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Desk Item - Proposals of Automobile Dealership SitesCOUNCIL STUDY SESSION REPORT DATE: March 16, 2006 TO: MAYOR AND TOWN COUNCIL FROM: DEBRA J. FIGONE, TOWN MANAGE SUBJECT: REMARKS: MEETING DATE: 3/20/06 STUDY SESSION: DESK ITEM STUDY SESSION TO DISCUSS SUGGESTED PROCESS TO REVIEW REDEVELOPMENT PROPOSALS OF AUTOMOBILE DEALERSHIP SITES Attached is information received after the report was completed. Attachments: 1-3. Previously submitted 4. Letter from attorney representing Swanson Ford (5 pages), received March 17, 2006 5. Letter from concerned citizens (1 page), received March 17, 2006. BNL:RT:mdc N*DEWtANDYITown Council\AUTO DEALERSHIPS\LGAutoDlrRpReso032006add.wpd PREPARED BY: BUD N. LORTZ, DIRECTOR OF RATTY DEVELOPMENT Reviewed by: PS‘, Assistant Town Manager Attorney Clerk Finance Community Development Revised: 3/20/06 3:20 pm Reformatted: 5/30/02 1:47-'7fc;; 1 1111\ 11 LUUU 1 1 • UJ 1 I\VI I• 1 V • JJJJ 1 VV L 1.J c 1 • Matteoni Q'Laughlin Hechtman L A S Norman E. Matteoni Peggy M. O'Laughlin Bradley M. Matteoni Barton G. ReohtrHn Gerry Houlihan 8 r4 a www'.mattpori.com ECEIVED • MAR 1 7 2006. TWOR&TOWN COI No - VIA FACSIMILE AND U.S. MAIL (408) 399-5786 March 17, 2006 Mayor and Members of the Council Town of Los Gatos PO Box 949 Los Gatos, CA 95031 Re: Proposed Resolution Concerning Car Dealership Sites Dear Mayor and Town Council: I am -writing on behalf of my client, Swanson Ford, which has retained our firm to advise it on land use matters related to their parcel at Los Gatos Boulevard and Blossom Hill Road. CONCERNS There are serious concerns regarding the propriety of the proposed Resolution aimed at retaining automobile dealerships by establishing requirements for a change of use on.these properties. Preliminarily, it is important to recognize that Swanson Ford has already closed. The dealership rights have been assigned back to Ford and operation is no longer generating any sales. This resulted only after attempts to sell the dealership were unsuccessful. It was offered back to Ford on a right of first refusal. Ford did not have a party to take the dealership and refused. There were also conversations with Acura and Honda for the site that did not produce a sale. Despite any anecdotal evidence collected by staff about the viability of auto dealerships, the only reliable data is the sales numbers from Swanson Ford and the market for car dealerships both 848 The Alameda San Jose, CA 95126 ph. 408 293 4300 fax. 408.293.4004, Attachment 4 I If'll\ 1 1 LCJCJIJ J. 1 . CJJ I V • JJJJ I VlJ Council Members of The Los Gatos Town March 17, 2006 Page 2 of which would indicate the site is not viable for auto sales. As we all well know it is the market, not regulators, which determines who stays in business and who does not. While there are many issues with the proposed Resolution, a first concern is the attempted distinction that• the draft makes between owners of commercial properties that sell automobiles and all other owners' of commercial property. In California and under federal case law, the singling of a small subset of owners for differential treatment regarding land use is not permissible. .This practice is commonly referred to as "spot zoning" or "down zoning". The proposed Resolution contains all the indicia of an impermissible spot zoning including: - Creating a distinction between a subset of owners and all other owners. - Singling out a piece of property for the purpose of thwarting and owner's plan of development. - Creating a classification that discriminates against a very small subset of parcels. -Imposing development requirements different 1 than similarly situated property. -Giving a parcel fcwer rights than surrounding property. -Precluding development of the property in a manner that would be consistent with the development on surround properties. The Swanson property is under contract to a developer, and the proposed development is consistent with the current General Plan land use designation as well as the current zoning. The mixed use proposed is specifically encouraged by the General Plan. Moreover, a review of surrounding properties, especially the three other comers, indicates that the retail use proposed is consistent with and complementary to the area. The only distinction being ,drawn by the Town staff is based on the amount of sales tax being generated. The creation of a minimum threshold of sales tax necessary to approve a proposed development is without any basis in the law. Even if such a' threshold were ,permissible, it would have to be I IftI\ 11 LUVU 11.1U I V. J J JJ I V V . Z' Council Members of the Town of Los Gatos March 17, 2006 Page 3 uniformly applied to all commercial property and not single a small subset of owners who have this added burden. There is discussion in the staff memo supporting the proposed Resolution that the proposed Resolution would not become part of the Town's Code, but will express the Council's expectations regarding applications to change the land use of an automobile dealership site. From a legal perspective, we believe this is a distinction without any meaning since the Resolution, if relied upon in the development process, is a de facto zoning ordinance, without the benefit of the formal hearing process required to adopt an ordinance. In addition to the foregoing, there are other infirmities with the proposed Resolution. Paragraph A raises the specter of a moratorium in the event that a conversion is proposed by means other than a Planned Development application. While we question whether the statutorily required findings could be made to sustain such an interim ordinance, I would point out that the proposed development for the Swanson site is' intended to be by a Planned Development application. Adding a requirement that owners of land, which contain auto dealerships, submit a fiscal impact analysis as required by paragraph B unfairly burdens a very small subset of owners. There are many non -automotive retail uses that generate sales tax which do not have to undertake such an analysis when a change of use is sought for the property. As discussed above, creating distinctions or burdens which affect a very small subset of owners is improper. Importantly, the CEQA process _ does not require. an economic analysis as proposed in the draft ordinance and lost sales tax is not an impact that is required to be mitigated. Furthermore, it is unclear what the "peer review" detailed in paragraph B would entail or who would be considered a peer. Since' Swanson is no longer a functioning dealership, is the peer review based on the proposed peers —commercial retail developments or is it tied somehow to other auto dealerships in the area? What are the qualifications and expectations of a peer review team? Is it an advisory role only? All of these questions are left unanswered in the proposed Resolution. 