| ITEM #: 4. DATE: 09/22/2025 AI #:2795 |
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CITY COUNCIL ACTION REPORT
| SUBJECT: | RESOLUTION APPROVING THE SIXTH AMENDMENT TO INFRASTRUCTURE DEVELOPMENT AGREEMENT FOR MICROSOFT PROJECT 10-11 |
| STAFF PRESENTER(S): | Kini Knudson, Deputy City Manager |
SUMMARY
Sixth Amendment to Infrastructure Development Agreement for Microsoft Project 10-11 (“Project”) regarding modifying the terms for funding the Facilities Escrow Account from the Financial Assurance Deposit and the funding by Microsoft of the costs for the City Designated Representative.
STRATEGIC PLAN ALIGNMENT
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RECOMMENDATION
ADOPT RESOLUTION NO. 2025-2489 APPROVING THE SIXTH AMENDMENT TO INFRASTRUCTURE DEVELOPMENT AGREEMENT FOR PHX 10-11. (Kini Knudson, Deputy City Manager)
FISCAL IMPACT
There is no direct budgetary impact on the city.
Microsoft previously deposited $5,000,000 with the city that was to be used as financial assurance for building and replacing certain water lines needed for the Project. Per the Sixth Amendment, the funds will now be used to fund an escrow account related to a replacement water campus, which Microsoft may draw upon for design and construction costs. Any remaining balance between the $5,000,000 deposited with the city and the Replacement Water Facilities Cost must be returned to Microsoft within thirty (30) days of Microsoft’s written request.
Microsoft also deposited $800,000 to retain the services of the City’s Designated Representative for a limited duration of two years. The Sixth Amendment allows the City to extend the City Designated Representative's services for a third year using any unused portion of the original $800,000 deposit by Microsoft. If the costs exceed the original $800,000 during the third year, Microsoft must provide additional funding to pay the difference. Any funds remaining with the city after the City Designated Representative’s services end must be promptly returned to Microsoft.
Microsoft previously deposited $5,000,000 with the city that was to be used as financial assurance for building and replacing certain water lines needed for the Project. Per the Sixth Amendment, the funds will now be used to fund an escrow account related to a replacement water campus, which Microsoft may draw upon for design and construction costs. Any remaining balance between the $5,000,000 deposited with the city and the Replacement Water Facilities Cost must be returned to Microsoft within thirty (30) days of Microsoft’s written request.
Microsoft also deposited $800,000 to retain the services of the City’s Designated Representative for a limited duration of two years. The Sixth Amendment allows the City to extend the City Designated Representative's services for a third year using any unused portion of the original $800,000 deposit by Microsoft. If the costs exceed the original $800,000 during the third year, Microsoft must provide additional funding to pay the difference. Any funds remaining with the city after the City Designated Representative’s services end must be promptly returned to Microsoft.
BACKGROUND AND PREVIOUS ACTIONS
In 2018, Microsoft acquired approximately 279 acres, generally located between the north side of Broadway Road and the south side of MC-85 and extending from east of Bullard Avenue to west of Litchfield Road. Since this acquisition, Council has considered and taken numerous actions to facilitate the development of the PHX 10-11 Site, including the adoption of the Infrastructure Development Agreement for Project 10-11 approved by City Council on June 27, 2019, and the following five amendments: a First Amendment recorded on July 14, 2020, a Second Amendment recorded on April 27, 2021, a Third Amendment recorded on March 8, 2023, a Fourth Amendment recorded on June 28, 2023, and a Fifth Amendment recorded on July 12, 2024.
Pursuant to the Third Amendment, Microsoft deposited the Designated Representative Deposit in the amount of $800,000 with the city to pay for the city’s costs to retain the services of the City’s Designated Representative for a two-year period. Under the Sixth Amendment, the city may use the remaining portions of the original deposit to extend the services of the City’s Designated Representative in support of the Project.
Pursuant to the Fourth Amendment, Microsoft deposited $5,000,000 with the city as the Financial Assurance Deposit, and Microsoft and the city were to establish an escrow account allowing Microsoft to draw upon the Financial Assurance Deposit to construct the Dedicated Discharge Line, Pump Station, and water lines. Despite Microsoft having delivered the Financial Assurance Deposit to the city, no escrow account was established and Microsoft constructed the Dedicated Discharge Line, Pump Station and water lines needed without drawing upon the Financial Assurance Deposit and the full amount of the deposit remains in the possession of the city. Microsoft requested to use the Financial Assurance Deposit to establish a separate escrow account required under the Fifth Amendment related to a replacement water campus. Under the Sixth Amendment, Microsoft will be able to use the $5,000,000 deposited with the city to establish that separate escrow account.
Pursuant to the Third Amendment, Microsoft deposited the Designated Representative Deposit in the amount of $800,000 with the city to pay for the city’s costs to retain the services of the City’s Designated Representative for a two-year period. Under the Sixth Amendment, the city may use the remaining portions of the original deposit to extend the services of the City’s Designated Representative in support of the Project.
Pursuant to the Fourth Amendment, Microsoft deposited $5,000,000 with the city as the Financial Assurance Deposit, and Microsoft and the city were to establish an escrow account allowing Microsoft to draw upon the Financial Assurance Deposit to construct the Dedicated Discharge Line, Pump Station, and water lines. Despite Microsoft having delivered the Financial Assurance Deposit to the city, no escrow account was established and Microsoft constructed the Dedicated Discharge Line, Pump Station and water lines needed without drawing upon the Financial Assurance Deposit and the full amount of the deposit remains in the possession of the city. Microsoft requested to use the Financial Assurance Deposit to establish a separate escrow account required under the Fifth Amendment related to a replacement water campus. Under the Sixth Amendment, Microsoft will be able to use the $5,000,000 deposited with the city to establish that separate escrow account.
STAFF ANALYSIS
The proposed Sixth Amendment updates how the city and Microsoft use the money previously deposited for water infrastructure and the City's Designated Representative's services:
- Reallocates the $5,000,000 Financial Assurance Deposit, which the city currently has in its possession, to establish an escrow account that funds the Replacement Water Facilities via a formal escrow account and any remaining funds shall be refunded to Microsoft.
- Confirms the city’s right to draw upon the $800,000 Designated Representative Deposit made by Microsoft for an optional third-year extension, and Microsoft agrees to cover any shortfall during that third year.