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					                                                                                 ITEM #10B




                                                                   Approved for Distribution
                                                                   /s/ Beverly R. Cameron

                                     MEMORANDUM
TO:            Mayor Thomas Tomzak and Members of City Council
FROM:          Beverly R. Cameron, City Manager
DATE:          November 1, 2011
SUBJECT:       Downtown Tourism Zone Incentive Agreement, F. W. Sullivan’s Old Town
                  Bar and Grill, 407-409 William Street


ISSUE

Shall the City Council grant an incentive agreement under the Downtown Tourism Zone
ordinance to F. W. Sullivan’s Old Town Bar and Grill to be located at 407-409 William Street?

RECOMMENDATION

I recommend that City Council approve the attached ten-year incentive agreement with a
maximum value of $100,000 in tax revenue sharing subject to annual performance measures by
adoption of the attached resolution.

BACKGROUND

The application was received September 6. The Richmond-based operator of F. W. Sullivan’s
Fan Bar and Grill and Lady N’awlins Cajun Café, both in Richmond’s Fan District, first applied
for incentives in January for 106 George Street, but lease delays led to the William Street change
of location. Both Richmond restaurants have received numerous awards for their cuisine and
atmosphere.

The 7,500 square foot restaurant will have 180 seats and employ 35 or more people, under a ten-
year lease. The hours of operation will mirror the Richmond locations, 4:30 p.m. to 2:00 a.m.
Monday through Friday and 9:30 a.m. to 2:00 a.m. on Saturdays and Sundays. Lunch hours
may be added in the future.

The interior has been completely redecorated with a moveable barrier defining spaces in the
room, carpeting, professionally designed lighting, strategically spaced acoustic panels, high top
tables, new booths with fabric, new earth tone colors, copper and dark-stained wood.

Job creation was the Downtown Tourism Zone incentive threshold met by the application. The
application was scored by the Economic Development staff at 50 points. Based on this score,
Memorandum to Mayor and Council
F.W. Sullivan’s Incentive Agreement
Page 2 of 2


the restaurant qualifies for a 50% BPOL tax reduction and 10% revenue sharing on the meals and
sales tax, up to a combined limit of $100,000.

FISCAL IMPACT

The projected ten-year tax revenues, including BPOL, meals and local sales tax, is a cumulative
$2.1 million, of which up to $100,000 will be shared with the business subject to satisfaction of
annual performance measures.



Attachments:

   1. Resolution
   2. Score sheet
   3. Incentive agreement summary
   4. Performance Agreement
MOTION:                                                                       November 8, 2011
                                                                              Regular Meeting
SECOND:                                                                       Resolution No. 11-


RE:            AUTHORIZING THE CITY MANAGER TO EXECUTE A
               PERFORMANCE AGREEMENT WITH CAPITAL CATERING, LLC,
               d/b/a F.W. SULLIVAN’S OLD TOWN BAR AND GRILL, AND THE
               FREDERICKSBURG ECONOMIC DEVELOPMENT AUTHORITY, FOR
               TAX INCENTIVES IN THE DOWNTOWN/PRINCESS ANNE STREET
               TOURISM ZONE

ACTION:

                 WHEREAS, the City Council adopted Ordinance 07-31 on July 10, 2007,
establishing the “Downtown/Princess Anne Street Corridor” as a Tourism Zone, as amended by
Ordinance 10-33 adopted by City Council on October 26, 2010, by authority of Virginia Code
§58.1-3851. The purpose of the District is to provide economic incentives and regulatory
flexibility for eligible business entities which will attract visitors from the Fredericksburg region,
make a substantial investment, and create new jobs. The new and expanded businesses that
participate in this Tourism Zone will enhance the revitalization efforts in the historic heart of the
City;

               WHEREAS, Fredericksburg Comprehensive Plan (2007) identifies the
Downtown as a “Key Area,” “critical to the economic health and well-being of Fredericksburg.”
The Comprehensive Plan’s Downtown Goals include the protection of the character of
Fredericksburg’s historic area and city center environment, to preserve a sense of place, promote
economic strength, and ensure the City’s continuing appeal to residents, business people, and
visitors. The Comprehensive Plan includes a Downtown Policy to encourage development of
“destination” activities and unique uses downtown, and a Downtown Initiative to pursue
innovative financing strategies to encourage and facilitate development in the downtown,
including the establishment of the tourism zone;

