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16 Desk Item - Automobile Dealerships Study Sessiontow N uF MEETING DATE: 4/17/06 OTHER BUSINESS , DESK ITEM ~o ova„os COUNCIL AGENDA REPORT S GAj DATE: April 17, 2006 TO: MAYOR AND TOWN COUNCIL FROM: DEBRA J. FIGONE, TOWN MANAGER SUBJECT: CONSIDERATION OF A RESOLUTION EXPRESSING SUPPORT FOR AUTOMOBILE DEALERSHIPS AND DIRECTION ON ACTION ITEMS FROM THE AUTOMOBILE DEALERSHIPS STUDY SESSION REMARKS: The attached information was received after the report on this matter was finalized. Attachment 13 prepared at the request of Mayor McNutt. Attachments: 1-9. Previously Submitted 10. Letter from Nancy Bowen dated April 12, 2006 (2 pages). 11. Email from John Moore dated April 12, 2006 (4 pages). 12. Flyer provided by a council member from a member of the public (1 page). 13. Summary of Planning Permits (1 page). 14. Letter from Hoge, Fenton Jones & Appel, received April 17, 2006 (5 pages) 15. Study of Incentives & Policy Suggestions submitted by BT Commercial on April 17, 2006 (53 pages). N:1DEV\RANDY\Town Council\AUTO DEALERSHIPS\LGAUTODLR RPT 041706dsk.wpd PREPARED BY: BUD N. LOR DIRECTOR OF COMMUNITY DEVELOPMENT Reviewed by: Assistant Town Manager Attorney Clerk Finance Community Development Revised: 4/17/06 4:22 pm Reformatted: 5/30/02 RECEIVED Nancy R. Bowen APR 1 3 2006 P. O. Box 35660 AY4R~TOVVNC4UNC Monte Sereno, CA 95030-0660 Phone 408-354-7414 Fax 408-354-7585 April 12, 2006 Mayor Diane McNutt Town of Los Gatos 110 East Main Street Los Gatos, CA 95031 Dear Mayor McNutt: Enclosed is a copy of an article from last weeks Kiplinger Forecast Letter which, over the last 40 years, I have found to be quite accurate on business trends. It was with some reluctance that I extended the lease agreements for auto dealerships with my tenants, because I was not sure that the current structure of marketing cars will continue to be viable. The trend among the younger generation is to do their auto shopping on line and head to where they can get the best deal 620 Blossom Hill Road was an eye sore when it sat empty for over 3..years. Now When Hummer moves to Milpitas, I fear the crowds coming to`Vasona Park are again going to see empty buildings and a used car lot. This is Los Gatos? This council should be looking to the future and not be trying to save what is passing. My father was born on this property 105 years ago this month as was his father. He saw fruit trees that were no longer productive and had the property moved into the Town of Los Gatos during the 1950's. Grant Bishop leased the property and put in a Chevrolet Agency. Similarly Bill% Stuart created a Pontiac/GMC dealership. Times had changed. Then the Town put up a great deal of resistance as the remaining part of the ranch became condos. We could not give the fruit away. Times have changed again. As I stated at the last meeting, I sincerely wish my tenants well. However, failed businesses are not good for anyone, but empty buildings are even worse.. For the sake of the citizens of Los Gatos (and of Monte Serero who shop here), please vote for Alternative 1 of the draft resolution. i- 'he Kiplinger Letter - (March 31, 2006) The Kipf mqe1r L etter Sear ch B ac tsu6s , Many- GM and Ford dealers will close up shoes in coming years, forced out by the ailing automakers, which want to cut marginal =sellers with high inventories and poor service. GM and Ford are worried that the struggling dealerships will hurt weak brand names even more;;: FSome multibrand dealers-will consolidate sales locations. Prodded by GM and Ford with buyouts, they'll shutter several showrooms and bring weaker-selling car lines to lots with more-popular models.;:;. Buicks with GMC trucks or Lincolns and Mercurys with Fords, for :example. Trimming dealerships won't be cheap or easy. Most are franchises, protected by state laws that mandate elaborate buyout procedures. More GM and_Fard car outlets are slaghinct nri.ces on their own, without any incentives from automakers, in a bid to perk up their sales. 