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CC - Item 5A - Authorization to Use Community Development Block Grant (CDBG) Funds to Assist Howard's Appliance in Relocating to the City of Rosemead (-5 `elf '9EMF, O f,,„,p,,„„-;y ,.,...0..,.. ---,04 staff.eport TO: HONORABLE MAYOR AND MEMBERS ROSEMEAD CITY COUNCIL FROM: FRANK G. TRIPEPI, CITY MANAG� DATE: JANUARY 23, 1997 RE: AUTHORIZATION TO USE COMMUNITY DEVELOPMENT BLOCK GRANT (CDBG)FUNDS TO ASSIST HOWARD'S APPLIANCE IN RELOCATING TO THE CITY OF ROSEMEAD Last fall, Howard Roach and Bob Buchi of Howard's Appliance contacted the City about the possibility of relocating its San Gabriel store to the City of Rosemead, near the intersection of Valley and Rosemead Boulevards. After several discussions and visits to the area,Mr. Buchi notified staff that the company was interested in the parcel at 3939 Rosemead Boulevard (the current site of the Dixieland Ice Cream Parlor)and an adjacent residential parcel. In addition, Mr. Buchi and Mr. Roach inquired about the potential of the City providing financial assistance for a relocation of the business to that site. A letter from Mr. Buchi dated November 4, 1996 has been attached for the Council's review. Howard's is a desirable retail business generating substantial sales tax revenues. In the attached letter,Mr. Buchi states that Howard's sales tax history in the City of San Gabriel for the past three years was as follows: 1994-$120,366, 1995 -$114,589, and 1996 - $103,213. In summary, Howard's is seeking $700,000 from the City of Rosemead to cover the cost of land acquisition. Because the area is not in the City's redevelopment project area, the only potential source of financial assistance is the use of Community.Development Block Grant (CDBG)funds. Use of those funds, as the Council is aware, is highly restricted by the Department of Housing and Urban Development(HUD). Members of staff have met with Mr. Roach and Mr. Buchi to explore their interest in using such funds and to explain, quite frankly, the restrictions and"down sides"of the CDBG program for commercial relocation projects. Both stated that they understood the restrictions and wished to proceed with the request. COUNCIL AGENDA JAN 2 8 1907 ITEM No. .. I4• Howard's Appliance January 23, 1997 Page 2. The following is a brief explanation of issues that must be addressed before using CDBG funds for this type of project: • Howard's is specifically requesting $700,000 in "assistance" to complete the relocation. The City has not allocated CDBG funds for this type of project. To move forward, the Council must reallocate funds for this project. The funding would come from funds currently earmarked for the Garvey Avenue Senior Housing project and reallocated to this new commercial acquisition project. It is also important to note that re-prioritizing those funds would require that the Council develop a new funding plan for the community center and a new plan for the $500,000 in HOME Funds that it accepted in FY 1996. When taking action to accept HOME Funds,the Council intended to use the money as a"match"with funds already allocated for the Garvey Avenue project. By redirecting CDBG funds, the City will be forced to find another use for HOME funds. Those funds are very restricted and must be expended by December 1998. • Under HUD guidelines, there is no specific category for "relocation." The City may lend CDBG funds to a business enterprise for general purposes, which the business may use for relocation. In addition,the City needs to make this assistance in the form of a loan and must determine that there is no other viable funding source. Howard's, however,has indicated that it is not interested in a loan. Nonetheless,the City may structure a loan in a variety of ways and does retain the authority to forgive the loan at some point in the future in exchange for certain performance measures, such as sales tax history,job creation, and other items that would be determined mutually between the City and the business. • HUD guidelines state that such loans must meet a National Objective of the program, i.e.,job creation. For every$35,000 lent, one permanent job must be created and the City must track that position over time for CDBG monitoring purposes. The positions must be tangible,which means that the Howard's must be able to state the job title,job description and salary of the positions created. • Should the Council decide to move forward with the project,the City would need to develop its own underwriting criteria to ensure the City is making a good loan and that the business could reasonably be expected to pay back the loan. As such, the City would be required to review financial statements and other data as part of the underwriting process. Staff has also identified other procedural issues, such as amending the Consolidated Plan adopted by the Council, gaining environmental clearance, and working with HUD officials in gaining approval of this proposal. In addition, should Howard's seek to acquire the adjacent residential parcel to the north,there will likely be significant residential relocation issues. Howard's Appliance January 23, 1997 Page 3. RECOMMENDATION: Staff recommends that the City Council authorize staff to negotiate with Howard's Appliances and seek HUD approval to utilize Community Development Block Grant (CDBG) funds for the purpose of assisting the relocation of Howard's Appliances to the City of Rosemead. ccmemo.howazdsIgt •••••••••••••••••••••••••••••••• • General Offices • 901 E. Imperial Hwy. SINCE 1946 ' •• , La Habra, CA • 90631 • (714) 871-2700 • �r'r • Service Center • 4177 Rowland Ave: • • • El Monte; .CA • 91731 • (800) 882-7722 •••••••••.•••••••••••••••••••••• Appliances • TV's • Audio • Video • Sales and Service November 4, 1996 Mr. Frank G. Tripepi Rosemead City Manager 8838 E. Valley Blvd. Rosemead, CA 91770 RE: Proposed Site Location 3939 N. Rosemead Blvd. Dear Frank: We certainly appreciate the,time you and your staff spent in reviewing the above location as a site for a Howard's Superstore. Prior to incurring the expense for an appraisal on this property we would like an approximation of the financial support that may be expected from the City of Rosemead. Howard's is requesting that the City of Rosemead participate by covering the $700,000 land acquisition cost. The following initial cost estimates are furnished for your information: Land Purchase $700,000 Lease Buyout $300,000 Demolition of existing bldg. $100,000 New Building $1,200,000 (15,000+sq. ft. plus amenities) Estimated Cost: $2,300,000 Howard's is celebrating our 50th Anniversary as a member of the San Gabriel business community. For our fiscal year ending June 30, 1996, our San Gabriel location generated sales of $10,500,000. We currently employ about 180 employees with 25 being at the San Gabriel store. The following sales tax revenue has been paid to the City of San Gabriel for the past three years: 1994 $120,366 1995 $114,589 1996 $103,213 6 SUPERSTORES TO SERVE YOU 0 E.Valley Boulevard•San Gabriel,CA•91776•(818)288-4010 3300 E.Willow Street• Long Beach, CA•90806•(310)427-098 1 E. Imperial Highway• La Habra, CA•90631 • (714)871-5830 23740 El Toro Road• Lake Forest, CA•92630• (714)470-299 58 W.7th Street• Upland, CA• 91786• (909) 949-8584 7539 Friinnur Aua n A .. _.. _. _. Mr. Frank Tripepi Page 2 October 16, 1996 With Rosemead Blvd. being a key artery to Arcadia, Pasadena, Sierra Madre, Temple City, etc. we consider this a strong location to attract new business without sacrificing our existing customer base. The upgrading of this site, coupled with our heavy advertising schedule, would attract new customers to the area benefiting surrounding businesses and the City of Rosemead. We look forward to working with the City of Rosemead on this proposal. Hopefully we will be a business member of the Rosemead community for the next 50 years. Thank you for your time and consideration. If we can furnish any additional information please give a call. Sincerely, :ob :