               WHEREAS, Capital Catering, LLC proposes to open a new restaurant in vacant
restaurant space located at 409 William Street in downtown Fredericksburg, Virginia, with
seating for approximately 175 people in substantial accordance with its Incentive Application
dated September 6, 2011 (“the Restaurant”).           This location lies within the City’s
Downtown/Princess Anne Street Corridor Tourism District;

                WHEREAS, the City Manager has negotiated a proposed Performance
Agreement, whereby the City and the Fredericksburg Economic Development Authority will
provide certain incentives to Capital Catering, LLC in exchange for its operation of the
restaurant; and
                                                                                   November 8, 2011
                                                                                    Resolution 11-__
                                                                                              Page 2




              WHEREAS, City Council wishes to authorize the City Manager to execute,
deliver and carry out the terms of the Performance Agreement on behalf of the City of
Fredericksburg.

               NOW, THEREFORE, BE IT RESOLVED that the Fredericksburg City
Council authorizes the City Manager to execute, deliver and carry out the terms of the
Performance Agreement entitled, “Performance Agreement, City of Fredericksburg,
Fredericksburg Economic Development Authority and Capital Catering, LLC, d/b/a F.W.
Sullivan's Old Town Bar and Grill,” on behalf of the City of Fredericksburg, in substantially the
form submitted for approval.



Votes:
Ayes:
Nays:
Absent from Vote:
Absent from Meeting:




                                         Clerk’s Certificate
I, the undersigned, certify that I am Clerk of Council of the City of Fredericksburg, Virginia, and
   that the foregoing is a true copy of Resolution No. 11- duly adopted at a meeting of the City
        Council meeting held November 8, 2011 at which a quorum was present and voted.


                          ____________________________________
                                      Tonya B. Lacey
                                     Clerk of Council
                 F. W. SULLIVAN’S OLD TOWN BAR & GRILL
                         407-409 WILLIAM STREET
                    PROPOSED INCENTIVE AGREEMENT
                       DOWNTOWN TOURISM ZONE
                           SEPTEMBER 20, 2011


Application Date:           September 6, 2011
Application Score:          50 points
Length of Lease:             Ten Years


A. Eligibility Thresholds

        1. Open for business by December 1, 2011
        2. Create and sustain a minimum of 30 full-time equivalent jobs
        3. Generate annual meals and local sales taxes of at least $120,000
        4. Maintain regular hours of operation for the full duration of the agreement,
           including dinner seven days a week and lunch on Saturdays and Sundays
        5. Provide access for year-round, rotating exhibits of local artists at no cost to the
           artist
        6. File annual performance reports and remain in good standing with city codes,
           regulations, ordinances, taxes and fees.

B. Incentive Grant, 7-Year Term

       1.    50% BPOL waiver – up to $2,500/year
       2.    10% reimbursement of meals/sales tax – up to $12,500/year
       3.    Maximum annual incentive value - $15,000/year
       4.    Total 10-year maximum incentive value - $100,000

C. Estimated Annual Tax Revenue

        Projected Sales (Average for Term)                      $2,950,000

        Estimated Taxes

                BPOL (20 cents/$100)                                $5,900

                Meals (6%)                                        $177,000

                Local Sales (1%)                                   $29,500

                    Total Annual Taxes                            $212,400
                    Total Ten-Year Taxes                        $2,124,000
                           PERFORMANCE AGREEMENT
                            CITY OF FREDERICKSBURG,
           FREDERICKSBURG ECONOMIC DEVELOPMENT AUTHORITY
                                      AND
                             CAPITAL CATERING, LLC,
               d/b/a F.W. SULLIVAN’S OLD TOWN BAR AND GRILL

       THIS PERFORMANCE AGREEMENT (the “Agreement”) is entered into on
December 1, 2011 by CAPITAL CATERING, LLC, d/b/a F.W. SULLIVAN’S OLD TOWN
BAR AND GRILL, a Virginia Limited Liability Company, (“Sullivan’s” or “Company”), the
FREDERICKSBURG ECONOMIC DEVELOPMENT AUTHORITY, a political
subdivision of the Commonwealth of Virginia (“EDA”), and the CITY OF
FREDERICKSBURG, a Virginia municipal corporation (the “City.”)

                                           RECITALS:

        A.       The City Council adopted Ordinance 07-31 on July 10, 2007, establishing the
“Downtown/Princess Anne Street Corridor” as a Tourism District, by authority of Virginia Code
§58.1-3851. The purpose of the District is to provide economic incentives and regulatory
flexibility for eligible business entities which will attract visitors from the Fredericksburg region,
make a substantial investment, and create new jobs. The new and expanded businesses that
participate in this Tourism Zone will enhance the revitalization efforts in the historic heart of the
City.