4Vp 6 wa4 cL a3/~1 Page 1 of 1 Patsy Garcia - Auto Dealership property From: "John Moore" <jymoore@moorevalue.com> To: "diane Mcnutt" <dmcnutt@losgatosca.gov>, 'Joe pirzynski" <jpirzynksi@losgatosca.gov>, "steve glickman" <sglickman@losgatosca.gov>, "mike wasserman" <mwasserman@losgatosca.gov>, "barbara spector" <bspector@losgatosca.gov> Date: 4/12/2006 4:32:34 PM Subject: Auto Dealership property Dear council members. At the bottom of this message is a link to an article that recently appeared in the Mercury News. Interesting how the approach of San Jose's council and staff is addressing the opportunity surrounding potential land use. Certainly the specific properties involved are much larger than the parcels in Los Gatos (except for the North 40) but the direction of San Jose to provide their residents with additional varied retail opportunities is a much better approach than limiting both your options and the property owner's ability to maximize their return. I have no problem with being a contributor to our community, making it the best that it can be. For the past 50+ years our family has done exactly that. I urge the council to abandon the proposed resolution and take a proactive approach to bringing to our residents the retail shopping opportunities they deserve. http://www.mercurynews.com/mld/merci rynews/business/14315087.litm John Moore Moore Buick Pontiac GMC 15500 Los Gatos Blvd Los Gatos, Ca. 95032 (408) 356-8111 jymoore _.moorevalue.com ATTACHMENT It file://C:\Documents and Settings\pgarcia\Local Settings\Temp\GW}00003.HTM 4/13/2006 MercuryNews.com 104/11/2006 12 parcel sales likely to boost retail shopping space in S.J. Page 1 of 3 t' al ou;'New's Subscriber Services Search Recent News Archives Web for 0 Jobs Back to Home Cars Business Real Estate 0 Apartments Posted on Tue, Apr. 11: 2000 email this A print this (51 reprint or license this 0 Local Shopping All Classifieds 2 parcel sales likely to boost retail • Create an Ad • Find an Ad shopping space in S.J. • Pets Dating By Jon Ann Steinmetz Mercury News San Jose's efforts to provide more shopping space are bearing fruit, so to speak: A T H News former 74-acre orchard along Highway 85 is on track to be developed as a retail and Opinion _ industrial complex. Business • Financial Markets Separately, an 18.7-acre parcel owned by Knight Ridder at 1-880 and Brokaw Road is • Technology under contract to be developed for retail uses as well. • Personal Technology • Personal Finance • Drive The projects would address issues raised in a 2004 retail study that concluded the city is • Real Estate under-retailed" by about 25 percent, particularly in South San Jose and Berryessa. Both Sports properties would require amendments to the city's General Plan to change their permitted land use. Entertainment _ Life & Style ......,,.-._...-....,.....,w...................w....,....,..,,. ,..k Nanci Klein of San Jose's Office of Economic Development said Lincoln Property, which ONLINE EXTRAS is expected to close soon on its purchase of the Knight Ridder land adjacent to the Mercury News offices, has not decided exactly how it's going to use the land. Newspaper Ads Online _....,_.m. Blogs Klein said the project could be one big-box store (Home Depot, Wal-Mart, etc.) or Podcasts perhaps two large stores with smaller, free-standing stores on the property. Photo I Video . . . . _ . . RSS Feeds "They're just beginning to talk to people in the marketplace about who specifically are . Discussion Boards the interested parties, but they definitely sound excited," she said. "I'd imagine Lowe 's is M _..._....,,.._W_...... Traffic Reports interested ...but we'll see." • San Weather Lincoln Property could not be reached for comment. A Knight Ridder spokeswoman • Rea Past articles confirmed the sale, but would not discuss details. Terms were not disclosed. • star Newsletters • Met Coupons The former orchard in South San Jose's Edenvale area is being developed by iStar • Pub Today's Front Page Financial. It was part of IBM now the Hitachi campus - when iStar bought it in June Ret; 2000 for more than $1 million an acre. crTC cr=o111t'CC • i5ta http://www.mercurynews.com/mld/mercurynews/business/14315087.htm 4/13/2006 MercuryNews.com 104/11/2006 12 parcel sales likely to boost retail shopping space in S.J. Page 2 of 3 Maps & Directions Its current zoning calls for 1.5 million square feet of industrial use, but iStar is seeking a Yellow Pages General Plan Amendment for 1 million square feet of industrial and 450,000 square feet Contact Us of general commercial use. The request comes before the San Jose Planning • clin < Commission