| ITEM #: 12. DATE: 01/29/2024 AI #:1898 |
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CITY COUNCIL ACTION REPORT
| SUBJECT: | DEVELOPMENT AGREEMENT FOR REIMBURSEMENT OF ROAD IMPROVEMENTS |
| STAFF PRESENTER(S): | Kini Knudson, Deputy City Manager |
SUMMARY
Development Agreement for Reimbursement of Road Improvements providing terms for the dedication of right-of-way and the construction of public road improvements. Costs will be reimbursed by the City from sales tax collected for those taxable activities occurring on the property located at the southeast corner of the intersection of Interstate 10 and Bullard Avenue.
STRATEGIC PLAN ALIGNMENT
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RECOMMENDATION
ADOPT RESOLUTION NO. 2024-2387
FISCAL IMPACT
The proposed Development Agreement for Reimbursement of Road Improvements (the “Agreement”) requires the City to reimburse the party that constructs the designated public roadway improvements for those final costs, expenses, and fees incurred up to a maximum reimbursement. Per the Agreement, the City shall deposit 50% of the sales collected for taxable activities conducted on the property into a reimbursement account on a monthly basis. Within 30 days of the end of each fiscal quarter the City shall pay the amounts in the reimbursement account to the party that constructs the public roadways until the party is fully reimbursed their actual costs up to a maximum reimbursement or until the expiration of the Agreement. The estimated reimbursement is approximately $7.1 million with an estimated maximum reimbursement of $8.6 million.
The expected development of the property has the potential to add to the City’s tax base, enhance the economic welfare of residents and businesses of the City and generate significant revenues.
The expected development of the property has the potential to add to the City’s tax base, enhance the economic welfare of residents and businesses of the City and generate significant revenues.
BACKGROUND AND PREVIOUS ACTIONS
The Property was originally a part of approximately 243 acres of property rezoned for Airport Gateway at Goodyear, by the City Council, on October 8, 2007 by Ordinance No. 07-1091. Thereafter, the Airport Gateway property was developed over time with sections being rezoned and developed independently. Approximately 25 acres was developed as the current City of Hope medical facility; approximately 25.3 acres was recently rezoned for commercial office and multi-family uses; approximately 43.83 acres was rezoned for business park uses and approximately 51 acres is currently being considered for a rezoning for a light industrial and storage at the northeast corner of Bullard Avenue and Van Buren Street.
The Property is currently being considered for rezoning from Preliminary PAD to a PAD Zoning District with an underlying zoning district of I-1 (Light Industrial).
The Property is currently being considered for rezoning from Preliminary PAD to a PAD Zoning District with an underlying zoning district of I-1 (Light Industrial).
STAFF ANALYSIS
PURPOSE OF THE AGREEMENT
Owner intends to develop the Property in phases as an integrated mixed-use project containing light industrial and commercial. The Property comprises the “West Parcel” generally identified as the west approximately 28.03 acres of the Property adjacent to Bullard Avenue and the “East Parcel” generally identified as the east approximately 43.45 acres of the Property adjacent to the east boundary of the West Parcel. The West Parcel is intended to be developed as a retail facility owned by a nationally recognized large retail user (the “Retail User”) with at least 53,000 square feet of retail space and with at least 75 fueling/charging positions (the “Retail Project”). The East Parcel is intended to be used for light industrial uses with the Owner reserving a total of 7.5 acres on a portion or portions of the East Parcel to solely pursue General Commercial uses for a period of 18 months. The proposed Agreement sets forth the terms and conditions pursuant to which the Owner or Retail User will dedicate certain rights of way and construct full street improvements for a public street running east and west between Bullard Avenue and 143rd Avenue and full street improvements for a public street running north and south along the border of the West Parcel and the East Parcel (collectively the “Road Improvements”). The City believes that the development of the Property will bring substantial sales tax revenues, significant job creation, and therefore is willing to reimburse 50% of the sales taxes collected for taxable activities conducted on the Property to reimburse the party or parties their proportionate share of the actual costs of public infrastructure to construct the Road Improvements up to a maximum reimbursement. DEVELOPMENT AGREEMENT TERMS.
The following is a summary of the substantive terms of the proposed Agreement.The Retail User must receive a certificate of occupancy and the Road Improvements must be accepted by the City within five years of the effective date of the Agreement or the Agreement shall terminate.
Owner is not required by the Agreement to construct or develop all or any portion of the Property or the Road Improvements, however, as an express condition to the City’s reimbursement obligations the Owner shall have caused the development the Retail Project and the Road Improvements.
The Owner or Retail User (each a “Constructing Party”) may construct the Road improvements or a portion thereof.
At least 30 days before the commencement of construction of the Road Improvements, or any portion thereof, the Constructing Party shall submit to the City Engineer for approval a preliminary estimate of the costs of the design and construction of the Road Improvements, or a portion thereof, (the “Preliminary Cost Estimate”). Due to inflation and other factors the maximum reimbursement of the Road Improvements, or any portion thereof, will be the Preliminary Cost Estimate plus an additional 20% (the “Maximum Reimbursement”).
The Constructing Party shall design and construct the Road Improvements, or any portion thereof, to the ultimate full-street design specifications attached as an exhibit to the Agreement. The Constructing Party shall comply with all applicable state, county, and City laws governing the procurement of services related to the design, installation, and/or construction of the Road Improvements including but not limited to the public bidding requirements of A.R.S. Title 34.
After the completion of the Retail Project and the Road Improvements the City shall reimburse the Constructing Party its final costs incurred for expenses that are reasonably and solely necessary for the design, and construction of the Road Improvements, and as approved by the City in the Preliminary Cost Estimate, up to the applicable Maximum Reimbursement.
As a condition to the reimbursement obligation under the Agreement the City shall establish an account separate from the City’s general fund (the “Reimbursement Account”). The funding of the Reimbursement Account is limited to transaction privilege taxes imposed and actually received by the City from all activities engaged in, on, or within the Property that result in the generation of sales tax, including the design and construction of the Road Improvements, and that occur during the term of the Agreement.
Within 30 days of the end of each fiscal quarter the City shall pay the Constructing Party(ies) their proportionate share of the total amount held in the Reimbursement Account. The City shall continue to make payments to the Constructing Party(ies) on a quarterly basis from the Reimbursement Account until each Constructing Party is reimbursed their actual costs to construct the Road Improvements, or any portion thereof, up to the Maximum Reimbursement or until the expiration of the Agreement, at which time all amounts collected in the Reimbursement Account shall be paid to the Constructing Party(ies) unless each party has been fully reimbursed.
TERMS OF RESOLUTION
This Agreement is contingent upon the Agreement being finalized and executed by the Owner. Accordingly, the resolution is only seeking the approval of the form of the attached Development Agreement for Reimbursement of Road Improvements and it provides the City Attorney or his designee with authority to make non-substantive changes to the Agreement before it is finalized. If the Agreement is not fully executed by February 8, 2024, the authorization to execute the Agreement terminates.
RECOMMENDATION