HomeMy WebLinkAbout07.A- City Clerk DOC ID: 1819 A
CITY OF SAN BERNARDINO—REQUEST FOR COUNCIL ACTION
Public Hearing
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From: Georgeann "Gigi" Hanna M/CC Meeting Date: 05/07/2012
Prepared by: Cindy Buechter, (909) 384-5035
Dept: City Clerk Ward(s): 1
Subject:
Appeal Hearing Regarding the Requirement for Kohl's Department Stores to File an Amended
Business Registration Renewal Application Stating the Gross Sales Attributable to the Internet
Fulfillment Center for the Purposes of Calculating the Correct Business Registration Fee Due to
the City; and to Pay All Applicable Fees.
Financial Impact:
Possible revenue enhancement.
Mayor to open the hearing. . .
Motion l: Close the hearing; deny the appeal and uphold the decision of the City Clerk to
require that Kohl's Department Stores file an amended Business Registration
Renewal Application stating the gross sales attributable to the internet fulfillment
center for the purposes of calculating the correct Business Registration fee due to
`- the City; and to pay all applicable fees.
Motion 2: Continue matter to June 18, 2012.
Synopsis of Previous Council Action:
N/A
Background:
San Bernardino Municipal Code Section 5.04.525 establishes those businesses for which the
annual business registration fee is based on gross receipts. SBMC Section 5.04.525B defines
"Retail Merchants" as "Every person, firm or corporation conducting, managing or carrying on
the business of selling at retail any goods, services, wares or merchandise other than food...shall
pay a fee established by resolution of the Mayor and Common Council." Resolution 96-188
establishes the fee for Retail Merchants as"$60.00 per year plus three fourths of one-tenth of one
percent (.00075) of all dollar value of annual gross receipts in excess of fifteen thousand dollars
of such gross receipts..." Gross receipts are reported, and the appropriate fee paid annually, to
the Business Registration Division of the City Clerk's Office.
August 2, 2010
Kohl's Department Stores Inc. entered into a "Business Operations and Covenant Agreement"
Updated:5/3/2012 by Sabdi Sanchez A
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(Exhibit A) with the City of San Bernardino which was adopted by Resolution 2010-272 at the
City of San Bernardino Mayor and Common Council and Community Development Meeting of
August 2,2010.
Contained within this agreement are several statements indicating that Kohl's would establish a
sales office at this location and designate the City of San Bernardino as the point of sale for all
taxable e-commerce sales transactions in California.
August 12, 2010
Kohl's Department Stores Inc. obtained a Zoning Verification Review and completed a Business
Registration Certificate Application for a "fulfillment center - warehouse distribution" and paid
the minimum business registration fee for the period of May 24,2010 to April 30,2011.
Mav 2, 2011
The Business Registration Division received a renewal application from Kohl's. In the "gross
receipts" area of the application, the term "N/A" was placed in lieu of a gross receipts amount
and a minimum payment was collected.
September, 2011
Upon review of the renewal application, and noting the lack of a gross receipt statement, it was
determined that further investigation was required. It was at this time that the Business
(�. Registration Division became aware of the existence of the "Business Operations and Covenant
Agreement"between the City and Kohl's.
October 19, 2011
A letter was sent to Kohl's Department Stores Inc. (Exhibit B) referencing the agreement and
requesting Kohl's to file an amended Business Registration Renewal Application form stating
the gross sales attributable to the internet fulfillment center. Upon receipt of the amended return,
we would then calculate the fees due and invoice Kohl's accordingly. We requested Kohl's
response by November 10,2011.
December 6.2011
The Business Registration Division received Kohl's response (Exhibit C) stating, "There are no
sales transactions at the e-commerce fulfillment center (EFC) that would require Kohl's to
source receipts to the City of San Bernardino for purposes of the annual Business Registration."
January 23,2012
Business Registration Manager, Cindy Buechter sent an inter-office memorandum to Stephanie
Easland, Sr. Assistant City Attorney requesting their review of the agreement and to advise the
Business Registration Davison on the matter of whether gross receipts for the e-commerce sales
transactions should be reported annually, and the appropriate business registration paid.
Updated:5/3/2012 by Sabdi Sanchez A
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March 28,2010
✓ Legal Memo No. 12-015 (Exhibit D) was received from Stephanie Easland, Sr. Assistant City
Attorney in which she agreed with the position of the Business Registration Division and that the
annual business registration fee should be based upon the same agreed upon taxable sale
transactions that are reported to the Board of Equalization for sales tax purposes. In addition, if
Kohl's still disputes this analysis, it needs to exercise its right to appeal.
April 11, 2012
A letter (Exhibit E) was sent to Kohl's Senior Tax Manager, Joseph Malloy confirming our
position that Kohl's must submit an amended Business Registration Renewal Application
showing the appropriate gross receipts for the EFC. In addition, Kohl's was provided with the
appropriate Appeal Form and deadline to file the appeal of April 26,2012.
April 26, 2012
Kohl's Department Stores, Inc. submitted (via facsimile) a "City of San Bernardino Appeal
Form" (Exhibit F) stating, "Kohl's EFC is merely participating in the movement of merchandise
(i.e. fulfilling orders). There are no sales transactions that would require Kohl's to source
receipts to the City of San Bernardino for purpose of the annual business registration.
Supporting Documents:
Exhibit A-Resolution No. 2010-272 (PDF)
Exhibits B-E -Letters, Memos, Appeal Form (PDF)
Updated:5/3/2012 by Sabdi Sanchez A
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1 RESOLUTION NO.
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RESOLUTION OF THE MAYOR AND COMMON COUNCIL OF THE CITY
3 OF SAN BERNARDINO APPROVING AND AUTHORIZING THE
EXECUTION OF A BUSINESS OPERATIONS AND COVENANT
4 AGREEMENT BY AND BETWEEN THE CITY OF SAN BERNARDINO AND
5 KOHL'S DEPARTMENT STORES; INC., FOR THE OPERATION OF AN `o
INTERNET SALES OFFICE WITHIN THE CITY OF SAN BERNARDINO N
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WHEREAS,the City of San Bernardino(the"City")is a California charter city formed pursuant m
to the Constitution and laws of the State of California; and o
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9 WHEREAS,the Mayor and Common Council of the City of San Bernardino(the"Council"),as o
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10 the governing board of the City,seeks to enter into a Business Operations and Covenant Agreement(the
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11 "Agreement")with Kobl's Department Stores,Inc.,a Delaware corporation("Kohl's"),to provide for
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12 the operation of an internet sales office in the City(the"Sales Office"),which is expected to produce w
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13 significant revenues resulting in the generation of significant new local sales tax revenues to the City; a
14 and
15 WHEREAS, the City desires to provide certain Covenant Payments, as defined in the
to Kohl's for the purpose of obtaining Kohl's commitment to designate the City as the
16. Agreement, b
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17 "point of sale"of the relevant sales transactions(the"Relevant Sales")for State of California sales tax Z
18 purposes during the term of the Agreement,and in consideration of the new and additional local sales o
19 tax revenues and other tangible and intangible benefits to be received by the City arising from the m
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20 operation of the Sales Office within the City; and a
21 WHEREAS,the City has not paid any costs associated with Kohl's acquisition or development t
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22 of the land for the Sales Office or for the construction or equipping of the Sales Office;and
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WHEREAS,Kohl's operation of the Sales Office will provide significant public benefits to the t
er matters,additional Sales Tax revenues generated by such activities represent
24 City because,among oth a
25 a significant source of new and additional public revenue for the City,which may be used by the City
26 for the funding of necessary public services and facilities,including public safety services and facilities;
27 and
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1 WHEREAS,the City has further determined that the operation of the Sales Office serves the
2 additional public purpose of fostering a business and civic environment which may attract additional
3 businesses and investment in the community due to the availability of the increased public and private
4 services and economic activity resulting therefrom;and
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5 WHEREAS,the City has the legal rlgbt,power and authority to enter into the Agreement and to `o
6 consummate the transactions contemplated by the Agreement; and
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7 WHEREAS, in making the Covenant Payments, the City would not be in violation of any A
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8 spending or debt restrictions arising under Article XIIIB of the California Constitution. o
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9 NOW,THEREFORE,THE MAYOR AND COMMON COUNCIL OF THE C1TY OF SAN Y
10 BERNARDINO DO HEREBY RESOLVE,DETERMINE AND ORDER,AS FOLLOWS:
11 Section 1. The information set forth in the above recitals of this Resolution is true and
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12 correct. o
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13 Section 2. The Council hereby approves and authorizes execution of the Agreement by the a
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14 City with Kohl's Department Stores,Inc.,regarding the operation of an internet sales office within the
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15 City. N
16 Section 3. The Mayor of the City is hereby authorized and directed to execute the c
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17 Agreement on behalf of the City in substantially the form attached hereto as Exhibit"A,"together with Z
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18 such changes thereto as maybe approved by the City Attorney. The Mayor orthe City Manager or such °-
19 other designated representative of the City is further authorized to do any and all things and take any v
20 and all actions as may be deemed necessary or advisable to effectuate the purposes of the Agreement, a_
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21 including making non-substantive modifications to the Agreement. x
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22 Section 4. This Resolution shall take effect in the manner as provided in the City Charter. c
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7.A.a
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CITY OF SAN BERNARDINO
ECONOMIC DEVELOPMENT AGENCY
FROM: Emil A.Marzullo SUBJECT: Business Operations and Covenant Agreement
Interim Executive Director by and between the City of San Bernardino and
Kohl's Department Stores, loo., a Delaware
corporation (IVDA Redevelopment Project
DATE: July21,2010 Ate)
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wyn cola of Previous Commission/CouuClllCommittee Action(s_):_
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On July 22,2010,Redevelopment Committee Members Johnson,Marquez NO Brinker unanimously voted to recommend that E
the Mayor and Common Council and the Community Development Commission consider this action for approval. o.
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Recommended Molionfal: m
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Ma.or and Common Council
Resolution of the Mayor and Common Council of the City of San Bernardino approving and authorizing the execution o.
of a Business Operations and Covenant Agreement by and between the City of Son Bernardino and Kohl's o.
Department Stores,Inc.,for the operation of an internet sales office within the City of San Bernardino Q
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Contact Person(s): Emil A.Marzullo Phone: (909)663-1044 cr
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Project Area(s): IVDA Redevelopment Project Area Ward(s):
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Supporting Data Attached: 0 Staff Report 0 Remiudon(s)0 Agreement(s)/Contmol(s)❑Map(s)❑Letter(&) z
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FUNDING REQUIREMENTS: Amount: S Agreement_ Source: General Fund ._
Budget Authority: Future Budget Authorization °w
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Signature: Fiscal Review: K
Emil A. Executive Direct" Lori er erhn sb ve Services Director w
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4o mimlordCoi neil Notes: ---_.�_.----- E
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Meeting Dates 0111=910
Agenda Item Number:
`?acltet,pB��lia .
