Title
Enter into Contracts with Arizona Fresh Holdings, LLC for Redevelopment of Del Rio Former Landfill (Ordinance S-46989)
Description
Request to authorize the City Manager, or his designee, to enter into a disposition and redevelopment agreement, ground lease, and any and all related and necessary agreements (Agreements) with Arizona Fresh Holdings, LLC (Developer) for the lease and redevelopment of the 156-acre City-owned Del Rio former landfill site located at 1150 E. Elwood St. (Site).
Report
Summary
The Site is a former municipal solid waste landfill operated between 1971 and 1981. In the center of the Site, running north-south, are approximately 20 acres that formerly comprised the municipal Rio Salado Industrial Recreation Park that closed in 2008. The Site has been inactive since this time and is currently vacant and partially used for dirt and asphalt milling storage. The Site is also being monitored to ensure protection of adjacent properties and the environment from the landfill including controlling landfill gas and monitoring for protection of surface and groundwater.
Over the years, the City has conducted extensive community outreach seeking input to develop and activate the Site including three separate planning processes:
- 2003 Rio Salado Beyond the Banks Area Plan (City's former Planning Department);
- 2012 Del Rio Area Brownfields Plan (Office of Environmental Programs); and
- 2012 Del Rio Park Conceptual Master Plan (Parks and Recreation Department).
In 2005 and 2018, the City issued Requests for Proposals (RFPs) to redevelop the Site; however, none of the proposals met the RFP requirements.
In January 2020, City staff issued a public redevelopment and lease opportunity for the redevelopment of the Site. Staff received five offers for this opportunity, three of which offered to develop the entire site. Other proposed uses included:
- Golf concept;
- Office research park;
- Soccer fields and academy concept; and
- Solar testing and research facilities.
The Developer was selected based on its unique offer to provide solutions in all areas of community interest such as a public park; food and agriculture; and amenities that front the river. The Developer will lease and redevelop the Site into the “Arizona Fresh: Agri-Food Innovation Center”, described as a national leading source of innovation and education in the production and distribution of food. As part of the Project, the Developer has offered to build a 20-acre public park (Park) on the Site. Total proposed square footage for the Project is approximately 944,000 square feet, which will be developed in four phases and will create approximately 1,400 construction and 1,500 ongoing operations jobs respectively, with an estimated capital investment of $128 million.
In March 2020, staff began to negotiate with the Developer. In June 2020, the City executed a letter of intent and a license agreement with the Developer so it may access the Site to conduct engineering and geo-technical assessments. The recommended business terms include:
- Developer shall construct a phased, mixed-use project that includes: an Agri-Food Innovation Center with a wholesale produce distribution center; retail; education; research facilities; and, an approximately 20-acre City park (Project). The Project scope will be subject to change based on market and environmental conditions, as mutually approved by the City and Developer. Developer agrees to develop, at a minimum, the first phase of the Project.
- Developer shall provide the City unobstructed access to environmental protection systems including, but not limited to, the methane gas system and groundwater wells (System) during the term of the Agreements.
- Developer will comply with all applicable environmental regulatory requirements and be responsible for obtaining all required permits and approvals as necessary to develop on a closed municipal solid waste landfill. Developer shall retain its own environmental consultant and engineer for any necessary site investigations for the feasibility of the Project. Developer shall be responsible for any impacts of the Project to the System.
- City and Developer shall collaborate to develop and implement an acceptable plan to relocate the System if needed, which will provide equal or greater protection.
- City shall retain control for operating, maintaining, and monitoring the System to maintain environmental protections.
- Developer shall construct the Project in compliance with all City-approved plans and regulations including: Complete Streets, Comprehensive Bicycle Master Plan, Tree and Shade Master Plan, Rio Salado Interim Overlay District, the Rio Salado Beyond the Banks Area Plan and the Del Rio Area Brownfields Plan.
- Developer and City shall enter into Agreements within 12 months of the City Council's approval of these business terms (Authorization Date).