'The proposed Resolution also requires the applicant to propose mitigation measures to offset'Town service impacts associated with the project. CEQA already contains a process whereby .a project's impacts are assessed and the mitigation measures are detailed. Any additional mitigation tied to secondary impacts which I Ifl1\ 11 LCJ�JV 1 1 • 1CJ I \VI I• 1 J • JJJ.J 1 L��.J Council Members of The Los Gatos Town March 17, 2006 Page 4. are caused by forces in the marketplace are not the responsibility of an individual owner. The requirement that the owners of auto dealership property demonstrate that an automobile dealership use is no longer feasible is yet another disparate requirement that impermissibly burdens a very small subset of property owners. A drug store or furniture store is not required to first prove that these uses are not feasible before switching uses. Such an arbitrary distinction between retail owners is irrational and improper. Moreover, what is the standard for determining feasibility? The marketplace is the only effective determinant of feasibility and the requirement as proposed is impossible to measure. Paragraph E of the proposed Resolution is especially troubling since it creates entirely different standards for a development proposal submitted by the owner of a car dealership parcel. No other owner in Los Gatos is required to prove that the change of use is necessary or unavoidable. Imposing such a strict standard on one small class Of owners is arbitrary and not permissible. Additionally, it is impossible to measure whether a change of use is necessary and unavoidable and impossible for an applicant to meet these standards. In the present case the owners marketed the site as a car dealership and there were no viable buyers. That is the best proof that a change in use is necessary and no subjective, artificial determination will be any more accurate than the marketplace. CONCLUSION Change is inevitable. The ebb and flow of the market preferences and market forces' require a constant adjustment by business and communities. In most communities owners of vacant or under-utilized commercial property are being threatened with eminent domain, ,if they don't redevelop in a manner that accounts for the changed realities of the modern marketplace. Ironically, the Town's proposed response is quite the opposite —it would prefer the property to remain vacant in the hopes that the market forces might change and make a car dealership more viable. This is an unfair gamble to impose on any individual owner. If the Town wants to gamble on the future viability of the car dealership use then the Town should buy theproperty and incur the risk: Spot zoning 1 1111\ 11 L J JV 1 1 • 11 1 1\VI 1• I V• JJJJ 1 VV 1 . V' V Council Members of the Town of Los Gatos March 17, 2006 Page 5 and disparate treatment of the owners of auto dealerships to hedge the Town's bet is improper. In the end some viable car dealerships will remain in Los Gatos. There are many complex factors influencing the closing of a franchise -namely, national marketing, condition of parent company, parent company -dealer relationship, state of economy, product line, local competition and trend toward regional auto malls (e.g. Stevens Creek Auto Dealer Row in San Jose). These complex factors will not be addressed nor impacted by any ordinance. Obviously, we are asking the Council not to adopt the proposed Resolution. But, we think that it is appropriate, for the Town to seek ways to assist existing dealerships Yours, Norman E. Matteoni NEM:mr Cc: Debra Frizone, Town Manager Orry Korb, Town Attorney Robert Swanson via facsimile Bruce Swanson via facsimile March 16, 2006 Los Gatos City Council 110 E. Main Street Los Gatos, CA 95030 To Whom It May Concern: RECEIVED MAR 1 7 2006 'MR &TOWNCOIINCY The Los Gatos council proposal to press Los gatos auto dealerships to use their properties for that use only seems unconstitutional and an overly intrusive attempt to control the use of private properties. I do not support this proposal and urge you to vote against this for the betterment of the town and the property owners. Yours truly v — )7/zaf2A- Fellow C. Stearns Molly Stearns Judy A. Fotion Attachment 5 Submitted for the Record Town Council Meeting Town of Los Gatos Nancy Roberts Bowen 16151 Los Gatos Boulevard, and 60 Blossom Hill Road Good evening Mayor and Honorable Council Members Received by V I am the owner of 1/2 of these two parcels and co -trustee wit my atiamp I am not in the automobile business. Since development, these 2 agencies have been occupied by 10 or 11 different tenants. Your staff has reported on confidential conversations with the dealers. Over all these years, I have never had a tenant tell me that business was other than good (except when rent was mentioned). I did however come home from a long 4th of July weekend to find one of the premises totally devoid of cars where the tenant evaporated overnight. Do you really think that a good business person who has to borrow money, or who wants to sell his interest in an agency is going to let it be known that business is bad? I'm sure this is what your staff was told, but it is not in the interest of any competent business person to allow for