ECONOMIC DEVELOPMENT AGENCY
STAFF REPORT
BUSINESS OPERATIONS AND COVENANT AGREEMENT BY AND BETWEEN THE CITY OF
SAN BERNARDINO AND KOHL'S DEPARTMENT STORES,INC.,A DELAWARE
CORPORATION(SVDAREDEVELOPMENT PROJECT AREA)
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BACKGROUND/CURRENT ISSUE: w
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The proposed Business Operations and Covenant Agreement (the "Agreement")with Kohl's Department E
Stores, Inc, a Delaware corporation ("Kohl's"), provides for the operation of an internet sales fulfillment @
center/office (the"Sales Office') in the City of San Bernardino(the'City"). The Sales Office is expected
to generate substantial economic benefits resulting in the generation of significant new local sales tax 3 o
revenues to the City that may be used for the funding of necessary public services and facilities. The Sales s
11 Office would also serve to foster a business and civic environment which may attract additional businesses o
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and investments in the community.
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In May, 2010, Kohl's closed escrow on the approximately 986,000 square foot warehouse distribution
building constructed by Hiliwood Development Services on the south side of Central Avenue between =
Lena Road and Tippecanoe Avenue. Kohl's was seeking expansion space to conduct internet sales in m
addition to the approximately 645,000 square foot office and distribution center previously constructed by a
Kohl's on Lena Road north of Mill Street in 2002 and 2003. This facility on Lena Road was the initial G
redevelopment effort of the Inland Valley Development Agency within the former Norton Air Force Base e,
which then provided the means for Kohl's to open the first Kohl's Department Stores in California soon
after the first distribution center was completed.
More recently,Kohl's sought to obtain a major building facility to expand internet sales and to serve for the o
fulfillment of intemet orders for the western portion of the United States. Until this facility becomes fully c
operational, intemet orders are processed from a site in Ohio. This San Bernardino facility is intended to
provide internet fulfillment for the western half of the country. It is anticipated employment levels at the z°
facility could result in as many as 1,800 new jobs for certain times of the year, particularly the winter o
holiday season.
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Kohl's obtained the necessary building permits soon after the close of escrow to construct the initial phases m
Of a 50,000 square foot distribution center within the building and to install the necessary racking and other
typical warehouse/distribution center improvements. No City funds were offered or given to Kohl's to off- C
set any of its development costs for this facility and no infrastructure improvements were paid for by City n
j funds. No moneys reimbursable under the Agreement to Kohl's are intended to be used to off-set or are
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otherwise applied for payment or reimbursement of the construction costs. Virtually all of the physical
I construction work has been completed and the Sales Office is expected to be operational during the latter w
part of the month of July,2010. E
The Sales Office would generate additional benefits to the City such as new jobs and property tax revenues. =°•
Pursuant to the Agreement, Kohl's would designate the City as the `point of sale" for all sales activities a
(the "Sales Activities") attributable to the Sales Office and establish the Sales Office located within the
City as the site for the Sales Activities. furthermore,Kohl's would, at its sole cost and expense, maintain
all permits, contractual arrangements, licenses and registrations necessary for Kohl's to lawfully conduct
Sales Activities and to designate the City as the"point of sale" in all reports and sales tax returns submitted
vayme.,raw�a+co..m,eo.:coczmaneox-:o sou,e,,,��,oR,wo�,wcer<.�."nn,�an srta. COMMISSION MEETING AGENDA
Meeting Date: 08/0212010
Agenda Item Number:
Packet Pg. 383
7.A.a
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Economic Development Agency Staff Report
Kohl's Department Stores, InC.
Page 2
to the Board of Equalization(the`BOE"). In consideration of Kohl's commitment to designate the City as
the "point of sale" of the taxable sales transactions for State of California Sales Tax purposes and during
the tern of the Agreement to refrain from establishing similar operations elsewhere in California, the
increase of local sales tax revenues and other tangible and intangible benefits to the City resulting from the y
operation of the Sales Office within the City, the City would provide certain Covenant Payments to Kohl's d
as described below and defined in the Agreement. °
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The Covenant Payments would be remitted quarterly following submission to the City of certified copies of `m
Kohl's quarterly reports as filed with the BOE. The Agreement would extend for 40 years, commencing >_
when both parties duly approve,execute and deliver the Agreement and ending on the last calendar day of o.
the 40"'Operating Year as defined in the Agreement, unless sooner terminated pursuant to the Agreement o
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In consideration for Kohl's obligations set forth in the Agreement,the City would pay to Kohl's an amount o
equal to BOO/*of the Local Sales Tax Revenues actually received by the City in each Operating Quarter,as Y
�i defined in the Agreement, payable after the City has received fixed payments (the "Fixed Payment
Amount")equal to the first$100,000 of local sales tax revenues for Operating Year 1,the first$250,000 of c
Local Sales Tax Revenues for the Operating Year 2,and the first$500,000 of Local Sales Tax Revenues in
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each subsequent Operating Year during the remaining term of the Agreement(the"Covenant Payments") _
calculated in the manner as illustrated on the attached spread sheet and incorporated into the operative text m
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of the Agreement. a
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If at any time commencing with the Operating Year 3 and thereafter the Local Sales Tax Revenues for the m
Sales Activities (as defined in the Agreement) were less than $1,000,000, based upon $100,000,000 of
taxable sales generated by the Sales Activities as determined by the BOE, the Fixed Payment Amount
would be adjusted for the applicable Operating Year to $400,000 until such time as in any succeeding N
Operating Year the minimum of$1,000,000 of Local Sales Tax Revenues for the Sales Activities are again c
i achieved. $
In any Operating Year for which the Local Sales Tax Revenues for the Sales Activities are equal to or z°
greater than $2,000,000 based upon $200,000,000 of taxable sales generated by the Sales Activities as c
i determined by the BOE,the City would receive 30%of the amount in excess of the Fixed Payment Amount
and Kohl's would receive 70%of the amount in excess of the Fixed Payment Amount. —°m
Kohl's acknowledges and assumes the risk that the State of California legislature has in the past adopted <
certain legislation which diverted to the State of California a portion of the Local Sales Tax Revenues ..
which would otherwise be payable to the City and knows that similar legislation is a possibility in the L
future. Such legislative changes may materially and negatively impact the amount of Local Sales Tax w
Revenues and,accordingly,the Covenant Payments. In such a situation,the State of California legislature
or other public entities may provide for the payment to the City of other revenues for the purpose of off- w
setting any losses in Local Sales Tax Revenues resulting from the enactment of such aforementioned E
legislation. Should any such off-setting revenues be provided following such legislation, then for the R
computation of any Covenant Payments the City would consider any such off-setting revenues which are(i) G
indexed to sales tax and off-set the loss of Local Sales Tax Revenues to the City on a dollar for dollar basis,
(ii) actually received by the City, and (iii) not subject to any restrictions on use beyond those which are
otherwise generally applicable to Local Sales Tax Revenues received by California municipalities, to be
Local Sales Tax Revenues within the meaning of the Agreement.
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Meeting Date: 0 8/0 2120 1 0
Agenda Item Number:
Packet Pg. 384
Economic Development Agency Staff Report
Kohl's Department Stores,Inc.
Page 3
Any Covenant Payment may be payable from any source of any legally available funds of the City. The
Agreement provides for a procedure in the event there is a dispute as to the dollar amount of the Covenant
Payments. Any disputed amount of the Covenant payments would not accrue interest during the pendency
of any negotiation period or subsequent legal proceeding unless there is a determination that the City acted N
in bad faith with regard to the dispute. In such situation,any amount ultimately determined to be owed by 'o
the City would be deemed to have accrued interest at the rate of 4% simple interest per annum, n
commencing on the 90'h calendar day following the end of the negotiation period and continuing thereafter
until paid in whole by the City. E
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ENVIRONMENTAL IMPACT: a
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This does not meet the definition of a "project" under Section 15378 of the California Environmental 0
Quality Act ("CEQA"), which states that a `Project" means the whole of an action,which has a potential E
for resulting in either a direct physical change in the environment, or a reasonably foreseeable indirect Y
physical change in the environment. rn
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FISCAL IMPACT: _
The City would pay an amount equal to 80%of the Local Sales Tax Revenues actually received by the City o.
to Kohl's in each Operating Quarter payable only after the City has received the Fixed Payment Amounts a
equal to the first $100,000 of local sales tax revenues for Operating Year 1, the first $250,000 of Local ..
Sales Tax Revenues for the Operating Year 2, and the first$500,000 of Local Sales Tax Revenues in each
subsequent Operating Year during the remaining term of the Agreement unless the Local Sales Tax
Revenues for the Sales Activities are less than $1,000,000 based upon $100,000,000 of taxable sales
generated by the Sales Activities as determined by the BOE. Under such circumstances the Fixed Payment N
1 Amount would be adjusted to$400,000 for the applicable Operating Year until the minimum of$1,000,000
of Local Sales Tax Revenues for the Sales Activities are again achieved. The calculation formula is N
illustrated in the attachment to this Resolution and as set forth in the Agreement, z°
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Account Budgeted Amount: $0 Balance as of: July 27.2010 0
Balance after approval of this item: $0 v
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RECOMMENDATION:
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That the Mayor and Common Council adopt the attached Resolution. x
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Emil A.VurrelialaAarim Executive Director
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Meeting Date: 0WOV2010
Agenda Item Number:
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BUSINESS OPERATIONS AND COVENANT AGREEMENT
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CITY OF SAN BERNARDINO
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KOHL'S DEPARTMENT STORES, INC.
