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1994 08 16 CC Minutes LA QUINTA CITY COUNCIL LA QUINTA REDEVELOPMENT AGENCY MINUTES AUGUST 16, 1994 Special joint meeting of the La Quinta City Council and the La Quinta Redevelopment Agency was called to order at the hour of 10:00 a.m. PRESENT: Council Members Bangerter, Perkins, Sniff, Mayor Pena ABSENT: Council Member McCartney MOTION It was moved by Council Members Sniff/Bangerter to excuse Council Member Mccartney. Motion carried unanimously. PUBLIC COMMENT None STUDY SESSION 1. PRESENTATION OF PROPOSAL BY MIDLAND PROPERTIES, INC. CONCERNING THE PROJECT DESCRIBED IN THE ERN BETWEEN MIDLAND PROPERTIES, INC. AND THE CITY OF LA QUINTA. Mr. Tim Ealey, Director of Real Estate Development for Midland Properties, Inc. of 2001 Shawnee Mission Parkway, Shawnee Mission, Kansas, introduced the following associates who were present: Mark Moran of Mark S. Moran & Associates, Bill Warner of Warner Engineering, John Boyd of Rutherford Investments, and Mark Briggs of Mark Briggs & Associates. He noted Midland's California law counsel, Jeff Otterman, had a meeting conflict and was unable to attend. Mr. Ealey reviewed briefly how Midland Properties became involved with the proposed auto mall. John Boyd, of Rutherford Investments, contacted Midland in October 1993, regarding a proposal to locate an auto mall facility in the City of La Quinta. Due to a potential conflict between the City of La Quinta and the City of Indio, relative to such a facility, a site on the southwest corner of Highway 111 and Jefferson Street was considered, which would include adjacent property within both cities. A meeting was held in December, with representatives from both cities and Midland introduced the concept of a public/private partnership, which is still undefined. An exclusive right to negotiate was signed by both cities. Mr. Ealey believes there is opportunity for all entities involved, to create a development that will benefit Midland, the cities, the auto dealers, and the communities in general. Midland's concept is to build and own the project on a long-term basis. He then introduced Mark Moran. BIB] 01-18-96-U01 03:51:05PM-U01 CCMIN081694-U02 City Council Minutes 2 August 16, 1994 Mr. Mark Moran, Mark S. Moran & Associates, displayed a site plan, noting the properties under consideration for the auto mall. He advised that Midland has received an option to purchase, for the portion of the property owned by Landmark Land Company and the Resolution Trust Corporation. Mayor Pena stated, for the record, that the city limits, as marked on the Site plan, were incorrect, noting the City of La Quinta city limits should be on the west side and the City of Indio on the east side. Mr. Moran stated that the proposed public/private partnership is unique, having two cities work together to raise revenues. He noted that an agreement, between the City of Indio and the Redevelopment Agency of the City of La Quinta, was signed declaring that the City of La Quinta would not actively pursue auto dealerships. Due to high interest from auto-related users and general retail/commercial users, Midland is requesting to purchase additional property for the project, from the City of La Quinta Redevelopment Agency. The commercial interest that Midland has experienced, is new commercial and not companies relocating from other cities in the east end of the valley. The commercial interest, if achieved, would make Jefferson Street a commercial corridor down to Avenue 48. In the proposed layout, auto-related users are planned for the frontage along Highway 111 in Phase I, as well as a theater and after-market users building, that would be attached to a stand-alone" mini-mall, or larger retail user building. The business activities planned for the Site are auto intensive toward Highway 111 and retail intensive toward the back of Highway 111 and Jefferson Street. He added that Midland anticipates building a bridge across the Coachella Valley Storm Water Channel. The proposed project schedule has been revised to begin construction by June 1995. Proposed commercial and retail users have been identified and auto dealerships have signed letters of interest, or letters of intent. All of the proposed auto dealerships will be relocating from the City of Indio, except two or three, which will be new dealers. The auto dealers will be located within city limits of both cities, with retail-commercial proposed to be located within the City of La Quinta only. Users have also been identified for Phase II of the development and could begin construction within a few months of the completion of Phase I, as concurrent development is planned on the site, with both phases being completed within two years. The proposed project is expected to be a boost to the economy of both cities through sales tax revenues, property tax increases, and expected expansion of other retail and commercial projects along Highway 111. Mr. Moran believed that