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AGENDA ITEM REVIEW FORM |
13.A.
Regular City Council Meeting
- Meeting Date:
- 12/14/2016
- Department Head:
- Kay Macuil
- Submitted By:
- Kay Macuil, City Attorney, Attorney's Office
Action Requested:
Motion
Resolution
Resolution
ITEM:
Discussion and possible action to adopt Resolution No. 1171. A resolution of the Mayor and City Council of the City of San Luis, Arizona approving a Memorandum of Understanding between the City of San Luis, Arizona and San Luis Commercial Holdings, L.L.C., an Arizona limited liability company. (Jenny Torres, Community Development Director)
SUMMARY:
Through the efforts of Jenny Torres and Ralph Velez, City staff have negotiated with San Luis Commercial Holdings, L.L.C. to develop a multi-use hotel, restaurant, convenience store and gas station, and possible medical complex at the corner of 22nd Street and Highway 95 as an economic development project.
What is being presented is a memorandum of understanding, not the final agreements. The purpose of a memorandum of understanding is to outline the basic understandings between the parties which will be incorporated into the final agreements between the two parties. It is anticipated the final agreements will be two, separate agreements.
(1) The first will be a development agreement and
(2) the second will be what is described by A.R.S. §9-500.11 as a retail development tax incentive agreement.
The developer of the project has been working on this project for some time now. For this project to be economically feasible, it will need to use the federal program of new market tax credits as well as economic development participation of the City of San Luis. The participation of the City of San Luis is limited in scope. It involves the buying of land by the city for public infrastructure of the city. It involves helping to pay part of the cost of other public infrastructure. It also involves rebating a portion of the sales taxes generated by the ultimate businesses that are developed until the sum of $1,500,000 is rebated.The City did a version of this before for the development of WalMart. For the WalMart project, part of the infrastructure needed was development on 22nd Street. These costs were fronted by WalMart and paid back to WalMart from a portion of the sales taxes collected from WalMart. In similar fashion a portion of sales taxes from the businesses developed under this MOU will be rebated. Because the monies are limited to 80 percent of taxes actually generated, at all times the City will received more revenue than the amount of the incentive. Further the agreement requires a study and bargained for employment of persons within the effective market area of the City such that the benefit of this employment and the development of public infrastructure will also meet or exceed the incentive pledged by this MOU.
What the City will receive in return is multi-fold. First is the development of a brand hotel. Second is the development of a brand restaurant. Third is a convenience store/gas station. Fourth is a possible medical complex. Fifth is employment of its residents. Sixth is additional developed infrastructure for the City. It is anticipated that the amount of private investment to develop this project could be as much as $20,000,000.
What is also important is what the City is not doing. It is not buying the land for the private businesses being proposed to be developed. The portion of land being purchased by the City is for land for the City, not private enterprise. It is not providing the financing or lending of the City's credit. If sales taxes are not generated, the City will not be paying the incentive.
Care has been taken to comply with Arizona law with regards to the power granted by A.R.S. §9-500.11 and the limitations imposed by Article 9 Section 7 of the Arizona Constitution, also known as the Anti-Gift Clause.
Again, the proposed memorandum of understanding is not the final agreement. But by agreeing to the memorandum, Council will be saying that it agrees in principal with the understandings outlined within the memorandum.
Staff recommends the approval of the proposed resolution approving said memorandum of understanding.
What is being presented is a memorandum of understanding, not the final agreements. The purpose of a memorandum of understanding is to outline the basic understandings between the parties which will be incorporated into the final agreements between the two parties. It is anticipated the final agreements will be two, separate agreements.
(1) The first will be a development agreement and
(2) the second will be what is described by A.R.S. §9-500.11 as a retail development tax incentive agreement.
The developer of the project has been working on this project for some time now. For this project to be economically feasible, it will need to use the federal program of new market tax credits as well as economic development participation of the City of San Luis. The participation of the City of San Luis is limited in scope. It involves the buying of land by the city for public infrastructure of the city. It involves helping to pay part of the cost of other public infrastructure. It also involves rebating a portion of the sales taxes generated by the ultimate businesses that are developed until the sum of $1,500,000 is rebated.The City did a version of this before for the development of WalMart. For the WalMart project, part of the infrastructure needed was development on 22nd Street. These costs were fronted by WalMart and paid back to WalMart from a portion of the sales taxes collected from WalMart. In similar fashion a portion of sales taxes from the businesses developed under this MOU will be rebated. Because the monies are limited to 80 percent of taxes actually generated, at all times the City will received more revenue than the amount of the incentive. Further the agreement requires a study and bargained for employment of persons within the effective market area of the City such that the benefit of this employment and the development of public infrastructure will also meet or exceed the incentive pledged by this MOU.
What the City will receive in return is multi-fold. First is the development of a brand hotel. Second is the development of a brand restaurant. Third is a convenience store/gas station. Fourth is a possible medical complex. Fifth is employment of its residents. Sixth is additional developed infrastructure for the City. It is anticipated that the amount of private investment to develop this project could be as much as $20,000,000.
What is also important is what the City is not doing. It is not buying the land for the private businesses being proposed to be developed. The portion of land being purchased by the City is for land for the City, not private enterprise. It is not providing the financing or lending of the City's credit. If sales taxes are not generated, the City will not be paying the incentive.
Care has been taken to comply with Arizona law with regards to the power granted by A.R.S. §9-500.11 and the limitations imposed by Article 9 Section 7 of the Arizona Constitution, also known as the Anti-Gift Clause.
Again, the proposed memorandum of understanding is not the final agreement. But by agreeing to the memorandum, Council will be saying that it agrees in principal with the understandings outlined within the memorandum.
Staff recommends the approval of the proposed resolution approving said memorandum of understanding.
RECOMMENDATION / SUGGESTED MOTION:
I MOVE TO APPROVE AND ADOPT RESOLUTION NO. 1171.
Fiscal Impact
- IS THERE FISCAL IMPACT ASSOCIATED WITH THIS ITEM:
- Yes
- CITY/STATE/FEDERAL FUNDS:
- City
- TOTAL:
- $500,000.00
- BUDGETED:
- Not for 2016-2017
- AVAILABLE TO TRANSFER:
- N/A
- GL ACCT # & NAME/REMAINING BALANCE BEFORE PURCHASE:
- To be determined
FISCAL IMPACT STATEMENT (IF THIS IS A BUDGET TRANSFER, YOU MUST ATTACH THE BUDGET ADJUSTMENT FORM):
Timing of this cost is not addressed in the Memorandum of Understanding (MOU) whether before July 1, 2017 (this fiscal year) or after July 1, 2017 (next fiscal year).
This cost is for the City to obtain the City's own land for infrastructure and the infrastructure itself. Specifically, under the MOU the purchase for the City would include two (2) acres of land for City infrastructure( including closing costs) and the costs of infrastructure in the public right of way. These costs are capped under the MOU at $500,000.00.
This cost is for the City to obtain the City's own land for infrastructure and the infrastructure itself. Specifically, under the MOU the purchase for the City would include two (2) acres of land for City infrastructure( including closing costs) and the costs of infrastructure in the public right of way. These costs are capped under the MOU at $500,000.00.