Chapter 3.25 — SALES TAX SHARING PROGRAM

The purpose of this chapter is to provide an economic development incentive program for the opening, operation, and expansion of commercial and industrial businesses which: (1) enhance the quality of facilities, goods, and services that businesses make available to the public and the City's residents; (2) provide desirable and attractive shopping experiences for the City's residents and visitors; (3) promote job creation opportunities in the City; (4) encourage property upgrades and enhancements in the City's commercial and industrial areas; and (5) increase the sales tax revenue to the City. In the implementation of this program, the City Council finds:

• A. The general welfare and material well-being of the residents of the City depend in substantial measure upon the growth and expansion of commercial and industrial businesses in the City.

• B. The opening, operation, and expansion of the inventory of businesses in the City will: (1) enhance the quality of facilities, goods, and services that businesses make available to the public and the City's residents; (2) provide desirable and attractive shopping experiences for the City's residents and visitors; (3) promote job creation opportunities in the City; (4) encourage property upgrades and enhancements in the City's commercial and industrial areas; and (5) increase the City's sales tax revenue.

• C. It is in the best interest of the City to induce and encourage the opening, operation, and expansion of businesses that might not otherwise exist or might not be as successful, thereby creating new sources of revenues for the City's general fund which supports the public services the City provides its residents and visitors.

• D. The authority granted and the purposes to be accomplished by this chapter are proper local governmental and public purposes for which public funds can be expended and that the opening, operation, and expansion of the inventory of commercial and industrial businesses are of paramount importance to the City, its residents, and businesses.

• (Ord. 4-13, 2013)

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

"Approved business" means any existing commercial and/or industrial business or new commercial and/or industrial business located within the designated commercial and industrial zoned areas of the City which has submitted an application for participation in the program and been approved by the City to participate in the program through a participation agreement.

"Business" means any "existing commercial and/or industrial business" or "new commercial and/ or industrial business" as defined in this section.

"Developer" means any person or entity in the business of developing real property for the purpose of operating a business thereon, and with whom the City Council may, in its sole discretion, enter into a participation agreement.

"Existing commercial and/or industrial business" means a retailer and/or operator in the business of selling goods or services which are subject to sales tax, which was operating with a valid

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City of Orange, CA § 3.25.020

ORANGE CODE

§ 3.25.020

business license anywhere within the City not less than five years prior to the filing of an application by the existing business for assistance under this chapter.

"New commercial and/or industrial business" means a retailer and/or operator in the business of, or which proposes to be in the business of, selling goods or services which are subject to sales tax, which desires to open a business within the City, and is not operating said business within the City as of the date of the application by the new business for assistance under this chapter, and has not operated such a business within the City within one year of the date of the application.

"Owner" means the person or entity which owns and operates the business, and has legal authority to enter into a participation agreement on behalf of the business with the City.

"Participation agreement" or "agreement" means an agreement between the City and an approved business which provides for the rebate from the City to the business owner of a portion of the business's sales tax increment, at a rate and for a time period as determined by the City. Said agreements may include such provisions, restrictions, conditions or other provisions as the parties then agree are necessary to give effect to the intent and spirit of this chapter.

"Sales tax" means that portion of local sales taxes accrued on account of sales made by a business that would be payable to the City from the State Board of Equalization, from the imposition of the Bradley Burns Uniform Local Sales and Use Tax Law, provided that such sales taxes are legally available for use by the City's general fund, and the use of which by the City is not otherwise restricted by the state or federal government.

ocal sales taxes accrued on account of sales made by a business that would be payable to the City from the State Board of Equalization, from the imposition of the Bradley Burns Uniform Local Sales and Use Tax Law, provided that such sales taxes are legally available for use by the City's general fund, and the use of which by the City is not otherwise restricted by the state or federal government.

"Sales tax base" means the historical production of sales tax by an existing business as calculated in the sales tax sharing report. The sales tax base shall be calculated in a manner as to take into account the then-current economic state relative to the historical performance of the business. In addition, it shall use a method determined by the preparer of the tax sharing report, for averaging production over an appropriate period adjusted for inflation, or other similar adjustment index, it being the intent that an approved business should receive a tax sharing arrangement which does not reward the business for improvement in sales tax arising from general economic conditions as opposed to the improvements made by the business owner.

"Sales tax increment" means, on an annual basis, the difference between the sales tax base and the amount of sales tax actually generated by a business and received by the City from the State Board of Equalization after a business begins participating in the program. It is determined by reference to actual receipts by the City of sales tax from the State Board of Equalization. With respect to new businesses, all sales tax received shall be deemed to be sales tax increment unless adjustment(s) and/or additional condition(s) are incorporated into the participation agreement and approved by City. Under no circumstance shall the City be liable for any reimbursement of sales tax increment not actually received and permanently retained by the City.

