Consideration and Possible Adoption of Ordinance No. 2017-15: An ordinance approving the Sale of City-Owned Property consisting of approximately 32 acre parcel located at the northwest corner of Pulliam and John Wesley Powell and identified with Assessors Parcel Number 116-61-006.

The City released a Request for Proposals for the 32-acre parcel and there was one Proposer, Greentree Hospitality Group, Inc. Their proposal was submitted for the purchase of the entire parcel, but in a two-phase take down under one purchase and sale agreement. Total purchase price is $5,576,725 broken out as follows:  The first phase is for 12.515 acres with a total price of $2,316,900 or $4.25 per square foot.  The second phase is 19.491 acres at $3.84 per square foot for a total price of $3,259,825.  The City released the Request for Proposals for economic development purposes and not strictly for the monetary benefit.  The first phase will be constructing a 120 room hotel with a restaurant and event space.  More importantly, a 15,000 square foot office space is planned which will house the Greentree Hospitality Group's corporate headquarters as they expand into US markets.

The purchase of the property will provide $5,576,725 towards funding airport infrastructure and upgrades. Additionally, it will initiate job growth through a new hotel, restaurant, office space, and Greentree's corporate headquarters.  More indirect benefits will be discussed in Expanded Financial Considerations below.

There is no direct policy impact.

Economic Development - Grow and strengthen a more equitable and resilient economy.

There have not been previous decisions on this parcel. First reading of the Ordinance/Resolution occurred at the May 16, 2017, Council Meeting.

1. Approve the sale of the 32 acres to Greentree Hospitality Group.                                                                           
2. Reject proposal and direct the release of a new RFP for sale of all or a portion of the parcel.
3. Reject the proposal and provide additional direction.

The City has various parcels near the airport that are available for sale or lease for development.  These parcels were released by the Federal Aviation Administration (FAA) towards that end with the funding reserved to benefit the airport.  The majority of those parcels are zoned Research and Development.  The parcel under consideration is the largest of the parcels and the only one zoned Highway Commercial.

The City released a Request for Proposals, and Greentree was the sole proposer.  Their current proposal is for the purchase of the entire 32 acres, with the purchase occurring in two phases.  The purchase of the second phase is required to be no earlier than six months and no later than five days before the first anniversary of the transfer of title to Phase I.  A deposit for Phase II of $162,991.25 (5% of the price) is required within 90 days of the opening of escrow. 

The proposal, which was evaluated and scored by a seven member evaluation committee, was based on various criteria including price, 120 room hotel, a restaurant, event space, and 15,000 square feet of office space.  As part of their proposal, Greentree has committed to using part, or potentially all, of the office space for their corporate headquarters at some time in the future.  

City staff's primary focus in negotiating the Purchase and Sale Agreement was securing corporate jobs.  The added benefits to the airport would be having a hotel in close proximity, the generation of sales tax, and energizing of the area.  It is hoped this will also increase enplanements for the airport as the corporate offices grow and utilize their transportation services.

Greentree's commitment to develop, as required by the contract, has a 15 year term as well as a requirement to increase jobs.   Their initial proposal was originally for 100 corporate jobs with 40 hotel jobs.  However, concerns about the requirement and macro-economic influences led to a commitment in the Purchase and Sale Agreement for 30 hotel jobs and 10 corporate headquarters jobs at construction completion increasing  to 40 hotel jobs and 50 corporate jobs by year six.  It is hoped they will still achieve the 100 jobs originally proposed.  Additionally, language in the Purchase and Sale Agreement provides for economic factors, outside of Greentree's control, to be taken into consideration as the jobs schedule is enforced.  To ensure the office space is used for corporate offices, and not just as leasable space, the Purchase and Sale Agreement allows the City Manager to prohibit leasing of the space if the jobs commitments are not being met.

Greentree has partnered with Kinney Construction Services for the development in the design and construction and will be fully subject to City Code.  They also have a partnership in place with Northern Arizona University's Hotel and Restaurant Management School and the University's President has provided them a letter of support.

• 50 corporate jobs and 40 hotel jobs within six years.  Proposed 140 total jobs at full completion.
• 120 room hotel with a restaurant and event space.
• Phase II is currently unplanned and will be developed at their discretion, but within the City zoning and other code requirements.
• 15 year requirement on the use of Phase I property and the jobs numbers.  Some allowance will be made for macro-economic factors outside Greentree's control.  The City Manager has the ability to prevent commercial leasing of the office space if it is determined Greentree is not meeting their jobs obligations.
• Greentree has secured a reputable development team.
• This is one of the last larger pieces of highway commercial property in the City's inventory which can be used for economic development purposes.
• Funds from the sale are to benefit the airport which is currently reliant on grants and the general fund.
• Final execution of the agreement is subject to City approval of a site plan and FAA approval of the project.
• The consummation of the transaction will take significant time as the purchase is executed only after site plan approval and then occurs in two phases with up to 361 days between Phase I and II.
   

As mentioned earlier, the final purchase price is $5,576,725 which is $4.00 per square foot for the property.  The first phase is $4.25 per square foot and the final phase is $3.84.  These funds will be reinvested into the airport, as required under the Federal Aviation Administration's Grant Assurances. 

Greentree has stated that the phase I development of the project will be a $15,000,000 investment which will generate construction sales tax. 

Additionally, placing the 32 acres on the private tax rolls with significant commercial value added will also increase the property taxes received.

It is also anticipated that the hotel and restaurant will generate significant transaction privilege tax which will include Bed, Board and Beverage revenues.  

140 jobs, from hotel to corporate offices, has the potential to generate a $6,000,000 annual payroll which will benefit the economy both directly and indirectly. 

Generates funds for the airport

Additional activation of the Airpark area

Economic benefits outlined above

Continued partnership with Northern Arizona University

There has been discussion with the Airport Commission which was supportive of the potential use and the Request For Proposals.