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Dated August 2,2010, r
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BUSINESS OPERATIONS AND COVENANT AGREEMENT
This BUSINESS OPERATIONS AND COVENANT AGREEMENT (this "Agreement") is
as of dated August 2, 2010 (the "Reference Date"), by and between the CITY OF SAN
BERNARDINO, a California charter city formed pursuant to the Constitution and laws of the State
of California (the "City"), and KOHL'S DEPARTNIENT STORES, INC., a Delaware corporation
( Kohl' "), and this Agreement shall become effective as of the Effective Date as further provided o
in this Agreement. The City and Kohl's, are sometimes each, individually, referred to in th s n
Agreement as a "Party" and, collectively, as the "Parties." The City and Kohl's enter into this
Agreement with reference to the following facts: r
RECITALS m
WHEREAS, Kohl's has developed and opened or will develop and locate an internet sales
fulfillment center/office (the "Sales Office') in the City and intends, during the Term hereof, to Y
designate certain taxable sales transactions through the City(the"Relevant Sales"); and
WHEREAS, Kohl's expects to generate significant revenues as a result of the Relevant
Sales generated through the Sales Office, all of which will result in the generation of significant x
new local Sales Tax revenues to the City; and ;
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WHEREAS, the City, in consideration of the new and additional local sales tax revenues, a
property taxes, employment benefits, and other tangible and intangible benefits to be received by m
the City arising from the operation of the Sales Office and other retail operations within the City as
described in this Agreement, desires to provide certain Covenant Payments to Kohl's as an n
incentive solely related to the taxable Relevant Sales activities to be conducted at the Sales Office; N
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WHEREAS,the Covenant Payments to be remitted by the City to Kohl's shall be solely for z°
the purpose of obtaining Kohl's commitment as herein set forth to designate the City as the "point o
Of sale"of the Relevant Sales for State of California Sales Tax purposes and to thus cause Kohl's to 2
refrain from establishing any similar e-commerce operations elsewhere within the State of o
California during the Term of this Agreement in addition to the other covenants and commitments
of Kohl's as to the manner in which the Sales Office shall be operated and maintained,all as further a
provided in this Agreement; and a
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WHEREAS, it is anticipated that the State of California Board of Equalization shall issue a w
seller's permit for the Sales Office, designating the City of San Bernardino as the jurisdiction c
wherein all taxable e-commerce Relevant Sales transactions conducted in California by Kohl's shall
be identified as having occurred;and u
WHEREAS, such Covenant Payments shall not be deemed to be a reimbursement or a
payment to Kohl's in any manner for construction costs or for any labor and material costs that may
be expended by Kohl's for the construction and equipping of the Sales Office or any other facility,
and it is agreed that Kohl's has utilized its own funds and assets to pay all such conshucl on and
equipping costs relative to the Sales Office, and Kohl's shall not utilize any amount of the Covenant
Payments,or the expectation of the receipt of such Covenant Payments,for such purposes; and
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WHEREAS,Kohl's operation of the Sales Office will provide significant public benefits to
the City because, among other matters, additional Sales Tax revenues generated by such activities
represent a significant source of new and additional public revenue for the City,which may be used
by the City for the funding of necessary public services and facilities, including public safety
services and facilities; and
j WHEREAS, the City has further determined that the guaranteed operation of the Sales d
Office serves the additional public purpose of fostering a business and civic environment which o
may attract additional businesses and investment in the community due to the availability of the c
increased public and private services and economic activity resulting therefrom. E
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NOW, THEREFORE, IN CONSIDERATION OF THE MUTUAL PROMISES SET
FORTH IN THIS AGREEMENT,THE CITY AND KOHL'S AGREE AS FOLLOWS: o
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1. Incorporation of Recitals. The Recitals of fact set forth above are true and correct and are Y
incorporated into this Agreement in their entirety by this reference.
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2. Effective Date of this Agreement.
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2.1 This Agreement is dated as of the Reference Date for reference purposes only. This w
Agreement shall become binding on the Parties as of the date that both the City and Kohl's have as
duly approved,executed and delivered this Agreement (the"Effective Date"). The Parties agree to a
j confirm in writing the precise date of the Effective Date not later than one hundred twenty (120) rn
calendar days after the Reference Date and if the Effective Date has not been so confirmed and if
this Agreement has not previously been terminated by either Party,then the Effective Date shall be
deemed to be that date which is one hundred twenty(120)calendar days after the Reference Date. N
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3. Representations and Warranties of the City. N
3.1 The City represents and warrants to Kohl's that,as of the Reference Date: z
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3.1.1 To the City's actual current knowledge, the City's entry into this Agreement
and the performance of the City's obligations under this Agreement do not violate any contract or d
agreement to which the City is a party;
3.1.2 To the City's actual current knowledge, there are no pending claims or a
lawsuits against the City that will delay or prevent the performance of the City's obligations under x
-j this Agreement; w
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3.1.3 The City has the legal right, power and authority to enter into this Agreement e
and to consummate the transactions contemplated by this Agreement, and in making the Covenant
I Payments herein for provided, the City will not be in violation of any spending or debt restrictions
arising under Article MIIB of the California Constitution; and
{ 3.1.4 Based upon the facts and circumstances as disclosed by Kohl's to the City,
the opening and operating of the Sales Office in the manner as anticipated to be undertaken by
Kohl's is not within the definition of a "public work" as defined by the California Labor Code
Section 1770, et se q., and the City has not received written notice from the California Department
2
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7.Aa
of industrial Relations stating to the effect that the subject matter of this Agreement, including the
leasing,construction,use and equipping of the Sales Office,is a"public work".
3.2 The representations and warranties of the City set forth in this Section 3 are material
consideration to Kohl's, and the City acknowledges that Kohl's is relying upon the representations
of the City set forth in this Section 3 in undertaking its obligations under this Agreement.
N
3.3 As used in this Agreement,the term "City's actual current knowledge" shall mean, `o
and shall be limited to, the actual current knowledge of Emil Marzuilo (Inter m Executive Director y
1
of the Economic Development Agency of the City of San Bernardino) as of the Effective Date,
without having undertaken any independent inquiry or investigation for the purposes of making
such representation or warranty and without any duty of inquiry or investigation. o
0
i 4. Representations and Warranties of Kohl's.
4.1 Kohl's represents and warrants to the City that, as of the Reference Date: o Y
4.1.1 Kohl's is a Delaware corporation,in good standing to do business in the State
of California as a foreign corporation(i.e.,a non-California corporation); d
x
4.1.2 The individuals executing this Agreement on behalf of Kohl's are duly m
i authorized by appropriate corporate action of Kohl's to execute this Agreement on behalf of Kohl's; a
4.1.3 To Kohl's actual current knowledge,Kohl's entry into this Agreement and/or
the performance of Kohl's obligations under this Agreement do not violate any contract, agreement
or other legal obligation of Kohl's;
N
4.1.4 To Kohl's actual current knowledge, there are no pending lawsuits or other °
1 actions or proceedings which would delay, prevent or impair the timely performance of Kohl's °v
obligations under this Agreement;and °
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4.1.5 Kohl's has the legal right, power and authority to enter into this Agreement 2
and to consummate the transactions contemplated by this Agreement, and the execution, delivery a
and performance of this Agreement have been duly authorized by Kohl's and no other action by
Kohl's is requisite to the valid and binding execution, delivery and performance of this Agreement, a
except as otherwise expressly set forth in this Agreement. a
4.2 The representations and warranties of Kohl's set forth in this Section are material W
consideration to the City and Kohl's acknowledges that the City is relying upon the representations
of Kohl's set forth in this Section 4 in undertaking its obligations under this Agreement. E
4.3 As used in this Agreement, the term "Kohl's actual current knowledge" shall mean, a
and shall be limited to,the actual current knowledge of Thomas Taugher,Vice President of Finance a
as of the Effective Date,without having undertaken any independent inquiry or investigation for the
purpose of making such representation or warranty and without any duty of inquiry or investigation.
5. Definitions. All initially capitalized terms used in this Agreement shall have the meanings
set forth below or, if not set forth below,where such terms first appear in this Agreement.
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7.A.a
5.1 "BOE" means the State of California Board of Equalization and any successor
agency.
5.2 "City" means and refers to the City of San Bernardino, a California charter city
formed pursuant to the Constitution and laws of the State of California.
5.3 "City Attorney" means and refers to the City Attorney of the City of San
Bernardino,California. n
5.4 "City Manager" means and refers to the City Manager of the City of San w
f Bernardino,California. £
t_
5.5 "Covenant Payments" means and refers to those payments to be made to Kohl's in o
accordance with Section 7 of this Agreement.
L
5.6 "Effective Date" shall have the meaning ascribed to the term in Section 2 of this Y
Agreement.
' 5.7 "Eligibility Period" means and refers (subject to Sections 11 and 31) to the forty m
(40) consecutive twelve (12) month periods commencing on the first calendar day of Operating =
Year 1 and ending on the last calendar day of Operating Year 40. o
5.8 "Enforced Delay" means and refers to delays or defaults in performance due to a
causes beyond the control of the Party whose performance is required pursuant to this Agreement,
including, but not limited to, war; acts of terrorism;.insurrection; any form of labor dispute;
lockouts; riots; floods; earthquakes; fires; acts of God; acts of a public enemy; referenda; acts of n
governmental authorities(except that the failure of the City to act as required under this Agreement o
shall not excuse its performance); moratoria; epidemics; quarantine restrictions; and freight c
N
embargoes. d
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1 5.9 "Kohl's" means and refers to, Kohl's, and includes any nominee, assignee or o
successor to Kohl's rights,powers and responsibilities.
5.10 "Local Sales Tax Revenues" means the net Sales Tax received by the City from the
BOE pursuant to the application of the Sales Tax Law(as such statutes may hereafter be amended, Q
substituted, replaced,re-numbered,moved or modified by any successor law) attributable to Kohl's a
retail sales allocated by the BOE to the City in a particular Operating Year. Local Sales Tax x
Revenues shall not include: (i) any Sales Tax levied by, collected for or allocated to the State of w
California, the County of San Bernardino, or a district or any entity (including an allocation to a c
statewide or countywide pool) other than the City, (ii) any administrative fee charged by the DOE,
(iii) any Sales Tax subject to any sharing, rebate, offset or other charge imposed pursuant to any
applicable provision of federal, state or local (except City's) law,rule or regulation, (iv) any Sales a
Tax attributable to any transaction not consummated within the Eligibility Period, or (v) any Sales
Tax (or other funds measured by Sales Tax) required by the State of California to be paid over to
another public entity(including the State) or set aside and/or pledged to a specific use other than for
deposit into or payment from the City's general fund. Local Sales Tax Revenues shall specifically
j exclude the Countywide Measure"T sales tax override which is designated for funding of regional
transportation projects within the County of San Bernardino and the City approved Measure "T'
which is designated to fund public safety efforts within the City. Local Sales Tax Revenues shall
4
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also specifically exclude any other Sales Tax override that is imposed within the boundaries of the
City and which is intended to fund a specific activity or project rather than to be used by City as
general fund revenues without any specific voter approved limitations on such uses.
5.11 "Mayor and Common Council" means and refers to the Mayor and Common
Council of the City of San Bernardino, California.