on Wednesday. Kni! Feedback Site Map • wsi City planners are recommending approval. As proposed, it would become' a hybrid • Disi Advertise property that retains some of the industrial core," said Susan Walton, principal planner for Print Services m the city. Jobs at MN.com ; Buy Photos Klein said the iStar project is modeled after the adjacent Hitachi site, where the industrial Ethics Policy portion is smaller to allow room for other uses on the property a boon for developers - °--r - because they can lease the extra space for commercial uses. Of the 74 acres, 42 would be converted to commercial and 32 would remain as industrial. According to a city staff report, that could reduce the number of potential jobs on the site by 500 to 1,100. However, 495,000 square feet of industrial development would be reallocated to the New Edenvale Industrial Redevelopment area nearby, "so we don't lose any industrial capacity, Klein said. Further, the staff report says, the additional retail would meet the city's objective of providing more places to shop. To increase density, iStar is asking for a height increase to allow buildings up to 10 stories high 120 feet on the entire site instead of just a portion of it. Stores that could go on the property include home improvement, clothing, electronics or home furnishings. On the industrial side, it could house a large corporate headquarters or several smaller campuses for biotech, semiconductor, communications or other users. "There are a number of players in New Edenvale like Clinimetrics, Western Digital, IDT, that are already saying that in the not-too-distant future they're going to need some more space," Klein said. The shopping center, meanwhile, would draw from the 2,900 homes approved for the Hitachi transit village. CET HOME DEL 1VE'Q7OF ("0 THE MERCUi Y 1I V http://www.mercurynews.com/mld/mercurynews/business/14315087.htm 4/13/2006 MercuryNews.com 104/11/200612 parcel sales likely to boost retail shopping space in S.J. Page 3 of 3 http://www.mercurynews.com/mld/Mercurynews/business/14315087.htm 4/13/2006 AldkR'P! ALERT! ALE.. J." T.tUS HAPPEN TO YOU COME TO THE TOWN COUNCIL MEETING MONDAY, .APRIL I7, 2006 7PM I'.Ll'1~. SWA.NSON FAMILY MUST SE), THEIR AUTO DEALERSHIP PROPERTY .ATTHE CORNER GE BLOSSOM BILL AND LOS G A'TOS BLVD THE LOS GATOS TOWN COUNCIL WISHES TO MAKE THAT .SALE IMPOSSIBLE War Property Owner: You are the owner of a property that has Commercial Zoacing. Your property could be in danger due to unfair limitations placed on you by the Town. Re it known, that the Los Gatos Town Council is considering placing a moratorium on all auto dealership properties in Los Gatos. By this resolution the only Buyer these property owners could sell to would be one that could house an auto dealership. Section 3062 of the California. Vehicle Coda, "firnits the ability of a franchisor to establish or relocate a dealership within an area where the same liinc-make is already represented. In doing so the section utilizes the term 'relevant warket area' which is in turn 4efined in Section 507 as being "any area within a radius of :l0 miles from the site of a potential new dealership" (see Civ 231.95 Court of Appeal, 'T'hird District, California Dec. 1.8, 1984 RMW North Americo, vs. New Motor Vehicle Board) The Swanson faamby have been forced to close their dealership due to 2 change in the economy. They have a willing Buyer who has committed- to following the current city code-, and requirement,, in order to develop a mixed use property with both retail shops and residential properties. fP a moratorium demands that an auto dealer be a tenant in that property, there: will be NO BUYER because ALL AUTO DEALERSRL(PS ARE INSIDE THE 1.0 MILE RAW US. 1'.01S IS JUST WOAT COULD HAPPEN' TO YOU! In essence the Town of Los Gatos is discriminating against- this properly owner and any property owner who has an auto dealership as a tenant. This resolution or change actually imposes development requirements different than similarly situated properties. PROTECT YOUR RIGkITS AND SUPPOIr'.'1". HE RIGHTS OF PROPERTY OWNERS. SPEAK UP AND TELL THE COUNCIL T.'R'AT THERE S.I-101ILD BE NO C.I:IA GE IN THE C URREI~T C 0.9,«'.S. IF, THE TOW[. 'COUNCIL CAN 'T'IE THE HAM)$ OF ON'E YROPERTY OWNER, THEY C.AN TIF THE HANDS OF QTIIERS. TUIS COULD HAPPEN TO YOU! Mrs. Grant Robert Bishop ATTACHMENT /Z SUMMARY OF PLANNING PERMITS April 17, 2006 !