TO: CITY COUNCIL
VIA: CITY ADMINISTRATOR
Placentia City Council
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FROM: DIRECTOR OF DEVELOPMENT SERVICES
DATE: APRIL 19, 2022
SUBJECT: PUBLIC HEARING TO APPROVE AGREEMENT WITH TWO FRANCHISE
VEHICLE DEALERS IN PLACENTIA FOR THE ESTABLISHMENT OF THE
RESIDENT VEHICLE REBATE PROGRAM AS PART OF THE CITY'S BUY
LOCAL INCENTIVE PROGRAM
FISCAL
IMPACT: ESTIMATED EXPENDITURES OF UP TO $120,000 ANNUALLY (NOT TO EXCEED $360,000 OVER A 3 -YEAR TERM)
SUMMARY:
The City's Buy Local Incentive Program is a means to spur growth of the local tax base and to encourage Placentia residents to buy local by creating specific incentive programs aimed to entice residents to buy their products in Placentia. The Resident Vehicle Rebate Program has been developed to incentivize Placentia residents to purchase or lease a vehicle from a franchise vehicle dealer, Fairway Ford or Audi North Orange County in Placentia, by offering a $500 rebate for vehicles purchased/leased with a minimum sales price of $25,000. If approved by the City Council, the program will begin on May 1, 2022 and continue for a three-year period, ending on April 30, 2025. The annual allocation for this program is $120,000 and may not exceed a total of $360,000 over the three-year term of the agreement.
Pursuant to Assembly Bill 562, codified as California Government Code Section 53083, the City is required to hold a public hearing on the terms of any agreement that provides subsidies to local businesses in the amount of $100,000 or more. In accordance with that statute, a written Economic Development Subsidy Report detailing the terms of a proposed agreement has been made available to the public. The subsidy is provided to advance the public interest, including increased employment, an enhanced local tax base through recruitment and retention of revenue - generating businesses. If approved by the City Council, the proposed subsidy will result in retaining and expanding upon the City's largest producers of sales tax revenue, which will ensure support for essential City services such as public safety, recreation, and public infrastructure.
RECOMMENDATION:
It is recommended that the City Council take the following actions:
1. Open the public hearing pursuant to California Government Code 53083 to consider the terms of the Economic Development Subsidy Report; and
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Apr. '19, 2022
City Council Agenda
April 19, 2022
2. Receive the staff report, consider all public testimony, ask any questions of Staff; and
3. Close the public hearing; and
4. Authorize the City Administrator to execute the participation agreement with Penske Audi North OC and Fairway Ford to establish the Resident Vehicle Rebate Program for the period of May 1, 2022 to April 30, 2025, for a total of $120,000 per year, for an amount not to exceed $360,000 over a three-year period, subject to non -substantive changes approved by the City Administrator and City Attorney; and
5. Approve Resolution No. R-2022-20, a Resolution of the City Council of the City of Placentia, California, authorizing a budget amendment in Fiscal Year 2021-22 in compliance with City Charter of the City of Placentia Sections 1206 and 1209 pertaining to appropriations for actual expenditures to allocate funds in the amount of $20,000 from the General Fund Reserve for Appropriation (Account No. 102534-6363) for the Resident Vehicle Rebate Program; and
6. Authorize the City Administrator to execute all necessary documents, in a form approved by the City Attorney.
DISCUSSION:
The City, in an effort to generate additional sales tax revenue, create additional local jobs, and enhance economic vitality, proposes to create the Resident Vehicle Rebate Program, which is a type of subsidy included in Government Code Section 53083. The City of Placentia ("City"), Fairway Ford, Inc. ("Fairway Ford"), and Audi North Orange County ("Audi North OC") intend to enter into an Economic Development Subsidy Agreement ("Agreement"). The Agreement requires Fairway Ford and Audi North OC to retain their business in Placentia, and for the City to provide a limited sharing of sales tax revenue to assist Fairway Ford retention in Placentia and Audi North OC in recouping its development and renovation costs to ensure its long-term viability in the City of Placentia.
The Resident Vehicle Rebate Program has been developed to incentivize Placentia residents to purchase or lease a vehicle from a franchise vehicle dealer in Placentia by offering a $500 rebate for vehicles purchased/lease with a minimum sales price of $25,000. The City estimates that the total amount of the expenditure or loss of revenue of public funds as a result of the economic development subsidy will be up to $120,000 per year for a total of $360,000 for a three (3) year period.
The proposed Agreement 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:
Ensure increased sales for Fairway Ford and Audi North OC and increased sales tax revenue to the City of Placentia, which ultimately funds essential City services while securing the City's long-term financial stability.
City Council Agenda
April 19, 2022
Create new 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 a highly visible property along a commercial corridor, making it a more appealing, economically vital destination for prospective car buyers.
The proposed Agreement will encourage the long-term viability of the City's highest -grossing automobile businesses and one of its largest producers 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, public infrastructure, etc. Ford Motor and Audi Companies have an established national brand which can benefit the City in future business expansion and retention.
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 or expand new revenue -generating businesses to the community. The proposed Agreement, through its generation of sales tax revenue and creation of additional on-site employment, advances the City's economic development goals and thus achieves a considerable public purpose.
With marketing of the program, Staff is expecting that the number of new and leased autos sold to local residents, and entitled to the incentive, could reach up to 720 vehicles. The chart below demonstrates the projected sales tax per vehicle to the City at each purchase price level and the estimated revenue to the City after the rebate is provided to the resident.
Example of Revenue Generated Per Vehicle Sold with Rebate Incentive Purchase Price
Sales Tax to Rebate to
City (2.0%) Residents
Estimated
Revenue to City
Per Vehicle
$25,000
$500 $500
$0
$30,000
$600 $500
$100
$35,000
$700 $500
$200
$401000
$800 $500
$300
$400
$500
$45,000
$900 $500
$50,000
$1,000 $500
Government Code Section 53083 requires that the City Council must hold a noticed public hearing and, prior to the public hearing, provide information to the public through the City's website regarding the proposed economic development subsidy in a report (Attachment 2). An "Economic Development Subsidy" is any expenditure of public funds or loss of revenue of $100,000 or more, for the purpose of stimulating economic development. The aggregate expenditure of public funds by the City for the Placentia Vehicle Rebate Program is anticipated to be over $100,000. An economic subsidy report has been prepared and shall remain available to the public and posted on the City's website until the end date of the economic development subsidy.
City Council Agenda
April 19, 2022
FISCAL IMPACT:
Upon approval of the appropriation adjustment, estimated funds in the amount of $20,000 for the first two (2) months of this agreement will be available in the Resident Vehicle Rebate Program (Account No. 102534-6363) for expenditure in FY 2021-22. Future amounts will be included as part of the City's budget.
Funds for the agreement period will be budgeted in the fiscal years as follows:
Fiscal Ve--arl
Account
Amount
2021-22
102534-6363
$20,000
2022-23
102534-6363
$120,000
2023-24
102534-6363
$120,000
2024-25
102534-6363
$10%000
Total
$360,000
Prepared by:
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Jeahrfette a
Assistant to the City Administrator/
Economic Development Manager
Reviewed and approved:
Jennif6r Lampman
Finance Director
Reviewed and approved:
teph'-M.Lambert
ctor of Development Services
Reviewed and approved:
Damien R. Arrula
City Administrator
Attachments
1. Participation Agreement
2. Economic Development Subsidy Report
3. Program Guidelines and Form
4. Resolution No. R-2020-20 - Budget Amendment