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Item 9C - MemoM E M O R A N D U M April 4, 2023 To: Shana Yelverton, City Manager From: Daniel Cortez, Director of Economic Development & Tourism Subject: Item 9C - Consider approval of an economic development agreement between the City of Southlake, Texas, and Capital Grill Holdings, Inc., a North Carolina Corporation Action Requested: Consider approval of the economic development agreement between the City of Southlake, Texas, and Capital Grill Holdings, Inc. Background Information: Capital Grille is an approximately 9,300 square-foot fine dining restaurant & steakhouse that will be occupying existing tenant space in Carroll Pointe located on the southeast corner of eastbound State Highway 114 frontage road and N. Carroll Avenue. In September 2022, Capital Grille Holdings submitted a request for public investment to the City, seeking a fifty-percent reimbursement from the General Fund sales tax to be generated from the future restaurant. As established in the City’s Procedure for Investment Consideration, the Community Enhancement and Development Corporation reviewed the request at their November 17, 2022, meeting and comments from that review were provided to the City Council for their review on January 3, 2023. Following their review of the request at that meeting, the City Council directed City Manager Shana Yelverton to enter into a Memorandum of Understanding (MOU) whose purpose was to establish the mutually agreed upon terms of a future incentive agreement. Due to the concise nature of the request, City staff worked with the City Attorney’s office to draft the full economic development agreement. The proposed agreement is set to expire ten years after the opening date of the restaurant and includes a number of performance requirements related to minimum capital investment, minimum sales tax generation, design standards, and employment targets. Board Review: On November 17, 2022, the Community Enhancement and Development Legal Review: Corporation reviewed and commented on the proposed request per the City’s Procedure for Investment Consideration. The City Attorney’s office prepared and reviewed the proposed agreement between the City and Capital Grille Holdings, Inc. Item 9C Page 2 of 2 Strategic Link: C4 Attract & keep top-tier businesses to drive a dynamic & sustainable economic environment. There are also a number of elements of the City’s Comprehensive Plans that support approval of this agreement. Financial Considerations: Following are financial aspects of the development and associated agreement: Sales Tax Per the agreement, Capital Grill Holdings, Inc. has agreed to the following pertaining to Sales Tax reimbursement: • The City will reimburse Capital Grille Holdings, Inc. fifty percent (50%) of the General Fund Sales Tax Paid provided that Capital Grille Holdings complies with the following: o Must generate a minimum of $60,000 in General Fund Sales Tax (1%) for the corresponding calendar year and excludes sales tax generated for any other City funding source or state- generated sales tax. o Maintain a minimum of fifty (50) total employees at the restaurant at all times. o Make a Capital Investment in the improvements of the space in the amount of at least $5,149,000. o The restaurant must open no later than June 1, 2024. o The Improvements shall conform to the approved Site Plan, unless amended and approved by the City Council, and all building and construction materials identified therein. Alternatives: Approve the agreement with amendments, direct staff to revise the agreement and return for City Council consideration at a future meeting, or deny the agreement. Supporting Documents: Economic Development Agreement Staff Contact: Daniel Cortez (817) 748-8039 Page 1 CITY OF SOUTHLAKE, TEXAS AND CAPITAL GRILLE HOLDINGS, INC., dba THE CAPITAL GRILLE CHAPTER 380 ECONOMIC DEVELOPMENT PROGRAM AGREEMENT This CHAPTER 380 ECONOMIC DEVELOPMENT PROGRAM AGREEMENT (this “Agreement”) is made and entered into by and between the CITY OF SOUTHLAKE, TEXAS, a Texas home rule municipality (the “City”), and CAPITAL GRILLE HOLDINGS, INC., a North Carolina corporation, dba The Capital Grille (the “Company”), each of which may be singularly referred to as a “Party” and jointly referred to as “Parties,” for the purposes and considerations stated below. WHEREAS, the Company is entering into a lease at 1201 E. State Highway 114, Suite 100, and desires to renovate the existing building shell; and WHEREAS, the Company proposes to utilize the renovated approximate 9,306 s.f. of floor space as the new location of a The Capital Grille (the “Restaurant”); and WHEREAS, the Company proposes to make a significant private investment in a new restaurant; and WHEREAS, the City has the authority under Article 3, Section 52-a of the Texas Constitution and Chapter 380 of the Texas Local Government Code (“Chapter 380”) to make loans or grants of public funds for