FROM:
Development Services
SUBJECT:
Title
Commercial Lease Agreement between the City of Fontana and La Tapatia Arrow Inc
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RECOMMENDATION:
Recommendation
1. Approve and authorize the City Manager to enter into the Commercial Lease Agreement between the City of Fontana and La Tapatia Arrow Inc. in the form attached to this Staff Report.
2. Authorize the City Manager to take all necessary actions in furtherance and administration of the Lease.
3. Determine that the authorized actions are exempt from CEQA pursuant to CEQA Guidelines Sections 15301 (Existing Facilities), 15332 (Infill Development Projects), and 15061 (Common Sense Exemption).
4. Determine that the City’s approval of the Lease is in furtherance of the common benefit and the health, safety, and welfare of the City and its residents and visitors through the support and facilitation of the City’s economic development initiatives.
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COUNCIL GOALS:
• Promote economic development by concentrating on job creation.
• Promote economic development by pursuing business attraction, retention, and expansion.
• Promote economic development by establishing a quick, consistent development process.
• Promote economic development by being business friendly at all levels and striving to constantly improve the city's competitiveness.
DISCUSSION:
The City of Fontana (City) owns property located at 8572 Sierra Avenue, Fontana, California, 92335, identified as Assessor Parcel Number 0191-274-33 (the “Property”). The Property is improved with a commercial structure used for restaurant purposes and other related improvements. The Property has a General Plan designation of WMXU-3 (Walkable Mixed Use), and falls within the FBC (Form Based Code) Downtown Core Zoning District
One of several economic goals in the City is to support and encourage a thriving business community within the City. This initiative supports the City and its residents directly and indirectly through the availability of quality local retail, restaurants, and entertainment and associated local tax revenue.
Staff is proposing that the City Council approve a new commercial lease agreement (the “Lease”) for 10,158 rentable square feet within the Property with La Tapatia Arrow Inc. (the “Tenant”), a business which proposes to open and operate an Americana Restaurant and Tap Room. The proposed use is consistent with the General Plan and Zoning designations for the Property.
The full form of Lease is attached to this Staff Report. The Lease is proposed for a period of 120 months with two (2) five (5) year options to renew. The Tenant would pay to the City a monthly rent starting at $5,000.00 and subject to increases set forth in the Lease, with future lease amounts calculated at a minimum rate equal to approximately 5% of annual sales. Rent shall be abated for the first (3) months after the opening of the business.
During the term of the Lease, the Tenant would be obligated to remain open at least ten (10) hours a day, six (6) days a week for the entire duration of the Lease, and to keep the leased premises orderly, neat, and at all times consistent with applicable laws and requirements.
If the Tenant is in good standing under the Lease, the Tenant may elect to exercise an option to purchase the leased premises between the 6th and 10th Lease year. Any purchase will be approved through a Purchase and Sale Agreement approved by the City Council. In the event the tenant exercises the option to purchase, a Purchase and Sale Agreement will be presented to the City Council for consideration.
The structure and terms of the Lease are intended to assist the Tenant in establishing a strong business operation on the leased premises for the ultimate benefit of the City and its residents. It is further recommended that the City Council determine, by minute order, that adoption of the Lease is in furtherance of the common benefit and the health, safety, and welfare of the City and its residents and visitors.
ANALYSIS:
Approval of the recommended minute orders would authorize the City Manager to enter into the Lease on behalf of the City, and authorize the City Manager to take such further actions as may be necessary to implement the Lease.
In the alternative, the City Council could vote not to approve the Lease, and direct Staff to pursue use of the Property for another purpose.
ENVIRONMENTAL IMPACT AND SURPLUS LAND ACT:
The California Surplus Land Act (SLA) (Gov. Code, §§ 54220 et seq.) requires that local agencies comply with certain requirements prior to selling or entering into long-term leases for public lands. Consistent with the SLA’s requirements, on July 10, 2026, the City caused a declaration of Exempt Surplus Land to be published in the Fontana Herald News and on the City’s website, consistent with Government Code section 54221 (b). The thirty-day comment period for that notice lapsed on August 9, 2026, and no responses were received.
Approval of the recommended actions is exempt from the California Environmental Quality Act (CEQA) (Pub. Res. Code, §§ 21000 et seq.) pursuant to CEQA Guidelines Sections 15301 (Existing Facilities), 15332 (Infill Development Projects), and 15061 (Common Sense Exemption). (Pub. Res. Code, § 21065; CEQA Guidelines, §§ 15061, 15301, & 15332.)
The Lease would apply to an already developed City-owned structure designed for compatible uses, located in an area of the City where economic activity is planned and expected. Based on the size and type of use, no potentially significant impact to the environment is anticipated.
FISCAL IMPACT:
Approval of the Lease would result in an additional $5,000.00 of monthly base rent after the first three (3) months of the Lease term, which would increase annually. Approval of the Lease may result in additional percentage rent if the Tenant’s annual adjusted gross sales exceed the threshold in the Lease.
Finally, approval of the Lease may result in a positive indirect impact to the City’s sales tax revenue through increased local economic activity. All necessary budget adjustments are included in the First Quarter Budget Report in Fund 601 Capital Reinvestment Org 60130106.6332 also being presented on this agenda.
MOTION:
Approve staff’s recommendation