N
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5.12 "Negotiation Period" means and refers to a period of no less than thirty (30)
calendar days.
i m
i 5.13 "Notice of Appeal" shall have the meaning ascribed to the term in Section 7.3. c
m
a
5.14 "Notice of Determination" shall have the meaning ascribed to the term in Section o
7.2. "
O
5.15 "Opening Date" means and refers to the first calendar day of the calendar month Y
next succeeding the date on which the Sales Office first opens for business to the public. m
5.16 "Operating Quarter" means and refers, individually, to each of one hundred sixty
consecutive three-month periods of time commencing as of the first calendar day of the calendar ,
quarter next succeeding the Opening Date,with the first Operating Quarter commencing on the first n
calendar day of the BOE-designated reporting cycle immediately succeeding the Opening Date and
with each such three-month period of time referred to in this Agreement in consecutive numerical ;
order as"Operating Quarter 1,""Operating Quarter 2,"etc.
5.17 "Operating Year" means and refers, individually, to each of the forty (40)
consecutive three hundred sixty-five (365) calendar day periods of time succeeding the Opening C4
Date, with the first Operating Year commencing on the fast day of the BOE-designated reporting N
cycle immediately succeeding the Opening Date and with each such three hundred sixty-five (365) d
calendar day period referred to in this Agreement in consecutive numerical order as "Operating z
c
Year 1,""Operating Year 2,"etc. 4
j
5.18 "Reference Date" means August 2, 2010. a
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5.19 "Sales Activities" means and refers to conducting retail Relevant Sales activities a
which result in the sale or lease of any tangible personal property and which is subject to the a
payment of local sates and use taxes pursuant to the Sales Tax Law. x
W
5.20 "Sales Tax"means all sales and use taxes levied under the authority of the Sales Tax c
Law attributable to Sales Activities, excluding Sales Tax which is to be refunded to Kohl's because s
of an overpayment of Sales Tax.
5.21 "Sales Tax Law" means(i) California Revenue and Taxation Code Section 7200, et a
se ., and any successor law thereto, (ii) any legislation allowing the City or other public agency
with jurisdiction in the City to levy any form of local Sales Tax on the operations of Kohl's, and
(iii) regulations of the BOE and other binding rulings and interpretations relating to (i) and (ii)
hereof.
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7.A.a
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5.22 "Term" means and refers to the period commencing on the Effective Date and
ending on the last calendar day of the Eligibility Period, unless sooner terminated pursuant to this
Agreement.
6. Kohl's Tax Information. Subject to the provisions of Section 32, below, Kohl's
acknowledges and agrees that the Sales Tax reporting and payment information related to Sales
Taxes may become a public record as a result of the covenants of Kohl's contained in Section 8 and
the Covenant Payments to be made by the City to Kohl's(as further described in Section 7). Kohl's. n
hereby authorizes the City to use the Sales Tax reporting and payment information to allow the City
to perform its obligations under this Agreement and, subject to Section 32,below,to disclose such E
information when, in the City Attorney's reasonable opinion, such disclosure is required by law, r
{
7. Determination of Local Sales Tax Revenues and Covenant Payments. In consider ation o
for Kohl's obligations set forth in this Agreement, and subject to satisfaction of all conditions a
precedent thereto, the City shall, for each Operating Quarter during the Eligibility Period, pay to Y
Kohl's an amount equal to eighty percent(80%) of the Local Sales Tax Revenues actually received
by the City in such Operating Quarter after the City has received an amount equal to the first
$100,000 of Local Sales Tax Revenues for the Operating Year 1, the first $250,000 of Local Sales
Tax Revenues for the Operating Year 2, and the first $500,000 of Local Sales Tax Revenues (the =
"City Fixed Payment Amount") in each subsequent Operating Year thereof during the remaining m
Term of this Agreement (such percentage amounts payable to Kohl's after deduction of the City a
Fixed Payment Amount are herein defined as the"Covenant Payments")calculated in the manner as a
illustrated on Exhibit"A" as attached hereto and incorporated herein and by reference made a part rn
of this Agreement. If at anytime commencing with the Operating Year 3 and thereafter, the Local
Sales Tax Revenues for the Sales Activities are less than $1,000,000 based upon$100,000,000 of N
taxable sales generated by the Sales Activities as determined by the BOE, the City Fixed Payment N
Amount shall be adjusted for the applicable Operating Year to an amount equal to $400,000 until
j such time as in any succeeding Operating Year the minimum of $1,000,000 of Local Sales Tax N
Revenues for the Sales Activities are again achieved. In any Operating Year for which the Local z6
Sales Tax Revenues for the Sales Activities are equal to or greater than $2,000,000 based upon o
$200,000,000 of taxable sales generated by the Sales Activities as determined by the POE,the City -
shall receive thirty percent(30%) of the amount in excess of the City Fixed Payment Amount and o
Kohl's shall receive seventy percent (70%) of the amount in excess of the City Fixed Payment M
Amount. In the event any adjustments are required to be made to the amounts payable to Kohl's for a
any Operating Quarter, such adjustments shall be made with respect to the payment due and payable
for the specific Operating Quarter in which the particular milestone has been achieved pursuant to x
the formula as set forth above. a
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7.1 State of California Legislation Impact on Covenant Payment. Without limiting
the generality of the foregoing paragraph, Kohl's acknowledges that the State of California
legislature has in the past adopted certain legislation which diverted to the State of California a 42
portion of the Local Sales Tax Revenues which would otherwise be payable to the City. Kohl's a
acknowledges that it is possible that the State of California legislature may enact similar legislation
in the future which would cause a corresponding reduction of and/or delay in the payment of the
Local Sales Tax Revenues and that such reduction will cause a corresponding reduction for Kohl's
and/or delay in the payment of the Covenant Payments due to Kohl's during such time as such
legislation is in effect. Furthermore, Kohl's acknowledges that it is possible that the legislation
described above, or some variant thereof, may be enacted and effective during one or more
6 .
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subsequent times during the Eligibility Period and may materially and negatively impact the amount
of Local Sales Tax Revenues and, accordingly, the Covenant Payments. The City does not make
any representation,warranty or commitment concerning the future actions of the State of California
legislature with respect to the allocation of Local Sales Tax Revenues to the City. Kohl's agrees
that it is undertaking its obligations under this Agreement after having considered, and is expressly
assuming the risk of; the possibility of the enactment of such legislation. The City acknowledges
that the State of California legislature or the federal government through Congressional actions or m
other public entities may provide for the payment to City of other revenues for the purpose of 8
offsetting any losses in Local Sales Tax Revenues re sulting from the enactment of legislation of the c
type described in this paragraph. The City agrees that should any such offsetting revenues be d
provided, then for puiposes of this Agreement and the computation of any Covenant Payments :
which may become due to Kohl's hereunder, the City will consider any such offsetting revenues a
which are (i) indexed to Sales Tax and offset the loss of Sales Tax revenues to the City on a dollar
for dollar basis, (ii) actually received by the City, and (iii) not subject to any restrictions on use c
beyond those which are otherwise generally applicable to Sales Tax revenues received by California Y
municipalities,to be Local Sales Tax Revenues within the meaning of this Agreement.
7.2 City's Notice of Determination of operating Quarter Local Sales Tax Revenues d
and Covenant Payment. Within thirty (30) calendar days following the end of each Operating =
Quarter within the Eligibility Period, Kohl's shall submit to City: certified copies of Kohl's a
quarterly reports to the BOE which set forth the amount of Sales Tax paid to the BOE during the a
prior Operating Quarter in connection with Sales Activities. Within one hundred twenty (120)
calendar days following its receipt of the foregoing information from Kohl's, the City will
determine the Local Sales Tax Revenues applicable to the Operating Quarter and the Covenant
Payment due and provide Kohl's with written notice of the City's determination ("Notice of A
Determination"), together with reasonable supporting documents and calculations, and the City
shall verify that the City is in receipt of the requisite dollar amount of Sales Tax from the BOE as a o
condition precedent to any remittance by the City of the Covenant Payment to Kohl's. '
d
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7.3 Kohl's Notice of Appeal: Negotiation Period. Notwithstanding any other c
provision of law,including,without implied limitation,any statutes of limitation provided therefore
in the California Government Code or the California Code of Civil Procedure, the City's N
determination of the matters set forth in the Notice of Determination shall be deemed final, .
conclusive, and non-appealable unless, within ninety (90) calendar days from the receipt of the
Notice of Determination by Kohl's, Kohl's notifies the City in writing that Kohl's appeals one or a
more of the matters set forth in the Notice of Determination,which notice must specifically identify x
the matter appealed and all of the bases for such appeal("Notice of Appeal"). Any matter set forth w
in the Notice of Determination that is not appealed in the manner and within the time limits set forth
above, shall be final and conclusive as against Kohl's and all others claiming by or through Kohl's. E
The provisions of this Section 7.3 shall be strictly construed and Kohl's waives, to the maximum m
legal extent, any statutory or judicially created right to institute any administrative or judicial a
proceeding to contest any matter set forth in a Notice of Determination that is not timely appealed in
strict accordance with this Section. If Kohl's does not file a Notice of Appeal,the City shall tender
I the Covenant Payment due within forty-five (45) calendar days from the issuance of the Notice of
Determination by the City to Kohl's as provided in Section 7.2. If Kohl's files a timely Notice of
Appeal with the City,the City and Kohl's shall negotiate in good faith to resolve their dispute for a
l Negotiation Period. If, by the end of the Negotiation Period, the City and Kohl's are unable to
resolve the dispute set forth in the Notice of Appeal,each of them may exercise any judicial remedy
7
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Ii7.A.a
available to them pursuant to this Agreement for the resolution of such dispute;provided,however,
! that any provision of law to the contrary notwithstanding, such judicial remedy must be instituted
(the term "instituted' is defined as the filing of an action in a court of competent jurisdiction in
strict accordance with the terms of this Agreement) within the applicable statute of limitations
period following the end of the Negotiation Period or be barred forever. In connection therewith,
the City and Kohl's irrevocably consent to the appointment of a referee to resolve such dispute in
accordance with California Code of Civil Procedure Section 638,et sue., and to pay equal amounts d
of the cost of such referee. e
I N
7.4 No Accrual of Interest on Disputed Covenant Payments. The City and Kohl's `m
agree that any disputed amount of the Covenant Payments shall not accrue interest during the R
pendency of any Negotiation Period or subsequent legal proceeding (including any appeals filed in a
connection therewith),unless the court makes a determination upon recommendation of the referee o
that the City acted in bad faith with regard to the dispute, in which case, any amount ultimately L
determined to be owing by the City shall be deemed to have accrued interest at the rate of four Y
percent(4%) simple interest per annum, commencing on the ninetieth(90th) calendar day following
the end of the Negotiation Period and continuing thereafter until paid in whole by the City. Kohl's c
hereby waives, to the maximum legal extent, the right to the imposition of any different rate of
interest in accordance with any provision of law. _
R
7.5 Covenant Payment Paid From Any Source of City Funds. Any Covenant a
Payment due under Section 7 may be payable from any source of any legally available funds of the a
City. The City covenants to reasonably consider such actions as may be necessary to include all e
payments owed hereunder in each of its annual budgets during the Eligibility Period and to
reasonably consider the necessary annual budgetary appropriations for all such payments.
