The Foreign Trade Zone (FTZ) Policy of City of Goodyear Dated August 28, 2023 clarifies the requirements for a Qualified Internet Fulfillment Center, modifies how PILOT Fees are collected, and corrects minor scrivener’s errors in the existing FTZ Policy.

ADOPT RESOLUTION NO. 2023-2339 APPROVING THE FOREIGN TRADE ZONE (FTZ) POLICY OF THE CITY OF GOODYEAR DATED AUGUST 28, 2023; PROVIDING AUTHORIZATION AND DIRECTION TO TAKE ACTIONS AND EXECUTE DOCUMENTS NECESSARY TO CARRY OUT INTENT OF THE RESOLUTION; LIMITING APPLICATION OF TAX POLICY TO FUTURE FTZ SITES; AND PROVIDING FOR AN EFFECTIVE DATE. (Sarah Chilton, Deputy City Attorney)

No fiscal impact will result from the adoption of the Foreign Trade Zone Policy of the City of Goodyear Dated August 28, 2023 as it is only clarifying existing requirements for a Qualified Internet Fulfillment Center, modifying how PILOT (Payment in Lieu of Tax) Fees are collected, and correcting minor scrivener’s errors.

10/4/2010 – City Council Adopts Resolution 10-1404 and 10-1405 amending the FTZ Tax Policy clarifying the circumstances under which a PILOT (Payment in Lieu of Taxes) Agreement is required and approving the Goodyear Crossings FTZ site.

12/15/2014 – City Council Adopts Resolution 14-1687 amending the FTZ Policy providing administrative approval of FTZ applications for User Driven sites for speculative buildings that met certain requirements by January 1, 2018.

4/26/2021 – City Council Adopts Resolution 2021-2154 which modified the tax policy applicable to activated FTZ sites.  Under the 2021 FTZ Policy, unless an activated user meets the requirements of a qualified high-wage manufacturer employer or qualified internet fulfillment center, the user is required to pay a PILOT Fee so that the city and other taxing jurisdictions will receive property taxes that would have been collected had the property not been reclassified and taxed as property within an activated foreign trade zone.

Since the adoption of the 2021 FTZ Policy, staff has determined that certain minor modifications to the 2021 FTZ Policy are needed to clarify the requirements for a Qualified Internet Fulfillment Center, to modify how PILOT Fees are collected, and to correct minor scrivener’s errors, including the addition of a definition for a term used throughout the 2021 FTZ Policy that should have been defined but was not. Attached is a document that reflects the changes made to the 2021 FTZ Policy.

The intent of the 2021 FTZ Policy is for the city to collect a PILOT Fee so that the city and other taxing jurisdictions receive the property taxes that would be owed for the property had the property not been reclassified to an activated zone site unless the operator meets the requirements for a Qualified Internet Fulfillment Center or Qualified High Wage Manufacturing Employer.  The 2021 FTZ Policy required the PILOT Fee to be paid twice a year. However, this payment arrangement does not work if the operator is claiming to be exempt from the PILOT Fee because it is a Qualified Internet Fulfillment Center.

The requirements for an activated FTZ Site to be a Qualified Internet Fulfillment Center includes a minimum volume of sales that generate transaction privilege taxes paid to the City of Goodyear over the property taxing year.  Because this is determined on an annual basis and at the end of the year, the PILOT Fee cannot be collected twice a year for internet fulfillment centers.  The 2021 FTZ Policy is being modified to require the payment of PILOT Fees twice a year for all activated FTZ sites other than internet fulfillment centers and the payment of PILOT Fees for internet fulfillment centers once a year, after the end of the property taxing year.

The 2021 FTZ Policy is also being modified to clarify the requirements for a Qualified Internet Fulfillment Center.  The requirements for a Qualified Internet Fulfillment Center currently read:

A Qualified Internet Fulfillment Center will be required to meets all of the following criteria:

•  Employer/Operator provides documentation demonstrating a Capital Expenditure of at least $25,000,000.
•  The internet fulfillment center generates a minimum of $25,000,000 of end user sales in Arizona on an annual basis that is sourced from a facility in Goodyear resulting in the transaction privilege tax of 2.5% to be paid to the City of Goodyear for each occurrence.

The City’s interpretation is that only internet fulfillment centers that generate sales taxes paid to the City of Goodyear on a minimum of $25,000,000 in end-user sales on an annual basis meet the requirements to be a Qualified Internet Fulfillment Center exempt from paying a PILOT Fee.  The revised language makes that clear.

By approving and adopting Resolution 2023-2339, the Council is approving and adopting the Foreign Trade Zone Policy of the City of Goodyear Dated August 28, 2023 (the “2023 FTZ Policy”). The 2023 FTZ Policy shall not apply to zone sites that are included within the boundaries of the FTZ No. 277 Western Maricopa County as of August 28, 2023, the date this Resolution is approved.  Zone sites that have been included within the boundaries of the FTZ No. 277 Western Maricopa County before August 28, 2023, will be subject to the Foreign Trade Zone Policy of the City of Goodyear in effect when the sites were included within the boundaries of the FTZ No. 277 Western Maricopa County.