"Sales tax quarter" means a three-month quarterly period as designated by the State Board of Equalization in its reports to the City.

"Sales tax sharing" means the disbursement amount from the City to the owner of an approved business of a portion of that business's sales tax increment, as determined each year for which the agreement is valid. The payment of the approved business's portion of the sales tax increment shall be paid to the approved business within a reasonable time after the conclusion of each sales tax quarter, consistent with the City's ability to verify its actual sales tax receipts relative to the approved business.

"Sales tax sharing program" or "program" means the sales tax program established by this

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City of Orange, CA

REVENUE AND FINANCE

§ 3.25.020

§ 3.25.030

chapter. A business's participation in the program extends as long as the time period provided for in a participation agreement.

"Tax sharing report" means the report which shall be completed for any applicant business which shall analyze the projected economic factors relating to the expansion of an existing business, or construction of a new business, and the projected impact of such expansion or construction on the business's generation of sales which are subject to sales tax and which generate general fund revenues to the City, which shall be considered by the City Council in making its decision as to a particular business, and which the City Council may use, along with other evidence presented, in its sole discretion, to determine whether the subject business is approved to participate in the program, and if so, the appropriate sales tax sharing rate and time period for the participation agreement. The tax sharing report shall be prepared by staff or by a qualified economic consultant employed by the City. The cost of preparing the tax sharing report, whether prepared by staff or an outside consultant shall be paid by the owner of the business applying for participation in the program, unless the City, in its sole discretion, waives this requirement as part of the terms of the participation agreement. (Ord. 4-13, 2013)

• A. Eligible existing commercial and/or industrial businesses include those businesses located on property zoned for commercial and/or industrial use with an operating history of not less than five years or more in the City of Orange. Participation requirements include implementation of a minimum of four criteria listed below:

  1. Be a developer and/or owner of any existing commercial and/or industrial businesses;

  2. Plan and implement renovation to the existing commercial or industrial property including, but not limited to rehabilitation work such as upgrading and expanding permanent building improvements, parking, landscaping, tenant improvements, signs and equipment that are permanently attached to the building;

  3. Plan and implement expansion to improve and/or expand the businesses operations;

  4. Plan and implement consolidation of operations to a location in the City;

  5. Retention and/or creation of employment opportunities in the City; and

  6. Generate a minimum of $10,000,000.00 in annual taxable sales reported in the City.

• B. Eligible new commercial and/or industrial businesses shall include those developer(s) and/ or owner(s) who desires to open a business within the City, and is not operating said business within the City as of the date of the application by the new business for assistance under this chapter, and has not operated such a business within the City within one year of the date of the application. Participation requirements shall include all of the following:

  1. Identify a suitable location in the City's commercial or industrial zoned uses;

  2. Plan and implement expansion, relocation and/or consolidation of its business operations in the City which shall not diminish market share of similar business operations; and

  3. Creation of employment opportunities of not less than 50 full-time jobs in the City;

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City of Orange, CA § 3.25.030

ORANGE CODE

§ 3.25.040

and

4. Generate a minimum of $10,000,000.00 in annual taxable sales reported in the City.

• C. Both eligible new and existing commercial and/or industrial businesses are required to complete all the following:

  1. Submit to the City Manager a completed application for participation in the sales tax sharing program on the City's official sales tax sharing program application form; and

  2. Received approval for participation in the program from the City; and

  3. If approved by the City, enter into a participation agreement in the form approved by the City.

• D. It is recognized that some businesses will be located in premises which are not owned by the owner of the business and are rented or leased from a third party. In such circumstances, the City and the business shall seek the permission of the owner of the property to record the operating covenants against the subject property, applicable only to the business. The City Council, at its sole discretion, may approve such terms or conditions as it deems appropriate in order to obtain the property owner's consent, or may, in its sole discretion, waive the requirement of recording the operating covenants. If the property owner and the owner are under common control, recording the operating covenants shall be a requirement of approval of the participation agreement.

• (Ord. 4-13, 2013)

• A. Subject to the following statutory exceptions, the City Council is authorized to enter into participation agreements with businesses in accordance with this section:

  1. The City may not enter into a participation agreement with a vehicle dealer or big box retailer which is relocating from the territorial jurisdiction of another local agency within the same market area, if said agreement would violate the provisions of California Government Code Section 53084, as this section may be amended;

  2. The City may not enter into any participation agreement if said agreement would violate California Government Code Section 53084.5, as this section may be amended. Said violation may arise, subject to exception, if the agreement would result in reduced sales tax revenues received by another local agency from a retailer that is located within the territorial jurisdiction of that other local agency from the tax proceeds collected under the Bradley Burns Act, and the retailer maintains a physical presence in the territorial jurisdiction of that other local agency.

