Discussion of Possible Financial Incentive
Program(s) to Attract Entertainment Retail
Businesses to Lathrop
City Council Special Meeting
November 18, 2024
Item 5.1
Summary
October 14, 2024 – Lathrop City Council Directed
Staff to Explore Possible Financial Incentive
Programs for the Purpose of Attracting
Entertainment Uses to the City.
Identified Funding Source: Measure D, Economic
Development Fee—Citywide Account.
Program
Incentive
Exploration
Included
1) Partial Reimbursement or Grant
Based on City Capital Facility Fees
2) City Lease Arrangement for
Entertainment Use
3) Potential Loan Program to
Entertainment Businesses
1 Solely funded by new homes built in River Islands
$5,000 Fee Paid by Each New Home Sold 20% of Fee Deposited in City-Wide Account to Support Economic Activity
Created Economic Development Fund for the purpose of stimulating business activities in the local economy
Passed by a Vote of the Electorate on November 7, 2000
Measure D
Measure D limits allocation of money from the Citywide Economic Development Fund to the east side of Interstate 5. (Document #2003-069319, Official Records of County of San Joaquin Dated 3/31/2003, “2003 Amended and Restated Development Agreement By and Between Califia, LLC, a California limited liability company, The Cambay Group, Inc., a California Corporation, and the City of Lathrop, a municipal corporation, dated February 4, 2003, Section 7.05.01 Economic Development Fee)
1 East Side of Interstate 5
Potential Land Sites
• Various Land Sites for Potential
Entertainment Use Development
o Public & Private Ownerships
o Size Range(s): 0.17 – 45 acres
• Retailers & Entertainment Uses Desire
Locations Close to a Highway or Interstate
Background
• Residential Growth Outpacing Commercial Development
• Residents Desire More Retail and Entertainment Venues • Limited Available Space in Existing Commercial Buildings • New Construction Challenges
‒ High Interest Rates
‒ Increasing Costs of Construction
‒ Return on Investment to Sustain New Business
Option 1 – Partial
Reimbursement or
Grant Based on City
Capital Facility Fees
• Developers are required to pay permit and
development impact fees before constructing a
new building.
• Fees Vary by Parcel, Acreage, Use Type,
Location
• Fees may include:
Building Permit & Plan Check
Fees
Levee Impact Fees
Non-City Development Impact Fees
(i.e.: School Fees, Habitat Mitigation,
County Capital Facilities, Regional
Transportation Impact Fees,
Air District)
City Capital Facility Fees
(i.e.: Water, Sewer, Storm,
Transportation, Municipal Facilities)
Agricultural Mitigation Fees
FOR ILLUSTRATION PURPOSES ONLY
Estimated Development Fees – Hypothetical Development
5,000 sq. ft. on 1.5 acres
Location 1 Location 2
Permit/PlnCk $ 13,990 $ 13,990
City Cap Fac $197,076 $273,142
Other Dev Fees $ 34,134 $ 39,434
Non-City Fees $ 6,850 $ 18,650
Total $252,050 $345,216
40,000 sq. ft. on 4 acres
Location 1 Location 2
Permit/PlnCk $ 73,857 $ 73,857
City Cap Fac $510,775 $1,015,499
Other Dev Fees $ 91,024 $105,159
Non-City Fees $ 54,800 $149,920
Total $730,456 $1,344,435
In addition to the development fees for new construction, businesses also have start-up costs for land purchase, construction, inventory, employee recruitment/training, etc.
A financial incentive that provides a reduction to the business for start-up costs may be the most impactful to attracting entertainment users.
