97-024 ACI Real Properties, Inc. Reso 9837city lial l
10300 Tom Awmue
Cupertino, CA 9501
(409) / ;
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.. FAX: ) 777 - 3366 ._
CRY o �
eithio
' " t# THE I MANAGER
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AGENDA ITEM NUMBER AGENDA DATE L4avl L97 {
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AGREEMENT oR CONSULTATION SERVICE S WITH ACI REAL R P •l TIES INCA t:
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Apple mputer moist a siicat. rest•ctrr..�•u --T f
include - decisions about the 1o�4tion of various sales and marketing activities. The location of these }
corporate functions could have a 311g1lificant economic impact on the City of Cupertino. Under
California law, if the point of sale for retail transactions is within the boundarichs o f a community, then. f.
the one - percent local sales tax revenue .ccr os to that community's benefit.
Apple Computer 'is considering ario s organizational and loc .tioii options with regard to their sales .
tax locations. Consolidation of a, portion of these sales activities wiflain ertin.p coutd result in
�t � •ate decisions involve c cost - c i significant c revenues the City. �� o these corpo
s to the best economic retuni to the company,
4L.. .
The tt ched Consultation Agreement provides payment to A CI Rc l Properties based on new sales tax s+
generatilig activities from Appic Computer in Cupertino. It provides a sliding scale payment t to ACS
Real Properties based on the level of ne w sales tax revenue realized by the Cite. t
No payinent is required nt;41 a inini mum of $250,000 of new sales tax revenue is -realized by the Cite.
The initial payment is at the rate of %. This percentage: increases as the total sales tax revenues
increase 0% for sales tax between $250,000 and $1,000,000; and 0% for sees tax above
$1,000,0000.) The ten-n ten-n o f the agreement is for five years.
The City's payments occur only after the new sales tax rA wen e is recc i ed, Therefore, the benefits to
the City would accrue prior to reiinbu iseme t to ACI Real Properties. t
Discussions witb Apple Computer inoluded the l oteni ia's , #err Div ni Ili calit cl c:troni c sales, hel115y C�' �`lited
to. Cupertino, We befie e that through this agreement nt there is a strong new hicenti e for 'the company
to reorganize their operations and, to work with the State Board of EMijali tion to bring this about.
Without this) incentive, it is unlikely iliac Apple Weald undertake such h f' ort.s.
i-'ninea on lie -c w led Paptyr
RECOMMENDATION:
Adopt Res. authorizing the City Manager to sign the Agreement meat, f r Consultation Services
ri i Apple Comp t r.
S tt � y:
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City Manager
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►.G R NI* FOR
CONSULTATYON SERVICES
WHEREAS, ACI Real Properties, Inc ;, a Delaware, corp i on (hereinafter
"Consultant,"') has u i t d a proposal to the City of Cupertino (hereinafter "City")
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t provide City with consulting services consisting f the s � t � �' � �� of
r sales and use tax revenue sources o CI y to be derived from Apple. Computer,
Inc., a California corporation, n its subsidiaries (hereinafter collectively referred t
as "Apple"); and
WHEREAS, it is intended by Consultant and City that said services will be
automatically self-funding because consultant is willing to receive its compensation
for said services on a contingency basis solely and entirely derived from new sales or
tine tax i + generated y Apple for t o . �� i� � �c City � not
otherwise tai; and
WHE1 R E , Consultant and City ish to enter into this Agreement for the
purposes dcrild above:
NOW, TFIEREF40RE, IT IS HEREBY AGREED AS FOLLOWS:
Consultant all perform h oll ri services coll ctivel i ��, the "Services")
der this Agreement-.
(a) Assess and detail � current sales n tax arc r v nu r c ive by City
from Apple.
(b) Recommend new methodologles to increase the sales or use tax for
City d a r t t. o i corporate
reorganization of forts at Apple.
.
(c) Provide to City a deudled analysis and description. of any new local
sales and use tax revenue r ceived b y City from Apple,, `
2.
As consi6eration for Corn i)lta nt':; perfonnance of the Serv�c s, asdescribed in
Paragraph 1, above, Consultants-hall receive the following compensation for each
City fiscal year duniig the t i 'n covered by ffil s . r.g- eerner' -t, as follows:
(a) I for any fiscal yezir during the term c vel- ffils Agreernent,, new �
A
ocal tax revenue } qwfls an).F C"21TI OUXIt lees than Two flue red Fifty
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Thousand ollars ($250,000), then in such event Consultant will
receive :ox p nsatio . with respect to such fiscal year.