the purposes of promoting local economic development and stimulating business and commercial activity within the City; and WHEREAS, the City desires to provide, pursuant to Chapter 380, an incentive to the Company to renovate 1201 E. State Highway 114, Suite 100 and locate the Restaurant; and WHEREAS, the City has determined that a grant of funds to the Company will serve the public purpose of promoting local economic development and stimulating business and commercial activity within the City; and WHEREAS, the City finds that a grant of funds would satisfy a fundamental objective of the City’s strategy, which is to attract and keep top-tier businesses to drive a dynamic and sustainable economic environment; and WHEREAS, the City finds that a grant of funds will further City-identified goals, including: (a) supporting comprehensive plan implementation; (b) adding to the identified target industry inventory; (c) supporting identified workforce goals related to daytime population; (d) incorporating preferred quality of life benefits quality dining destinations in alignment with strategic objectives, city goals, and comprehensive plan recommendations; and WHEREAS, the City further finds that were it to provide the incentives, doing so will be in alignment with the City’s comprehensive plan, including: (a) Vision, Goals, and Objectives; (b) the Consolidated Future Land Use Plan; (c) the Economic Development Master Plan; and (d) the Tourism Master Plan. Page 2 NOW THEREFORE, for and in consideration of the agreements contained herein, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties agree as follows: SECTION 1. FINDINGS INCORPORATED. The foregoing recitals are hereby incorporated into the body of this Agreement and shall be considered part of the mutual covenants, consideration and promises that bind the Parties. SECTION 2. PROGRAM APPROVED. The City Council of the City hereby establishes a Chapter 380 economic development program (the “Program”) to facilitate the renovation of an existing building for the placement of the Restaurant and determines that this Agreement will effectuate the purposes of the Program, and that the Company’s performance of its obligations herein will promote local economic development and SECTION 3. TERM. This Agreement shall be effective as of the Effective Date and shall terminate when all terms and conditions of this Agreement have been fulfilled, unless terminated earlier pursuant to the terms of this Agreement. SECTION 4. DEFINITIONS. The following words shall have the following meanings when used in this Agreement: “Agreement” means this Chapter 380 Economic Development Program Agreement, together with all exhibits and schedules attached to this Agreement from time to time, if any. “Capital Investment” means the dollar value of money or other items of value contributed towards the Improvements. “City” means the City of Southlake, Texas, a Texas home-rule municipality, whose address for the purposes of this Agreement is 1400 Main Street, Suite 460, Southlake, Texas 76092. “Company” means Capital Grille Holding, Inc., a North Carolina corporation, dba The Capital Grille, whose address is 1000 Darden Center Dr., Orlando, FL 32837. “Effective Date” means the last date this Agreement is signed by either Party. “Event of Default” means and includes any of the Events of Default set forth below in the Section 7. “Force Majeure” means any act of God or the public enemy, war, riot, civil commotion, fire, explosion or flood, and strikes or other act beyond the reasonable control of the Page 3 Parties, but not including lack of funds. “Certificate of Occupancy” means an approval issued by the City after final inspection reflecting that construction of the Improvements has been completed in conformance with all appropriate City codes and requirements. Separate Certificates of Occupancy may be issued for the separate Improvements required hereunder. “Improvements” means the renovation of approximately 9,306 square foot space at 1201 E. State Highway 114, Suite 100, Southlake, Texas 76092 as the new location of the Restaurant. “Open” means the date the Restaurant opens for business to the general public. “Program Grant” or “Program Grant Payment” means the economic development grants paid by the City to the Company in accordance with this Agreement. “Property” means that real property known as, 1201 E. State Highway 114, Suite 100, Southlake, Texas 76092, and being more particularly described as Lot 1R, Greenway- Carroll Addition and as shown on the attached Exhibit A. “Restaurant” means the approximately 9,306 square foot space at 1201 E. State Highway 114, Suite 100, Southlake, Texas 76092 being operated as The Capital Grille. “Sales Tax” means the City’s municipal General Fund sales and use tax, currently at the rate of one percent (1.0%), pursuant to Section 321.103 of the Texas Tax Code, as amended, generated from the Property and received by the City; provided, should