Hemet Municipal Code Art. XIV Sales Tax Sharing and Economic Development Program

Footnotes:

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Editor's note— Ord. No. 1970, §§ 2, 3, adopted January 12, 2021, repealed former art. XIV, §§ 18-466—18-474, which pertained to the residential rental registration and crime-free rental housing program and derived from Ord. No. 1870, adopted August 27, 2013; and Ord. No. 1873, adopted October 8, 2013.

(a) The city hereby establishes a sales tax sharing and economic development program to promote the retention, expansion, and continued viability of automobile and other vehicle dealerships within the city's jurisdiction. The city recognizes that automobile and other vehicle dealerships serve as significant contributors to local economic activity and generate substantial sales tax revenue that supports essential public services and infrastructure. Given the competitive nature of the automotive and vehicle industry and the financial burden associated with facility upgrades, this program is intended to create an incentive structure that ensures the continued operation, modernization, and expansion of these businesses within the city limits.

(b) Automobile and other vehicle dealerships play a crucial role in the local economy by providing employment opportunities to residents and serving as a key source of consumer access to vehicle purchases, leasing, and maintenance services. Ensuring the retention and expansion of these businesses within the city is essential for maintaining local economic stability and improving the quality of life for residents. By supporting dealership improvements, the city fosters job growth, enhances business investment, and ensures that residents have convenient access to essential automotive and other vehicle services, thereby reducing the need to travel to other jurisdictions for such services.

(c) This article authorizes the city to enter into legally binding sales tax sharing agreements with qualifying automobile and other vehicle dealerships for the purpose of reimbursing a portion of eligible facility upgrade costs. Such agreements shall be structured in strict compliance with all applicable federal, state, and local laws, including but not limited to article XVI, section 6 of the California Constitution (prohibiting the gift of public funds), Government Code § 53083 (economic development subsidies), and all other relevant provisions governing municipal finance and economic development.

(d) The intent of this article is to establish clear and objective criteria under which the city may consider such agreements, ensuring that they:

(1) Provide a demonstrable public benefit;

(2) Are fiscally responsible;

(3) Support job creation and economic growth; and

(4) Prevent the unnecessary diversion of public funds without tangible economic return.

The city shall ensure that all agreements under this program are subject to transparency, accountability, and oversight mechanisms, including public hearings, periodic performance reviews, and annual reporting requirements to protect the interests of the taxpayers and the broader community.

(Ord. No. 2056, § 1, 3-25-25)

For purposes of this article, the following definitions shall apply:

Agreement means a written contract, approved by the city council, between the city and a dealership pursuant to this article, setting forth the terms, conditions, performance requirements, and financial obligations of both parties in connection with sales tax sharing incentives.

City means the City of Hemet, a municipal corporation organized and existing under the laws of the State of California.

Dealership means a business entity holding a valid California Department of Motor Vehicles dealer license (or other appropriate state license) and operating within the city for the primary sale of new automobiles, new motorcycles, new motorhomes, new watercraft, new aircraft, new travel trailers or new off-road vehicles. A dealership may also sell used automobiles, used motorcycles, used motorhomes, used watercraft, used aircraft, used travel trailers, or used off-road vehicles as a secondary or accessory function, but the primary business purpose must be the sale of new vehicles from one or more manufacturers.

Eligible costs means reasonable, necessary, and documented expenses incurred by a dealership for new facility construction or existing facility upgrades, including but not limited to: new facility construction, site improvements, building renovations, signage, parking lot enhancements, Americans with Disabilities Act (ADA) compliance upgrades, energy efficiency improvements, expansions of existing facilities, complete rebuilds, demolition and reconstruction of dealership buildings, the costs of engineering, architects, fees and infrastructure improvements directly related to dealership operations. Eligible costs shall not include routine maintenance or operational expenses that do not substantially improve the dealership's capacity or longevity.

Sales tax revenue means the portion of sales tax generated by a participating dealership and remitted to the city pursuant to applicable state and local laws, including but not limited to revenue collected under the Bradley-Burns Uniform Local Sales and Use Tax Law (California Revenue and Taxation Code § 7200 et seq.). Sales tax revenue shall not include revenues from the Hemet Transactions and Use Tax (Measure U). Sales tax revenue for the purpose of this article shall be calculated based on the amount received by the city from such sources after deductions for any applicable state-mandated distributions or adjustments.