a possible leak of this information. I have read that one of my tenants will be leaving. I sincerely hope the other agency is staying and will do well. But as everyone in this valley should know, if their Corporate office decides to pull out, the local people will have no say in the matter. Will you please tell me what benefit 2 empty parcels comprising 6.25 acres are going to do for the Town. I will continue to collect rent for quite a few more years under their leases, but it sure isn't going to bring any revenue to the Town. Believe me I hope all the dealers in Los Gatos do fabulously well, but if you talk to the younger generation of car buyers, there can be no doubt that the nature of the business is in flux and Edmonds.Com and Carmax.com are on the rise. I do not think this Resolution is necessary and frankly I don't even understand some of the language such as "requires an applicant submit a fiscal impact analysis which may be peer reviewed". Who are the peers? other land owners?, your pending competition?, dealers?, the planning commission?. Most of the points in this resolution are covered by the General Plan and I see no reason why you can not ask your staff to tell a developer to use a P.D. I think it is time for the Council to recognize that an unprofitable business is useless to the Town, the landlord, the operators and their terminated employees. I urge the Council to be proactive on what is going to be an ongoing concern and work with the land owners not against them. Talk to other cities who are going through the same problems and try to find solutions that will bring revenue to the Town of Los Gatos, but also be fair to the long time owners. Your best course of action NOW is to Vote for the No Action Alternative #1 on page 3 of this Study Session Report. Thank you for your time. WILLIAM F. HIRSCHMAN & ELIZABETH K. DODSON 15585 Los Gatos Boulevard Los Gatos, CA 95032 March 20, 2006 Mayor and Town Council Members Town of Los Gatos 110 East Main Street Los Gatos, CA 95030 RE: Auto Dealership Resolution Submitted for the Record Town Council Meeting Town of Los Gatos MAR 2 (l 7006 Received by v� aft Clerk Dep ment Dear Honorable Mayor and Town Council Members: The purpose of this letter is to state our concerns related to the proposed council resolution regarding automobile dealerships within the Town. We understand the underlying intent of the proposed resolution; however we do not believe that the resolution as proposed is in the best interest of all the affected parties and future land owners. The situation we are currently experiencing in Los Gatos is not unique and is in fact similar to the other communities facing similar circumstances as the automobile business changes and evolves. As we as a community try to preserve our sales tax revenue, we need to also be mindful that we do not place the burden on a small group of businesses and property owners. Our concerns are that the current proposed policies are a knee jerk reaction without sufficient study and thought as to the ramifications of these proposed policies on future permitted land use decisions. We are the owners of the smallest parcel of land currently being used for automobile sales without additional services. When we were granted a use permit in 1997 for the automobile use Conditions of Approval (see attached) limited the use of the property for basically auto display only. (1) "AUTOMOBILE DELIVERY. Truck deliveries of automobiles shall be prohibited on the site or on the adjacent Los Gatos Boulevard and Shannon Road frontages." (9) "PROPERTY USE. As long as an auto dealership exists at this site, the use shall be restricted to vehicle sales only. No sale of auto parts or vehicle services shall be allowed." The specific use permit conditions were a direct result of many committee meetings. At the time of approval of the appeal to the Town Council following the planning commission's denial of the use, conditions were imposed so that a workable compromise could be reached between the interests of the neighbors and our vested interest. It would be difficult LO ascertain that the concerns of the neignoors in 1997 have significantly changed to cause the current council to alter the existing use permit conditions. Therefore our particular site will never be able to be used as a full service automobile dealership but only an accessory sales display site. It is for this reason that we are concerned with the proposed resolution. If we are to be encouraged or what we believe to be restricted to only automobile sales uses, we unlike other current automobile sites would be restricted to sales only. It is therefore hard if not impossible to think of any dealership that does not already exist in Los Gatos that would have any interest in our site because of the size, and restricted use. We therefore would have an extremely limited market place to try and obtain a tenant with the exception of our current tenant, Honda. Because of the circumstances and concerns as stated, we believe it is incumbent on the council to consider the financial impact of such a limited restricted use of our property given that the council chooses to approve the existing or similar proposed resolutions. It is clear to us having developed many properties in Los Gatos that through the current PD, CUP or general approval process, the Town possesses the ability to control uses under the current policies. We do not believe that enacting new policies provides any additional benefits and in fact further restricts the ability of property owners to provide viable tax generating business for the Town. A good case in point would be that of Netflix, Inc. Who would have been able to predict ten years ago that a single company such as Netflix, Inc. would be providing in excess of 18% of the Town's revenue? Would we want to restrict property users on Los Gatos Boulevard or anywhere else in Town to the point where a Netflix, Inc. could not be considered as a possible tenant? We do not believe that these additional conditions benefit the current situation, and that