the Texas Legislature amend the applicable tax code provision to increase or decrease the amount of allowed municipal sales and use tax, then in the event of a decrease, Sales Tax shall mean the actual amount of sales and use tax received by the City, and in the event of an increase, the General Fund Sales Tax shall mean one percent (1.0%). Sales taxes specifically excluded from this definition include any present or future sales tax that, on account of their designation or commission to a specific purpose or entity pursuant to state or local law, are not retained by the City for general use. “Sales Taxes Paid” means Sales Tax paid to and received by the City net of any fees charged by the State Comptroller, generated by The Capital Grille (Restaurant) located on the Property. “Sales Tax Report” has the meaning set forth in Section 5(G). SECTION 5. OBLIGATIONS OF THE COMPANY. The Company covenants and agrees with the City that, while this Agreement is in effect, it shall comply with the following terms and conditions: (A) Completion of Improvements. The Company agrees that the Restaurant must Open no later than June 1, 2024; provided, however, that if requested in writing by the Company, the Southlake City Council will extend this deadline, if in the City’s reasonable discretion the Southlake City Council determines that an extension is Page 4 warranted because of: (a) an event of Force Majeure that delays or suspends construction of the Improvements for a period of time such as to prevent the Restaurant from Opening by June 1, 2024; or (b) disruption due to construction of off- site infrastructure improvements by the City for a period of time such as to prevent the Restaurant from Opening by June 1, 2024. The property shall be used only in compliance with the City’s Comprehensive Zoning Ordinance. (B) Design. The Improvements shall conform to the approved Site Plan, unless amended and approved by the City Council, and all building and construction materials identified therein. (C) Capital Investment. The Company agrees to make a Capital Investment in the amount of at least $5,149,000 into the Improvements, and further agrees to provide proof, in a manner acceptable to the City, of such Capital Investment to the City within fifteen (15) days of its Open date. (D) Performance. The Company agrees to perform and comply with all terms, conditions, and provisions set forth in this Agreement and in all other instruments and agreements between the Company and the City. (E) Minimum Number of Employees. The Company agrees to maintain a minimum of fifty (50) total employees at the Restaurant at all times. The Company agrees to provide proof of employee count, in a manner acceptable to the City, on an annual basis. (F) Undocumented Workers. The Company certifies that the Company does not and will not knowingly employ an undocumented worker in accordance with Chapter 2264 of the Texas Government Code, as amended, in carrying out its obligations under this Agreement. If during the Term of this Agreement the Company is convicted of a violation under 8 U.S.C. § 1324a(f), the Company shall repay the amount of the Program Grant provided under this Agreement received during the previous 12 months, plus interest at the rate of the prime rate published in the Wall Street Journal plus two percent (2%) per annum, not later than the 120th day after the date the City notifies the Company of the violation. (G) Sales Tax Reports. The Company shall authorize the State Comptroller to issue Sales Tax Reports to the City for the total taxable sales consummated at the Property on an annual basis, but only to the extent that the City does not have access to such Sales Tax Reports. The City’s obligations to make Prog ram Grant Payments are contingent upon receipt of (or access to) the Sales Tax Reports or the tax information contemplated in the next succeeding sentence. In the event such Sales Tax Reports are not available from the State Comptroller, the Company shall use its reasonable efforts to provide the City with information to verify taxable sales from the Property before any Program Grant Payment will be made. (H) Minimum Annual Sales Tax Generation. In order to be eligible for any annual Grant Payment under Section 6(A), the Property must generate a minimum of $60,000 in General Fund Sales Tax (1%) for the corresponding calendar year and excludes sales tax generated for any other City funding source or state generated sales tax . The $60,000 in General Fund Sales Tax can be pro-rated for the first and last year of Page 5 this agreement if less than a full 12-month year. (I) Taxes. During the term of this Agreement, the Company shall timely pay all ad valorem and other charges due by the Company to the City (to the extent not being contested in good faith) or the City’s obligations under this Agreement can be nullified and this Agreement terminated by the City. Additionally, the Company, upon the City’s