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HomeMy WebLinkAboutTri-City Auto Dealers' Association; 1972-11-21;' .. 4- c MEMORANDUM OF UNDERSTANDING This Memorandum is created to provide a reference document and guide for administration and accounting of a lease, leaseback agreement dated November 21, 1972, between the CITY OF CARLSBAD and an unincorporated association known as the TRI-CITY AUTO DEALERS' ASSOCIATION. 1. A fair market rental for the premises covered in the agreement is based to some extent on the capital investment in the improvements on the leased premises and a return on that investment. To aid the parties in ascertaining expenditures which will comprise the capital directly allocable to improving the leased premises, it is agreed such capital shall be composed of expenditures for the following: Road and all improvements thereto Curbs Gutters Sidewalks Drains within the right of way Street lights Other construction items as indicated by the City Engineer and Association engineer representative, and as approved by the City Engineer. Fees - engineer, legal, loan Soils engineering Grading 2. The parties have agreed that $43,250 is a fair- market annual rental based on existing estimates of the capital investment and depreciation of the improvements. When the improve- \ ments to the leased premises are completed, the capital investment factor will be accurately ascertained. At that time if the LAW OFFICES OF FEIST, VETTER KNAUF AND LOY POST OFFICE BOX 240 810 MISSION AVENUE SUITE 300 OCEANSIDE, CALIFORNIA -1- rental figure appears to be out of line, the parties will deter- mine a new annual rent which will be a fair market rental. To this end, all expenditures for work and material involved in construction will be submitted to the CIW for its determination that proposed expenditures for these items are reasonable. Any disagreement on the reasonableness or the inclusion of any work or material in the capital expenditures account shall be resolved by the attorneys for the respective parties, It is the intent of the parties to determine and set a rental which will give a return on the capital outlay so that the ASSOCIATION does not incur a loss and does not receive a profit over the return of its expen- ditures. 3, In the basic lease agreement, the CITY has received an option to buy the improvements located on the leased premises. the option price is to be the amount determined as capital expendi- ture under the above paragraphs, increased by any current interest due on the capital outlay. As a guideline for establishing the option price, the ASSOCIATION will maintain an amortization of cost accounting against which rental payments will be applied. The balance of that account will be used to establish the option price, or the lower limit of the option price. a) In this connection, any prepaid rent shall be credited against the cost account. 4. The agreement refers to enterprises that are equiva- lent in sales tax revenue to four dealerships. To establish a basis for determining this, the revenue raised by six dealerships in Oceanside in 1970 will be used. The six dealers who comprise the ASSOCIATION generated through their dealerships in Oceanside in 1970 sales tax revenue of $192,000.00. Two-thirds of the UW OFFICES OF FEIST. VETTER KNAUF AND LOY POST OFFICE BOX 240 810 MISSION AVENUE SUITE SO0 OCEANS~DE, CALIFORNIA -2- z .r *. I- - $192,000.00, or $128,000.00, is established as equivalent sales tax producing enterprises. 5. The CITY intends to prepay rent by utilizing sales tax revenue generated by the Auto Center. Sales tax revenue will be an indication of the use of the leased premises by the public and the value of the rental. Both parties are aware that there is no binding requirement that the CITY commit such sales tax revenue to rent if such action would violate Article XIII, 540, of the Constitution. 6. Both parties understand that coastal protection legislation may present an obstacle to construction of both the leasehold improvements and the individual dealerships. If the development is halted to the extent that the purposes of the basic Agreement are frustrated, the parties will renegotiate the terms as necessary in good faith to reach a new agreement. 7. In regard to the construction of improvements, it is recognized that change orders to contracts once approved may be necessary to take care of conditions not anticipated when the contracts were let. Since a change order will necessarily affect the capital outlay, both parties must agree to the change order, if time permits. If a change order will result in a significant modi- fication of the capital outlay, the basic Agreement will be adjusted to reflect the change. It is contemplated that the change will probably be reflected in a change of the term of the leaseback. 8. In establishing the option purchase price of the improvements (road and appurtenances) the price shall be ascer- tained in part by reference to replacement cost. To provide a guide for replacement cost, the ASSOCIATION will maintain a cost expenditure record via a controlled construction disbursement fund. All expenditure items will be approved by both parties. LAW OFFICES OF FEIST, VETTER KNAUF AND LOY POST OFFICE BOX 240 BIO MISSION AVENUE SUlTe 900 OCEANSIDE. CALIFORNIA -3- L. f The costs of construction plus other costs directly attributable to the improvements such as professional fees, permits, soils testing, funding and similar items shall comprise the capital out- lay which will be a factor in determining the option price. The objective is to insure that the price is such that the ASSOCIATION is not out-of-pocket and likewise does not experience a gain over its costs. 9. Landscaping of park and landscape easement area. a) At some time in the future, the CITY will land- scape the one-acre park area in keeping with the overall land- scape architectural plan of the Center. The timing of such im- provements is within the discretion of the CITY. 10. It is understood that the sidewalks may have to encroach into the ten foot landscape easement area because of street design. 11. It is understood that street lights will be placed over the entire Plaza del Norte road from Cannon to Palomar Air- port Road, but that the number and location over the stretch of road on the Ecke - Carltas portion will be set by the City Engineer. 12. The CITY will enter into an agreement on a drainage district whereby other landowners using the drainage system through the Center will reimburse the ASSOCIATION part of the construction cost for the drainage system. 13. The cost of electrical lines for street lights is to be part of the capital outlay of the ASSOCIATION. 14. It is understood that private utility installation costs will not be part of the capital outlay for purposes of fair LAW OFFICES OF FEIST. VETTER KNAUF AND LOY POST OFFICE BOX 240 810 MISSION AVENUE SUITE 800 OCEANSIDE, CALIFORNIA -4 - L t‘ ’ . f’ . market rental value or option price determination. APPROVED AS TO FORM: CITY OF CARLSBAD City Attorney FEIST,mER, KNAUF AND LOY T B B LAW OFFICES OF FEIST, VETTER KNAUF AND LOY POST OFFICE BOX 240 810 MISSION AVENUE SUITE SO0 OCEANSIDE. CALIFORNIA -5-