| ITEM #: 9. DATE: 09/25/2023 AI #:1687 |
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CITY COUNCIL ACTION REPORT
| SUBJECT: | DEVELOPMENT AGREEMENT FOR AIRPORT GATEWAY SOUTH |
| STAFF PRESENTER(S): | Andy Granger, Deputy City Manager |
SUMMARY
Development Agreement for Airport Gateway South providing terms for receipt of additional water supplies and delivery of additional wastewater discharges to the City’s wastewater treatment facility from operations at 14170 W. Yuma Road, Goodyear, AZ.
STRATEGIC PLAN ALIGNMENT
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RECOMMENDATION
ADOPT RESOLUTION NO. 2023-2354 APPROVING THE FORM OF A DEVELOPMENT AGREEMENT FOR AIRPORT GATEWAY SOUTH, CONDITIONALLY AUTHORIZING ITS EXECUTION, PROVIDING DIRECTION AND AUTHORIZATION, PROVIDING FOR THE TERMINATION OF THE APPROVALS AND AUTHORIZATIONS PROVIDED IN THE RESOLUTION; AND PROVIDING AN EFFECTIVE DATE.
FISCAL IMPACT
The proposed Development Agreement for Airport Gateway South (the “Agreement”) provides the City with the recovery for costs associated with the City providing additional water to the Factor Property, in excess of the volumes initially represented, as being needed and the costs associated with the City accepting additional wastewater discharges at the City’s 157th Avenue Wastewater Reclamation Facility (the “157th Ave WRF”) in excess of the volumes initially represented as being delivered. It also provides for the recovery of un-metered water used by the business on the Factor Property.
BACKGROUND AND PREVIOUS ACTIONS
Airport Gateway South Property LLC, a Delaware limited liability company (“Owner”), owns approximately 30.27 acres of land currently consisting of two lots located at 14160 West Yuma Road, Goodyear AZ (the “South Property”) and 14170 West Yuma Road, Goodyear, Arizona (the “Factor Property”) (collectively the South Property and the Factor Property are referred to as the “Property”), upon which Owner constructed two shell industrial buildings. In support of the development of the two shell industrial buildings located on the Property, Owner submitted the Final Sewer Report for Airport Gateway South West Yuma Road East of 143rd Avenue Goodyear, Arizona dated April 2021 (the “2021 AGS Sewer Report”) and the Final Water Basis of Design Report for Airport Gateway South West Yuma Road East of 143rd Avenue Goodyear, Arizona dated March 2021 (the “2021 AGS Water Report”). (Collectively the 2021 AGS Sewer Report and the 2021 AGS Water Report are referred to as the “2021 AGS Utility Reports”). According to the 2021 AGS Water Report, the average daily demand for the two buildings and the landscaping for the Property was 64,138 gallons per day; and according to the 2021 AGS Sewer Report, the average daily wastewater flow to be discharged to the City’s 157th Avenue Water Reclamation Facility (the “157th Ave WRF”) was 24,678 gallons per day, for both buildings located at the Property. Water infrastructure improvements and wastewater infrastructure improvements were constructed to handle the delivery of the volume of water reflected in the 2021 AGS Utility Reports.
On November 15, 2021, Owner and Factor 75 LLC, a Delaware limited liability company (“Tenant”) entered into a Lease Agreement for the lease of the building located on approximately 17.52 acres, the “Factor Property”, pursuant to which Tenant intended to operate a production and distribution facility (the “Business”). Pursuant to the terms of its lease, Tenant submitted an amended site plan and construction documents for the Tenant improvements required for the operation of the Business on the Factor Property. In support of its site plan amendment and construction documents for the Tenant improvements on the Factor Property, Tenant submitted letters to the City advising that the proposed development plans did not require any amendment to the 2021 AGS Utility Reports. The City issued Tenant a Temporary Certificate of Occupancy on August 1, 2023.
Since it began operations on the Factor Property, Tenant has been receiving more water, both metered and unmetered, than the volumes reflected in the 2021 AGS Water Report and has been discharging more flows of wastewater to the 157th Ave WRF than the volumes reflected in the 2021 AGS Sewer Report. Tenant now approximates that the full build-out average daily water demand for the Business on the Factor Property must increase from 30,537 gpd to 180,000 gpd (the “Additional Water”), and the wastewater flows that will be discharged to the 157th Ave WRF from the Factor Property must increase from 14,729 gpd to 150,500 gpd (the “Additional Wastewater Discharges”).