if the infrastructure is in place and commercial business is already established, there is a greater certainty of other businesses locating along Highway 111. BIB] 01-18-96-U01 03:51:05PM-U01 CCMIN081694-U02 City Council Minutes 3 August 16, 1994 Mr. John Boyd, Rutherford Investments, 42-475 Prickly Pear, Palm Desert, advised that five different theater companies have been contacted regarding locating in this project. Mayor Pen a asked if there is a competitive ring" for theater companies that would affect locating a theater on this site, if another theater complex were to be located in the Albertson's Center, as has been verbally proposed. Mr. Boyd advised that the project site is outside of any 10 mile competitive ring that would conflict with present valley theaters. Any new theater construction would be on a first-come-first-served basis. Currently those theater companies expressing interest are Sony, Cinemart, Metropolitan, and Edwards. Mr. Boyd stated strong interest has been voiced from two to three new auto dealerships to locate at the auto mall. Mercedes has indicated an interest in locating a service presence on the site, as well as other related auto users and after-market users, such as: auto parts, tire sales, sound systems, and auto upholstery. These users are in various stages of negotiations and reviewing site plans. National restaurants have been contacted for interest and a letter of intent has been received from one car wash service. In response to Mayor Pena, Mr. Boyd advised there wouldn't be any dealership conflict with the Thousand Oaks-based Aladdin dealership and Fiesta Ford, because Aladdin would be a Toyota dealership, not selling Lincoln-Mercury. The Aladdin Toyota dealership was one of the first dealers to show an interest in locating in the auto mall facility. Mr. Tim Ealey stated that the site plan layout for the auto dealers is, presently, very specific. Midland has met with the auto dealers, as a group and individually, to discuss the layout, and prototype buildings have been generated. The retail/commercial blocks of buildings in Phase I, referred to by Midland currently as a capacity study", represent square footage and parking, which could result in a combination of two to three users or six to eight users, depending on final tenant selection. The blocks of buildings in Phase II are also a capacity study representing approximately 171,000 square feet of retail/commercial uses. All of the proposed retail/commercial buildings are subject to change, depending on selection of the final users. Based on current information, he believed the proposed plan is fairly close" to working, on a square footage basis and parking requirements. In response to Mayor Pena, Mr. Ealey clarified the proposed location of the ten auto dealers on the site plan. A restaurant is proposed at the site's northwest corner, and a financial institution and car wash are proposed along Jefferson Street. In response to Council Member Perkins, Mr. Ealey advised that a method of assigning auto dealer sites has not yet been determined. Most auto mall developments have a limited number of dealers on the frontage road. A few sites will have better frontage on BIB] 01-18-96-U01 03:51:05PM-U01 CCMIN081694-U02 City Council Minutes 4 August 16, 1994 Highway 111, but he believes it will be very viable for all auto dealers, due to visibility and accessibility from both Highway 111 and Jefferson Street. Rotating-display pedestals are proposed along the perimeter of the site and all dealers will have access to these pedestals. Mr. Ealey believes some of the auto dealers, located in the City of Indio, are more anxious to relocate than others because of the age, or lack of expansion, of their present facilities, as well as other reasons. Other dealers are better located and are experiencing low overhead costs and are not as anxious, except for the opportunity to be located within an auto mall and auto related facility. Most major auto companies encourage dealerships to locate in an auto mall facility, which meets their needs from a marketing standpoint. Dealers are no longer competitors across the street. They now need to be in a facility where they can feed off of each other's traffic. Mayor Pena asked if major auto companies ever provide incentives to locate their dealerships in specific sites or become partners in projects such as this. Mr. Ealey advised that the auto companies encourage their dealerships to locate in an auto mall facility, but rarely get involved from a financial standpoint. The auto companies do have a ten-mile radius requirement when locating dealerships near other existing, like-dealerships, and must approve of their locations. This proposed auto mall site is approximately 13 miles from any other auto dealerships that would conflict with the dealerships under consideration, thus being outside of the ten-mile radius. Council Member Bangerter asked if there is opportunity for one dealership to sue another