FOR ILLUSTRATION PURPOSES ONLY
Estimated Development Fees – w/City Financial Incentive 5,000 sq. ft. on 1.5 acres
Location 1 Location 2
Permit/PlnCk $ 13,990 $ 13,990
City Cap Fac $197,076 $273,142
Other Dev Fees $ 34,134 $ 39,434
Non-City Fees $ 6,850 $ 18,650
Total $252,050 $345,216
50% Incentive
w/$500k Max
($98,538) ($136,571)
Business Pays $153,512 $208,645
40,000 sq. ft. on 4 acres
Location 1 Location 2
Permit/PlnCk $ 73,857 $ 73,857
City Cap Fac $510,775 $1,015,499
Other Dev Fees $ 91,024 $105,159
Non-City Fees $ 54,800 $149,200
Total $730,456 $1,344,435
50% Incentive
w/$500k Max
($255,388) ($500,000)
Business Pays $475,068 $844,435
RECOMMENDATION: Council may consider a Financial Incentive for Entertainment Users Based on a Grant or Reimbursement of 50% of the City Capital Facility Fees up to a maximum of $500k per project/user. RECOMMENDED
Option 2 – City Lease Arrangement
Real Estate Broker & Landlord Feedback on Entertainment Use Tenants
1. Commercial Lease Space
a. Annual Lease Rates + CAM + Insurance + Taxes on 5,000 s.f. @ $300k+ b. Extremely Limited Availability of Commercial Lease Space in Lathrop
2. Industrial Lease Space
a. Little Interest in Leasing Industrial Space to Entertainment Use Tenants i. Poor Credit History Causing Above Market Lease Rates ii. Higher Liability and Cost of Insurance to Landlord
iii. Devaluation of Building – “Industrial Tenants Tend to Take Better Care of Leased Space” iv. Costly Tenant Improvements to Convert Space to Entertainment Use v. Many Entertainment Uses Fail Before Lease Expires Leaving Large Expense for Landlord to Demolish and Recondition Space Back to Original Use
b. City Incentive of Financial Contribution Toward Lease Space i. Landlord Likely to Require Security Deposit
ii. Guaranteed Lease Arrangement
iii. City to Be Lessee While Allowing the Ability to Sublease Space to User Option 2 – City Lease Arrangement
Real Estate Broker & Landlord Feedback on Entertainment Use Tenants
1. Commercial Lease Space
a. Annual Lease Rates + CAM + Insurance + Taxes on 5,000 s.f. @ $300k+ b. Extremely Limited Availability of Commercial Lease Space in Lathrop
2. Industrial Lease Space
a. Little Interest in Leasing Industrial Space to Entertainment Use Tenants i. Poor Credit History Causing Above Market Lease Rates ii. Higher Liability and Cost of Insurance to Landlord
iii. Devaluation of Building – “Industrial Tenants Tend to Take Better Care of Leased Space” iv. Costly Tenant Improvements to Convert Space to Entertainment Use v. Many Entertainment Uses Fail Before Lease Expires Leaving Large Expense for Landlord to Demolish and Recondition Space Back to Original Use
b. City Incentive of Financial Contribution Toward Lease Space i. Landlord Likely to Require Security Deposit
ii. Guaranteed Lease Arrangement
iii. City to Be Lessee While Allowing the Ability to Sublease Space to User RECOMMENDATION: Due to industry history as provided by creditable sources, a City Lease Arrangement is NOT RECOMMENDED.
Option 3 – City Funded Financial Loan Program
Commercial Businesses (Large & Small) Financial Needs
Real Estate Equipment Inventory Construction
Costs
Inventory
Established Financial Lending Institutions / Programs
Banks &
Credit Unions
San Joaquin County
Economic Development
Association
• Commercial Loans
• SBA 7(a) Loans
• SBA 504 Loans
• SBA 7(a) Loans
• SBA 504 Loans
• Microloans
• Small Business Loan Match
• Jump Start Loans
• Loan Guarantees
• Revolving Loan Fund
• Microloans
Financing is dependent on credit history of applicant.
Option 3 – City Funded Financial Loan Program
OTHER CITY FUNDED LOAN PROGRAMS
City of Lodi City of Tracy
Eligibility Small Businesses Small Businesses
Loan Types MicroLoan Programs SBA 504 & SBA 7(a) Loans
3 rd Party Lending Agency California Capital National Development Council City Investment $340,000 $1,000,000, plus $3,000,000
Grow America Match
Additional City Cost $130,000 Built into Loan Structure Staff Involvement Monitor, Market, Schedule Appts Monitor, Market, Schedule Appts RECOMMENDATION: Due to availability of existing lending programs, additional expense for program administration and staff time, and risk of default, a City Funded Financial Loan Program is NOT RECOMMENDED.
REVIEW & RECOMMENDATION
Council to Consider Incentive Options Presented, Discuss, and Provide Staff Direction to Establish an Entertainment Incentive Program Based on Use of Measure D Funding