Home Oakley Oakley’s Very Bad Cup Cake Deal

Oakley’s Very Bad Cup Cake Deal

by ECT

Oakley

So much for Oakley City Council ensuring fiscal responsibility of our city staff as not one member of the council asked about the Lease Agreement in detail with Republic of Cake. The city will now shell out up to $220k in tenant improvements for a brand new building.

This is nothing short of city staff picking and choosing business they will provide money to. The truth is, that money should have been offered to business already in the area and vested in the community–not reserved to bring in outsiders.

For the record, I have nothing against Republic of Cake, I wish them well and I hope they are a success while I also give them kudos for negotiating the deal to get the $220k out of our city. However, my beef is with the council as there is no excuse for them to approve this deal with out questioning the improvements that will likely never be recovered.

This deal can be broken down two different ways. Emotionally, this was a great win for Oakley and our community since Republic of Cake gives back to the community as its something to feel great about.  Or look at reality and financially, its a poor deal for residents shelling out $220k.  My opinion in falls somewhere in the middle but the questions should still be asked.

Just go look at the video, the council was focused more on the philanthropy than our tax dollars.  Not one asked for specifics of the tenant  improvements.

In fact, Cecelia Nichols-Fritzler, Economic Development Coordinator, explained how Republic of Cake was the sole responder to the RFP for the space–this should have been an auto re-bid.  She praised the business and what they did for the community calling them a “successful small business”.

“They are philanthropist in the community in the city of Orinda. They support local schools, education foundation and donations to children’s charities and percentage of their proceeds,” said Fritzler.

She explained how a key feature  of the business is they will create 9-10 local jobs which will be a boost to local economy.

“As part of the submittal, Republic of Cake has asked for Cities participation to participate, the details are listed within the lease agreement you have before you,” said Fritzler.

Excuse me, why did she not state the details nor the actual $1 per square foot rent?

“I truly believe this is a great opportunity to bring this unique small business to our community they are successful small business in Orinda and have a great track record,” said Fritzler.

There is no substance at all when explaining the deal to the council–just praise. That is irresponsible on her part trying to ram this deal through.

According to the staff report:

The newly-constructed building is currently a “vanilla shell” and Mr. McNiff and Mr. Fang have asked for the City’s financial participation in a “build-to-suit” lease. The build out of the facility will include all fixed in place equipment such as plumbing, hood with makeup and exhaust systems, grease trap/collector, electrical, and HVAC. Pursuant to the proposed lease agreement, the cost of these improvements shall not exceed $220,000. Mr. McNiff and Mr. Fang will invest $50,000 to $60,000 for all removable equipment such as ovens, refrigerators, furniture, and small kitchen equipment.

The Successor Agency will receive $1,300 per month in rent. Base rent will increase at a rate of 2.5% per year. The return on investment in tenant improvements will be made through base rent combined with percentage rent. The owners propose that for years 1 through 5, the break point will be set at $175,000 –with a percentage rent of 5.0% for all gross sales above $175,000. During years 6-10, the owners propose the break point will be set at $200,000 –a percentage rent of 5.0% for all sales over $200,000.

Do the math, after five years they are around $156,000 in rent and potential percentage rent which is suspect in itself–god forbid the business doesn’t make it, that’s less return on our $220k.

The council was no better than city staff focusing on the wrong thing such as “uniqueness” and “philanthropy”.

Mayor Kevin Romick explained how great it was this was unique and not something shopping malls in Brentwood and Antioch. He failed to ask any questions.

Councilwoman Carol Rios appeared confused as to who they even were before the meeting with her comments.

“Thank you for explaining who you are,” said Rios. “Our schools will embrace fundraising and projects. Will you be part of our community and share your success with us and we can do it together as a team. That is our motto, team Oakley. To be part of our team, our business need to be part of our team.”

This team she speaks of doesn’t exist because the council is allowing city staff to pick and choose winners. I know several business who have asked for similar tenant improvements and were told “money is not available”.

Even Doug Hardcastle who has been solid lately was willing to let finances slide even after he rediculaed the $1 million plus fountain earlier in the meeting–it’s as if he was sending mixed messages.

“I appreciate how you do give back into the community, it shows a great deal of you as a man and how you run your business. You are always rewarded what you give and pay back. I appreciate that very much,” said Hardcastle.

With all do respect to Ms. Burgis who explained how she visited the shop and how great the cup cakes are, is it worth $220k in improvements?  I doubt it. They want the improvements, let them cover a majority of the costs.

Where is the talk of details? Where is the talk of the $1 per square foot on top of the fact Oakley is throwing $220k at its the project? It’s a hell of a deal for any business.

If I am Black Bear Diner, I am marching right into City Hall and requesting my rent now be reduced to match Republic of Cake because I am paying $2 a sq. foot and they are paying $1 for a brand new building right across the street.

Now matter how great something sounds or as bad as we want it, the financials tell the story and shame on the city council for their lack of curiosity with the tenant improvements portion of the lease.

The council can do better than simply follow city staff blindly on deals such as this one. At least ask the questions and pretend you care about our tax dollars.

If I am another city business, I start knocking on Mr. Montgomery’s door and asking for a similar deal so that I can improve my business.

You may also like

10 comments

Barbara DuMont Feb 28, 2013 - 10:48 am

Lets face it, the city staff is not providing good guidance to the council and the council is allowing them to do so. This is a very very bad decision and there should have been questions asked. Just because it has a following in Orinda does not mean that it will have a following in Oakley. Different demographics all around. And so what if they donate money. If they aren’t making enough money to pay the bills, they won’t keep the shop open.

Rob Saw Feb 28, 2013 - 12:26 pm

Really Oakley? Well done Burk for bringing attention to the council being focused on the wrong thing. Be curious to know how many business folks have been rejected from their own tenant improvements.

Steve Feb 28, 2013 - 12:33 pm

A donation of money means very little as reasno to move forward with a bad deal because many business already donate money and giv to the community. It’s admirable, but should not be the focus of the council.

According to Burkholder, the council is throwing our money down the drain with free rent in March to all tenants in the plaza, reduced rent prior , waived cam fees, . The council approved $600k to Ace, and now throw another $22k and that adds up as lost revenue to the city.

Barbara DuMont Feb 28, 2013 - 12:58 pm

you forgot the La Clincia deal

Julio-Antioch Feb 28, 2013 - 12:56 pm

Antioch council does the same thing. No one checks out anything and after the fact it is too late. Antioch would give away the moon if staff told them they could. All councils must do their own homework.

JimSimmons42 Feb 28, 2013 - 1:24 pm

Agree with Julio, Antioch Council is just as bad. Carol Rios comment pretty much sums this up that the council doesn’t do their homework prior to a vote. If I am approving $220k, I go find out who the heck this company and owners are and find out their back story.

Julio-Antioch Feb 28, 2013 - 2:47 pm

Find out their back story or say…in some cases police calls, arrests for selling to minors there are all kinds of things easy to find if only these city council members do their HOMEWORK.

Frank Spinelli Feb 28, 2013 - 4:14 pm

Remember the old saying “Head in the sand”? This is another prime example.

jake Feb 28, 2013 - 5:05 pm

this is whack! Not impressed.

LeRoy Jun 11, 2013 - 1:56 pm

Maybe the community needs to take a more active role in the city counsel meetings. I’m going to start voicing my opinion. Government is government – no matter what level they’re in.

Comments are closed.