dealership, when located outside of the ten-mile radius. Mr. Ealey advised that, his understanding and opinion is, that the auto companies approve the location of the dealerships and also control the franchises; therefore, he believed that they would not allow their dealerships to bring litigation against each other. Council Member Perkins expressed concern regarding the rotating auto pedestals along the perimeter of Highway 111, and suggested careful planning to alleviate a junk yard" effect. In response to Mayor Pena, Mr. Jerry Herman, Community Development Director, said the 50' setback requirement is for buildings only and can allow, with good design, intrusion of parking. Mr. Moran reiterated that economic incentives are no longer available by the manufacturer to the dealers to locate dealerships in auto malls, as was in the early 80's. In reference to Council Member Bangerter's earlier concern, he advised that a Cathedral City dealer had recently requested to locate within the City of Palm Desert and was denied approval by the manufacturer, enforcing the ten-mile radius limit. If the proposed BIB] 01-18-96-U01 03:51:05PM-U01 CCMIN081694-U02 City Council Minutes 5 August 16, 1994 auto mall proceeds as planned, there will no longer be sufficient distance between the cities of La Quinta, Palm Desert and Rancho Mirage, to locate any more dealerships toward the center of the valley. This will also hinder any other attempt by dealerships to centralize in another location. Mayor Pena, noting a significant amount of auto leasing, expressed concern that a point of sale be located within the City of La Quinta, not in a corporate office, thus insuring sales tax revenue. Mr. Tim Ealey advised that the dealerships have insisted that financial institutions be on- site, and would consist of a commercial bank and a finance company. Mr Mark Briggs, Mark Briggs & Associates, 505 N. Tustin, Suite 2S2, Santa Ana, explained the proposed public/private partnership is unique because of the short timeframe in which it will be a complete auto mall facility. Normally, it takes several years to fill an auto mall. Contracts are now being negotiated, between Midland and the ten auto dealers, to build all of their facilities, within a 11/2 to 2-year timeframe, with Midland financing 100% of the cost to build the project. Midland will also negotiate agreements with the retailers to build-to-suit and finance that construction as well. He believes locating all major auto dealers in one location, in a short timeframe, will make the auto mall a success. Midland will negotiate leases for the land and facilities with each dealer on a private basis and at a competitive lease rate. Mr. Briggs advised that a public/private partnership is needed because of the approximately $9 million of off-site improvements in the project. These off-sites include improvements to Highway 111 and Jefferson Street, internal streets on the project that will be used to gain access to all the facilities, the storm channel, a bridge across the channel, widening of the current Jefferson Street bridge, sewer system, and all utility requirements. He believed that improvements of this type, are typically recognized, by cities and/or redevelopment agencies, as part of their activity in a public/private partnership. If these extensive off-site improvements were not needed, the project could proceed without any need of public assistance. The proposed off-site improvements on Highway 111 and Jefferson Street are part of each city's master plan. He believes the two cities recognize the benefit of the proposed project in helping to accomplish their master plans. He advised that a pro forma has been provided showing what the project looks like in terms of economics with the level of public assistance they propose. He added that it is financeable. Midland has determined that the project would not be economically feasible if they incurred all off-site improvement costs. Midland is prepared to build all of the dealers facilities and front the cost of all off-site improvements, at the beginning of the project, eliminating the financial risk to the cities. They will also continue to work with all entities involved, regarding a master assessment district. He believes there will be no risk to the cities, as to the performance of the developer, because the developer will BIB] 01-18-96-U01 03:51:05PM-U01 CCMIN081694-U02 City Council Minutes 6 August 16.1994 have already performed, before any reimbursements for the off-site improvements are required. The only action required of the two cities, is to enter into an agreement with Midland, agreeing to assist with the off-site improvement costs. The project is expected to generate an increase of combined city property tax revenue of approximately $55,000 yearly, and approximately $1,100,000 in new sales tax, within 18-24 months. A market study has been initiated to help validate the projections of the sales tax revenue. Seven of the proposed