instead of limiting uses we should be looking at solutions to the auto dealership situation that would provide the widest range of uses possible under the current zoning and planning process. In closing we support the council in doing whatever is feasible to encourage and support the existing auto dealers in Town. We encourage the council to take a hard look at current policies to see if changes can be made to further support improvements to the existing dealerships. At the same time we encourage the council to consider the impact of such decisions on the property owners and at the same time not prohibit in the future the next new unknown business that can provide benefits to the community. Respectfully Submitted, Eliza eth�K. Dodson William F. Hirschman PLANNING COMMISSInEETING.JANUARY 8,199T CONDITIONS OF APPROVAL FOR: 16212 LQS GATOS BOULEVARD.,; eROJECT:APPLICATION PRJ-96-96 ' :.Repuest•forArchitecture and Site approval and a Conditional.Use Permit todemolish existing commercial .'..: buildings and to construct a new auto dealership -building on property in the CH. zone: • .,. PROPERTY OWNER/APPELLANT: Maxim Investments, Inc.. APPLICANT: Michael Mcf(ay TO THE SATISFACTION OF THE PLANNING DIRECTOR: . •(Planning Section) AUTOMOBILE DELIVERY: Truck deliveries of automobiles shall be prohibited on the site or on the adjacent Los Gatos Boulevard. and Shannon Road frontages: - • TEST DRIVING: The test driving of autornabiles shall beprohibitedalong both Shannon Rd. and Magneson Loop. • - • • ' - - . AUTOMOBILE DISPLAY.• Automobilee Shall not be displayed in the landscaped. front setback. HOURS OF OPERATION.' The: maximum hours of Operation shelf be Monday through Friday 8AM.. to 8•PM, Saturday 9AM..to 7PM and Sunday•10AM to 6PM. - SOND AMPLIFICATION DEVICES.°.The use of outdoor loudspeakers or other sound .amplification -: .devices on the site shell.be•prohibited AUTOMOBILE WASHING. Displayed automobiles shall not be power -washed between 8-PM and 8•` ON -SITE LIGHTING. Vehicle display area lighting shall be turned off by'OPM;._with:the exception •'of security lighting. ON -SITE. CIRCULATJON..The on -site access lahe.3betweenthe Los Gatos Boulevard driveway and the Shannon Road driveway shall be delirieate'd bathe site Alen with raised planted'areas enclosed.': withvcOntinuous curbing:. The circulation shall allow people entering from either,ef the driveways to • access requited parking The access lane shall be: appropriately signed' PROPRTY USE. As long as an auto dealershipe fists at this.site, the use shaii•be restricted to • • vehicie'satesbnly.: Ni.) sale ofauto parts or vehicle services shall be allowed._:-- • ` 10..: PROMOTIONAL EVENTS. ,My auto dealershp located at this site. will be prohibited from using. ` searchtights.and7or Kleig.lights; cold air inflatable devices and banners, flags, etc: for promotional • ,`.events... The dealership -will be allowed other activities as permitted iri Town Code Section 29.50.032; Promotional' events for'auto dealers. • :11:. ' ONE YEAR REVIEW` Com(iliance with this conditional use permit shall be reviewed by the Planning Commission one year from the date of approval. (DevelopmenfEngineering Section) • 12,:' , GRADING PERIMfT. -A grading permit- is; required for.e par thking lot'and on -site drainage,: A Separate application for a grading permit (with'ghading Otani) 'shall be•made.fo'he • eebevelopment Enginring Sectiop of the Planning Department. The grading plans shall inciude:final grading, '. drainage, driveways, ytilltiesandilntenm;erosioricontrol 'Unless specificaf1y'aH wed'bytheJ•Director of Bgllding and Engineering: Services,. the -grading permit will be Issued evndurrenay wiith:the buflding pew WEi.LS A well arifotmabon •questiorrtiatre i:availablethrough the Counter Technician) shaq.be ; compieted iefore the 4ssuance of the 0uiduxj permit 14 DED1�►TIONS,y 1Ttie f owing 8baI1 tie 'dedicated.by separate instrument, : T'he tledtcaiioib shall be 4. ' recorded tore file rssU@nce Qf an perrnits : , t { 3 tos Boulevard A 12-foat-half streekri ht-oorway with't1 a ctot tot* *0-foot redws a.'.• ? 60400t half street right-of-Wey`with the chord of !' q. .< f ';- �° 1�11Di<}AC1L'ICaC►.ri`c _'C S..r lt.w=t.1__ �_ _ i %'max x+y' fie III` 4.x•T airegisterec - f: ' `` •ter-: :.fh = +�'R�^^'-J ��,,�� f :" i�L7�.C�Ij le tQ�pY�..., . MOORE GMC TRUCK PONTIAC BUICK 15500 Los Gatos Blvd. • Los Gatos, CA 95032 • Phone 408/356.8111 • Fax 408/356.7107 Submitted for the Record Town Council Meeting Town of Los Gatos MAR 2 0 2006 Received by Clerk De rtment John Moore, Moore Buick Pontiac GMC, 15500 Los Gatos Blvd. Los Gatos. Good Evening Mayor and honorable council members. I have the unique distinction of being the only surviving dealer and property owner in Los Gatos. As dealer I commend the Town for recognizing the tremendous service and revenue that we provide to the Town and it's residents. But I cannot understand how this proposed resolution "encourages the retention of automobile dealerships". If the intention of the Town is to truly support and promote the vitality of it's auto dealerships, perhaps even attracting new investment, then provide the dealers with processes that will fulfill that objective. What we need is a "fast track" permit process, a financially incentivized permit cost structure...read "no cost", and whatever creative measures you could enact to attract and encourage auto facility investment in our town. Just walking through the parking lot outside, I notice that a majority of those vehicles have been purchased somewhere outside of town. And people should have the right to purchase whatever make and model of vehicle they wish. Unfortunately, as a dealer, I cannot pick and choose which manufacturers' products I can represent. There are strict state laws regulating the proximity of same make dealerships, and all desirable makes are within this 10-mile moratorium. If my products fall out of favor with the public or my manufacturer goes out of business, I do not have many, if any, options for an auto related business that you would permit or