f7.6 Remittance of Covenant Payments As Contingent Obligation of City. The City's
obligations under Section 7 are contingent on a year to year basis on and, for each Operating Year o°
within the Eligibility Period, the City's obligations to make any payments to Kohl's under this o
Z
Agreement are expressly contingent upon Kohl's, for the entirety of such Operating Year,not being o
in Default in any of its material obligations under this Agreement. If for any reason Kohl's fails to -
authorize the release or use of Sales Tax information in a manner satisfactory to the BOE or provide o
any information reasonably required by the City to perform the City's obligations under this
Agreement,the City shall have no obligation to make any Covenant Payment with respect thereto to a
Kohl's for the period during which such information is unavailable to the City or the City is not a
legally authorized to use such information for the purposes of performing its obligations under this x
Agreement. Additionally, during any period in which the Sales Tax information of Kohl's is w
unavailable to the City or the City is not legally authorized to use such information for the purposes
j of performing its obligations under this Agreement, Covenant Payments with respect thereto shall E
be deemed suspended.
7.7 Covenant Payment Calculated on Quarterly Basis. The City and Kohl's agree a
that the calculation and determination of all financial components of the Parties' rights and
obligations under this Agreement shall be computed on an Operating Quarter to Operating Quarter
basis. Local Sales Tax Revenues generated in one Operating Year shall not be carried forward or
back to any future or prior Operating Year, it being the express understanding of the Parties that for
each Operating Year the financial obligations of the Parties and satisfaction of the conditions
8
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precedent to such obligations shall be determined and made independently of any other Operating
Year.
7.8 BOE Determination of Improperly Allocated Local Sales Tax Revenues. If, at
any time during or after the Eligibility Period of this Agreement,the BOE determines that all or any
portion of the Local Sales Tax Revenues received by the City and shared with Kohl's as provided
herein were improperly allocated and/or paid to the City ("Misallocation"), and if the BOE requires
repayment of, offsets against future Sales Tax payments, or otherwise recaptures from the City the o
Misallocation, then Kohl's, shall, within thirty (30) calendar days after written demand from the a
City, repay the amount of the Misallocation theretofore paid to Kohl's. This Section 7.8 shall
survive the expiration or termination of this Agreement. Further, if at any time, the BOE fails or r
refuses to remit to the City all or any portion of any Local Sales Tax Revenues applicable to any o
time period during the Eligibility Period,then such Local Sales Tax Revenues retained by the BOE o
shall not be considered in calculating any Covenant Payment otherwise due and payable under this
Agreement, unless and until such retained Local Sales Tax Revenues are paid to the City. 0
8. Designation Covenant. Kohl's shall, during the Eligibility Period, in all reports to the
POE,designate the City as the"point of sale" for all Sales Activities attributable to the Sales Office
and shall establish the Sales Office as located within the City as the site for all employees of Kohl's =
engaged in Sales Activities. Kohl's shall, for the full Eligibility Period,at its sole cost and expense,
maintain all permits, contractual arrangements, licenses, and registrations necessary for Kohl's to a
lawfully conduct Sales Activities and to designate the City as the "point of sale" in all reports and a
returns submitted to the BOE. Failure of Kohl's to comply with the covenant of this Section 8 shall m
be deemed to be a material breach of this Agreement by Kohl's and the City shall be entitled to
pursue any remedy or damages available under this Agreement, at law,or in equity for such breach. N
N
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9. Covenant Not to Discriminate. Kohl's covenants to the City that it will not unlawfully c
discriminate within the Sales Office against any employee or applicant for employment because of N
sex,marital status,race,color,religion,creed,national origin,or ancestry,and that they will comply z°
with all,applicable local, state and federal fair employment laws and regulations. Kohl's further a
covenants and agrees that there shall be no discrimination against or segregation of any person or °—
group of persons on account of race, color, creed, religion, sex, marital status,ancestry or national o
origin in the sale, lease, sublease,transfer, use, occupancy, tenure or enjoyment of the Sales Office,
nor shall Kohl's itself, or any person claiming under or through it, establish or permit any such
practice or practices of discrimination or segregation with reference to the selection, location, G<
number,use of occupancy of tenants,lessees, subtenants, sublessee or vendees of the Sales Office. a
X
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10. Indemnification. Subject to the terms of this Agreement, to the fullest extent permitted by
law, Kohl's shall defend, indemnify and hold the City, its directors, officials, including the Mayor E
I and Common Council, officers, employees, volunteers and agents free and harmless from any and
all claims, demands, causes of action, costs,expenses, liability, loss, damage or injury of any kind,
j in law or equity,in any manner arising out of,pertaining to,or incident to any alleged acts,errors or a
I omissions of Kohl's, its officials, officers, employees, subcontractors, consultants or agents in
connection with the performance of this Agreement, including without limitation the payment of
expert witness fees and attorneys fees and other related costs and expenses. In no event shall
Kohl's indemnification obligation extend to, and the City hereby waives, any present or future
claims to consequential,punitive,exemplary,treble, or other similar measures of damages.
9
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7.A.a
11. Defense of this Agreement. If a third-party files a legal action regarding the City's
approval of this Agreement or the pursuit of the Sales Activities contemplated by this Agreement,
the City or Kohl's may terminate this Agreement on thirty (30) calendar days' written notice to the
non-terminating Parry stating the terminating party's intent to terminate this Agreement,referencing
this Section 11,without any further obligation of the terminating to to perform t thee terms of
Agreement and without any liability of the terminating Parry g arty g
from such termination, unless the non-terminating Party unconditionally agrees to indemnify and
defend the terminating Party against such third-party legal action, as provided hereinafter in this 0
Section 11. Within thirty (30) calendar days after receipt of the terminating Party's notice of intent N
to terminate this Agreement, as provided in the preceding sentence,the non-terminating Party may v
offer to defend the terminating Party in the third-party legal action and pay all of the court costs, r
attorneys' fees, monetary awards, sanctions, attorney fee awards, expert witness and consulting o
fees, and the expenses of any and all financial or performance obligations (subject to the terms of o
this Agreement) resulting from the disposition of the legal action. Any such offer from non- r
terminating Party must be in writing and in a form reasonably acceptable to the terminating Party. Y
j 12. No Effect on City's Legislative Authority. Nothing in this Agreement shall limit or m
restrict the authority of the Mayor and Common Council to take any other actions with respect to
the Sales Office and the property comprising the Sales Office and/or Kohl's without notice to or =
consent from Kohl's, except as may otherwise be expressly provided by applicable law. Nothing
herein contained shall constitute a prejudgment or precommitment by the City with respect to any of a
the discretionary City permits and approvals that may be required far the Sales Office, including, a
without limitation any General Plan Amendment, Development Code text amendment, and/or
conditional or special use permits,and the environmental reviews and approvals required pursuant to
CEQA in conjunction therewith that are required to accommodate the Sales Office, and the City N
I reserves its full and unfettered discretion with respect thereto to the same extent it would have such N
discretion in the absence of this Agreement. °
N
I N
13. Non-liability of the City or City Officials and Employees. No member of the Mayor and z°
Common Council, officer, official, contractor, consultant, attorney or employee of the City shall be C
j personally liable to Kohl's, any voluntary or involuntary successors or assignees, or any lender or .2
other party holding an interest in the Sales Office, in the event of any default or breach by the City, .2
or for any amount which may become due to Kohl's or to its successors or assignees, or on any
obligations arising under this Agreement. a
Mayor and Common Council, o
14. Conflict of Interests. No member of the official, officer,
a
contractor, consultant, attorney or employee of the City shall have any personal interest, direct or w
indirect, in this Agreement nor shall any such member of the Mayor and Common Council, official,
officer, or employee participate in any decision relating to this Agreement which affects his/her E
personal interests or the interests of any corporation or partnership in which he/she is directly or E
indirectly interested. a
15. Defaults - General. Subject to any extensions of time provided for in this Agreement for
event of Enforced Delay,the occurrence of any of the following shall constitute a"Default."
15.1 The failure by either Party to perform any obligation of such Party under this
Agreement for the payment of money,if such failure is not cured within ten(10)calendar days after
10
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7.A.a
the non-performing Party's receipt of written notice from the injured Party that such obligation was
not performed when due; or
15.2 The failure by either Party to perform any of its obligations set forth in this
Agreement other than obligations subject to subsection 15.1,if such failure is not cured within thirty
(30) calendar days after the non-performing Party's receipt of written notice from the injured Party
that such obligation was not performed when due or, if such failure is of a nature that cannot d
reasonably be cured within thirty (30) calendar days, the failure by such Parry to commence such 2
cure within thirty (30) calendar days after receipt of such notice and to, thereafter, diligently N
prosecute such cure to completion;or m
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15.3 Any representation or warranty by a Party set forth in this Agreement proves to have
been false or misleading in any material respect when made and said Party does not take the „
D
necessary action, following notice pursuant to subsection 15.2,to remedy said misrepresentation or N
breach of warranty within the time period set forth in subsection 15.2, such that the original o
representation or warranty becomes truthful and accurate. Y
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15.4 Any failure or delays by any Party in asserting any of their rights and/or remedies as
to any default shall not operate as a waiver of any default or of any such rights or remedies. Delays _
by any Party in asserting any of their rights and/or remedies shall not deprive any Party of its right
I to institute and maintain any actions or proceedings that it may deem necessary to protect, assert or o
enforce any such rights or remedies. a
15.5 If Kohl's fails to make any repayment of a Misallocation (as defined above) within
sixty (60) calendar days after the City's written demand therefor (the "Grace Period"),then Kohl's
shall be in breach of this Agreement from and after the expiration of the Grace Period and the n
amount of such repayment shall thereupon accrue interest at four percent (4%) simple interest per c
annum,until paid. °
0
15.6 If Kohl's fails to comply with the covenant in Section 9 which failure continues for Z
thirty (30) days after the City's written notice thereof then Kohl's shall be in breach of this o
Agreement and the City shall be entitled to pursue any remedy or damages available under this
Agreement,at law, or in equity for such breach. °
N
15.7 Upon the occurrence of any Default by Kohl's, and after Kohl's receipt of written a
notice of default and expiration of the time for Kohl's to cure such Default as provided in a
subsection 15.2,the City may at its option: x
w
(a) suspend the payment of the Covenant Payments otherwise due and payable
to Kohl's hereunder for the period that Kohl's remains in Default. If the City has so suspended s
its payments in accordance with the terms of this clause (i),then upon Kohl's cure of such Default,
the City shall resume its payment obligations, but shall have no obligation to make payments for a
g which the City's obligation to make payments was
any Operating Quarter or portion thereof durin
i so suspended; or
(b) if the Default continues uninterrupted for a period of six (6) months, the
City may terminate this Agreement, in which case the City's obligation to make Covenant
Payments to Kohl's for any period of time after the occurrence of the Default shall be finally
terminated and discharged.
