Operating as Garden Grove Kia, GGA currently sells Kia automobiles on property located at 10081 Garden Grove Boulevard in Garden Grove (“Current Site”) and is desirous of opening Garden Grove Kia at a new location, 13731 Harbor Boulevard in Garden Grove (“New Site”).  GGA has entered into an agreement to acquire the New Site which is approximately 2.3 acres.

The existing Garden Grove Kia operates on the Current Site via a lease and is required to vacate the property pursuant to the terms of an existing Disposition and Development Agreement with New Age Garden Grove, LLC (“New Age DDA”).  The New Age DDA provides for the development of Brookhurst Place in multiple phases. In order to begin Phase 2 construction of  Brookhurst Place, several action items need to occur including: 1) the existing Garden Grove Kia to vacate the Current Site; 2) the Successor Agency is required to clear the Current Site; and 3) the Successor Agency to convey the cleared Current Site to New Age by early 2018.

The Agency has previously entered into a relocation agreement with GGA with respect to the Current Site which fully compensated GGA with respect to relocation benefits required by law.

In August 2017, GGA submitted a formal request to the City requesting economic development assistance to help facilitate opening and operation of its Kia dealership on the New Site.  To that end, the City has negotiated an agreement with GGA to encourage the opening and operation of Garden Grove Kia on the New Site. GGA has agreed to be bound by certain operating and other covenants with respect to the Kia dealership on the New Site. It should be noted that the Agreement is not an agreement to construct a dealership on the New Site but rather an agreement to pay certain Covenant Consideration if GGA actually opens, operates and fulfills other covenants on the New Site.  In consideration for commitments under the proposed Agreement, the City would agree to pay certain Covenant Consideration to the GGA in amounts measured below:

• The City agrees to pay to GGA an amount equal to thirty-five percent (35%) of the Sales Tax Revenues generated annually above a base amount of One Hundred Fifty Thousand Dollars ($150,000), which payments shall be made until the expiration of or earlier termination of the Sales Tax Revenue Accrual Period.

• The Covenant Consideration Payments shall be made annually, on or before October 1 of each year during the Sales Tax Revenue Accrual Period.

• The Total Covenant Consideration Payments to GGA has a cap and will not exceed the sum of Two Million, Five Hundred Thousand Dollars ($2,500,000).

• The term of the payment obligation expires on the earlier of (i) the twentieth (20^th) anniversary date of the date on which Garden Grove Kia opens for business on the New Site, (ii) payment in the aggregate of Two Million, Five Hundred Thousand Dollars of Covenant Consideration, or (iii) termination of the Agreement. 

• The term of the Agreement is twenty-five (25) years.

• GGA covenants to make available not less than forty (40) Full-Time Equivalent (FTE) jobs (as defined in the Agreement) to be certified annually.  

The opening and operation of Garden Grove Kia would not be feasible without the Covenant Consideration to be paid by the City pursuant to the proposed Agreement. The Agreement is compliant with provisions of Government Code §§ 52200 et seq. and Government Code § 53083 et seq.  Government Code § 53083 et seq. requires the following be provided before approving any economic development subsidy within its jurisdiction and that such information be in written form available to the public and included on its Internet Website.

1)      The name and address of all corporations or any other business entities, except for sole proprietorships, that are the beneficiary of the economic development subsidy, if applicable.

2)      The start and end dates and schedule, if applicable, for the economic development subsidy.

3)      A description of the economic development subsidy, including the estimated total amount of the expenditure of public funds by, or of revenue lost to, the local agency as a result of the economic development subsidy.

4)      A statement of the public purposes for the economic development subsidy.

5)      Projected tax revenue to the local agency as a result of the economic development subsidy.

6)      Estimated number of jobs created by the economic development subsidy, broken down by full-time, part-time, and temporary positions.

7)      Before granting an economic development subsidy, each local agency shall provide public notice and a hearing regarding the economic development subsidy

8)      The City’s economic consultants Keyser Marston Associates prepared the report required by Government Code § 53083 et seq., which includes the aforementioned requirements and is attached as Attachment 2. 

This is a performance based Agreement.  The Covenant Consideration payments to GGA are measured by the incremental additional amount of net sales tax revenues generated by GGA operations, and are capped at a maximum of two million five hundred thousand dollars ($2,500,000) over twenty (20) years. The City of Garden Grove will receive a base sales tax base of $150,000 annually over twenty (20) years and 65% of the sales tax revenues above the sales tax base of $150,000.

It is recommended that the City Council take the following actions:

• Conduct a Public Hearing.

• Adopt the attached Resolution approving the Agreement Regarding Opening, Operating, and other Covenants (“Agreement”) by and between the City of Garden Grove, a California Municipal Corporation (“City”), and Garden Grove Automotive, Inc.; and

• Authorize the City Manager to execute the Agreement, including any minor modifications as appropriate, and any other pertinent documents necessary to effectuate and/or implement the Agreement.

By:  Greg Blodgett, Project Manager