HomeMy WebLinkAbout21 - Fletcher Jones Motorcars Revenuese'x�noN
CITY OF NEWPORT BEACH
,r CONINIUNI'IYANDECONOhIIC
Hearing Date: February 12, 2002
DEVBLOPNIGNf
"; !L PLANNING; DEPARTMENT Agenda Item No.: 21
3300 NEWPORT BOULEVARD Staff Person: Daniel R. Trimble
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NEWPORT BEACH, CA 92658 (949) 644 -3230
(949) 644- 3200; FAX (949) 644 -3229
REPORT TO THE MAYOR AND CITY COUNCII,
PROPOSAL: Report on Fletcher Jones Motorcars revenues from sales and other taxes.
SUMMARY: Fletcher Jones Motorcars of Newport Beach has significantly exceeded
the five -year $2 million sales tax threshold set out in the 1995
Memorandum of Understanding (MOU).
SUGGESTED
ACITON: Receive and File.
Backaround
It has been approximately 7 years since the City of Newport Beach and Fletcher Jones Motorcars
(F Ml negotiated a Memorandum of Understanding to relocate from the former Quail Street location
to 3300 Jamboree Road (a.k.a. San Diego Creek North property). The Irvine Company (TIC) was
also a party to the MOU. FJM began operating from its current location in 1997. A provision of the
MOU requires the City to review the sales taxes and other revenues generated by FJM. As a part of
this review staff has also examined the cost of development assistance for the project.
Revenues
The fiscal revenues generated by the FJM operation are derived from four sources: Sales Tax, Use
Tax, Property Tax and Business License Tax. Vehicle sales, which generate sales tax revenues,
account for approximately 25% of the volume of vehicle transactions, with the remaining amount
coming from leases. Approximately 75 -80% of those leases are processed through the Mercedes Benz
corporate finance operation. Since the remaining leases are processed through companies that also
finance other dealership transactions, it is impossible to segregate those specific revenues. Both
corporate and outside vehicle lease transactions generate use tax revenues. The property and business
license taxes are not as fiscally significant, but do contribute to the overall revenue generated from the
FJM operation on an annual basis.
City As'sistance
In order to facilitate the relocation of the FJM operation, the City contributed assistance in the form of
land, labor and capital. In this case, the land was actually conveyed through TIC for no cash
consideration. In exchange for the conveyance the City agreed to the following: permit the formation
of the CIOSA Financing District; incorporate the property into the District; administer the El Paseo
Storm Drain Project; reduce TIC's CIOSA circulation improvements advance for the cost of the storm
drain by $2.8 million; and initiate and approve if appropriate, a PC Text Amendment for Block 500 in
Balboa Village BID Renewal
hlarch27, 2001
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Newport Center. The entire site is nine acres or 392,040 square feet, of which Caltrans owns 1. 12
acres, with the remaining 7,93 acres owned by TIC and conveyed to FJM. In 1995, the benchmark
value for the full nine acres was approximately $5.88 million, or $15 per square foot. Pre - development
adjustments such as use restrictions and easements accounted for $2.68 million, while extraordinary
development and construction costs accounted for an additional devaluation of $3.17 million. The
residual value of the land is therefore $30,000. The original valuation was done by Keyser Marston
Associates and confirmed by George Hamilton Jones, Inc.
The labor portion of the assistance came in the form of entitlement and engineering services.
Entitlement Fees of $155,000 were waived for the project as well as $80,000 in planning, building,
water and sewer fees. In addition to these waivers the City and FJM agreed to share costs for certain
engineering, design and environmental review costs. The City's potion of these fees was $142,000.
Finally, the City also contributed $118,000 in administrative costs for management of the CIOSA
funded El Paseo Storm Drain construction project. The capital portion of the assistance was the result
of a 600 -foot extension of Bayview Drive from Jamboree Road. The approximate cost of the
extension project was $340,000; however, this was not a direct cost as it was funded through using
CIOSA funding.
Revenues and Assistance for Fletcher Jones Motorcars
FY 1997 -2001
Five Year Total Revenue From All Revenue Sources:
Total Direct Development Assistance:
Summary
$7,031,271
$525,000
Net Benefit to City Over Five Year Period: $6,506,271
The total revenues derived from the FJM operation for fiscal years 1997 to 2001 were approximately
$7 million. The largest source of revenue was sales tax from vehicle sales. The MOU set a specific
target of $2 million of sales tax generation over the five -year period. If the target was not met, FJM
would have to pay for the various waivers that were granted. The five -year target was met well in
advance of the fifth year. The total assistance provided was about $525,000. The net benefit to the
City, in terms of retaining and expanding the FJM operation, was a little more than $6.5 million over
the last five years. The $6.5 million, when adjusted for inflation in the Los Angeles- Anaheim - Riverside
statistical area, is equivalent to $5,436,000 when measured in 1995 dollars. Please note that this report
is not a fiscal impact analysis as it does not include estimates of various City service costs such as
police, fire, etc. since the dealership has been operating at the new location.
Submit{ed by:
SHARON Z. WOOD
Assistant City Manager
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Prepared by:
DANIEL TR MBLE
Associate Planner
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