No To Latest Proposed Lawful But Execrable Sales Tax Kick-Back
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(June 19, 2007) -- Later today (June 19), city management will ask the LB City Council to -- again -- give up sales tax revenue that LB taxpayers are entitled to, taxpayers in other cities receive and LB taxpayers should demand.
Big surprise, the item is buried as a "consent calendar" item -- not scheduled for public discussion unless a Councilmember or a taxpayer steps forward.
Big surprise, it's also on the same Council agenda where another item -- also agendized for consent calendar rubberstamping -- indicates that City Hall's supposedly balanced budget is expected to end up in the red, a revelation to which the Council's "Budget Oversight Committee" gave too little oversight last month and someone now wants "received and filed" without comment (more on this separately).
These outrages and their attempted cover-ups are remnants of the taxpayer-milking denial-minded former O'Neill administration and fly in the face of what we think LB voters wanted when they elected the more rational Bob Foster.
We urge Councilmembers to reject management's latest attempt to shortchange LB taxpayers on sales tax.
The latest proposed sales tax kickback -- legal but in our view execrable on policy grounds -- would sweeten an already sweet "sales tax incentive agreement" with Marina Pacifica LLC (Marina Pacifica), a 15-year deal begun in 1996 that's set to expire in 2011 (don't hold your breath).
Ask yourself: what would you tell some six figure city management type if he/she knocked on your front door and told you the following? [Verbatim text from city management memo]
Marina Pacifica continues to request the City's assistance in the form of a Sales Tax Sharing Agreement, beginning with the fourth quarter of calendar 2011, which is the start of the amended period. The Agreement is contingent upon Marina Pacifica executing a minimum 10-year lease with Best Buy Co ., Inc. (Best Buy) for space at 6310 East Pacific Coast Highway in Long Beach, California .
Marina Pacifica has requested the City's assistance to partially offset the cost of a reduced rental rate required to attract Best Buy . The rental rate Best Buy is willing to pay is below that which returns an adequate return on investment. The City's investment of shared sales tax will assist in securing a national retailer, stabilizing the
tenancy, enhancing overall business at Marina Pacifica, and augmenting sales tax revenue.
The machinery for this is a so-called Sales Tax Incentive Program -- in our view basically corporate welfare -- enacted by the Council in 1992 when (O'Neill mythology says) LB was in dire straits until she and her friends arrived in 1994 and "turned things around."
If so, why is it that over a decade later LB City Hall still grovels by offering big outfits (only those generating more than $5 million in annual sales tax) a legal kickback of up to half of the sale tax revenue they produce in excess of an amount agreed to by City Hall?
Every LB small and medium size business denied such sweetheart treatment while politicians pay them lipservice, and every LB taxpayer now gouged with higher City Hall fees and fines for nearly everything, should be outraged if Councilmembers approve this item tonight.
Here's the history as told by city management in its agendizing memo:
On June 6, 1995, the City Council authorized a 15-year Sales Tax Incentive Agreement
to provide financial assistance for capital improvements to rebuild Marina Pacifica . The
initial agreement was subsequently modified a number of times. A summary of the agreement is attached [text below]
We believe that if a six figure city management employee knocked on our neighbors' doors with the proposal we quoted above, they'd be sent packing...and probably with some choice words.
As a strategic tool, the Program has been used successfully at Marina Pacifica. The Program was used to assist in rebuilding a distressed shopping center, protecting it during a period of economic challenge for one of its primary retailers, and to improve it so that it now houses theaters, retailers and restaurants. Current tenants include AMC,
Barnes and Noble, Ralphs, Pier 1 Imports, Sportmart, Loehmann's, Acapulco and Tantalum . Sales tax revenue to the City increased from $62,062 in calendar 1995 before the current agreement went into effect, to $277,763 in 1997 when it was fully operational . For calendar 2006, sales tax revenue retained by the City was $298,775.
...City Council action is requested on June 19, 2007 to expedite the attraction of Best Buy
to Marina Pacifica.
The proposed amendment is expected to have no fiscal impact in the 2007 fiscal year, but a positive impact in the 2008 fiscal year in the approximate amount of $69,000.
Brief Summary of Sales Tax Incentive Agreements
Marina Pacifica LLC
|6/6/95||The City Council authorized a 10-year (later modified to 15 years) Sales Tax
Incentive Agreement with the Trident Group (subsequently changed to Marina
Pacifica LLC) . The City would lease a portion of the premises from Marina
Pacifica LLC for 50% of the sales tax in excess of ($50,000 plus a base year
amount), and sublease the property back for $1 per year . The agreement would
terminate earlier if other conditions were met . The agreement would terminate
earlier if other conditions were achieved .|
|2/6/96||The City Council authorized the following modification : (1) The Agreement is to last for three years, (2) the base year is set as 1995, and (3) a First Source Hiring
Clause is added . The early termination provision was eliminated . There would
be no early termination provision .
|10/29/96||The City Council authorized payment of the transportation improvement fee in installments .|
|4/8/97||To assist in the construction of the store Loehmann's is to occupy, the City Council authorized the following amendments :
1 . The City would reimburse Marina Pacific for all the hard and soft costs, not to
exceed $2.875 million via a $750,000 CDBG loan for "soft costs" structured
as a Key Tenant loan to be amortized over 10 years but not requiring
2. Increase the term of the agreement to 15 years .
3. Share 50% of the sales tax above the 1995 base year.
4. Lease Loehmann's premises for the first five years if Loehmann's terminates
the lease . (Note : There is a "kick-out" clause allowing Loehmann's to
terminate if sales targets are not met in the first three years .)
|May 1999||Loehmann's declared Chapter 11 Bankruptcy, resulting in the closure of 28 stores nationwide .
|9/19/2000||When Loehmann's declared Chapter 11 Bankruptcy, to protect the City's
investment, reduce the risk of the City's guarantee-to-lease requirement from going into effect, and continue to provide a wide range of retail opportunities, the City Council authorized the following :
1 . Require Marina Pacifica to reduce Loehmann's rent $50,000 per year for two
2. Allow a potential increase in sales tax sharing of $50,000 per year for two
3. Require Marina Pacific to eliminate the early-termination clause in the
That's what Councilmembers, who knock on those doors seeking votes, need to say to city management tonight and to other corporate suits too long accustomed to feeding at LB's public trough.
Contact us: mail@LBReport.com
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