Title
Amend City Contract 164171 for Public Infrastructure Improvements at Halo Vista (Ordinance S-52845) - District 1
Description
Request to authorize the City Manager, or his designee, to amend the Development Agreement, City Contract 164171 (Agreement), and to execute any other agreements, instruments or documents necessary with Biscuit Flats Dev LLC, (Developer) or its City-approved designee, for the installation of public infrastructure improvements in and around a proposed development on approximately 2,300 acres of land surrounding the Taiwan Semiconductor Manufacturing Company (TSMC) development. Further request to authorize the City Controller to disburse all funds related to this item and authorize the City Treasurer to accept funds associated with this request.
Report
Summary
In December 2024, City Council authorized the Agreement with the Developer to develop the new mixed-use commercial park known as Halo Vista consisting of an estimated 12 million square feet of industrial, 3.5 million square feet of flex-tech/office, and up to four million square feet of major destination retail, restaurants, an auto mall, residential, medical, and educational uses. As master planning work has progressed, the Developer and City have performed additional due diligence. The Developer now expects to provide approximately $500,000,000 to $700,000,000 of public infrastructure improvements. Under the existing Agreement, the City will reimburse the Developer for Public Infrastructure Improvements using 100 percent of eligible General Fund Transaction Privilege Tax (TPT) generated at Halo Vista.
Additionally, master planning work associated with the North Gateway Advanced Water Treatment Facility (NGAWTF) is progressing. The NGAWTF is expected to be operational in 2031-2032. As part of a Participation Agreement with the Arizona State Land Department (ASLD), the Developer committed to construct two million gallons per day (MGD) of wastewater treatment capacity for Phase 1 of Halo Vista. This cost has been established by the City of Phoenix Water Services Department to be $180,525,000 (WW Commitment).
This amendment seeks several changes and additions to the existing Agreement including a new performance-based structure for the TPT reimbursement and payment plan for the two MGD of wastewater treatment capacity and agreement term limits, refined commitments for wastewater capacity, enhanced limitations on data center development, and the removal of language that requires the City to pay interest to the developer on unpaid reimbursements.
The City and Developer have negotiated the following terms related to the performance-based TPT reimbursement structure and payment plan for the WW Commitment with details to be included in the Amended Agreement:
The first $16 million of eligible TPT will be paid to Developer for improvements related to the Auto Mall.
The next $180,525,000 of eligible TPT generated from the site will be retained by City to cover the WW Commitment unless the following performance milestones are met by the Developer, upon which the TPT will be split 50/50 between the City, for the WW Commitment, and Developer, to reimburse Public Infrastructure Improvements;
A Certificate of Completion is obtained for the first research and development or higher education building on the planned innovation campus generally described as the Sonoran Oasis Research and Technology Park.
Design, construction and delivery of 2.5 million SF of industrial space within the Technology Park or similarly zoned portions of the project. Developer will receive credit towards the 2.5 million square feet if a site plan is rejected due to unavailable wastewater capacity.
After the Developer's WW Commitment is satisfied, the Developer will receive 100 percent of eligible TPT on actual verifiable public infrastructure improvements until the term of the agreement is finished or all public infrastructure is reimbursed.
A Form of Collateral, suitable to the City, equal to 25 percent of the WW Commitment must be established with the City as beneficiary no later than January 2028. At no point during the term of the Agreement should the collateral total exceed the balance of the WW Commitment. Collateral must meet other terms and details in the amended Agreement.
Amend language related to the cost of financing and delete language requiring the City to pay 3 percent interest on unpaid reimbursements.
The WW Commitment as funded shall constitute public infrastructure improvements as defined in the Development Agreement and would be eligible for Impact Fee credits in proportion to the TPT accrual attributed to the WW Commitment. WW Commitment credits may be processed as a reimbursement to Master Developer.
The City will provide dedicated teams to expeditiously review and approve all Halo Vista plans to enable the Developer to meet all performance milestones.
The City and Developer have negotiated the following terms related to wastewater treatment capacity:
Amend the Agreement to clarify that the City has committed to the Developer immediate access to a wastewater treatment capacity allocation of 266,667 gallons of average daily flow over a calendar year, with a conveyance peak-hour flow capacity allocation of 400,000 gallons.
The City commits to providing the Developer with the additional 2MGD of wastewater treatment facility capacity allocation once NGAWTF is operational.
The City and Developer commit to work collaboratively and use best efforts to explore the possibility of identifying additional access to wastewater treatment capacity.
The City and Developer have negotiated the following terms related to the term of the Agreement:
The term of the Agreement will expire 25 years from completion of the NGAWTF.
Two five-year extensions are available if the following performance milestones are met:
Five years for construction of one million square feet of space at Sonoran Oasis Research and Technology Park (excluding data center space).
2. Five years for construction of seven million square feet of industrial space related to the semiconductor industry and related supply chain uses at the Technology Park (excluding data center space).
The City and Developer have negotiated the following terms related amending the Data Center definitions, limitations and exceptions as follows:
Require a major amendment to the existing Planned Unit Development (PUD), through a public hearing process, before development of a data center can commence.
Reduce the existing Data Center cap from not more than 15 percent down to 7 percent of the total acreage within the Project.
Prohibit the development of Data Centers for the earlier of 14 years from beginning of the Agreement or when the WW Commitment has been fully satisfied.
Excludes ancillary Data Centers associated with a semiconductor facility or academic use from the prohibition on development.
All other terms and conditions of the Agreement shall remain the same. The Project recently broke ground in March with multiple portions of Phase I in the design phase including the Auto Mall, Costco and Marriott Hotel and additional retail pads have submitted Pre-Application designs to the Planning and Development Department.
Contract Term
The term of the Agreement shall be amended to expire 25 years from completion of the NGAWTF. Two five-year extensions are available if performance milestones detailed above are achieved.
Financial Impact
The City's financial impact will be the reimbursement of the eligible General Fund share of the TPT generated from the Project as well as other restricted fund sources, as applicable to the improvements constructed. Financial terms of the Agreement will be provided to Budget and Research and Finance Departments for review prior to the execution of the Agreements.
Concurrence/Previous Council Action
The Agreement was recommended for approval by the Economic Development and Housing Subcommittee by a vote of 3-0 on December 11, 2024, and unanimously approved by City Council on December 18, 2024.
Location
Approximately 2,300 acres around TSMC, bordered by the Carefree Highway (SR-74) to the north, I-17 Freeway to the east, Loop 303 Freeway to the south and Deadman's Wash to the west.
Council District: 1
Department
Responsible Department
This item is submitted by Assistant City Manager Ginger Spencer and the Community and Economic Development and Water Services departments.