaquin, have successfully used this Section 15303 CEQA Guidelines exemption for the exact sign type and size, and without challenge.
Additionally, Section 15301 - Existing Facilities. Class 1 consists of the operation, repair, maintenance, permitting, leasing, licensing, or minor alteration of existing public or private structures, facilities, mechanical equipment, or topographical features, involving negligible or no expansion of existing or former use.
Legacy Sign Company will be leasing a portion of a 6+acre site that contains a detention basin. The sign, mounted on a pole will not involve expansion of the detention basin, nor cause impacts to its function.
Explain the Recommendation and How it Supports the Vision Gonzales will continue to be a safe, clean, family-friendly community, diverse in its heritage, and committed to working collaboratively to preserve and retain its small-town charm.
Explain: The utility to the City of being able to better reach to residents, increase public safety through emergency messaging and instructions, and offer our local businesses a 25% discount on the going advertising market rates, supports our small town and our citizens. Architecturally, the sign is reflective of the civic investments made in the 4th Street at Alta archway, reemphasizing the small-town charm of the City.
Explain how the Recommendation Directly Implements the Mission The City Council and Staff of the City of Gonzales will realize our Vision by providing the leadership, commitment, and resources necessary to provide excellent services that enhance the quality of life of our diverse community.
Explain: The City Council demonstrated leadership by entertaining a presentation and proposal to allow such an outdoor advertising sign in the City and asked directly about health and safety issues, which were dispelled. City staff committed to enable this economic investment in the City by absorbing the staff time costs of re-writing the zoning code to enable such signs. Now that there is an actual proposal on the table and a lease to be negotiated to the public’s benefit, the quality of life for the community will be enhanced, for businesses, celebrated citizens and students through this civic leadership.
City services will be delivered in a cost-effective, respectful, and friendly manner to ensure the safety and well-being of the residents and the promotion of business, recreational, housing and employment opportunities in an environmentally sustainable manner.
Explain: At no cost to the City for the physical construction of the sign, nor its operations, a base revenue will be returned to the City annually, and the City will share proportionately in increased advertising revenues in good marketing years. The sign will be used by businesses and the City alike in the promotion of business, recreation, housing and employment opportunities in an environmentally sustainable manner.
Strong fiscal policies allow us to provide appropriate infrastructure for:
• Public Safety X Yes No N/A
• Housing X Yes No N/A
• Recreation X Yes No N/A
• Environment X Yes No N/A
• Education X Yes No N/A
Explain: Please see the Vision above.
ALTERNATIVES
Alternative – The City Council could direct staff to modify the Billboard Lease Agreement.
FISCAL IMPACT
If the Billboard Lease Agreement is approved, it will generate a minimum of $38,000 annually. During the life of the contract (25 years) it will generate a minimum total of $1,159,984 including a 10% increase every 5 years. Two more 5-year options to continue the billboard sign under this contract could be applied, further increasing the return to the City.
Potentially, the revenue return to the City may be higher than the base revenue (MAG) as the City negotiated a revenue share of 20% which can capture additional funds should 20% be higher than $38,000.
CONCLUSION
It is recommended that the City Council of the City of Gonzales approve a base 25-year Lease Agreement with Legacy Sign Company for the construction and use of an offsite advertising billboard sign on a Cityowned 6+acre parcel adjacent to Highway 101 on Assessor’s Parcel Number 020-201-022-000, as embodied and clarified in the terms of the attached Billboard Lease Agreement.
Attachments:
1. Lease Agreement with Legacy Sign Company