FROM:
Economic Development
SUBJECT:
Title
Fontana Hyundai - Operating Covenant Agreement
End
RECOMMENDATION:
Recommendation
End
COUNCIL GOALS:
• To promote economic development by concentrating on job creation.
• To promote economic development by pursuing business retention, expansion and attraction.
• To promote economic development by establishing a quick, consistent development process.
DISCUSSION:
Fontana Automotive Services East, Inc. is doing business at 16850 South Highland Ave as Fontana Hyundai. In August, 2021 Fontana Hyundai opened for business, and became the sixth dealership facility in the Fontana Auto Center.
In order to ensure that Fontana Hyundai remain in business and maintain their operations in Fontana, an Operating Covenant Agreement (OCA) has been proposed. To that end, Staff and representatives from Fontana Hyundai have negotiated an OCA with the following proposed deal points:
• Fontana Automotive Services East, Inc will continuously operate Fontana Hyundai in the Fontana Auto Center starting on August 1, 2021 for a period of twelve years (through August 2033).
• Fontana Hyundai would be eligible to receive a quarterly operating covenant payment based upon the level of sales and service activity they generate. Said payment will be equal to 50% of the actual sales tax revenue generated by Fontana Hyundai during that respective quarter.
• In total, the OCA quarterly payments will be capped at $2.4 million after which there will be no additional payments due to Fontana Hyundai.
The California Environmental Quality Act (Pub. Resources Code, § 21000 et seq.) (“CEQA”) provides that if a Mitigated Negative Declaration has been approved for a project, additional environmental review shall not be required for subsequent actions taken in connection with the project unless the subsequent actions would require major revisions to the Mitigated Negative Declaration because of new circumstances or new information that reveal new or different environmental impacts, mitigation measures, or other information of substantial importance (Pub. Resource Code, § 21166; State CEQA Guidelines [Cal. Code Regs., tit. 14, § 15000 et seq.], § 15162).
The City has determined that approval of the Agreement will not result in any additional environmental impacts and that all impacts have been previously considered and mitigated in that Mitigated Negative Declaration adopted by the City for the Fontana Mazda project on June 19, 2018. Because the Agreement does not have the potential for resulting in either a significant direct physical change in the environment or a reasonably foreseeable significant indirect physical change in the environment beyond that which was already considered in the Mitigated Negative Declaration that City is relying on that previously approved document.
Approval of the Operating Covenant Agreement will ensure that the Fontana Hyundai Dealership will remain in business and maintain their operations in the Fontana Auto Center for a period of at least twelve years.
FISCAL IMPACT:
Continued receipt of sales tax revenues generated by Fontana Hyundai for a period of twelve years (the Operating Covenant Agreement term).
MOTION:
Accept staff recommendation.