On November 15, 2021, Owner and Factor 75 LLC, a Delaware limited liability company (“Tenant”) entered into a Lease Agreement for the lease of the building located on approximately 17.52 acres, the “Factor Property”, pursuant to which Tenant intended to operate a production and distribution facility (the “Business”). Pursuant to the terms of its lease, Tenant submitted an amended site plan and construction documents for the Tenant improvements required for the operation of the Business on the Factor Property. In support of its site plan amendment and construction documents for the Tenant improvements on the Factor Property, Tenant submitted letters to the City advising that the proposed development plans did not require any amendment to the 2021 AGS Utility Reports. The City issued Tenant a Temporary Certificate of Occupancy on August 1, 2023.
Since it began operations on the Factor Property, Tenant has been receiving more water, both metered and unmetered, than the volumes reflected in the 2021 AGS Water Report and has been discharging more flows of wastewater to the 157th Ave WRF than the volumes reflected in the 2021 AGS Sewer Report. Tenant now approximates that the full build-out average daily water demand for the Business on the Factor Property must increase from 30,537 gpd to 180,000 gpd (the “Additional Water”), and the wastewater flows that will be discharged to the 157th Ave WRF from the Factor Property must increase from 14,729 gpd to 150,500 gpd (the “Additional Wastewater Discharges”).
STAFF ANALYSIS
PURPOSE OF THE AGREEMENT
The proposed Agreement sets forth the terms and conditions pursuant to which the City has agreed to provide additional water to the Factor Property and to accept additional wastewater discharges at the 157th Ave WRF from the Property.
DEVELOPMENT AGREEMENT TERMS
The following is a summary of the substantive terms of the proposed Agreement:
Updated Utility Reports. Factor 75 LLC, a Delaware limited liability company (the “Tenant” is required to submit a new water report and a new sewer report (collectively the “Updated Utility Reports”). The Updated Utility Reports are to account for the water and sewer demands of the Factor Property, the South Property, and the Surrounding Properties and are to identify all additional on-site and off-site infrastructure that will be required to accommodate these demands.
Discharge Permit. Tenant is required to obtain a wastewater discharge permit pursuant to the requirements of Article 12-A of the Goodyear City Code as it may be amended from time to time (the “Discharge Permit”) and to construct all pretreatment facilities identified in the Discharge Permit.
Payments. Tenant will be making the following payments to the City:
- $4,468,634, which represents a contribution of $2,226,689 toward the cost of the water resources for the Additional Water Tenant requires for its operations and a contribution of $2,241,945 towards the cost of the water system that will produce the Additional Water. This payment will be made before the City issues Tenant a 4-inch water meter, which is required to deliver all of the additional water to the Factor Property.
- $5,430,840, which represents a contribution towards the cost of the wastewater system that will treat and dispose of the Additional Wastewater Discharges that Tenant will be discharging to the 157th Ave WRF. This payment will be made before the City issues Tenant a 4-inch water meter, which is required to deliver all of the additional water to the Factor Property.
- $9,148, which represents an agreed-upon payment in full of the cost of the unmetered water Tenant used. This payment is to be made within 30 days of the effective date of the Agreement.
- Tenant will not be required to pay any wastewater development impact fee or water development impact fee that would otherwise be owed as a result of the City’s commitment to deliver the Additional Water to the Factor Property or to accept the Additional Wastewater Discharges from the Factor Property to the 157th Ave WRF
Infrastructure Improvements. Tenant will be responsible for constructing, at Tenant’s sole cost and expense, all on-site and off-site water and wastewater infrastructure improvements identified in the Updated Utility Reports as being needed for the City to deliver the Additional Water to the Factor Property, including peak water demands, and fire flow needs, and to accept the Additional Wastewater Flows.
Interim Water. Tenant shall be entitled to receive up to 85,000 gpd of potable water from the City from the Effective Date of the Agreement until November 1, 2023. Beginning on November 1, 2023, Tenant shall be entitled to receive up to 110,000 gpd of potable water from the City until such time as Tenant has installed a 4-inch water meter
Issuance of 4-inch Water Meter. The City shall not issue Tenant a 4-inch water meter to allow the delivery of the Additional Water to the Factor Property until: (i) the City has received all of the payments as set forth above, (ii) there is capacity at the 157th Ave WRF to accept the Additional Wastewater Discharges, (iii) Tenant has obtained a Discharge Permit; and (iv) all pretreatment facilities identified in the Discharge Permit as being needed to comply with the requirements of Article 12-A of the Goodyear City Code have been completed.