11
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In no event,however, shall the City have the right to specifically enforce Kohl's covenants set forth
in Section 8 of this Agreement regarding the continuous operation of the Sales Office, to prevent
Kohl's conversion of the Sales Office to another lawful use(even if such use would be inconsistent
with this Agreement), or to sue Kohl's or to recover from Kohl's any amount that is actually
or allegedly attributable to loss of anticipated Sales Tax or other revenues, whether because
the amount of Sales Tax:generated from the Sales Office is less than projected by Kohl's or the
City, or because Kohl's does not operate the Sales Office for the entire Operating Period, or `o
otherwise,unless Kohl's is in violation of the provisions of Section 10 of th s Agreement. y
15.8 Upon the occurrence of any Default by the City, and after the City's receipt of
written notice of Default from Kohl's and expiration of the time for the City to cure such Default as
provided in Section 15,Kohl's may terminate this Agreement by written notice to the City and/or
seek whatever legal or equitable remedies may be available to Kohl's,subject to the provisions °
of Section 17. o
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16. City Offset Remedy. In addition to those rights and remedies provided by Section 15, the
City's rights and remedies for a Default by Kohl's include the right to off-set any amount of money
due to Kohl's from City following the notice and opportunity to cure provided in Section 15,against m
any Covenant Payments due or becoming due to Kohl's. _
d
17. Legal Actions. In addition to any other rights or remedies, but subject to the other terms a
and conditions of this Agreement, either Parry may institute legal action to cure, correct or remedy
any Default by the other Party,to recover general or consequential damages for any default, or to
obtain any other remedy available to that Party under this Agreement or at law. It is expressly
agreed to by the Parties that in the event of a Default hereunder, the only remedy available to the
non-defaulting Party shall be as set forth expressly in this Agreement and in no event shall any party
hereto have any equitable remedy,it being agreed by both parties that legal remedies alone shall be c
j sufficient as a result of any Default hereunder. In no event shall either Parry be entitled to seek or
obtain punitive,exemplary,consequential or other similar remedies against the defaulting Party. z°
o
Furthermore, anything herein to the contrary notwithstanding, in no event shall Kohl's
liability under this Agreement for damages or otherwise (including without limitation any N
indemnification obligations), in the aggregate, exceed the greater of (i) $1,000,000 and (ii) the
Covenant Payments actually received by Kohl's for the three (3) year period ending on the date of d
Default. 9
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18. Governing Law. The procedural and substantive laws of the State of California shall w
govern the interpretation and enforcement of this Agreement,without regard to its conflicts of laws
d
principles. E
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19. Rights and Remedies are Cumulative. Except as otherwise expressly stated in this «_
Agreement, the rights and remedies of the Parties under this Agreement are cumulative and the a
exercise by any Party of one or more of such rights or remedies shall not preclude the exercise by it,
at the same or different times, of any other rights or remedies for the same default or any other
default by another Party.
12
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20. Notices,Demands and Communications between the Parties.
20.1 Any and all notices, demands or communications submitted by a Party to the other
Patty pursuant to or as required by this Agreement shall be proper, if in writing and dispatched by
messenger for immediate personal delivery,by a nationally recognized overnight courier service or
by registered or certified United States mail, postage prepaid, return receipt requested, to the
j principal office of the Party, as designated in subsection 20.2. Such written notices, demands and d
communications may be sent in the same manner to such other addresses as the Party may from ;
time to time designate. Any such notice,demand or communication shall be deemed to be effective N
i when received by the addressee.
20.2 The following are the authorized addresses for the submission of notices,demands or o
communications to the Parties:
0
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To Kohl's: Kohl's Department Stores,Inc. o
N56 W 17000 Ridgewood Drive Y
Menomonee Falls,Wisconsin 53051 m
Attention: Finance Department
°
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With a copy to: Kohl's Department Stores, Inc. �
N56 W17000 Ridgewood Drive "o
Menomonee Falls,Wisconsin 53051 °
a
^ Attention: Legal Department
l f To the City: City of San Bernardino
300 North"D" Street
San Bernardino,California 92418 c
Attention: City Manager N
With courtesy copy to: Lewis Brisbois Bisgaard& Smith LLP z°
650 East Hospitality Lane,Suite 600 0
San Bernardino, California 92408 M
Attention: Timothy J. Sabo °
v
Notwithstanding the foregoing, for the purpose of this Agreement, any and all notices, a
demands or communications submitted by Kohl's to the City pursuant to or as required by this a
Agreement shall be deemed to be from Kohl's. Conversely, any and all notices, demands or w
communications submitted by the City to Kohl's shall be deemed to be submitted by the City to
Kohl's.
21. Attorneys' Fees. In the event of the bringing of an arbitration, action or suit by a Party to
this Agreement against the other Party to this Agreement by reason of any breach of any of the a
covenants or agreements or any intentional inaccuracies in any of the representations and warranties
on the part of the Party arising out of this Agreement or any other dispute between the Parties
conceming this Agreement, then, in that event, the prevailing Party in such action or dispute,
whether by final judgment or arbitration award,shall be entitled to have and recover of and from the
other Party or Parties all costs and expenses of suit or claim, including reasonable attorneys' fees.
Any judgment, order or award entered in any final judgment or award shall contain a specific
provision providing for the recovery of all costs and expenses of suit or claim, including reasonable
13
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attorneys' fees (collectively, the "Costs") incurred in enforcing, perfecting and executing such
judgment or award. For the purposes of this Section 21, Costs shall include, without implied
limitation, reasonable attorneys' and experts' fees, costs and expenses incurred in the following: (i)
post judgment motions and appeals, (ii) contempt proceedings, (iii)garnishment, levy and debtor
and third party examination;(iv) discovery;and(v)bankruptcy litigation. The term Costs shall also
1 include the costs incurred by the City Attorney and members of the City Attorney's staff including
attorneys, investigators and other staff personnel, plus salaries and benefits payable to such o
employees, for any such Costs incurred by the City Attorney pursuant to this Agreement. This N
Section 21 shall survive any termination of this Agreement.
22. Jurisdiction and Venue. Any legal action or proceeding concerning this Agreement shall r
be, filed and prosecuted in the appropriate state or federal court in the State of California. The
Parties to this Agreement irrevocably consent to the personal jurisdiction of that court. Venue shall ❑
be in San Bernardino County. r
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23. Interpretation. The Parties acknowledge that this Agreement is the product of arms-length
negotiation and drafting and that each of the Parties have been represented by legal counsel in the
negotiation and drafting of this Agreement. Accordingly, any rule of construction that the
ambiguities in a document shall be construed against the drafter of that document shall have no i
application to the interpretation and enforcement of this Agreement. In any action or proceeding to
j interpret or enforce this Agreement, the finder of fact may refer to any extrinsic evidence not in a
I direct conflict with any specific provision of this Agreement to determine and give effect to the
intention of the Parries.
24, Counterpart Originals; Integration; Amendments. This Agreement may be executed in N
duplicate originals, each of which is deemed to be an original, but all of which taken together shall
constitute one and the same instrument. This Agreement and the Exhibits attached to this
Agreement represent the entire understanding of the Parties and supersede all negotiations,letters of N
intent,memoranda of understanding or previous agreements between the Parties with respect to all
z
j or any part of the subject matter of this Agreement. This Agreement may not be amended except by o
a written instrument executed by both Parties and approved in the manner as required by both
Parties. u°
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25. No Waiver. Failure to insist on any one occasion upon strict compliance with any of the a
terms, covenants or conditions of this Agreement shall not be deemed a waiver of such term,
covenant or condition, nor shall any waiver or relinquishment of any rights or powers under this x
Agreement at any one time or more times be deemed a waiver or relinquishment of such other right w
or power at any other time or times.
26. Time is of the Essence/Force Majeure. Time is of the essence in the performance of the
Parties' obligations under this Agreement. In addition to specific provisions of this Agreement g
providing for extensions of time, times for performance under this Agreement shall be extended by a
an Enforced Delay, provided, however, that the Party claiming the extension notify the other Party
of the nature of the matter causing the Enforced Delay within thirty(30)calendar days from the date
of the occurrence thereof, and, provided further, that the extension of time shall be only for the
period of the Enforced Delay.
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26.1 ANYTHING IN THIS AGREEMENT TO THE CONTRARY
NOTWITHSTANDING, KOHL'S EXPRESSLY ASSUMES THE RISK OF UNFORESEEABLE
CHANGES IN ECONOMIC CIRCUMSTANCES AND/OR MARKET DEMAND/CONDITIONS
AND WANES,TO THE GREATEST LEGAL EXTENT,ANY DEFENSE, CLAIM, OR CAUSE
OF ACTION BASED IN WHOLE OR IN PART ON ECONOMIC NECESSITY,
IMPRACTICABILITY, CHANGED ECONOMIC CIRCUMSTANCES, FRUSTRATION OF y
PURPOSE,OR SIMILAR THEORIES. o
26.2 KOHL'S EXPRESSLY AGREES THAT ADVERSE.CHANGES IN ECONOMIC
CONDITIONS,EITHER OF KOHL'S SPECIFICALLY OR THE ECONOMY GENERALLY, OR d
CHANGES IN MARKET CONDITIONS OR DEMANDS,SHALL NOT OPERATE TO EXCUSE
OR DELAY THE STRICT OBSERVANCE OF EACH AND EVERY OF THE OBLIGATIONS, d
COVENANTS, CONDITIONS AND REQUIREMENTS OF THIS AGREEMENT. KOHL'S °
EXPRESSLY ASSUMES THE RISK OF SUCH ADVERSE ECONOMIC OR MARKET s
CHANGES,WHETHER OR NOT FORESEEABLE AS OF THE EFFECTIVE DATE. Y
rn
Acceptance by Kohl's
27. No Third Party Beneficiaries. The performance of the Parties' respective obligations o
under this.Agreement is not intended to benefit any party other than the City and Kohl's, except as a
may be expressly provided otherwise in this Agreement. No person or entity not a signatory to this
„1 . Agreement shall have any rights or causes of action against either Party to this Agreement as a
4 result of that Party's performance or non-performance under this Agreement.
i 28. No Effect on Eminent Domain Authority. Nothing in this Agreement shall be deemed to ry
limit, modify, or abridge or affect in any manner whatsoever the City's eminent domain powers °
' with respect to the Sales Office.