request, will furnish evidence reasonably satisfactory to the City, on or before the first March 1 following the Open date , and on or before March 1 of each calendar year thereafter during the Term of this Agreement, that there are no delinquent Sales Taxes, City utility charges or fees, or ad valorem taxes due and owing as to the Property and that all such taxes for the preceding calendar year have been paid in full (to the extent not being contested in good faith). SECTION 6. OBLIGATIONS OF THE CITY. Program Grant Payments of the Sales Tax Rebate shall be paid according to the following terms: (A) Program Grant Payment. Upon the satisfaction of the Company’s obligations under Section 5, and so long as the Company remains in compliance with the provisions of Section 5, the City agrees to pay the Company a Program Grant Payment equal to fifty percent (50%) of the General Fund Sales Tax Paid, which payment shall be made for a period beginning the first full calendar month for which the Company has filed its Sales Tax Report with the State Comptroller, and continuing thereafter for one hundred twenty (120) consecutive months. (B) Grant Paid Annually. The City will pay the Program Grant Payment on an annual basis, based on the Sales Tax Report from the State Comptroller received by the City during each calendar year. The City will remit the Program Grant Payment to the Company upon receiving written request by the Company. Such request will demonstrate compliance with Section 5 of the Agreement, in a manner acceptable by the City, and by March 31st of the year following such calendar year and receipt of all of the following: (1) the Sales Tax Reports specified in Section 5(G) of this Agreement for each month of the applicable calendar year; (2) the Area Reports or other information establishing the amounts of received Sales and Use Tax from the Comptroller’s office for each month in the applicable calendar year; and (3) the City’s receipt of the Sales and Use Tax from the Comptroller’s office for each month of the applicable calendar year. SECTION 7. EVENTS OF DEFAULT. Each of the following shall constitute an Event of Default under this Agreement: (A) Default. Failure of the Company or the City to comply with or to perform any term, obligation, covenant, or condition contained in this Agreement or in any related documents, and the Company or the City fails to cure such failure within thirty (30) days after written notice from the City or the Company, as the case may be, describing such failure, or if such failure cannot be cured within such thirty (30) day period in the exercise of all due diligence, then if the Company or the City fails to Page 6 commence such cure within such thirty (30) day period or fails to continuously thereafter diligently prosecute the cure of such failure. (B) False Statements. Any written warranty, representation, or statement made or furnished to the receiving Party under this Agreement or any document(s) related hereto furnished to the receiving Party is/are false or misleading in any material respect, either now or at the time made or furnished, and the furnishing Party fails to cure same within thirty (30) days after written notice from the receiving Party describing the violation, or if such violation cannot be cured within such thirty (30) day period in the exercise of all due diligence, then if the furnishing Party fails to commence such cure within such thirty (30) day period or fails to continuously thereafter diligently prosecute the cure of such violation, or if the furnishing Party obtains actual knowledge that any such warranty, representation or statement has become false or misleading after the time that it was made, a nd the furnishing Party fails to provide written notice to the receiving Party of the false or misleading nature of such warranty, representation or statement within ten (10) days after the furnishing Party learns of its false or misleading nature. (C) Insolvency. The dissolution or termination of the Company’s existence as a going business or concern, the Company’s insolvency, appointment of receiver for any part of the Company’s property, any assignment of all or substantially all of the assets of the Company for the benefit of creditors of the Company, or the commencement of any proceeding under any bankruptcy or insolvency laws by or against the Company unless, in the case of involuntary proceedings, such proceedings are discharged within ninety (90) days after filing. SECTION 8. EFFECT OF AN EVENT OF DEFAULT. (A) Notice and Remedies. In the event of default under this Agreement, including, without limitation, Section 7, the non-defaulting Party shall give written notice to the defaulting Party of any default, and the defaulting Party shall have the period provided in Section 7 to cure said default. Should said default remain uncured as of the last day of the applicable cure period and the non -defaulting Party is not otherwise in