If, for any fiscal year during the term covered by this Agreement, new
local tax revenue equals ' ' ro Hundred ift r Thousand Dollars
. ,000 , then Consultant will receive the sum of Sixty-Two
Thousand Five Hundred Dollars ($62,500) �s compensation with
respect to such fiscal year,
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(b) I for any fiscal year during the terra covered by this . g-i. m t, new
local tax revenue exceeds TwQ Hundred Fifty Thousand Dollars
($250,000) but 's less than iv �l n r d 'I'housand Dollars ($500,000 )e
then Consultant will receive the sum of Sixty -Two Thousand Five
:.
Hundred $6�r,oa a amount equal to tat -five percent
(25%) of all such additional new local lax revenue between Two
Hundred Fifty Thousand Dollars ($250,000) and .dive Hu
Thousand sad o lars $500,000 .
(c) If, f or any fiscal year during the tern covered by tts Agreement, ►r
local tax revenue exceeds five Hundred Thousand Dollars ($500,000
but is less than n Million Dollars : 1.1,000,000 , then Consultant shall
receive the sum of One llundre& Twenty-Five ousand. Dollars
($125,000) plua in amount equal to forty por t 0% of all such new
local tax revenue between iv and d 'l 'housand Dollars ($500,000)
and One Million Do larsn ($1,000,000).
(d) ff, for any fiscal year during the term covered by' this Agreement, new
local tax revenue exceeds One Million Dollars ($1,000,000),' the
consult-ant shall l receive the sum of Three Hundred Sixty-Two .
Thou-sand Five Hundred oll rs ($362,500) P.ua an amount equal to
fifty percent 0% of all such new local tax revenue in excess of-One
Million Dollars $1,000,000 .
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Both City and Consultant expressly acknowledge and agree that Consultant
Will receive no compensation for any S rvice o rendered Mader this Agreement
other r tha the co p nsation described in Paragraph- 2, nor ,lull Consultant be
entitled to any reimbursernent froin City for any costs or Qxpenses incurred by
Consultant in p rfoirming or preparing to perform any Serviccls udder and Pursuant
to this Agrc-sement.
4. ay-m -;.
Not later tf;an thirt y (30) days -after the date on which City ry c lv s from the
Board of Equalization of the State of Cahforna, a total of $250,000 or in r e of new
Page
AP
local sales tax revenue Wch
performing any acts under this Agreement, except to the extent that any such claim,
action or lawsuit arises out of or in connection with any negligence or willful
misconduct on the part of any of the said indemnified persons. Consultant will also
defend (if so requested by City, and with counsel of Consultant's choice but
reasonably acceptable to City) City, its officers and employees from any legal action
challenging the validity of this Agreement. If any court of competent jurisdiction
orders the return to City of any funds paid to Consultant by City as compensation for
Consultant's performance of the Services under this Agreement, Consultant shall
hold City, its officers, and employees harmless from any claims Consultant may
have for reimbursement or contribution with respect to any said sums.
9. Int ratio�!a�a P' �ifta��xi1
The provisions of tlus Agreement contain the entire understanding of City
and Consultant related to the subject matter of this Agreement. No oral
,agreements, understandings or promises made by the parties or their agents which
are not contained in this Agreement are binding. 7.1 -ds Agreement may only be
modified by written agreement executed by both;, arties.
IN WITNESS WHERLOF, Consultant and City have executed this Agreement
by their duly authorized representatives, on the dates set forth below, to be effective
as provided, above.
CrrY O TERTINO
Date: 6 �By_ Vi
� �i'�C 1ty Mof Cupertino
ACI REAL1'.1�0i'LRTIES, INC.,
a llelarvarQ4ipora±ior.
Date:--11-
ate i �r�_ By
`Robert .A. Promm
Its President and Chief Executive Officer
City/Apple agt.rev.l
r:
city flail
!1j#k k v
10300 Torre Avenue
Cupertino. CA 95014-34255
1 Telephone: (408)'777 - 20
CUPEDTINte'%)
Fax: ( 0 ) 777 -3366
D1:PA RTM ENT OF A D M I N ISTRATI VE S E VICE
SUMMARY
Benda Item Rio: Al Meeting Date: May 7, 2001
SUBJECT I -SS
. tion Services ith � I teal 'rope deS, 111c e sio #' A rr Consult
!��'ACXX_3"!ROUND
In 1996/979 A. le Computer was in the midst of a significant restructuring. ParL of this
restructuring ikicludvd decisions about the location o f various sales and marketing Facilities,
which had econornic 1wrinacts on the City of Cupertino. In May of ' 997, the City entered into a
five -year consult . t gre -meat with ACI Real Properties to Providt are incentive for Apple to
aerate e ale tax activities within the City. Apple has a roae e61 the City i asked for a
five -year extension on this agreemerit, which is set to expire oil u-ile JO, 100. No othler changes
in terms or conditions have been propose..
f e a reciTte nt with ACI has both advi' at , s and disadvantages,, as set forth low:
A. vantaj s
0 Provides the City i average, CAF $1,1 i illion in s, al cs tax. per year a opposed to $290,000
Prior to the agreement.
o Increased corporate ii'voly 1r1 lit,
is va t
IR Removes a rox — r`j.x� t l 8 r ,00 per year ror � tal �ti��tic�,i��al sales r'e�; i is and remits
the mo�ies to M" Real Prop rtie.- .