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29. Tax Consequences. Kohl's acknowledges that it may experience tax consequences as a o
result of its receipt of the payments provided for in this Agreement and agrees that it shall bear any .2
and all responsibility,liability,costs,and expenses connected in any way therewith. o
30. Warranty against Payment of Consideration for Agreement. Kohl's warrants that it has Al
not paid or given, and will not pay or give, any third party any money or other consideration for
obtaining this Agreement. Third parties, for the purposes of this Section 30, shall not include s
persons to whom fees are paid for professional services if rendered by attorneys, consultants, w
accountants,engineers,architects and the like when such fees are considered necessary by Kohl's. c
d
31. Special Termination Right. In consideration of Kohl's entering into this Agreement, the
City agrees that Kohl's shall have the on-going right to terminate this Agreement for any reason,or
for no reason, in its sole and absolute discretion upon not less than three (3) days' prior written a
notice to the City.
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32. Confidentiality. Kohl's acknowledges that it may be requested to make certain confidential
financial disclosures to City, its staff or legal counsel, pursuant to this Agreement. The parties
recognize that such financial disclosures may contain sensitive information relating to business
transactions of Kohl's, that the disclosure of such information to third parties could impose
commercially unreasonable and/or anti-competitive burdens on Kohl's. Accordingly,City agrees to
maintain the confidentiality of any of Kohl's financial and/or proprietary information described in N
Government Code Section 6254.15, as may be provided by Kohl's to City or its consultants, to the
maximum extent permitted by law. City shall not provide a copy of any business record that is N
determined by counsel to City to be protected from disclosure under Government Code Section c
6254.15 to a third party, unless Kohl's first consents to such disclosure in writing or, unless a court E
of competent jurisdiction compels disclosure.
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IN WITNESS WHEREOF,the Parties hereto have executed this Business Operations and
Covenant Agreement on the date first written above.
CITY:
CITY OF SAN BERNARDINO, y
a California charter city
By: E
Patrick J.Morris,Mayor m
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ATTEST:
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By: c
Rachel G.Clark, City Clerk
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APPROV AS TO FORM: c
By:
J Penman,City Attorney
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KOHL'S DEPARTMENT STORES,INC. c
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EXMIT"A"
Method of Calculation of Covenant Payments
(Section 7 of Agreement)
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Est Total Gross
Taxable Sales in CA City Share After Kohl's Share After
Year (2%annual growth) Local 1% City Floor Floor-20°/ Floor-80°/
2010 $ 50,0001000 $ 500,000 $ 100,000 $ 80,000 $ 320,000
2011 $ 75,000,000 $ 750,000 $ 250,000 $ 100,000 $ 400,000
2012 $ 100,000,000 $ 11000,000 $ 500,000 $ 100,000 $ 400,000
2013 $ 102,000,000 $ 1,020,000 $ 500,000 $ 104,000 $ 416,000
2014 $ 104,040,000 $ 1,040,400 $ 500,000 $ 108,080 $ 432,320
I 2015 $ 106,120,800 $ 1,081,200 $ 500,000 $ 112,242 $ 448,966 m
2016 $ 108,243,216 $ 1,082,432 $ 500,000 $ 116,486 $ 465,946 $
2017 $ 110,408,080 $ 1,104,081 $ 500,000 $ 120,816 $ 483,265 rn
2018 $ 112,616,242 $ 1,126,162 $ 500,000 $ 125,232 $ 500,930 y
2019 $ 114,868,567 $ 1,140,686 $ 500,000 $ 129,737 $ 518,949 E
2020 $ 117,165,938 $ 1,171,659 $ 500,000 $ 134,332 $ 537,328 a
2021 $ 119,509,267 $ 1,195,093 $ 500,000 $ 139,019 $ 556,074 0
2022 $ 121,899,442 $ 1,218,994 $ 500,000 $ 143,799 $ 575,196 w
2023 $ 124,337,431 $ 1,243,374 $ 500,000 $ 148,675 $ 594,699 r
2024 $ 126,824,179 $ 1,268,242 $ 500,000 $ 153,64B $ 614,593 0
Y
2025 $ 129,360,663 $ 1,293,607 $ 600,000 $ 158,721 $ 634,885
2026 $ 131,947,876 $ 1,319,479 $ 500,000 $ 163,896 $ 656,583 c
2027 $ - 134,586,834 $ 1,345,8611 $ 500,000 $ 169,174 $ 676,695
2028 $ 137,270,571 $ 1,372,786 $ 500,000 $ 174,557 $ 698,229 _
2029 $ 140,024,142 $ 1,400,241 $ 500,000 $ 180,048 $ 720,193 m
2030 $ 142,824,625 $ 1,428.,246 $ 500,000 $ 185,649 $ 742,597 a
2031 $ 145,881,117 $ 1,456,811 $ 500,000 $ 191,362 $ 765,449 Q
2032 $ 148,594,740 $ 1,485,947 $ 500,000 $ 197,189 $ 788,758
2033 $ 151,588,634 $ 1,515,666 $ 500,000 $ 203,133 $ 812,533
2034 $ 154,597,967 $ 1,545,950 $ 500,000 $ 209,196 $ 836,784 _.
2035 $ 157,689,926 $ 1,576,899 $ 500,000 $ 215,380 $ 661,519 n
2036 $ 160,843,725 $ 1,608,437 $ 500,000 $ 221,687 $ 886,750
2037 $ 164,050,599 $ 1,640,606 $ 500,000 $ 228,121 $ 912,485 °
2038 $ 167,341,811 $ 1,673,418 $ 500,000 $ 234,684 $ 938,734 N
2039 $ 170,688,648 $ 1,706,886 $ - 500,000 $ 241,377 $ 965,509 6
2040 $ , 174,102,421 $ 1,741,024 $ 500,000 $ 248,206 $ 992,819
2041 $ 177,584,489 $ 1,775,845 $ 500,000 $ 255,189 $ 1,020,676 0
2042 $ 181,136,158 $ 1,811,362 $ 600,000 $ 262,272 $ 1,049,OB9 2
2043 $ 184,758,682 $ 1,847,569 $ 500,000 $ 269,518 $ 1,078,071 u0i
2044 $ 188,454,059 $ 1,864,541 $ 500,000 $ 276,906 $ 1,107,632
2045 $ 192,223,140 $ 1,922,231 $ 500,000 $ 284,446 $ 1,137,785 Q
2046 $ 196,067,603 $ 1,960,676 $ 500,000 $ 292,135 $ 1,168,541
2047 $ 199,988,955 $ 11999,890 $ 500,000 $ 299,978 $ 1,199,912 's
2048 $ 203,988,734 $ 2,039,887 $ 500,000 $ 307,977 $ 1,231,910 w
2049 $ 208,068,509 $ 2,080,685 $ 500,000 $ 316,137 $ 1,264,548
$ 19,350,000 $ 7,602,986 $ 30,411,962 E
Total to San Bernardino $ 26,952,988 46.99% A
Total to Kohl's $ 30,411,952 53.01% Q
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OFFICE OF THE CITY CLERK
RACRRL G.CLARK-CRY CLERK
300 North"D"Street•San Bernardino•CA 92418-0001
909.380.5002•Fax:909.384.5158
www.sbGity.org
San Bera ►no
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October 19,2011
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Kohl's Department Stores Inc. "
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Attn: Tax Manager yo
N56W 1700 Ridgewood Dr.
Menomonee Falls WI 53051-5660 =_
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RE: City Business Registration =
Internet Sales Fulfillment Center—825 E. Central Ave. a
Account#935001 a
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Dear Sir/Madam:
On May 2, 2011 our office processed your business registration renewal for the above
location. Upon review of the renewal application it was noted that your office indicated a°
"N/A" with respect to the gross receipts attributable to this location and therefore v
submitted the minimum annual business registration fee of$60. a
After further investigation,we found that Kohl's has entered into a"Business Operations E
and Covenant Agreement" with the City of San Bernardino which was adopted by 0
Resolution 2010-272 at the City of San Bernardino Mayor and Common Council Meeting y
of August 2,2010. A copy of the Resolution is attached for your reference. d
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Contained within this agreement are several statements indicating that Kohl's would
establish a sales office at this location and designate the City of San Bernardino as the m
point of sale for all taxable e-commerce sales transactions in California: r
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• Specifically, as stated in the "Recitals" "...the State Boatel of Equalization shall w
issue a seller's permit for the Sales Office,designating the City of San Bernardino
as the jurisdiction wherein all taxable e-commerce Relevant Sales transactions E
conducted in California by Kohl's shall be identified as having occurred..."
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CrrY OF SAN BERNARDINo / -
ADomD SHARED VALUES:Integrity•Accountability•Respect for Human Dignity•Hones[ packet Pa.407
7.A.b
• Section 8 of the agreement states in part, "Designation Covenant. Kohl's
shall....in all reports to the BOE, designate the City as the"point of sale" for all
Sales Activities attributable to the Sales Office and shall establish the Sales Office
as located within the City as the site for all employees of Kohl's engaged in Sales
Activities. Kohl's shall...at its sole cost and expense, maintain all permits, m
contractual arrangements, licenses, and registrations..." °
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San Bernardino Municipal Code Section 5.04.525 establishes those businesses for which £
the annual business registration fee is based on gross receipts. SBMC Section 5.04.525B m
defines "Retail Merchants" as "Every person, firm or corporation conducting, managing o
or carrying on the business of selling at retail any goods, services,wares or merchandise
other than food...shall pay a fee established by resolution of the Mayor and Common o
Council". Resolution 96-188 establishes the fee for Retail Merchants as "$60.00 per Y
year plus three fourths of one-tenth of one percent(.00075) of all dollar value of annual
gross receipts in excess of fifteen thousand dollars of such gross receipts..."
