Project

E C O N O M I C D E V E L O P M E N T A G E N C Y

OF THE CITY OF SAN BERNARDINO

FROM:	Gary Van Osdel	SUBJECT:	2002 REDEVELOPMENT COOPERATION AND FINANCING AGREEMENT – CITY OF SAN BERNARDINO AND LAMESA RV CENTER, INC., (CENTRAL CALIFORNIA)
	Executive Director
DATE:	May 23, 2012
Synopsis of Previous Commission/Council/Committee Action(s):
Recommended Motion(s):
	(Community Development Commission)
MOTION A:	RESOLUTION OF THE MAYOR AND COMMON COUNCIL OF THE CITY OF SAN BERNARDINO APPROVING A CERTAIN COOPERATION AND FINANCING AGREEMENT BETWEEN THE CITY OF SAN BERNARDINO, CALIFORNIA AND LAMESA RV CENTER, INC.
Contact Person(s):	Gary Johnson		Phone:	(909) 663-1044
Project Area(s)	South Valle		Ward(s):	Three (3)
Supporting Data Attached:	( Staff Report ( Resolution(s) ( Agreement(s)/Contract(s) ( Map(s) ( Letters
FUNDING REQUIREMENTS	Amount:	$	N/A	Source:	N/A
		Budget Authority:	N/A
SIGNATURE:
	Gary Johnson, Executive Director Economic Development Agency
Commission/Council Notes:

E C O N O M I C D E V E L O P M E N T A G E N C Y

STAFF REPORT

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2002 Cooperation and Financing Agreement - LaMesa RV Center, Inc., (Central California)

and City of San Bernardino

BACKGROUND

In January of this year, LaMesa RV Center, Inc., (“LaMesa”) approached the Redevelopment Agency (the “Agency”) regarding an interest in pursuing a deal to locate an RV dealership in San Bernardino, preferably at the vacated House2Home site located at 101 Redlands Boulevard in the South Valle Redevelopment Project Area. Based on the statement of interest by LaMesa, Agency staff contacted representatives of the owner of the House2Home site regarding the potential deal and to encourage a follow-up contact.

It is important to note that LaMesa has been in business since 1972 and currently operates out of three locations in California and five in Arizona. With corporate headquarters in SanDiego, LaMesa is the world’s largest Winnebago Industries dealer and is this country’s largest RV dealer west of the Mississippi.

LaMesa has proposed to lease the House2Home site with option to purchase and to convert the 100,000 square foot building located thereon into an indoor showroom for RV sales and service. According to LaMesa, use of the building for showroom purposes would be a unique concept in the RV industry and would help promote sales throughout the year, with weather no longer being a deterrent to would be customers. LaMesa is a neighbor of Camping World in several of its locations and anticipates complementing the local Camping World location and helping to increase sales from that store. According to LaMesa officials, the San Bernardino site would draw customers from throughout the greater Los Angeles and Inland Empire areas and would compete directly with the “RV Malls” in neighboring communities. Based on the pro-forma forecast of projected revenues and expenses provided by LaMesa, the estimated sales from the proposed site would approach $50 million in the first year increasing to $90 million by year five.

As part of Agency due diligence on the LaMesa proposal, staff requested the firm of Keyser Marston Associates Inc., (“KMA”) to review said proposal along with the pro-forma forecast of projected revenues and expenses. On February 7, 2002, the KMA report was received by Agency staff. According to Jim Rabe of KMA, his firm was aware that San Bernardino would be competing with at least two other cities for a LaMesa location. In review of the sales projections for the San Bernardino site, Mr. Rabe indicated that the projections seemed reasonable based on their sale performances at their other stores and with the sales recorded by other dealers in the Inland Empire. Mr. Rabe provided sales projections for years 6 through 10 which estimate a projected sales total of approximately $106 million for the tenth year of operations.

LaMesa’s willingness to commit is predicated upon the following contingencies: (1) an acceptable lease agreement, (2) City approval of use and improvement plans and the issuance of applicable permits and (3) an acceptable incentive package.