RECO!0 ME1\11)AIJON
Direct staff ofcouncil's preference.
f :tte ,rave for stihai sslell:
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Carol A. Atwo-od David W. Kritapp
Director of Ac1mi istt1r1ti e er i TC."Is City Manager
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G R I NT R
CONSULTATION SERVICES
WHEREAS, ACI Real Properties, Inc *, a Delaware corporation hereinafter
"Consultant") has submitted a proposal to the City of Cupertino . r i t r "'City")
to provide City with consulting services consisting of the assessment and rcation of
new sales and use tax revenue sources for City to 1�e derived from Apple Computer,
Inc,, a Cli.for corporation, and its subsidiaries collectively
as "Apple "; and
WMRE. S, it is intended by Consultant and City that said services
automaticaUy inn because Consultant is willing to receive its cow satin' n
for said sex -vices on a contingency basis solely and ntirel derived from new sales or
use tax revenue generated by Apple for the benefit of City w . City would not
otherwise realize; and
WHEEREAS, Consultant and City wish to enter into this
Agreement for the
purposes described above:
NOWT THEREFORE, IT IS HEREBY AGREED AS FOLLOWS:
Consultant shall i or -, the ollowi g services (collectively , the ""Se rvices"
under this A r ment-
(a) A and detail the current sales and use, tax revenue received by City
from Apple.
4
(b) Recommend new methodologies to increase the sales or use tax for
Cite to be developed and implemented through or° orate
reorganization efforts is at ..le,
(c) Provide to City a detailed analysis and description of any now local
gal
sales and LISe tax revenue received y City front Apple.
2. w-d-J2Y—CQ-119dtMt
As conssideration for ons td to nt "s performance of the Services as described in
13aragraph 1, above, Cos lta t shall receive the following compensation
or each CI fiscal y T during the term cov r y tu4 s
Agreement-, as follows:
(a) If, for any fiscid year during the term covered. b this A g.r )L
local tax
nu e equals arty amount less than wo Hundred Fifty
City/Apple a t.revA
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Thousand Dollars ($2500,000), then In such event Coasultant will
receive no compensation with respect to such fiscal rear. 4
(b) If, for any fisoal year during the term covered by this Agreement, new
local tax revenue equals Two d r d Fifty Thousand Dollars
($250,000), then Consultant will receive the sum of Sixty -Two
Thousand Five Hundred Dollars ($62,500) as compensation with
respect to such fiscal year,
(b) , for any fiscal year during the term co-Vered by this gi.�ement, new
local tax revenue exceeds Two, Hundred Fifty Thousand Dollars
($250,000) but Is less than Five Hdndred Thousand Dollars ($500,000),
then Consultant will receive the. sum or Sixty -Two Thousand Five
Hundred Dollars ($62,500) p1m amount ot equal to twenty -five - percent
(25%) of all such additional new local lax revenue between Two
Hundred Fifty ho sand Dollars ($250,0090) and Five Hundred.
Thousand Dollars ($500,000).
(c) l, for any fiscal year during the term covered by tl-ds Agreement; new
r
local tax revenue exceeds Five Hundred Thousand Dollars ($500,000)
but is less than one Million Dollars ($1,000,000), then Consultant shall
receive the sum of one Hundred Twenty -Five Thousand Dollars
($125,000) plia an amount equal to forty percent 0% of all such new
local tax revenue bet ween Five Hundred ' n. to} sand Dollars ($500,000)
and One Million Dollars 1,i00.0.
(d) If, for any fiscal year during the term covered b y tlu*s A ree.rr ent, new
local tax revenue exceeds s one Million Dollars ($1,,000,000), then
Consultant shall recei ,.ie the sum of Three Hundred Sixty-Two
Tlrousandi Five Hundred Dollars ($362,500) pju5. an amount equal 1:o
fifty percent % of all such new local tax revenue in excess of one
Million Dollars ($1,000,000).
3. 5Q1
Both City and Comultant expressly acknowledge and agree that Consultant
will receive no compensation for any Services rendered under this Ag. reement
other than the compensation described in Paragraph 2, nor shall Consultant be
entitled to any reimbursement from City for any cost: or expenses incurred by
Consultant In perforw,,ing or e par.ng, to perforin any Services under and pursuant
to th15 Agreement.
4. Ppymen l
Not later t -an thirty days after tl)e date on which City receives froin the
Board of Equalization of the State of 'ali r ia, a total of $250,000 or n), re of new
i! Apple agrt.ror.?