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Gross receipts are reported, and the appropriate fee paid, annually to the Business
Registration Division of the City Clerk's Office. Based on the above information, we a
request that you submit an amended Business Registration Renewal Application form a
staring the gross sales attributable to the internet fulfillment center for the time period of
May 1, 2010 through Auril 30, 2011. This amount should agree with your filings with
the State Board of Equalization. Once we have received your amended application we E
F will calculate your business registration fee for the current year (May 1, 2011-April 30, g
2012) and the fast year of operation (May 1, 2010-April 30, 2011) and invoice you
accordingly. o
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Please use the enclosed Business Registration Renewal Application to state the gross o
sales for the above requested time period and return to our office no later than November E
10, 2011. Should you have any questions, or need assistance in completing the 2
application please contact our office at(909) 384-5036.
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Sincerely,
ca
Cindy Buechter K
Business Registration Manager w
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Cc: Rachel Clark,City Clerk rE
Barbara Pachon,Director of Finance
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KOHL'S
expect great things
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November 30,2011 CD `-'- in
Cindy Bucchter wO E
Business Registration Manager o.
Office of the City Clerk o
300 North"D"Street a
San Bernardino,CA 92418-0001 c
Y
Re:Account#: 935001 a
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Dear Ms. Buechler:
In response to the City of San Bernardino's letter dated October 19,2011 (copy enclosed),Kohl's a
Department Stores,Inc.("Kohl's")respectfully disagrees with the determination that an amended application 4
needs to be filed for its E-Commerce Fullfillment Center("EFC")Business Registration.
m
Kohl's EFC is merely participating in the movement of merchandise(i.e.,fulfilling orders). There are no
sales transactions at the EFC that would require Kohl's to source receipts to the City of San Bernardino for E
purposes of the annual Business Registration. 0
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The City's Municipal Code does not provide reference to the sourcing of sales for sales tax reporting o
purposes. Any activities conducted at the EFC relate to participating in the sales transaction,which in turn a
allows Kohl's to source receipts to the City of San Bernardino for sales tax purposes only. o
E
Kohl's is in compliance with the reporting of sales as it relates to the Business Registration for the City of
San Bernardino. a
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Please feel free to contact me if you have any questions regarding the above information. Thank you in
advance for your consideration in this matter.
W
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Sincerely,
n n a
,nC(^llI J I/1 S
W
oseph Malloy
Senior Tax Manager—Kohl's E
(262)703-6016 A
josenh.malloyfkohls.com a
Enclosures—
As stated
CORPORATE OFFICES• N56 W17000 RIDGEWOOD DRIVE•MENOMONEE FALLS,WISCONSIN 53051•(262)703-7000
�i V Packefpg.469r.
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2.012 MAR 29 AM 7' 0(_)
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INTER OFFICE MEMORANDUM
OFFICE OF THE CITY ATTORNEY
CITY OF SAN BERNARDINO c
LEGAL MEMO NO. 12-015 n
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TO: Cindy Buechler, Business Registration Supervisor °
City Clerk's Office o
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FROM: Stephanie D. Easland,Assistant City AttomAL
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DATE: March 28, 2012 =
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RE: KOHL'S BUSINESS REGISTRATION FEE a
CC: James F. Penman, City Attorney; Gigi Hanna, City Clerk;
Andrea Travis-Miller,Assistant City Manager; Terrence Beaman,
Deputy Director of Finance E
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I've reviewed the documents you forwarded to me regarding the appropriate business n
registration fee for Kohl's Internet Sales Fulfillment Center and Office. I absolutely agree with the a
position you took in your letter to Kohl's Tax Manager, and you accurately stated the applicable
Municipal Code sections in relation to certain provisions contained in the 2010 Business Operations E
and Covenant Agreement("Agreement") entered into by the City and Kohl's Department Stores.
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The strongest argument that the business registration fee is based on gross receipts pursuant z
to SBMC §5.04.525B is found in Section 8 of the Agreement that provides in pertinent part as
follows: w
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"Kohl's shall, for the full Eligibility Period, at its sole cost and t
expense, maintain all permits, contractual arrangements, licenses, w
and registrations necessary for Kohl's to lawfully conduct Sales
Activities and to designate the City as the`point of sale' in all reports E
and returns to the BOE." (Emphasis added.)
The subject Agreement defines the"Eligibility Period"as 40 years and "Sales Activities" a
as"retail Relevant Sales activities which result in the sale or lease of any tangible personal property
and which is subject to the payment of local sales and use taxes pursuant to the Sales Tax Law."The
FABASLANMCi1y CIerIAISOhIcBneBegFea Bnech tscmem.wpd 1
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recitals set forth at the beginning of the Agreement and incorporated into the Agreement in their
entirety,define"Relevant Sales" as certain designated taxable sales transactions through the City.
Therefore, Section 8 of the subject Agreement between the City and Kohl's creates the
mandatory obligation for Kohl's to maintain a business registration with the City in order to conduct
retail relevant sales activities,i.e.,those certain designated taxable sales transactions through the City d
as the point of sale. °
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In summary, the business registration should be based upon the same agreed upon taxable E
sales transactions that are reported to the Board of Equalization for sales tax purposes. If Kohl's still R
disputes this analysis, it needs to exercise its right to appeal the determination to the Mayor and d
Common Council, and should be informed of such process. °
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If you have any further questions or comments on this matter, please do not hesitate to x
contact me. a
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OFFICE OF THE CITY CLERK
GEORGEANN°GIGO'HANNA—CITY CLERK
!' BUSINESS REGISTRATION DMSIoN
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P.O.Box 1318•San Bernardino•CA 92402
300 North`D"Street•San Bernardino•CA 92418-0001
909.384.5302•Fax:909.384.5158
San Bcrnar 1110 wwwsbcily.org
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April 11,2012
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Joseph Malloy ,10
Senior Tax Manager—Kohl's
N56W 1700 Ridgewood Dr.
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Menomonee Falls WI 53051-5660
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RE: City Business Registration m
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Internet Sales Fulfillment Center-825 E.Central Ave.
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Account#935001 a
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Dear Mr. Malloy:
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In response to your correspondence dated November 30,2011 regarding the business registration for ri
the above facility,we forwarded your letter and a copy of the Business Operations and Covenant @
Agreement with the City of San Bernardino to our City Attorney's Office for review. Their review agreed a
with the position taken in our original letter dated October 19,2011 and concluded the following:
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Section 8 of the Agreement provides that the business registration fee is based on gross receipts O E
pursuant to SBMC Section 5.04.525B. In pertinent part,Section 8 of the Agreement states, - g
"Kohl's shall,for the full Eligibility Period,at its sole cost and expense,maintain all permits, L
contractual arrangements,licenses, and registrations necessary of Kohl's to lawfully conduct
Sales Activities and to designate the City as the 'Point of sale' in all reports and returns to the
BOE". w
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The Agreement defines"Sales Activities" as"retail Relevant Sales activities which result in the
sale or lease of any tangible personal property and which is subject to the payment of local sales -5
and use taxes pursuant to the Sales Tax Law." The Agreement defines"Relevant Sales'as
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certain designated taxable sales transactions through the City.
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Therefore,Section 8 of the Agreement creates the mandatory obligation for Kohl's to maintain a
business registration with the City and that the business registration should be based upon the °
same agreed upon taxable sales transactions that are reported to the Board of Equalization for a
sales tax purposes.
Based on this information,we again request that Kohl's submit an amended Business Registration
Renewal Application form stating the gross sales attributable to the internet fulfillment center for the
CITY OF SAN BERNARDINO
ADOPTED SHARED VALUES:Integrity•Accountability •Respect for Human Dignity•Honesty
G Packet Pg.472
time period of May 1 2010 through April 30,2011. This amount should agree with your filings with the
State Board of Equalization. Once we have received your amended return,we will calculate your
business registration fee for the current year(May 1,2011-April 30,2012)and the first year of operation
(May 1, 2010-April 30,2011)and invoice you accordingly.
We request you submit this information on the enclosed Business Registration Renewal Application and
return to our office no later than April 30,2012. Failure to submit this information by April 30,2012 0
may result in the addition of all appropriate penalties.
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Should Kohl's continue to dispute this analysis,you may appeal this determination to the Mayor and E
Common Council as set forth in SBMC Chapter 2.64(copy enclosed). If you wish to appeal this o
determination,the enclosed Appeal Form must be completed and returned to the City Clerk's Office no 0
later than 5:30 p.m.April 26,2012. t
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If you have any questions regarding this determination,you may contact our office at(909)384-5036 or
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Stephanie Easland,Sr.Assistant City Attorney, at (909) 384-5355. °
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Sincerely, _
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Cindy Buechter
Business Registration Manager
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Cc: Gigi Hanna,City Clerk 0
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Stephanie Easland,Sr.Assistant City Attorney R
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FFjc,Iket Pgz 413 1
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CITY OF SAN BERNARDINO
APPEAL FORM
Office Use Only iJi2�n p n 4
Copies Distributed To; 7tdtlmk'Srtjmpi
❑City Attomey C3 City Manager
(Date;
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IMPORTANT INFORMATION, All appeals to the Mayor and Common Council, Board of -0
Building Commissioners (BBC) and Animal Control Commission mast be filed in the City
Clerk's Office.
COMPLETE ALL ITEMS BELOW; >.
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Annellant -
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Name: �� Y
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Address: AS�7 s 131 MD 0i(d gaofflh A �sl ti gx
C4n Person
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Name: Zl_ n A r 11 .c Address: T1 3� an.
� ys /yemacl Qr �se nr�nst fZtic l.0 c� .r
Day Phone: /u'71 (•-__ 1(o Fait- (z r o
Evening Phone: 14 `,ta
E-mail: ' yyt41 a
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Affected Property Address; a
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Assessor's Parcel Number(APN o): dot
Whose Decision Are You Appealing: tisrr AA
Date of that Decision: 't\
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TYPE OF APPEAL—CHECK ONE:
oard of Building Commissioners—$75.00 w
Mayor and Common Couuelf=S75.00k� [�Aalmal Control Commission-$75.00
PM, Commission—Fee Adjusted Annually Opel'" Commission—No Charge t
(Other:
"Note: Appeals to the Mayor and Common Council can only
be from Me Planning Commission and Police Como Charge
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City of San Bernardino-City Clerk's Office-300 N. '•D"Street
San Bernardino,CA 92418.(909)384-5002 �
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262704043
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A VALID APPEAL MUST INCLUDE THE FOLLOWING
INFORMATION(SSMC 2.64
1. The action appealed:
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2. The grounds for appeal: °
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3. The action(s)sought: a
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