~S GASOS \ppI lcat11111 \\,IIo Scope of Tcpc -\pproNes:' Fee RcNieN~ Architectural & Site Approval Planning Commission $ 5,871.00 Evaluate architecture and site layout. Uses (A&S) are not reviewed. Uses governed by Zoning Code. Conditional Use Permit (CUP) Planning Commission $ 4,069.80 Evaluate appropriateness of proposed use. Zoning Code identifies uses which may be approved at the discretion of the Planning Commmission (conditional uses). Evaluate the compatibility of proposed use with surrounding areas and establish conditions or standards for operation of the use. Planned Development (PD) Town Council $ 20,054.52 Zone change. Evaluate appropriateness of land use and general architecture and site layout of a proposed project. In approving a PD, Town Council establishes zoning regulations specific to the site. Requires Architecture and Site Approval for detailed architecture and site design after approval of PD. A T TA CHMENT 13 N:\DEV\RANDY\Town Council\AUTO DEALERSHIPS\Summary Planning Permits 041706.xls Page 1 yyJV V1 SAN JOSE OFFICE .Hoge Fenton Telephone: 408.287.9501 60 South Market Street, Suite 1400 Jones & Facsimile: 408.287,2583 San Jose, CA 95113-2396 Appel inc. TRI VALLEY OFFICE attorneys at Law Telephone: 925.224.7780 6155 Stoneridge Drive, Suite 100. Facsimile 925.224.7782 Pleasanton, CA 94588 Fax Cover Sheet TOi Mayor and Town Council D FAX NO: 408.399.5786 and 408.354.8431 COMPANY: Town of Los Gatos APR 1 7 2006 PHONE NO: 408.354.6832 or 408.354.6834 TOWN OF LOS GHTOS CLERK DEPARTMENT FROM: John A. Hickey 409.947.241. DATE: April 17, 2006 NO. PAGES: 5 MESSAGE: Re: 4/17/06 Council Agenda - Item 16 (Resolution re Auto Dealerships). Please distribute the attached letter to the Mayor and the Town Council, in advance of this evening's Town Council meeting. Thank you. CONFIDENTIALITY NOTICE The dooumeinu accompanying this teiecopy transmission contain confidential information belonging to the sunder wbkh is legally privileged. The information is intended only for the use of the individual or entity named above. If you are not the intended recipient, you are hereby notified that any disclosure, copying, distribution or the taking of any action in reliance on the contents of this telecopied information is strictly prohibited. If you have received this telecopy in error, please immediately notify its by telephone to arrange for the return of the original documents to us. If this tax is incomplete or difficult to read, please call (408) 287-9501, x 1485 ❑Original will follow by mail 13 Origin$1 will no, ATTACHMENT It LYJUUZ Reply to: ■ San Jose 60 South Market Street, SuBe 1400 San Jose, CeAtomla 95113-2396 Telephone 408,287. 9501 Fatsltnlla: 408.267.2583 John A Hickey 408.047.2414 jahChogefenton.com VIA PACSIMILE AND MAIL Mayor and Town Council Town of Los Gatos 110 E. Maid St. Los Gatos, CA 95031 Hoge Fentoxi. Jones & Appel int. att meys at Law San Jose ■ PleasaXton April 17, 2006 0 PNYiaankon 6155 stonari04e Drive, suite 200 Pleasanton, C irbrn!a 94598-3283 Telephone: 925.224.77so F-krille: 925.224.7782 Re: 4/17/06 Council Agenda, Item 16: Resolution Regarding Auto Dealership Sites bear Mayor and Town Council: On behalf of James and Paula McHugh, we submit the following comments regarding the proposed. resolution regarding auto dealership sites in Los Gatos. While the McHughs appreciate the Council's desire to keep auto dealerships in Los Gatos, the McHughs are dismayed to see that the resolution and action items proposed by Town staff would have the unintended effect of discouraging auto dealerships in town. The McHughs urge the Council to reject the proposed resolution and instead direct Town staff to work in close cooperation with auto dealerships, owners of auto dealership sites, and owners of potential auto dealership sites to develop an attractive incentive package to encourage auto dealerships in Los Gatos. 