auto dealers have established dealerships in the City of Indio, making reasonable projections of their sales performance and generated sales tax revenue, fairly" reliable. Midland proposes to be reimbursed for the infrastructure costs through a master lease structure, in terms of the cities paying some prorata-share. which is to repay the off-site improvement costs. Many of the off-site improvements on Highway 111 and Jefferson Street, will benefit other property owners and after a master assessment district is created, those properties will be evaluated, as to benefit value received, and assessed for their portion of the cost; thus the cities will not have to support that amount. The lease structure will provide city assistance for off-site improvements that can, ultimately, be identified against this project. The lease structure will also give some assurance that there is some credit enhancement standing behind the program that will fade out over a period of time. Jeff Otterman of Rutan and Tucker, has directed a memo to the City Attorney's, regarding the basic structure and how it might be created, such as through a joint powers authority. In response to Council Member Sniff, Mr. Briggs advised that the 500 new jobs expected in Phase I would be generated from the auto mall and 121,000 sq.ft. of retail space. The auto dealers from Indio will be relocating employees but expect to increase their activities and will need additional employees. The total expected increase in new jobs for the entire project is 950 Council Member Sniff asked for Midland's projection regarding the amount the City of La Quinta would need to reimburse them for the infrastructure costs, the timeframe projected for payment of that amount, and a timeframe that the City could expect to begin receiving tax revenues from the project. Mr. Briggs advised that would be determined by two factors: 1) how much of the $9 million off-site improvement costs will be assessed to adjoining property owners, per the conclusion of the assessment engineer; the amount that remains after that assessment will be the amount to be shared by the two cities; 2) the structure of the assessment district; depending upon whether the cities want to be reimbursed by the assessment district, or payments that occur based on financing arrangements. There will be net tax revenues to both cities from the beginning of the project. Midland will not request all of the tax revenues to be used, up front, for reimbursement payment of off-site improvements. The net benefit to each city will need to be determined. BIB] 01-18-96-U01 03:51:05PM-U01 CCMIN081694-U02 City Council Minutes 7 August 16, 1994 Council Member Sniff asked what the expected costs and technicalities are, to move or relocate the auto dealers that are presently in Indio. Mr. Briggs advised that Midland has a scheduled meeting with the City of Indio on August 17th to discuss their net impact. The cost should be minimal in cases where the City of Indlo has financially assisted an auto dealer and there is a reuse for the site, whereby costs can be recovered. Each dealer will be dealt with case-by-case, but specifically, where the City's Redevelopment Agency has assisted the dealer financially. Mayor Pena advised that a request has been made to the City of Indio for information on this issue. Mr. Moran advised that Fiesta Ford is the only dealership that currently has a loan through the City of Indio's Redevelopment Agency, for approximately $800,000. Midland is investigating another possible use for that facility. He stated that this paper debt" has been discussed with the City of Indio and they are willing to absorb it, based on what realized revenues they will receive from the auto mall project. The Fiesta Ford property is the only owned" property, out of the seven auto dealers proposed to relocate from Indio. The other six properties are under lease. In response to Council Member Sniff, Mr. Boyd advised that some dealers have made short-term lease arrangements. CIrrysler has the longest time remaining on a lease, approximately 2-3 years, but there is a short time difference between the end of their lease and the expected completion of the auto mall. Mr. Ealey stated that Midland has advised the dealers that any relocation costs, including buying out leases, will be the responsibility of the dealer. He believed this issue will not be a problem for either city. Mr. Moran advised that Midland has received a letter stating that the proposed project is outside of the scope of what was originally covered in the ERN. Midland is interested in a site that has been designated for use by the Desert Sands Unified School District. The site is interposed on property they wish to use for retail/cornrnercial on this project and they wish to negotiate with the City of La Quinta and the school district to obtain the site. Discussions have been held with the Facilities Corporation and Ms. Ballesteros, School District