        B.     The Fredericksburg Comprehensive Plan (2007) identifies the Downtown as a
“Key Area,” “critical to the economic health and well-being of Fredericksburg.” The
Comprehensive Plan’s Downtown Goals include the protection of the character of
Fredericksburg’s historic area and city center environment, to preserve a sense of place, promote
economic strength, and ensure the City’s continuing appeal to residents, business people, and
visitors. The Comprehensive Plan includes a Downtown Policy to encourage development of
“destination” activities and unique uses downtown, and a Downtown Initiative to pursue
innovative financing strategies to encourage and facilitate development in the downtown,
including the establishment of the tourism zone.

       C.      Sullivan’s proposes to open a new restaurant in vacant restaurant space located at
409 William Street in downtown Fredericksburg, Virginia, with seating for approximately 175
people in substantial accordance with its Incentive Application dated September 6, 2011 (“the
Restaurant”). This location lies within the City’s Downtown/Princess Anne Street Corridor
Tourism District. This location has potential for a successful restaurant, which could further
develop this area of William Street as a “restaurant row” within downtown Fredericksburg. The
proposed restaurant would provide a casual dining option at this location.

       D.     The EDA is authorized by Virginia Code §15.2-4900 et seq. and Fredericksburg
City Code §10-232 to accept contributions in order to make grants in furtherance of its purposes,
and to make grants for the purposes of promoting economic development within the City.



Performance Agreement 7789-05-1701                                                             Page 1
       E.     The Authority and the City have agreed to offer, and the Company has agreed to
accept the economic and tax incentives contained herein in exchange for the performance
promised herein.

        F.      The Economic Development Authority Board of Directors authorized the Chair to
enter into this Agreement at its meeting of November 14, 2011.

        G.    The City Council authorized the City Manager to enter into this Agreement at its
regular meeting November 8, 2011.

       H.      D. Hayden Fisher, Manager, is authorized to enter into this Agreement on behalf
of F.W. Sullivan’s.

                                         AGREEMENT

        IN CONSIDERATION of mutual covenants, benefits and other good and valuable
consideration, the receipt and sufficiency of which are acknowledged, the parties for themselves,
their successors and assigns agree as follows:

1.      Recitals incorporated. The foregoing Recitals are incorporated by reference.

2.      Eligibility criteria – in general. In order to be eligible for the Economic Incentives
        described below, Sullivan’s shall meet these eligibility criteria for the term of this
        Agreement. Company's failure to meet eligibility standards for one year of this
        Agreement does not terminate the Agreement. If Company fails to meet the eligibility
        standards for two years in a row, then the City and the Authority may terminate this
        Agreement on written notice to the Company.

     2.1. Open the Restaurant no later than December 1, 2011 and continue to operate the
          Restaurant thereafter;

     2.2. Employ the equivalent of thirty (30) full-time employees throughout the year;

     2.3. Generate annual combined local meals and sales tax revenues of at least one hundred
          twenty thousand dollars ($120,000.00). “Meals taxes” are those local taxes attributable
          to the Restaurant, paid on time to the Fredericksburg Commissioner of Revenue pursuant
          to Fredericksburg City Code Chapter 70, Article IX. “Local sales taxes” are the 1% of
          state sales tax revenue returned to the City by the Commonwealth of Virginia, not
          including the ½% sales tax revenue for education. Penalty and interest paid on
          delinquent taxes are not counted in these terms.

     2.4.Make Restaurant space available for the display of art by local artists at no cost to the
         artist;

     2.5.File with the City Manager an annual Performance Report containing sufficient
         documentation to establish compliance with these criteria. Company shall submit the
         Performance Report on or before the due date of its annual BPOL tax. The City Manager

Performance Agreement 7789-05-1701                                                          Page 2
        will submit the Company’s Performance Report to the Commissioner of Revenue for
        confirmation of eligibility prior to approving an economic incentive.

     2.6.Eligibility for the first year’s economic incentives shall be based upon the opening date
         only.

     2.7.By its signature, Sullivan’s agrees to the release by the City of otherwise confidential tax
         information as required for the administration of this Agreement, including the amount of
         any performance grant paid hereunder and information sufficient to establish Sullivan’s
         eligibility for the economic incentives. Sullivan’s agrees that the Commissioner of
         Revenue may release to the City Manager confidential gross receipts, meals tax and sales
         tax information as required for the administration of this Agreement.

3.      Economic incentive – business license tax reduction. Beginning March 15, 2012, if
        Sullivan’s meets the eligibility criteria, then it shall be entitled to a fifty percent (50%)
        reduction of its annual business license tax up to two thousand five hundred dollars
        ($2,500.00).

