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ITEM 10
City Council Memorandum City Clerk's Office Memo No.
ED21-006
Date:
April 8, 2021
To:
Mayor and Council
Thru:
Joshua H. Wright, Acting City Manager
Debra Stapleton, Assistant City Manager
Micah Miranda, Economic Development Director
From:
Erica Barba, Senior Management Analyst
Subject:
Resolution No. 5458, authorizing support for a Foreign Trade Zone application for Viavi Solutions, Inc.; authorizing support for a property tax reclassification from class one to class six for all new personal property; authorizing a development agreement between Viavi and the City of Chandler; authorizing the execution of an Intergovernmental Agreement between the City of Chandler and the City of Phoenix; and authorizing the Mayor to sign the Resolution and related documents as approved by the City Attorney.
Proposed Motion:
Move to approve Resolution No. 5458, authorizing support for a Foreign Trade Zone application for Viavi Solutions, Inc.; manufacturing facility to be located at 3455 South McQueen Road; authorizing support for a property tax reclassification from class one to class six for all new personal property; authorizing a development agreement between Viavi and the City of Chandler; authorizing the execution of an Intergovernmental Agreement between the City of Chandler and the City of Phoenix; and authorizing the Mayor to sign the Resolution and related documents as approved by the City Attorney.
Background/Discussion:
Viavi is a manufacturer of network testing, measurement, assurance and light management and optical coatings products and technologies. Viavi has more than 50 locations throughout the world and over 3,600 employees. The company generated more than $1 billion in revenue during its last fiscal year and is listed on the Nasdaq under ticker symbol "VIAV." In late 2020, the City's Economic Development Division began engaging with Viavi regarding two separate projects: a new manufacturing operation and a headquarters relocation out of San Jose, California.
Viavi has undertaken a competitive site selection process to evaluate multiple metropolitan areas outside of Arizona and multiple cities within Metro Phoenix. The company has short-listed an existing industrial building in Chandler, located at 3455 South McQueen Road. The building is under consideration for both the manufacturing project and the headquarters project. Over the next three years, these two combined projects have the potential to bring 233 jobs to Chandler at an average salary of $139,820. In addition, Viavi anticipates making a capital investment of $96,311,609.
Viavi has expressed that obtaining Foreign Trade Zone (FTZ) status for the property is a primary factor in its site selection process. FTZ status confers certain benefits to exporters, including paying reduced duty rates on manufactured products. Within Arizona, activated FTZ sites also are eligible for a property tax reclassification benefit. Real and personal property can be reclassified from class one to class six property, which carries a lower assessment ratio (5% instead of 18%).
Viavi has requested City support to obtain FTZ status and the property tax reclassification benefit. In consideration of this support, the company has agreed to only pursue reclassification for new personal property that would be located within its Chandler FTZ site. Additionally, the development agreement stipulates that Viavi’s headquarters must be located in Chandler for a minimum of five years.
To obtain the property tax reclassification benefit, the company must provide concurrence letters from each taxing jurisdiction that would be affected by the reclassification. Viavi’s FTZ consultant is responsible for requesting these concurrence letters and this process has begun. The consultant has received a concurrence letter from Chandler Unified School District stating their support for this property tax reclassification. The resolution included with this Council item would serve as the City of Chandler's concurrence letter.
To obtain FTZ status, an application must eventually be submitted to the federal Foreign Trade Zones Board. The application would first be submitted to the City of Phoenix, which serves as grantee for FTZ No. 75, covering Chandler and other areas in Metro Phoenix. If Chandler City Council approves this resolution with authorization to enter into an intergovernmental agreement with the City of Phoenix, the next step would be for the City of Phoenix to submit Viavi's application to the Foreign Trade Zones Board requesting the designation of an FTZ subzone at the site under consideration in Chandler.
Financial Implications:
Property tax reclassification from class one to class six for all new personal property. This is a statutory benefit available in Arizona for companies that receive Foreign Trade Zone status.
Attachments
Resolution No. 5458
Development Agreement with Viavi
Intergovernmental Agreement with City of Phoenix
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