(Ord. No. 2056, § 1, 3-25-25)

(a) The city council may, at its discretion, approve a sales tax sharing agreement with a dealership to reimburse eligible costs, provided that:

(1) The agreement results in a net public benefit to the city, including retention or expansion of dealership operations, job creation, or increased tax revenue.

(2) The agreement complies with article XVI, section 6 of the California Constitution (prohibition on gifts of public funds).

(3) The agreement complies with Government Code § 53083 regarding economic development subsidies.

(4) The reimbursement shall not exceed a percentage of the sales tax revenue generated by the dealership and shall be subject to a cap, not to exceed $7,500,000.00, as approved by the city council, except in the case of new dealerships, for which the amount shall not exceed $10,000,000.00 million, as approved by the city council.

(5) The term of the agreement shall not exceed 20 years.

(6) The agreement shall include clear performance benchmarks, such as job creation, investment thresholds, or facility improvements, which the dealership must meet to remain eligible for reimbursement.

(7) The agreement shall require annual verification of compliance, including revenue generation, facility improvements, and other agreed-upon terms.

(8) Any agreement with a dealership locating or relocating to the city shall comply with the provisions of Government Code § 53084, which prohibits subsidies for automobile dealerships relocating from another jurisdiction in the "market area" of the city, which for the purposes of this program shall include the relocation within the primary market area for a particular franchise, or if there is no primary market area, then the relocation of an automobile dealership operating within ten miles from the city.

(b) All agreements shall be subject to:

(1) A public hearing and disclosure of financial terms before approval.

(2) Annual reporting requirements, including verification of revenue generation and compliance with agreement terms.

(3) Performance benchmarks, such as job creation, investment thresholds, or capital improvements.

(4) A clawback provision requiring partial or full reimbursement to the city if the dealership fails to meet performance obligations or ceases operations within a specified period.

(c) The city council may set limitations on the number of agreements or the total reimbursement amount available for the program at any time, subject to increases based on the establishment of new dealerships or significant increases to revenue from existing dealerships.

(d) Any application submitted under this program shall be received by the city no later than ten years after the effective date of the ordinance codified in this article.

(Ord. No. 2056, § 1, 3-25-25)

(a) A dealership seeking to enter into an agreement shall submit a complete and detailed application to the city manager or designee. The application shall include, but not be limited to, the following:

(1) A comprehensive project description detailing the scope of the proposed facility improvements, including the anticipated timeline for completion.

(2) A breakdown of estimated eligible costs supported by contractor bids, engineering estimates, or other verifiable cost projections.

(3) A financial impact analysis illustrating the projected increase in sales tax revenue resulting from the improvements.

(4) Documentation establishing the necessity of the agreement, demonstrating why the project would not be feasible without financial assistance from the city.

(5) Any additional materials deemed necessary by the city to properly evaluate the application.

(b) The city manager shall conduct a thorough review of each application, verifying the accuracy of the submitted materials and assessing the projected public benefit. Upon completion of the review, the city manager shall forward the application with a recommendation for approval, denial, or modification to the city council for final consideration.

(Ord. No. 2056, § 1, 3-25-25)

(a) The city shall monitor compliance with all terms and conditions set forth in an agreement and shall require annual reporting from the participating dealership to verify adherence to performance benchmarks.

(b) If a dealership fails to meet its obligations, including but not limited to performance benchmarks, reporting requirements, or facility improvement commitments, the city may terminate the agreement, adjust reimbursement terms, or require repayment of funds.

(c) The city reserves the right to audit financial records and project expenditures to ensure compliance with agreement terms and protect the public interest.

(d) If a dealership ceases operation, reduces operations, or otherwise materially diminishes its business activity within ten years of receiving reimbursement without written authorization by the city, it shall be required to repay all funds received under this program. Any reduction in operations shall be assessed based on a measurable and sustained decline in revenue, employment, or facility utilization as determined by the city through periodic audits and reviews.

(Ord. No. 2056, § 1, 3-25-25)