default, the non-defaulting Party shall have the right to immediately terminate this Agreement. In the event the City terminates this Agreement as a result of the foregoing, it will have no further obligation to make any remaining Program Grant Payment. Additionally, the Company will owe the City repayment of the previous year’s Program Grant Payment made to the Company, plus interest at the rate of the prime rate per annum. The Company shall pay such funds to the City within sixty (60) days of termination. (B) Damage Limitation. Neither Party shall be liable to the other Party for indirect, special, or consequential damages. SECTION 9. ADDITIONAL SALES TAX PROVISIONS. The following additional sales tax provisions are a part of this Agreement: (A) Legislative or Judicial Changes. In the event of any legislative or judicial interpretation that limits or restricts the City’s ability to pay the general Sales Tax Rebates herein Page 7 provided or otherwise extracts or imposes any penalty or other restriction upon the payment of same, such rebate will cease as of the effective date of such limitation or restriction and be of no further force, effect or consequence in which event the City shall be under no further obligation to the Company as of the effective date of such limitation or restriction. However, the City and the Company agree to modify the rebate provided for herein to the extent permitted by such legislative or judicial action to the fullest extent then authorized without penalty or other restriction upon the City for the payment of same. (B) Erroneously Paid Sales Tax. In the event the State Comptroller determines, for any reason, that any Sales Tax were erroneously paid to the City from the sales provided for herein and the City shall be required to rebate or repay any portion of such taxes, the amount of such rebate or repayment shall be deducted from the calculation of the Sales Taxes Paid, and in the event the calculation of Sales Taxes Paid for a Program Grant Payment shall reflect an overpayment by the City to the Company, the Company agrees to reimburse the City the amount of such overpayment. If reimbursement is not received, the City will deduct the overpayment amount at the next program grant payment. Notification of any such required adjustment will be provided to the Company at the earliest practical date. SECTION 10. MISCELLANEOUS PROVISIONS. The following miscellaneous provisions are a part of this Agreement: (A) Amendments. At any time, the City and the Company may determine that this Agreement should be amended for the mutual benefit of the Parties, or for any other reason, including an amendment to induce the Company to continue development and commercial activities in the City when this Agreement could otherwise be terminated. The City and the Company agree to consider re asonable requests for amendments to this Agreement which may be made by any of the Parties hereto, lending institutions, bond counsel, or financial consultants. Any amendments to this Agreement must be in writing and signed by the appropriate authorities o f both the City and the Company. (B) Applicable Law and Venue. This Agreement shall be governed by and construed in accordance with the laws of the State of Texas, and all obligations of the Parties created hereunder are performable in Tarrant County, Texas. Venue for any action arising under this Agreement shall lie in the state district courts of Tarrant County, Texas. (C) Assignment. This Agreement may not be assigned without the written consent of the other Party. (D) Binding Obligation. This Agreement shall become a binding obligation on the Parties upon execution by all signatories hereto. The City warrants and represents that the individual executing this Agreement on behalf of the City has full authority to execute this Agreement and bind the City to the same. The Company warrants and represents that the individual executing this Agreement on the Company’s behalf has full authority to execute this Agreement and bind it to the same. Page 8 (E) Caption Headings. Caption headings in this Agreement are for convenience purposes only and are not to be used to interpret or define the provisions of this Agreement. (F) Counterparts. This Agreement may be executed in one or more counterparts, each of which shall be deemed an original and all of which shall constitute one and the same document. (G) Entire Agreement. This Agreement constitutes the entire understanding and agreement of the Parties as to the matters set forth in this Agreement. No other understanding, oral or otherwise, in direct conflict with this Agreement shall be deemed to exist or to bind any of the Parties hereto. All prior written or oral offers, counteroffers, memoranda of understanding, proposals and the like are superseded by this Agreement. No alteration of or amendment to this Agreement shall be effective unless given in writing and signed by the Party or Parties sought to