want. Every time I drive by the now empty Swanson Ford, I get a knot in my stomach... knowing that the Swansons have devoted the better part of 3 Generations to serving the Los Gatos area and contributing to the community at every turn, I can only imagine the how painful a decision it was for them to close. I feel this knot in my stomach because it would not take much more of a downturn in my business for my family to face the hard reality that we can no longer afford to remain a Buick Pontiac GMC dealership. In 2001 we had taxable sales of approximately $29,850,000. Last year in 2005 our approximate taxable sales were $23,500,000, a decrease of over 21% in sales and unfortunately sales tax revenue as well. Not an encouraging trend, but one I am sure we both hope and pray will turn around. I have got 65 employees and family members working their hardest to make it so. But if it doesn't happen? As a property owner with the historic Burger Pit, I am sure a lot of you have wondered why it has remained vacant?" For the last 15 years, it has been our desire to expand the dealership onto that property with an additional product offering. As you can see, that effort has been difficult to achieve. The manufacturers i have contacted either do not want the potential lawsuit an additional dealership would most certainly create, or flat do not believe Los Gatos is a viable location for them to invest. With this proposed resolution, I would be the village idiot to even consider converting the use of this property to dealership use. Even worse, the proposed resolution provides no incentive for me to invest in my current facility. If the town were to guarantee me a reasonable return www.moore✓alue.com on the value of my property, I would not object to the resolution. Perhaps a better resolution would be a council mandate that every vehicle garaged in Los Gatos be purchased from a Los Gatos auto dealer. This is as fair as requiring us to retain our property as solely automobile use. To create spot zoning will only create a situation where our tenants will dictate the terms of their lease with us, because they own the franchise... if they leave, or go out of business, it will be extremely difficult to find another automobile franchise that could or would come to Los Gatos. The current General Plan addresses most design and use criteria relative to our properties. I urge the council to follow the Town Staff's alternative #1, and take no further action on this resolution. Thank you. March 20, 2006 Submitted for the Record Town Council Meeting Town of Los Gatos MAR 2 0 2006 Received by �, Clerk De artment Submitted for the Recc. 4 Town Council Meeting "-•.wn of Los Gatos ') 2006 Receiv;a CIE :'apartment I would like to ask the council to take no action on the auto dealership properties in Los Gatos. I am not aware of any actual evidence that new franchises can come to town, or want to, other than some speculation of some of the existing dealers. There are 21 dealerships on Stevens Creek Blvd., at my last count, as opposed to 5 that will be left when Hummer leaves. I am not convinced that any franchise will want to attempt a new facility in this town with our town's history on remodel attempts. John Moore tried to get the Cadillac franchise back in Los Gatos this last year, GM refused. The only way Los Gatos got a Hummer franchise is the dealer also had to have a point on Stevens Creek Blvd, where the manufacturer mandated there be a sales facility. Any new non -boutique franchise will first require a point on Stevens Creek Blvd. The current General Plan covers our property, our current zoning, and is fair. We purchased our property to control its future. The other dealerships could purchase their land at fair market value to control their futures too. This town could have helped us a long time ago, said our plans looked like "Cookie Cutter Chevron," and caused Ford to abandon Los Gatos for Morgan Hill. That facility is 12 miles from the Gilroy Ford franchise, and 14 from the Capital store, in compliance with the 10 mile rule. The first dealerships that moved to Capital Expressway moved because there was a more favorable environment, now they have an Auto Mall and we don't. The town has a large parcel of land that is more favorable to Auto Dealerships but it is currently being turned into office space, along the boulevard where you could build your Auto Mall. You might consider to purchase the land if that is what you want there. Please chose option 1 and take no action against our property. Sincerely, Bruce Swanson Submitted for the Record Town Council Meeting Town of Los Gatos Good Evening! I'm Robert Swanson, 16005 Los Gatos Blvd. MAR 2 0 2006 Received by Clerk De ' . rtment After seeing DAVE MOELLER'S LETTER attached to the back of tonight's Study Session Report, I realized I should have told you about MY conversations with Dave Moeller. Last October, Dave Moeller let it be known that he was interested in our dealership. In early November, I phoned him and offered to meet him in my office. During that meeting, he told me he was not interested in our Ford Franchise. He wanted to buy the property. He further stated that he was not interested in leasing the property. After I told him the size of our property. He said it WOULD NOT work for him. I have subsequently spoken with him, but he has NEVER made an offer for our property. I suggested that he should consider the McHugh site, (which is about half the size of our site). Again, he has NEVER made an offer for that property, either. Since early January, I have had similar conversations with both Russ Hill from Los Gatos Acura and Marc Chase from Bentley of Silicon Valley. BUT ....neither of them has EVER made an offer to BUY or Lease our property or the McHugh property. Dave Moeller's LETTER would lead you to believe that he is actively trying to make a deal with us, when in fact, HE IS NOT. We're now all aware of the State's "10 Mile Rule." YOU see it as a detriment to your proposed Resolution to bring NEW Franchises to town However, it was DESIGNED to PROTECT