To date, LaMesa has negotiated a tentative lease agreement with the owners of the site, Home Club Ventures Ltd., calling for monthly lease payments of approximately $60,000 per year with a three year purchase option of $6,650,000. On March 6, 2002, representatives of LaMesa presented their plans to the City’s Economic Development Action Team (EDAT) for review and comment. Based on the EDAT meeting, the following determinations were made: (1) the proposed use of the site is an allowable use but a Conditional Use Permit (CUP) will be required; (2) to expedite processing the CUP application, the City’s planning consultant, Terra Nova Planning and Research, will handle the project; and (3) to enable LaMesa to occupy the site at the beginning of “the season” but prior to receipt of the CUP, a Temporary Use Permit would be necessary. As of March 18, 2002, an acceptable incentive plan had been agreed to by representatives of LaMesa and the Community Development Commission, and Agency staff had been directed to prepare the necessary redevelopment agreements.

On April 1, 2002 a Temporary Use Permit for the site was issued to LaMesa by the City’s Development Services Department. The Temporary Use Permit will be valid through June 22, 2002, or until approval of a CUP. On April 3, representatives of LaMesa confirmed their acceptance of the terms and conditions of the proposed City Cooperation and Financing Agreement. It is anticipated that the Planning Commission will review the CUP request at a May 2002 public hearing.

Current Issue:

The proposed the City Cooperation and Financing Agreement with LaMesa is a ten year agreement that calls for the City to remit from legally available funds an annual employment subsidy to LaMesa based on a site employment index which correlates the amount of sales and use tax generated with the number of employees required to generate such sales and use taxes. The “site employment index” refers to the total amount of sales and use taxes paid to the City from the sales or lease of RVs from the proposed LaMesa location in excess of $200,000 in each accounting year. The “employment subsidy” is to be determined by multiplying the site employment index for each accounting year by the following percentages for each respective accounting year for sales taxes in excess of $200,000 each year.

Accounting Year 1 - 40% Accounting Year 6 - 65%

Accounting Year 2 - 50% Accounting Year 7 - 70%

Accounting Year 3 - 55% Accounting Year 8 - 70%

Accounting Year 4 - 60% Accounting Year 9 - 75%

Accounting Year 5 - 65% Accounting Year 10 -75%

Under the proposed City Cooperation and Financing Agreement, in exchange for the creation and maintenance of a certain specified number of new jobs by LaMesa, the City will begin annual disbursement of the employment subsidy to LaMesa on the thirtieth calendar day following each of the first through the tenth anniversaries of the opening date.

In order for the City to meet its obligations pursuant to the, City Cooperation and Financing Agreement is necessary for the Mayor and Common Council to approve an agreement by and between the City and LaMesa whereby the City will transfer the amounts to be paid to LaMesa as the employment subsidy.

Approval and execution of the attached form of the City Cooperation and Financing Agreement will assure that the City is able to fully meet its financial obligations to LaMesa pursuant to the, City Cooperation and Financing Agreement and the City General Fund will be benefited by the new sales activities and the jobs generated by LaMesa within the City. The payments to be remitted by the City under the terms of the Cooperation and Financing Agreement are entirely new moneys to the City General Fund that would not have been available to the City but for the commitment to enter into the City Cooperation and Financing Agreement with LaMesa.

ENVIRONMENTAL DETERMINATION:

The proposed activity is exempt pursuant to Section 15301 of CEQA

Fiscal Impact

Assuming inflation at 7% per annum

Year SALES SALES TAX BASE SALES TAX TOTAL REBATE

TO CITY RETAINED RETAINED RETAINED LA MESA

1. $50,000,000 $500,000 $200,000 $180,000 (60%) $380,000 $120,000 (40%)

2. $53,500,000 $530,000 $200,000 $165,000 (50%) $365,000 $165,000 (50%)

3. $57,245,000 $572,450 $200,000 $167,202 (45%) $367,603 $205,248 (55%)

4. $61,252,000 $612,520 $200,000 $165,008 (40%) $365,008 $247,512 (60%)

5. $65,359,000 $653,359 $200,000 $158,675 (35%) $358,675 $294,684 (65%)

287,356,000 2,868,329 $1,000,000 835,885 1,835,885 1,032,444

Based upon projected sales of $287.3 million over a five year projection the City will retain $1,835,885 in new sales tax while disbursing 1,032,444 to LaMesa as per the terms of the Agreement.

After the term of the Agreement has expired the City will retain the full amount of the sales tax from there onwards, currently anticipated to be in the region of $900,000 per annum based upon sales projections of approximately $90, million

Based upon a multiplier for the area of 4.5 as put forward by Dr. John Husing a noted Inland Empire economist this is an injection of $1.3 billion in terms of sales not to mention the economic impact of the spending power of the new employees

Recommendation

That the Mayor and Common Council adopt the attached Resolution.

_______________________________

Gary Johnson

Executive Director