• B. In order to determine the appropriate rate of sales tax sharing for each business that has submitted an application pursuant to Section 3.25.030(A)(1), the City Manager or his or her designee shall cause to be prepared a tax sharing report, which shall analyze factors including the following. The City Manager or his or her designee, in its sole discretion, may consider additional factors, or require additional studies or reports, as deemed appropriate.

  1. For existing business, the existing level of sales tax generated by the business, and the projected sales tax to be generated after a planned expansion project; and

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City of Orange, CA

REVENUE AND FINANCE

§ 3.25.040

§ 3.25.050

2. For new businesses, the projected sales tax to be generated by the new business; and

3. The amount of expected sales tax increment; and

4. For new and existing businesses, the type, quality, and price point of the goods and services sold or provided by the business; and

5. For new and existing businesses, the total projected cost to construct the new business or expand the existing business; and

6. The impact and benefits of the proposed expansion or construction of the business on the residents and other businesses in the City and the surrounding region; and

7. The necessity for public assistance.

• C. After considering the sales tax sharing report and such other factors, studies or reports as it, in its sole discretion, deems appropriate, and subject to the limitations set forth in subsection (H), the City shall determine the rate of sales tax sharing to be provided to a business that will be necessary or appropriate to achieve the goals and intent of this chapter. The rate may vary over time as determined by the City Council in its sole discretion.

ther factors, studies or reports as it, in its sole discretion, deems appropriate, and subject to the limitations set forth in subsection (H), the City shall determine the rate of sales tax sharing to be provided to a business that will be necessary or appropriate to achieve the goals and intent of this chapter. The rate may vary over time as determined by the City Council in its sole discretion.

• D. After considering all of the material outlined in Section 3.25.040(C), and subject to the limitations set forth in subsection (I), the City shall determine, in its sole discretion, the time period over which sales tax sharing will be necessary or appropriate to achieve the goals and intent of this chapter. The time period may be subject to possible reduction or termination as the City Council may determine in its sole discretion.

• E. The City Council shall hold a public meeting on all contemplated participation agreements. Notice of the time and place of the meeting shall be published pursuant to laws of the State of California. At this meeting, the City Council shall consider all evidence before it, including the information contained in the tax sharing report.

• F. The City shall make all tax sharing reports available for public inspection and copying, at a cost not to exceed the cost of duplication, no later than the time of publication of the first notice of the public meeting mandated by this section.

• G. As part of the public meeting on a contemplated participation agreement, the City Council may approve the participation agreement with the owner or developer. Subject to the limitations set forth in subsections (H) and (I), a participation agreement may provide for the City to rebate to a business an appropriate rate of sales tax increment for an appropriate time period, as necessary to achieve the goals and intent of this chapter, as determined by the City Council in its sole discretion.

• H. The rate of sales tax sharing shall be determined and approved by the City Council.

• I. The time period of sales tax sharing shall be determined and approved by the City Council. (Ord. 4-13, 2013)

All sales tax revenues or sales tax increment remitted to the City by the State Board of Equalization, which were collected by a business, are general fund revenues of the City and shall be deposited in the City's general fund.

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City of Orange, CA

ORANGE CODE

§ 3.25.050

§ 3.25.070

(Ord. 4-13, 2013)

The City may terminate the participation agreement on 10 days notice, or a larger time period so specified in the participation agreement if the business violates any of the provisions in the participation agreement or this chapter, provided that such violation or violations continue to exist at the end of said 10-day period, or time period provided for in the participation agreement. The City shall give notice to the owner as required by the terms of the participation agreement. (Ord. 4-13, 2013)

Consistent with the intent and goals of this chapter, the City Manager may adopt administrative rules and regulations for implementation and furtherance of the requirements of this chapter. (Ord. 4-13, 2013)

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City of Orange, CA

REVENUE AND FINANCE

§ 3.25.070

CHAPTER 3.30 (RESERVED)[3 ]

3. Editor's Note: Ch. 3.30, Mobile Source Air Pollution Reduction Program Fund,adopted by Ord. 18-91, was repealed by Ord. 07-24, 5/14/2024.

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City of Orange, CA

REVENUE AND FINANCE

§ 3.40.010

§ 3.40.010