15400 Los Gatos Boulevard The McHughs own the property at 15400 Los Gatos Boulevard, located at the corner of Los Gatos Boulevard and Gateway Drive, through a living trust. -As noted in the materials prepared by Town staff for the Council's March 20 study session, the property is not an automobile dealership site, because the Swanson Ford dealership previously located at the site has been forced to close. Nonetheless, the McHughs are deeply concerned about the adverse impact that the resolution and the staff recommendations would have on the continued viability of auto dealerships in Los Gatos. Expression of Support Is an Emote Gesture While the McHughs appreciate the Council's desire to support auto dealerships in town, the mere expression of support in the draft resolutions is hollow, because is does not provide any q_J/. VVo Town of Los Gatos April 17, 2006 Page 2 practical incentive or support. Rather than adopt an empty resolution that fails to provide real assistance, the Council should acknowledge that certain sites in Los Gatos are no longer viable locations for auto dealerships and that the Town's policies have hurt, rather than helped, many of the auto dealerships. Working from that premise, the Council should direct Town staff to work in close cooperation with auto dealerships, owners of auto dealership sites, and owners of potential auto dealership sites to develop an attractive incentive package to help auto dealerships in Los Gatos. Fiscal Analysis Requirement Discourages Auto Dealerships Buried in item 3 of the staff repott is a recommendation that the Council amend the proposed resolution to require that any application to change the land use of an auto dealership site include a revenue impact analysis or a fiscal impact analysis, and that the Town consider fiscal impacts when reviewing such an application. Unfortunately, the proposed requirements would discourage landowners in Los Gatos from leasing to auto dealerships, because the requirements would increase the cost of shifting from an auto dealership use to another use after an auto dealership departs. While the Town may be tempted to impose additional procedural costs or substantive restrictions that would make it more difficult for auto dealership sites to shift to another use, the practical effect would be that landowners would refuse to lease to auto dealerships, and auto dealerships would refuse to purchase property in Los Gatos, thereby undermining the, Town's objective. Prudent business strategy requires that a landowner maintain as many options as possible. Ifthe Town imposes requirements that make it harder for a landowner to shift from an auto dealership use to another use, the Town effectively limits the value of the site by limiting the landowner's options. Faced with a choice between leasing land to an auto dealership, and thus being required to pay more and overcome additional obstacles in the event that the auto dealership fails, versus leasing. land to another commercial use without such restrictions, a prudent landowner would choose to avoid the auto dealership. The same consideration is true of any other procedural or substantive obstacle the Tow might impose to discourage changes of use at auto dealership sites. By imposing new obstacles, delays, and de facto moratoriums, the 'T'own punishes the auto dealerships that have provided so much of the Town's revenue over the yews.. Agenda Item Failed to provide Adequate Public Notice The McHughs also object to the fact that the agenda issued by the Council for the April 17 meeting fails to describe adequately the action proposed by Town staff. The agenda describes the proposed action benignly as "Consideration of a resolution expressing support for automobile dealerships and review of action'items from the automobile dealerships study session." However, buried in item 3 of the. staff report is a recommendation that the Council include in the proposed resolution an amendment to the Town's application procedure that would require a fiscal analysis for site development permits involving auto dealership sites. The requirement of a fiscal analysis is neither an expression of support for auto dealerships nor an action item from the automobile dealership study session, as evidenced by the minutes of the March 20 Council meeting. 