and BENEFIT the EXISTING dealers in a market area. YOUR proposed Resolution is ALSO designed to benefit ONLY "EXISTING DEALERS." Since it is highly unlikely that Los Gatos will have NEW Franchises locating here, the current dealers will be the only businesses that could use these properties that you want to designate as "dealership sites." Discouraging OTHER retail development opportunities on these sites would be a huge detriment to the Town. Therefore, I recommend you use the NO ACTION ALTERNATIVE on page 3 of this Study Session Report Thank you very much. atteoni O'Laughlin Hechtman A S Norman E. Matteoni Peggy M. O'Laughlin Bradley M. Matteoiii Barton G. Her htman Gerry Houlihan 8 I� 1. www.matteoni.com VIA FACSIMILE AND U.S. MAIL March 17, 2006 Mayor and Members of the Council Town of Los Gatos PO Box 949 Los Gatos, CA 95031 1L CEI VEL MAR 2 0 2006 ,\YCR&TOWNcoirnir (408) 399-5786 Re: Proposed Resolution Concerning Car Dealership Sites Dear Mayor and Town Council: I am writing on behalf of my client, Swanson Ford, which has retained our firm to advise it on land use matters related to their parcel at Los Gatos Boulevard and Blossom Hill Road. CONCERNS There are serious concerns regarding the propriety of the proposed Resolution aimed at retaining automobile dealerships by establishing requirements for a change of use on these properties. Preliminarily, it is important to recognize that Swanson Ford has already closed. The dealership rights have been assigned back to Ford and operation is no longer generating any sales. This resulted only after attempts to sell the dealership were unsuccessful. It was offered back to Ford on a right of first refusal. Ford did not have a party to take the dealership and refused. There were also conversations with Acura and Honda for the site that did not produce a sale. Despite any anecdotal evidence collected by staff about the viability of auto dealerships, the only reliable data is the sales numbers from Swanson Ford and the market for car dealerships both 848 The Alameda San Jose, CA 95126 ph. 408.293.4300 fax. 408.293.4004 Council Members of The Los Gatos Town March 17, 2006 Page 2 of which would indicate the site is not viable for auto sales. As we all well know it is the market, not regulators, which determines who stays in business and who does not. While there are many issues with the proposed Resolution, a first concern is the attempted distinction that the draft makes between owners of commercial properties that sell automobiles and all other owners' of commercial property. In California and under federal case law, the singling of a small subset of owners for differential treatment regarding land use is not permissible. This practice is commonly referred to as "spot zoning" or "down zoning". The proposed Resolution contains all the indicia of an impermissible spot zoning including: -Creating a distinction between a subset of owners and all other owners. - Singling out a piece of property for the purpose of thwarting and owner's plan of development. -Creating a classification that discriminates against a very small subset of parcels. - Imposing development requirements different than similarly situated property. -Giving a parcel fewer rights than surrounding property. -Precluding development of the property in a manner that would be consistent with the development on surround properties. The Swanson property is under contract to a developer, and the proposed development is consistent with the current General Plan land use designation as well as the current zoning. The mixed use proposed is specifically encouraged by the General Plan. Moreover, a review of surrounding properties, especially the three other corners, indicates that the retail use proposed is consistent with and complementary to the area. The only distinction being drawn by the Town staff is based on the amount of sales tax being generated. The creation of a minimum threshold of sales tax necessary to approve a proposed development is without any basis in the law. Even if such a- threshold were permissible, it would have to be Council Members of the Town of Los Gatos March 17, 2006 Page 3 uniformly applied to all commercial property and not single a small subset of owners who have this added burden. There is discussion in the staff memo supporting the proposed Resolution that the proposed Resolution would not become part of the Town's Code, but will express the Council's expectations regarding applications to change the land use of an automobile dealership site. From a legal perspective, we believe this is a distinction without any meaning since the Resolution, if relied upon in the development process, is a de facto zoning ordinance, without the benefit of the formal hearing process required to adopt an ordinance. In addition to the foregoing, there are other infirmities with the proposed Resolution. Paragraph A raises the specter of a moratorium in the event that a conversion is proposed by means other than a Planned Development application. While we question whether the statutorily required findings could be made to sustain such an interim ordinance, I would point out that the proposed development for the Swanson site is' intended to be by a Planned Development application. Adding a requirement that owners of land, which contain auto dealerships, submit a fiscal impact analysis as required by paragraph B unfairly burdens a very small subset of owners. There are many non -automotive retail uses that generate sales tax which do not have to undertake such an analysis when a change of use is sought for the property. As discussed above, creating distinctions or burdens which affect a very small subset of owners is improper. Importantly, the CEQA process does not require. an economic analysis as proposed in the draft ordinance and lost sales tax is not an impact that is required to be mitigated. Furthermore, it is unclear what the "peer review" detailed in paragraph B would entail or who would be considered a peer. Since' Swanson is no longer a functioning dealership, is the peer