1994 08 16 RDA Minutes9 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: Board Members Bangerter, Pena, Perkins, Chairman Sniff
ABSENT: Board Member McCartney
MOTION It was moved by Board Members Bangerter/Perkins to excuse Board 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.
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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.
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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 Pena 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 8-10 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
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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' 5 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
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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 2?2, 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 1 A 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 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
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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.
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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 Indio 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. Chrysler has the longest time remaining on a lease,
approximately 2'A-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/commercial 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
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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 comer 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 commit
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.
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2. DISCUSSION OF PROPOSAL BY BOYS AND GIRLS CLUB FOR AFFORDABLE
HOUSING PROJECT.
Mr. Herman, Community Development Director, advised that the Boys and Girls Club
wished to make a presentation regarding the establishment of a vocational program called
BuiIding Horizons Not yet having an opportunity to review the request in detail, Mr.
Herman advised that Staff would reserve comment to later in the meeting.
Mr. Steve Jones, a Boys & Girls Club Building Horizons Advisory Committee Member,
advised that the proposal by the Boys & Girls Club Board is a result of the Board
exploring ways to include community involvement, and a lack of available vocational
training within school programs. Their first pilot program is vocational training for the
conStruction trade and is called the Building Horizons" program. The program received
accreditation by the Desert Sands Unified School District in June 1994 and is proposed
to begin September 8, 1994. Enrolled students will begin their daily training class at the
end of the school lunch hour for approximately three hours each school day.
Mr. Scott Jones, the Project Director, advised that the Board expects to receive
accreditation from the Coachella Valley Unified School District August 17, 1994. School
officials have responded favorably to the program because of the lack of available
funding to carry-out such vocational programs within the school system.
Mr. Jones advised that two contiguous lots are needed for the Construction site to build
on. Approximately 40 students will be divided into two crews, with each crew building
a single-family dwelling on each lot. The manpower constraints require the lots to be
side-by-side for proper supervision. Training will be from a craftsman standpoint and
power-tool usage will be very limited.
The program is supported by the Desert Contractor's Association and the Building
Industry Association. The City of La Quinta was chosen as the site for the pilot program
because of its central location in the valley. The program is expected to expand next
year to other valley communities having high schools. Assistance for the program from
the City of La Quinta is expected to be requested again next year, but will be more
community oriented, as the students will be from the La Quinta High School. The pilot
program class is approximately at 50% capacity and consists of junior and senior high
school students. These students were contacted through a questionnaire distributed at the
close of the previous school year.
Mr. Jones advised that the Boys & Girls Club Board is requesting approval of a loan
from the Redevelopment Agency at 0% financing to cover construction costs.
Chairman Sniff asked Staff if the City's Redevelopment Agency has two contiguous lots
available for the project, noting the shortage of time left to accommodate the project.
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Mr. Spevacek, Rosenow, Spevacek Group, Inc., financial consultant to the City, advised
that none of the Agency's remaining four lots in the cove are contiguous. To
accommodate the request, the Agency would have to seek the acquisition of an adjoining
lot or two new contiguous lots.
Chairman Sniff suggested that the program might have to begin with only one lot until
an adjoining lot could possibly be acquired due to time constraints
Agency members asked Staff for a timeframe to purchase new lots and/or, if the Boys
& Girls Club Board could obtain the lots on the open market, could the Agency contract
to purchase the homes upon completion.
Mr. Spevacek advised that staff is currently researching the availability of the lots
adjacent to the agency-owned lots and that staff has a list of approximately 200 lots that
the Agency approved and authorized Staff to purchase approximately 1 A years ago. If
negotiations between the Agency and the owners of the lots are favorable, staff could
acquire lots from that list in three to four weeks. He also advised that a contract could
be done as suggested by Board Member Pena.
Board Member Pena suggested that a property owner with two contiguous lots, might be
willing to enter into an agreement that would allow construction on the lots with the
purchase cost of the land being paid upon completion and sale of the project.
Mr. Bruce Cathcart, a Boys & Girls Club Building Horizons Advisory Committee
Member, said contact has been made with a property owner in La Quinta who is willing
to sell two contiguous lots, receiving payment upon the sale of the homes, providing
payment can be guaranteed within an 18-month period. He believes there are other
property owners who would be willing to do the same. He suggested that the Agency
could accomplish two goals at once by contracting with the Boys & Girls Club for the
construction of these homes and also provide low-income housing for the community.
Ms. Honeywell advised that the Agency could not use the Boys & Girls Club Building
Horizon group as their contractors" because of the issue of prevailing wages.
Mr. Cathcart suggested the possibility of establishing an arrangement similar to the one
utilized with the Cusack houses; they would build the house and the Agency would
purchase the house upon completion.
In response to Ms. Honeywell, Chairman Sniff suggested that the proposed issue be
continued and discussed in Closed Session.
In response to Board Member Perkins, Mr. Scott Jones said the majority of students
showing interest in the program are from drafting and architectural design classes. The
students will receive school credit for the program but will not receive monetary
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compensation. College of the Desert students will be designing next years' design plans
through a design competition. The Boys & Girls Club plans to provide scholarship
funds, from the proceeds of the sale of this year's homes, to help graduating students
become involved with COD's design program. The- program is proposed to be self-
supporting in the future. Suppliers will be requested to donate materials on an at-cost"
basis.
Board Member Bangerter noted that school drop-out rates have decreased where similar
programs have been established in the eastern states.
In response to Chairman Sniff, Mr. Scott Jones advised that the $85,000 request for
construction loans for each dwelling is a maximum amount, noting new and safe tools
will be purchased the firSt year, thus making first-year costs higher than normal.
Redevelopment Agency recessed to Closed Session.
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 further business, the meeting was adjourned.
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Respectfully submitted,
5.
PHYLLIS MANLEY, Deputy Clerk
City of La Quinta, California
Ap?ved by:
/?A?L y Clerk
City of La Quinta California
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