Superintendent, about providing an alternate site. The school district has indicated they are willing to accept an alternate site, as long as their interests are accommodated and certain infrastructure is completed. Mayor Pena stated that a commitment has been made to the school district and the Council feels some duty to honor those commitments. Mr. Moran expressed appreciation for the Council's commitment to the school district and expressed interest to work with both entities to make certain the school district's BIB] 01-18-96-U01 03:51:05PM-U01 CCMIN081694-U02 City Council Minutes 8 August 16, 1994 needs are met, stating it might necessitate some additional movement from the City of La Quinta. He noted the school district will not generate any tax revenue to the City of La Quinta. Mr. Ealey advised that previous discussions were held in March 1994 with Bob Hunt, City of La Quinta's previous City Manager, regarding the school district site property. A development outline was supplied, which clearly presented the use of the school district site property, and Midland was not discouraged from pursuing the acquisition of that property. Midland has taken the school district's concept site plan and reconfigured it on the alternate site owned by the redevelopment agency. It appears that all elements and components, planned for the original site, will work on the alternate site. The property owner to the north of the alternate site is willing, on a very favorable basis, to negotiate with the City and the school district, if additional acreage is required to accommodate the school district. The original school district site of 40+ acres, is located on the northwest corner of Jefferson Street and Avenue 48 and east of the storm channel. The alternate school district Site, is north of Avenue 48, east of Dune Palms Road and west of the storm channel, and is five to six acres smaller than the previous site. Midland will include the improvements to the extension of Dune Palms Road to Avenue 48, if necessary. Mr. Ealey stated that Midland Properties views the proposed project as a good business opportunity and long-term investment wherein they plan to build, lease and manage the property. They are not requesting the cities to purchase the land, nor to directly share the tax revenues. They are asking for a mechanism to backstop the leases for the auto dealers, and reimbursement for infrastructure costs. Mr. Moran said that Midland is aware that modifications to the Environmental Impact Report EIR) may be needed, because property that is outside the scope of the ERN is being included for examination in the EIR. Midland is requesting the cities to cornmit financial assistance to the preparation of the EIR, to show their willingness to invest in the project. In response to Council Member Perkins, Mr. Ealey advised that Midland Properties has built, and continue to own and manage 27 similar facilities. He described the proposed project as average when compared in size and financial cost to Midland's similar projects, with the average cost being $35 million. The Council and Redevelopment Agency expressed appreciation to the representatives of Midland Properties for their presentation. Council recessed to Redevelopment Agency meeting. Council reconvened and recessed to Closed Session. BIB] 01-18-96-U01 03:51:05PM-U01 CCMIN081694-U02 City Council Minutes 9 August 16, 1994 CLOSED SESSION 1. Conference with City's Real Property Negotiator concerning the southwest corner of Highway 111 and Jefferson Street Midland Properties, Inc. Tim Ealey) negotiations for commercial development including price, term of payment pursuant to Government Code Section 54956.8. 2 Conference with Agency/City's Real Property Negotiator concerning a proposal submitted by the Boys and Girls Club concerning potential acquisition and disposition of property in the Cove pursuant to Government Code Section 54956.8. Ms. Honeywell, City Attorney, announced that the City Council and the Redevelopment Agency concluded a Closed Session, under Government Code Section 54956.8, concerning potential acquisition of property in the cove, related to a potential housing agreement with the Building Horizons non-profit. Council has directed Staff to take steps to acquire suitable lots for the Building Horizon proposal and negotiate a housing agreement with the Building Horizon group to discuss at the next meeting. There being no flirther business, the meeting was adjourned. Respectfully submitted, PHYLLIS MANLEY, Deputy??i? Clerk City of La Quinta, California SAUNDRA L. JUHOLA, City Clerk City of La Quinta, California BIB] 01-18-96-U01 03:51:05PM-U01 CCMIN081694-U02 LA QUINTA CITY COUNCIL MINUTES AUGUST 16, 1994 Regular meeting of the La Quinta City Council was not held due to lack of a quorum. PRESENT: None ABSENT: Council Members Bangerter, McCartney, Perkins, Sniff, Mayor Pena AUNDRA L. JUHOLA, City Clerk City of La Quinta, California BIB] 01-18-96-U01 03:53:26PM-U01 CCMIN081694-U02