review based on the proposed peers —commercial retail developments or is it tied somehow to other auto dealerships in the area? What are the qualifications and expectations of a peer review team? Is it an advisory role only? All of these questions are left unanswered in the proposed Resolution. The proposed Resolution also requires the applicant to propose mitigation measures to offset Town service impacts associated with the project. CEQA already contains a process whereby a project's impacts are assessed and the mitigation measures are detailed. Any additional mitigation tied to secondary impacts which Council Members of The Los Gatos Town March 17, 2006 Page 4 are caused by forces in the marketplace are not the responsibility of an individual owner. The requirement that the owners of auto dealership property demonstrate that an automobile dealership use is no longer feasible is yet another disparate requirement that impermissibly burdens a very small subset of property owners. A drug store or furniture store is not required to first prove that these uses are not feasible before switching uses. Such an arbitrary distinction between retail owners is irrational and improper. Moreover, what is the standard for determining feasibility? The marketplace is the only effective determinant of feasibility and the requirement as proposed is impossible to measure. Paragraph E of the proposed Resolution is especially troubling since it creates entirely different standards for a development proposal submitted by the owner of a car dealership parcel. No other owner in Los Gatos is required to prove that the change of use is necessary or unavoidable. Imposing such a strict standard on one small class of owners is arbitrary and not permissible. Additionally, it is impossible to measure whether a change of use is necessary and unavoidable and impossible for an applicant to meet these standards. In the present case the owners marketed the site as a car dealership and there were no viable buyers. That is the best proof that a change in use is necessary and no subjective, artificial determination will be any more accurate than the marketplace. CONCLUSION Change is inevitable. The ebb and flow of the market preferences and market forces' require a constant adjustment by business and communities. In most communities owners of vacant or under-utilized commercial property are being threatened with eminent domain, if they don't redevelop in a manner that accounts for the changed realities of the modern marketplace. Ironically, the Town's proposed response is quite the opposite —it would prefer the property to remain vacant in the hopes that the market forces might change and make a car dealership more viable. This is an unfair gamble to impose on any individual owner. If the Town wants to gamble on the future viability of the car dealership use then the Town should buy the property and incur the risk. Spot zoning Council Members of the Town of Los Gatos March 17, 2006 Page 5 and disparate treatment of the owners of auto dealerships to hedge the Town's bet is improper. In the end some viable car dealerships will remain in Los Gatos. There are many complex factors influencing the closing of a franchise -namely, national marketing, condition of parent company, parent company -dealer relationship, state of economy, product line, local competition and trend toward regional auto malls (e.g. Stevens Creek Auto Dealer Row in San Jose). These complex factors will not be addressed nor impacted by any ordinance. Obviously, we are asking the Council not to adopt the proposed Resolution. But, we think that it is appropriate for the Town to seek ways to assist existing dealerships Yours, Norman E. "Matteoni NEM:mr Cc: Debra Frizone, Town Manager Orry Korb, Town Attorney Robert Swanson via facsimile Bruce Swanson via facsimile TOWN OF LOS GATOS, CALIFORNIA TOWN COUNCIL/PARKING AUTHORITY JOINT REDEVELOPMENT AGENCY March 20, 2006/STUDY SESSION MINUTES Los Gatos Civic Center 110 E. Main Street Los Gatos, CA 95030 TIME ITEM TOWN COUNCIL 5:30 PM ROLL CALL 5:31 PM OPEN/CLOSED VERBAL COMMUNICATION 5:31 PM PRESENTATION AUTOMOBILE DEALERSHIP DISCUSSION 5:39 PM COUNCIL COMMENT ACTION ON ITEM The Town Council/Parking Authority/Redevelopment Agency of the Town of Los Gatos met in the Council Chambers of the Town of Hall, 110 East Main Street, at 5:15 PM, March 20, 2006, in a study session session. Present: Steve Glickman, Joe Pirzynski, Barbara Spector, Mike Wasserman, and Mayor/Chairman Diane McNutt. Absent: None None. Discuss suggested process to review redevelopment proposals for automobile dealership sites. Staff report made by Bud Lortz. • Clarification regarding used car lots in Los Gatos. • Questioned if proposed applications would have to comply with California Environmental Quality Act requirements. • Questioned advantages regarding the Planned Development process. • Clarification regarding a letter sent to the Town by representatives from Swanson Ford. • Clarification regarding the process relating to the 10-mile rule. • Would like to hear more information on variables regarding the 10-mile rule relating to potential expansion of dealerships in Town. Town Council Minutes Redevelopment Agency March 6, 2006 Los Gatos, California 5:47 PM AUTOMOBILE DEALERSHIP DISCUSSION Continued OPEN PUBLIC COMMENT Mr. Bruce Swanson • Commented that there has been no interest from other dealership franchises wanting to locate in Los Gatos. • Supports alternative number one (No action) regarding redevelopment of auto dealership properties in Los Gatos. • Commented on the abundance of dealerships on Stevens Creek Boulevard. • Commented that larger parcels of land are more favorable environments for auto malls. • Commented on Swanson Ford's attempts to remodel in the past 11 years. Council Comment • Clarification regarding remodel attempts at Swanson Ford. • Questioned if any auto dealers have made offers to lease or purchase Swanson Ford. Ms. Bowen • Commented that business is changing, and asked Council to work with the property and business