TO: City Council
FROM: Beth Beatty, City Manager
DATE: August 6, 2024
SUBJECT: Resolution Authorizing Execution of a Sales-Tax Sharing Agreement with World Automotive
Summary:
World Kia owner, Scott Falcone, requests a partnership agreement to cover 30% of the cost of his upcoming expansion project, World Automotive, through a sales-tax sharing agreement. Mr. Falcone plans to purchase 1705 W. Jefferson Street which is expected to close by the end of July. The expansion's total cost is estimated at $2,735,000, which means $820,500 is requested. The funding would support the site acquisition and building improvements.
The proposed dealership expansion would:
* Employ 23 new employees (16 full-time and seven part-time) over the first three years of the expansion. Full-time employees can expect an average salary of $6,000/month.
* Generate $1.3 million in sales tax over 10 years, after economic development incentive. This is based on a conservative projection model with a 2% annual growth.
* Continue paying property taxes. The 2022 tax bill for 1705 W. Jefferson was $54,049.10.
* Sell an additional 50 units per month or an additional $1 million in sales - based on World Kia projections.
The acquisition of the land will cost $1,920,000, and $785,000 will be invested in property improvements, which will include the following:
The table in Appendix A illustrates three different growth scenarios based the projected average sales-tax generated by World Kia in the first five years - $127,395. The proposed structure of the tax-sharing agreement is as follows:
* Year 1 to 4: 70% of sales-tax generated from sales/service (to 4th anniversary)
* Year 5 to 8: 60% of sales-tax generated from sales/service (to 8th anniversary)
* Year 9 to 10: 50% of sales-tax generated from sales/service (to 10th anniversary)
The maximum rebate of $820,500 amount is expected to be achieved at around the 10th year of operation, at which point the sales tax sharing progr...
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