Entitlement to Additional Water and Additional Wastewater Discharges. Tenant shall be entitled to receive the Additional Water from the City and to deliver the Additional Wastewater Discharges to the 157th Ave WRF after all of the following have occurred: (i) the City has received all of the payments set forth above; (ii) Tenant has submitted and received approval of the Updated Utility Reports, (iii) Tenant has obtained a Discharge Permit and all pretreatment facilities identified in the Discharge Permit have been completed; (iv) Tenant has installed a 4-inch water meter, and (v) there is capacity at the 157th Ave WRF to accept the Additional Wastewater Discharges.
Temporary Certificate of Occupancy. Until the City issues Tenant a permanent certificate of occupancy the City shall allow Tenant to operate under a temporary certificate of occupancy, unless either (i) Tenant has not obtained a permanent certificate of occupancy for the Factor Property by December 31, 2024; provided, however, that this deadline may be extended by the City Engineer, or his designee or (ii) the temporary certificate of occupancy issued for the Factor Property has been revoked pursuant to the terms of this Agreement.
Certificate of Occupancy. The City shall not issue Tenant a permanent certificate of occupancy for the Factor Property until all of the following have been satisfied: (i) the Updated Utility Reports have been submitted and approved by the City, (ii) Tenant has completed the construction of all on-site and off-site water and wastewater infrastructure improvements identified in the Updated Utility Reports as being needed for the City to deliver the Additional Water to the Factor Property and to accept the Additional Wastewater Discharges; (iii) Tenant has installed a 4-inch water meter subject to the terms of Section 11 above, and (iv) Tenant has obtained a Discharge Permit and all pretreatment facilities identified in the Discharge Permit as being needed to comply with the requirements of Article 12-A of the Goodyear City Code as it may be amended from time to time have been completed.
Enforcement. The Agreement includes deadlines for the satisfaction of the various requirements in the Agreement. Normally, the City would withhold building permits and/or certificates of occupancy (permanent and/or temporary) as a means of ensuring compliance with the development requirements. However, because Tenant is already operating and because there are no other means of enforcing compliance, the agreement allows for the City to revoke Tenant’s temporary certificate of occupancy if Tenant fails to comply with the deadlines in the agreement. In recognition of all of the myriad of circumstances that could cause delays in Tenant’s ability to satisfy its obligations within the stated timeframes, the agreement allows City staff to extend the deadlines upon a showing of good cause and provide opportunities for the Tenant to cure any breach prior to the revocation of Tenant’s temporary certificate of occupancy.
At Risk Construction. In anticipation of the requirements for the City’s issuance of a 4-inch water meter being satisfied, the agreement allows for Tenant to begin construction of improvements for the 4-inch water meter, at risk, no sooner than November 1, 2023 and subject to Tenant’s having submitted and obtained approval of all construction documents required by the City.
Limitation on Water Deliveries. The Agreement limits the City’s obligations to deliver additional water over and above the Additional Water the City will be providing under the terms of the Agreement unless an updated water report is submitted and approved by the City Engineer and all conditions required by the City for providing additional water have been satisfied.
Limitation on Wastewater Discharges. The Agreement limits the City’s obligations to accept additional wastewater over and above the Additional Wastewater Discharges the City will be accepting under the terms of the Agreement unless an updated water report is submitted and approved by the City Engineer and all conditions required by the City to accept additional wastewater discharges have been satisfied.
No Owner Obligations. Because all of the requirements in the Agreement are the result of the Tenant’s operations, the City has agreed that the obligations in the Agreement are obligations of Tenant, and not of Owner, and the City will not be required to satisfy any of the obligations in the Agreement.
TERMS OF RESOLUTION
This Agreement is contingent upon the Agreement being finalized and executed by the Tenant, Owner, and Owner’s lender by October 16, 2023. Accordingly, the resolution is only seeking the approval of the form of the attached Development Agreement for Airport Gateway South and it provides the City Attorney or his designee with authority to make non-substantive changes to the Agreement before it is finalized. It also sets forth conditions that must be satisfied before the City Manager can execute the Agreement. If the Agreement is not fully executed by October 16, 2023, the authorization to execute the Agreement terminates. RECOMMENDATION
Staff is recommending the adoption of Resolution 2023-2354 and the approval of the Development Agreement for Airport Gateway South, as it furthers Council’s requirement that growth pays for growth and allows for the continued operation of Factor 75’s business without interruption, while the issues related to the City’s delivery of additional water to the Factor Property and the City’s receipt of additional wastewater supplies at the 157th Ave WRF are being resolved.