owners. • Supports alternative number one regarding redevelopment of auto dealership properties in Los Gatos. • Commented that empty buildings will not bring revenue to the Town of Los Gatos. • Commented that most points contained in the resolution are covered under the General Plan. Council Comments • Questioned if sales tax revenue could be considered as part of a proposed application process. • Clarification on the "peer review" process as part of a proposed application process. • Suggested looking to the Planned Development process for all potential changes to dealerships. Mr. Moore • Supports alternative number one regarding redevelopment of auto dealership properties in Los Gatos. • Suggested that the Town provide incentives to attract dealerships to Los Gatos. N:I000NCIL\MI NUTES120061M20060320SS.doc 2 of 6 Town Council Minutes March 6, 2006 Redevelopment Agency Los Gatos, California AUTOMOBILE DEALERSHIP DISCUSSION Continued PUBLIC COMMENT Mr. Moore (Continued) • Commented on the decrease in sales for the last two years. • Commented that the General Plan addresses a majority of the requirements listed in the proposed resolution. • Commented on the 10-mile rule. • Suggested a fast track permit process for the dealerships. Council Comments • Commented on the negative impact if there where no dealerships in Town. • Commented on working as a team to attract new dealers to the community. • Clarification regarding the benefit of having many dealerships verses fewer dealerships in a community. • Clarification on the amount of property desirable for dealerships. Mr. Robert Swanson • Commented that no auto dealer has made an offer on his property. • Supports alternative number one regarding redevelopment of auto dealership properties in Los Gatos. • Commented regarding the 10-mile rule process. Council Comments • Questioned if alternative number two would be a consideration to the automobile dealers. Mr. Morici • Commented regarding his property located on Los Gatos Boulevard, and asked Council to consider releasing his property from the overall process. Mrs. McHugh • Supports alternative number one regarding redevelopment of auto dealership properties in Los Gatos. Mr. Stansbury • Commented on a retail analysis relating to potential sales tax revenue for the Swanson property. • Commented on retail proposals for the Swanson property. N:ICOUNCILIMINUTES120061M20060320SS.doc 3 of 6 Town Council Minutes Redevelopment Agency March 6, 2006 Los Gatos, California AUTOMOBILE DEALERSHIP DISCUSSION Continued PUBLIC COMMENT Council Comments • Clarification regarding square footage and sales tax revenue. Mr. Claxton • Commented on encouraging retail business for Los Gatos Boulevard. • Supports alternative number one regarding redevelopment of auto dealership properties in Los Gatos. • Supports fewer restrictions for redevelopment on dealership properties. Council Comments • Clarification regarding the process for Planned Developments on dealership properties. • Clarification on Land Use requirements relating to re -zoning of automobile dealership properties. Mr. Hirschman • Commented on the effects the resolution would have on his property. • Supports alternative number one regarding redevelopment of auto dealership properties in Los Gatos. 6:46 PM MOTION TO CONTINUE THE STUDY SESSION Motion by Mr. Wasserman to continue study session following the regular Council meeting. Seconded by Mr. Glickman. 6:46 PM MAYOR CALLED THE QUESTION Carried unanimously. 7:40 PM STUDY SESSION RESUMED 7:41 PM PUBLIC COMMENT Continued Mr. Davis • Commented regarding the Conditional Use Permit at the former auto dealership located on Los Gatos Boulevard. 7:44 PM CLOSED PUBLIC COMMENT 7:44 PM AUTOMOBILE DEALERSHIP DISCUSSION Continued COUNCIL DISCUSSION • Commented on supporting the Town's automobile dealerships. • Suggested looking into alternatives that provide similar benefits to the Town. N:\COUNCIL\MINUTESl2006\M20060320SS.doc 4 of 6 Town Council Minutes March 6, 2006 Redevelopment Agency Los Gatos, California AUTOMOBILE DEALERSHIP DISCUSSION Continued COUNCIL DISCUSSION • Expressed support for Alternate number two. • Suggested working with the dealerships to maintain their vitality in the community. • Would like information on sales per square foot for retail. • Would like information regarding existing controls and processes for proposals that have a change in the land use of a site. • Preferred that Planned Development be required for any change in use. • Clarification relating to process if an applicant does not go through a Planned Development. • Commented that Los Gatos Boulevard is at a pivotal point relating to auto dealership businesses. • Would like to create an environment that is conducive to a healthy vibrant auto dealer business in Los Gatos. • Suggested that any application that will have short or long term impacts on the community go through the Council. • Would like information on impacts to the community. • Clarification regarding the Commercial Guidelines, relating to the option of used car lots. Suggestion would be to include input from auto dealers if this was an option. • Suggested staff come up with a package to include: a. Town would prefer to keep auto dealers in town. b. Any changes to an auto dealer property site should come through Council. c. Council is provided with complete information for proposals that have a change in the land use of a site. d. Encourage the current automobile dealers to upgrade their property to make their business as successful as possible. e. Suggested staff to come up with some incentives including financial and permit streamlining incentives. N:ICOUNCIL\MINUTES12006\M20060320SS.doc 5 of 6 Town Council Minutes Redevelopment Agency March 6, 2006 Los Gatos, California AUTOMOBILE DEALERSHIP DISCUSSION Continued COUNCIL DISCUSSION Mrs. Figone clarified that a report could be brought back to Council on April 17, 2006. 7:57 PM MEETING ADJOURNED Submitted by: ATTEST: Jackie D. Rose, Deputy Clerk MarLyn Rasmussen, Clerk Administrator N:ICOUNCILIMINUTES120061M20060320SS.doc 6 of 6