- Developer shall, within 24 months of the Authorization Date, subject to any extensions approved by the City, obtain all necessary permits, provide performance surety to the City and commence construction of Phase 1 of the Project (Commence Construction Date).
- Developer shall complete construction of Phase 1 within 42 months from the Commence Construction Date, subject to any extensions approved by the City (Complete Construction Date).
- City shall lease the Site, as is, to the Developer upon the Complete Construction Date, pursuant to a 100-year Ground Lease. The lease shall include provisions for the City Council to consider an extension of the term upon the 25th year of the lease, as well as rights to terminate portions of the Site lease that are not developed. Developer shall pay an annual rent of $1 per year for the term of the lease.
- Developer shall provide the City with periodic written notices of changes in the scope of the Project based on current market factors.
- City shall provide the Project access to the Park from 7th Street through an easement or other form of access.
- City's Parks and Recreation Department shall, upon the completion of the Park, operate and maintain the Park. Developer shall provide the Parks and Recreation Department with mutually agreed upon financial assistance to fund the maintenance of the Park.
- Agreements will include other terms and conditions deemed necessary by the City.
Elliot D. Pollack & Company, a real estate and economic consulting firm, conducted an economic and fiscal impact study showing the Project will generate an estimated $868.6 million in annual economic activity, benefiting the City and region. The study also shows the City would benefit with approximately $2.4 million in construction tax revenue and over $3.5 million annually in tax revenue from businesses operating within the Project. Additionally, the cost to remediate and/or implement engineering measures to safely construct the Project and new public Park on the former landfill will be significant.
Groundbreaking for Phase 1, which will include a wholesale produce market and a pedestrian-friendly community park system, is anticipated in 2021.
Contract Term
The ground lease will be for a term of 100 years.
Financial Impact
The proposed annual lease rent is $1; however, the City will receive consideration in the form of value of new Park site redevelopment. The Parks and Recreation Department (PRD) will maintain the future community park; however, the Developer will reimburse the City for maintenance costs on an annual basis, at an amount to be determined.
Concurrence/Previous Council Action
- On Aug. 27, 2020, the City's Parks and Recreation Board recommended approval to relocate the Rio Salado Industrial Recreation Park within the Site and to enter into an agreement with the Developer to develop and manage a public park as part of the Project, subject to certain terms and conditions.
- This item was recommended for approval by the Land Use and Livability Subcommittee at its Sept. 16, 2020 meeting by a vote of 4-0.
- Additionally, this item was presented to the Workforce and Economic Development Subcommittee for information and discussion at its Sept. 23, 2020 meeting.
Public Outreach
City staff sought extensive public input on the Project, with community meetings held throughout August 2020. Meetings were scheduled with the Rio Salado Project Working Group, Del Rio Working Group, South Mountain Village Planning Committee, South Central Transit-Oriented Development Steering Committee, City of Phoenix Parks and Recreation Board, and three additional meetings organized by the Community and Economic Development Department (CEDD) that were open to the public with one of the meetings conducted in Spanish.
Outreach also entailed notices sent via email and U.S. mail to property owners, residents and tenants within 1,200 feet and neighborhood associations within one mile of the Site, listing Project details and scheduled public meetings. In addition, CEDD in partnership with the City's PRD and Public Works departments approached additional residents and organizations beyond the boundaries noted above. CEDD also created a webpage (phoenix.gov/EconDev/DelRio) to inform the community about the Project, provide updates, and receive feedback. Some of the feedback received include:
- Overwhelming support to bring the project to an area that is considered a food desert;
- A desire to include local growers/farmers in the different proposed uses;
- Facilitating space for local entrepreneurial activity;
- Interest in understanding how the Developer will interact with businesses in the area; and
- Interest in understanding the Site's current environmental status.
Additionally, future public outreach will be pursued to seek input on the development and construction of a 20-acre community park that will be considered part of the Project.
Location
1150 E. Elwood St.
Council District: 8
Department
Responsible Department
This item is submitted by Deputy City Managers Jeff Barton, Karen Peters, and Inger Erickson, and the Community and Economic Development, Public Works, and Parks and Recreation departments.