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local sales tax revenue wWch accrued from sales taxes paid by Apple during fiscal
year covered by this greemel -It, City pay the Consultant the compensation
described in Paragraph 2 of this Agreement,' WitWn 30 days, after the City receives
from the State of California iti new local sales tax revenue paid by Apple
w).fftin the same fiscal year as the initial payment, City shall pay to the Consultant
additional compensation as described in 'ara raph 2 of this Agreement.
5 aDM {
As used in this Agreement, the following teas shall have the ollo ing
meanings:
4+
"'Local sales tax reve ue" means that portion of the total ;gales an& use tax.
paid by Apple wWch isactually received by City.
"'New local sales tax revenue" — total sales and use tax paid. by Apple
which is actually received ed bar City, as
calculated for each fiscal - arter,'
the 'sales tax from Apple's Company Store
located as of the date of this Ag-reenient
on Apple's R&D campus in the. City of
Cupertino and � .. use tax o n
purchases by Apple, in eac h case
calculated for the quarter in question.
6. lex:m
This Agreement shall commence on July 1, 1997 and shall apply to the City's
1997-98t 1998-990, 1 9 � { 200M1 Finn 2001-02 ,fiscal years. This Agreement shall
expire can jime 30, :x002, and will have no ftirther force or effect; provided, however,
that Consultant shall be. entitled to receive any c mpe .safion due to it under i s
Agreement for the City fiscal year expiring on June 30, 2002, wWch compensation
shall be paid as provided in ar grai is 7, below,
7. 4. sc a _ Year
For purposes of this Agreemf int, City and Consultant agree City's fiscal, year
begins on July I of each calendar year and ends on june 30 of the succeeding calendar
year.
8.
Conmultant agrees to indemnify, defend if so requp.,sted by City, and with
counsel of Consultant's, choice but reasonabl cceptable to City), and hold City,, its
officeirs and employees., harmles5 from any claim, action, or .1 t r uit brought or
maintained by any gird party against City as a YeSLI t of, any acti it r of eitTi r party in
ty / A pple ag t . r(-P-v A
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rfor inv any acts under this Agreement, except to the extent that any such claim,,
action or lawsuit arises out of or in onn tion with any negligence r WUI.ful
misconduct the part of any of the said indemnified Persons. Consultarvt will also
defend (if so requested y City, and with counsel of Consultant's choice but
reasonably acceptable to City) City, its officers and employees from any legal action
challenging the validity of this Agreement. if any court of competent jurisdiction
orders the return to City of any funds paid to Com tart y City as compensation for
Consultant's rfor� ance o the Services under this Agreement, Consultant shall
hold City, its officers, and employees harmless from any claims Consultant may
have for reimbursement or coritribution with respect to any said suns.
9 ...���
The r sl r s o this Agree .gent contain the astir understanding City
and Consultant related to the subject matter of hi s Agreement. No oral
agreements, . understandings o prom s s made the parties or their .gents which
are o cntant t�s Agreement are binding. �s Agreement may only e
o to written agreemewt executed by both :.. rt es.
IN WITNESS WHEREO F, Consultant and City have executed tWs Agreement
by their duly authorized r r se 1katives, on the dates set fo,rth below,,to be eff e tive
= as provided, above.
CITY Oy�":'UTERTINO
t�
Date*". .....�_.�.�....... y_. .��.....
bty Marka ear, i o Cupertino
Date. ..�..�...��.
Gt /Apple ap,rev -I
.SCI REAL PROPER , INC.,
a D aw -4" r oratio ,
,Y
Robert A. Pro mm
its Presidemt and Chief Executive Officer
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Ryl!"SOLUTION NO. 9837 ,
` . RESOLUTION THE CITY COUNCIL OF THE "ITY OF CUPERTINO
J3E"rWEE.N ACI REAL PROPEUIES, INC. AND ` IH, CITY OF CURB IN
FOR CONSULTA ION SERVICES
WHERE , there has been resent -c i t tfie il.y Council a 1)r s agreement between
ACI Real Propertles, Inc. and the City of Culvaino for consultation services; and
W � , the t rins, conditions, and Prop isions thi gr e rent h ve been revie re
-. #5 ,,
and rope the City Mam cr and the City Attomey,
NO'S, ` " , REFORE, BE IT RESOLVED, that the City Coll,-Icil of the City of Cupertino
hereby approws the aforementioned agreement t nd authorizcs the City Manager to execute said
agreement on behalf of the City of Cupciiino.
] S AN ADOPTED t regular inecting of the City Council of the City of
Cupertino this 5th day of May, 1997, by the fbIlowing vote:
AYES: Chang, Dean, Sorensen, Bautista
NOES: Burnett
ABSENI dp Nolle
ABs"rAIN: None
AWE ST: APPROVED-
-1 hprl
City Clerk Mayor, City of Cuj)ej•tijjo
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