be charged or bound by the alteration or amendment. Neither Party is relying on any statement, representation, nor warranty of the other Party not expressly set out in this Agreement. Each of the undersigned authorized representatives of the Parties, warrants and represents and does hereby state and represent that no promise or agreement which is not herein expressed has been made to him or her in executing this Agreement, and that neither of the signatories is relying upon any statement or representation of any agent of the Parties. Each Party is relying on his or her own judgment and each Party has been represented by independent couns el of its choosing. This Agreement shall not be construed against the drafter hereof, but shall be construed as if all Parties drafted the same. (H) Force Majeure. It is expressly understood and agreed by the Parties to this Agreement that if the performance of any obligations hereunder is delayed by reason of Force Majeure, the Party so obligated or permitted shall be excused from doing or performing the same during such period of delay, so that the time period applicable to such obligation or requirement shall be extended for a period of time equal to the period such Party was delayed. This section does not affect the Company’s obligations or the City’s discretion described in Section 5(A). (I) Further Acts and Releases. The City and the Company each agrees to take such additional acts and execute such other documents as may be reasonable and necessary in the performance of their obligations hereunder. (J) Governmental Powers; Waiver of Immunity. By execution of this Agreement, the City does not waive or surrender any of its governmental powers, immunities, or rights. (K) No Third-Party Beneficiaries. The performance of the respective obligations of the City and the Company under this Agreement are not intended to benefit any party other than the City or the Company, except as expressly provided otherwise herein. No person or entity not a signatory to this Agreement shall have any rights or causes of action against any Party to this Agreement as a result of that Party’s performance or non-performance under this Agreement, except as expressly provided otherwise herein. Page 9 (L) Notices. Any notice or other communication required or permitted by this Agreement shall be in writing and shall be effective: (i) immediately when personally delivered either by hand; or (ii) three (3) days after notice is deposited with the U.S. Postal Service, postage prepaid, certified with return receipt requested, and addressed as follows: if to Company: Capital Grille Holdings, Inc. 1000 Darden Center Dr. Orlando, Florida 32837. ATTN: Marty Wilson if to the City: City of Southlake 1400 Main Street, Suite 460 Southlake, Texas 76092 ATTN: Director of Economic Development & Tourism With a copy to: Taylor, Olson, Adkins, Sralla & Elam, L.L.P. 6000 Western Place, Suite 200 1-30 at Bryant-Irvin Road Fort Worth, Texas 76107 Attention: Allen Taylor (M) Right of Offset. The City may at its option, after prior written notice to the Company, offset any amounts due and payable under this Agreement against any debt (including taxes) lawfully due and owing to the City from the Company, regardless of whether the amount due arises pursuant to the terms of this Agreement or otherwise, and regardless of whether or not the debt has been reduced to judgment by a court. (N) Relationship of Parties. The Parties shall not be deemed in a relationship of partners or joint ventures by virtue of this Agreement, nor shall either Party be an agent, representative, trustee, or fiduciary of the other. Neither Party shall have any authority to bind the other to any agreement. (O) Severability. The City and the Company declare that the provisions of this Agreement are severable. If it is determined by a court of competent jurisdiction that any term, condition, or provision hereof is void, voidable, or unenforceable for any reason whatsoever, then such term, condition, or provision shall be severed from this Agreement and the remainder of this Agreement enforced in accordance with its terms. (P) Attorneys’ Fees. In the event that either Party hereto brings an action or other proceeding to enforce or interpret the terms and provisions of this Agreement, the prevailing Party in that action or proceeding shall be entitled to have and recover from the non-prevailing Party all such fees, costs and expenses (including, without limitation, all court costs and reasonable attorneys’ fees) as the prevailing Party may suffer or incur in the pursuit or defense of such action or proceeding. Page 10 CITY OF SOUTHLAKE, TEXAS _____________________________________ By: John Huffman, Mayor Date: _________________________________ CAPITAL GRILLE HOLDINGS, INC. _____________________________________ By: Angela Simmons, President Date: ____________________________________ Page 11 Exhibit A Page 12 Page 13 Page 14 Page 15 Page 16