192019 %JV VY Town of Los Gatos April 17, 2006 . Page 3 Good governance and the Brown Act require that the agenda include a reference to the proposed requirement of a fiscal analysis. The agenda item as posted fails to provide adequate notice, and the Council, even if it adopts the proposed resolution, must not include the provision regarding a fiscal analysis- Seek Input from Auto Dealers Before Developing an Tncentive Plan Not After Town staff recommends that the Town develop a proposed incentive plan to encourage auto dealerships to come to andiemain in Los Gatos. If the Town wants to. encourage auto dealerships to remain in Los Gatos, the Town must offer an attractive incentive plan; moreover, that incentive plan must reflect the knowledge and needs of the auto dealerships, not just Town staff. . Unfortunately, Town staff recommends that the Council direct staff to convene a formal meeting with the auto dealers after Town staffprepares the Town Code amendments and the draft incentive package. With all due respect, this puts the cart before the horse and marginalizes the people and businesses that are in the best position to design the incentive plan. While Town staff may understand the planning objectives of the Town, Town staff does not understand the constraints and landscape of the, auto dealership market as well as the auto dealerships themselves. Rather than treat the auto dealerships as a token afterthought, the Council should require Town staff to develop an incentive plan only in close cooperation with the auto dealerships, and should direct the, Town staff not to bring the incentive plan to the Council for consideration unless it has the support of the auto dealerships in Los Gatos. Commitment to Los Gatos The McHughs have lived and worked in Los Gatos for almost 40 years and remain committed to the Town's economic health and community spirit. The McHugh property at 15400 Los Gatos Boulevard was a longtime auto dealership site and a source of much revenue for the Town. Now, despite the.McHughs' best efforts, the site is no longer a viable location for an auto dealership. The Council must acknowledge that if the Town wants to encourage the survival of the remaining auto dealerships, it mast revise its policies to provide real incentives and support. The McHughs therefore encourage the Council to reject the proposed resolution and instead direct Town staff to work in close cooperation with auto dealerships, .owners of auto dealership sites, and owners of potential auto dealership sites to develop an attractive incentive package to help auto dealerships: in Los Gatos. 192019 Lflj HOGE, Fl JONES & APPEL, INC. N/~I BT Commercial Commercial Real Estate Services, Worldwide. April 17, 2006 The Mayor and Town Council Members Town of Los Gatos 110 E. Main Street Los Gatos, CA 95030 1650 Technology Drive Suite 600 San Jose CA 95110 tel 408 436 8000 fax 408 436 3699 www.naibtcommercial.com 'AA 17 2.006 TOWN OF' 1_"S T vS CLERK Re: incentives and Policy Suggestions that Assist Automobile Dealerships Achieve Economic Viability Dear Madame Mayor: As you are aware, my associate, ion Stansbury and 1, are the real estate sales representatives for Swanson Ford in the disposition of their inactive land site located at 16005 Los Gatos Boulevard in the Highway Commercial Zoning District. The attached, bound informal study is provided to you to illustrate some facts about: The incentives the town has in place to support auto dealerships and/or landowners leasing to dealers. Those incentives that the dealers themselves have suggested. Those incentives offered in competing locations where the auto mall model, operating with proven incentives, is a thriving economic environment. These incentives are illustrated by a photographic tour of the auto dealerships in Los Gatos as compared to a similar pictorial tour of the Capital Expressway Auto Mall. Clearly, there are exceptional differences in the two operating models. We hope that this bound study will provide you with a direct illustration showing that the types of incentives asked for by your own dealership operators are found in this example of a successful "dealership" row. Please bring this bound study with you to the meeting tonight as you may want to use it as a ready reference. Please contact us if we can answer any questions. Sincerely, NAI BT COMMERCIAL/TERRACOMMERCIA.L u ti c l e th axton i! Jon Stansbury l = Vice President lam' Vice President a cc: Los Gatos Town Manager, Community Development Director Los Gatos Daily News, San Jose Mercury News ATTACHMENT/!5'- Build on the power of our network.TM'Over 300 offices worldwide. 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