4.      Economic incentive – performance grant. In addition to the annual license tax
        reduction, beginning March 15, 2012, if Sullivan’s meets the eligibility criteria, then it
        shall receive an annual performance grant from the Fredericksburg Economic
        Development Authority in an amount equal to ten percent (10%) of the annual combined
        local meals and sales taxes paid by the Restaurant in the previous calendar year, subject
        to appropriation by City Council, up to twelve thousand five hundred dollars
        ($12,500.00).

     4.1. As a grant to the EDA to enhance the economic development of the City, the City agrees
          to appropriate to the EDA an amount equal to the performance grant for each year in
          which the Company meets the eligibility criteria. The City’s obligation under this
          subsection shall be subject to annual appropriation by the governing body and shall
          not be deemed to be a general obligation or debt of the City.

     4.2. The EDA’s obligation to pay the Company the annual performance grant shall be subject
          to the appropriation of the performance grant amount by the City Council.

5.      Maximum economic incentive. The maximum economic incentive (combined business
        license tax reduction and performance grant) to be paid to the Company is:

     5.1. fifteen thousand dollars ($15,000.00) each year;

     5.2. one hundred thousand dollars ($100,000.00) over the term of the Agreement.

6.      Term. The term of this Agreement shall begin on December 1, 2011 and shall end
        March 15, 2021.




Performance Agreement 7789-05-1701                                                            Page 3
7.      Miscellaneous provisions. The following provisions shall apply to this Agreement:

     7.1. The City Council reserves the right to revoke this agreement after 30 days’ notice from
          the City Manager to the Company, in the event of repeated violations of the noise
          ordinance, ABC regulations, statewide fire prevention code, or other health and safety
          violations at the business, the building code or zoning regulations, or repeated or
          ongoing delinquencies in taxes or fees owed to the City.

     7.2. This Agreement is binding upon and shall inure to the benefit of the parties and their
          respective heirs, devisees, legal and personal representatives, assigns, and successors in
          interest.

     7.3. If, by reason of force majeure, either party hereto shall be rendered unable, in whole or
          in part, to carry out its obligations under this Agreement, and if such party shall give
          notice and full details in writing of such force majeure to the other party within a
          reasonable time after the occurrence of the event or cause relied on, then the obligations
          of the party giving such notice, so far as it is affected by such force majeure shall be
          suspended during the continuance of the inability then claimed, but for no longer period,
          and such party shall endeavor to remove or overcome such inability with all reasonable
          dispatch. The term "force majeure", as employed herein, shall mean acts of public
          enemy, orders of any kind of the government of the United States or the Commonwealth
          of Virginia or any civil or military authority, insurrections, riots, arrests, civil
          disturbances, labor unrest or strikes, machinery failure, inability to obtain any necessary
          supplies, utilities or services, earthquakes, floods, fires, storms and any serious weather-
          related casualty.

     7.4. This Agreement shall be administered and interpreted in accordance with the laws of the
          Commonwealth of Virginia. Any actions arising out of this Agreement shall be filed and
          maintained in the District Court or Circuit Court of the City of Fredericksburg, Virginia.

      The signatures of the authorized representatives of the parties are set out below in
acknowledgment of this Agreement.



                          [SIGNATURES FOLLOW ON NEXT PAGE]




Performance Agreement 7789-05-1701                                                             Page 4
CAPITAL CATERING, LLC, d/b/a F.W. SULLIVAN’S OLD TOWN BAR AND GRILL


By:____________________________________
      D. Hayden Fisher, Manager

COMMONWEALTH OF VIRGINIA
CITY/COUNTY OF                              , to wit:

       I,                            , a Notary Public for the Commonwealth aforesaid, hereby
certify that D. Hayden Fisher, whose name is signed to the writing above has acknowledged the
same before me in my county or city aforesaid.

      Given under my hand and official seal this        day of              , 2011.


                                                   Notary Public
My commission expires: __________________My registration number is:________________


ECONOMIC DEVELOPMENT AUTHORITY OF THE FREDERICKSBURG


By:__________________________________(SEAL)
      Joe R. Wilson, Chair

Attest:
__________________________________
Secretary


CITY OF FREDERICKSBURG


By_________________________________(SEAL)
      Beverly R. Cameron, City Manager

Attest:

______________________________
      Deputy Clerk

Approved as to form:

______________________________
City Attorney


Performance Agreement 7789-05-1701                                                     Page 5

				
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