Title
Resource Innovation Campus Agreements Authorization
Description
This report provides the Economic Development and Housing Subcommittee an update on the Resource Innovation Campus proposed development resulting from participation in the Reinventing Cities Competition, and requests the Subcommittee recommend City Council approval to enter into agreements with Krause Interior Architecture, Inc., or its City approved designee (Developer) and its partners for two phased developments on the Resource Innovation Campus and reimbursement of public infrastructure improvements.
THIS ITEM IS FOR DISCUSSION AND POSSIBLE ACTION.
Report
Summary
Since May 2022, the Public Works and Community and Economic Development Departments have been collaborating with the C40 Cities - Reinventing Cities Competition. Reinventing Cities is an initiative led by C40, a city leadership group made up of nearly 100 world-leading cities forming a global network focused on addressing climate change. C40 works to stimulate sustainable development and to celebrate innovative solutions to environmental and urban challenges. Through the competition, cities identify underutilized sites that are ready to be released and transformed and invite creative multi-disciplinary teams-including architects, planners, developers, investors, environmentalists, start-ups, academics, and community associations-to submit proposals that can serve as a model for city landmarks of the future.
The City worked with C40 to run an international call for projects to develop twenty of the forty acres at the Resource Innovation Campus (RIC). The RIC, and its associated waste diversion program, was approved by Phoenix City Council in 2015. Located at 27th Avenue and Lower Buckeye Road next to the City-owned transfer station, the RIC is dedicated to the creation and growth of a circular economy that will fulfill the City's goal of diverting waste from the landfill. The RIC will help Phoenix reap the economic development benefits of attracting manufacturing processes and conversion technologies that transform waste into resources and is an integral part of achieving the 2050 Goal of creating zero waste through participation in the circular economy as outlined in the 2021 Phoenix Climate Action Plan. In December 2023, a selection committee comprised of key City leadership identified the winning team and proposal for the site.
The winning team and proposal are led by Krause Interior Architecture, Inc. The proposal includes development in two phases, the first of which includes a short-term ground lease for a pilot program to determine the viability of the long-term concept. Upon proof of viability, the second phase will include an approximately 90,000 square foot building expected to include space for research and development labs, designated incubation/acceleration space, workforce training and development programs, and shared collaborative workspaces, as well as land designated for resource clustering focused on circular economy and by-product synergies (Project). In order to test emerging technologies; kick start entrepreneurial activities; and complete the necessary environmental assessments, staff proposes entering into a fair market value land lease based on an approved appraisal, which will take place in two phases. Should the Project move to Phase II, the total Project would be located on approximately 20-acres at build out. The following key business terms, and other terms and conditions will be incorporated into a Development Agreement.
Phase I
- Phase I will consist of a short-term ground lease of not more than five years.
- Phase I will allow for two research and development pilots that will divert waste from the landfill and generate revenue for Phase II. The first pilot will be focused on processing municipal solid waste and difficult to recycle plastic numbers (3, 4, 6, 7) and converting them to products such as bio char, bio diesel fuels, and naphtha. The second pilot will be focused on processing bio solids and sludge and converting them into products such bio crude oil, class A bio char, and liquid fertilizer. This second pilot is in conjunction with the Water Services Department and will use feedstock from the City's wastewater treatment plant. Both pilots' goals are to test new and emerging technologies and the feasibility of creating high-value products from waste streams to enable circularity, and help the City achieve its 2030 and 2050 waste diversion goals.
- The two pilots will utilize up to 2.5 acres of the Special Operations parcel located just east of the southeast corner of 35th Avenue and Elwood Street.
- The land lease terms will include a rent that meets the fair market value appraisal for the land site for a pilot, with credit towards rent provided for the waste materials that are diverted from the landfill and the City's other waste streams, which provide a financial value to the City.
Phase II
Phase II will include an amendment to the lease and execution of an operations and maintenance agreement to enable development of the 20-acre site as detailed in the winning proposal received under the C40 Reinventing Cities Competition. Upon the Developer proving viability from the pilot and verifiable documentation to the Community and Economic Development and Public Works Directors providing for the financing entity and the terms of adequate financial ability to complete construction of the Project on the full RIC Project Site, the following terms will apply to Phase II.
- The lease will be amended to extend the lease from five up to 99 years and the land subject to the lease will expand from the original 2.5 acres to 20 acres.
- Prior to executing the lease amendment, Developer shall submit to the City a site plan and pre-application for development of the full Project Site.
- The rent for the Phase II lease area will be established with the initial appraisal, considering a fair market value rate that may be reduced by the directs costs to the Developer of the environmental assessments and remediation, and public infrastructure work that is valuable to the City and completed by Developer in accordance with Title 34. Any infrastructure or environmental work must be approved by the City in advance to be eligible for credit. The annual rent may be reduced with credit towards rent provided by the waste materials that are diverted from the landfill and the City's other waste streams, which provides a direct financial value to the City.
- Developer will privately finance and construct the Project at their sole upfront cost and expense.
- Developer will construct a public park/open space to tie into the Rio Reimagined development project. These public improvements may be creditable towards the annual rent, and will be constructed in accordance with Title 34.
- Developer will construct an education room/tour space and gallery or meeting space for public use.
- Phase II must start construction within 24 months of entering into the amended lease.
- City will retain the right to approve tenant sub lessees at the Project Site, which approval will not unreasonably be withheld.
Contract Term
The term for Phase I will terminate after five years. Phase II will be for a period of up to 99 years.
Financial Impact
The City's primary financial impact for Phase I will be the feedstock provided by the Public Works and Water Services departments in the form of municipal solid waste, difficult to recycle plastics, wastewater bio solids, and wastewater sludge. Terms of the agreements will be reviewed and monitored by the Public Works and Water Services departments to verify availability of feedstock prior to execution of agreements and monitored throughout the life of the agreement. The Phase II impact will be the annual rent modified by the Developers ability to divert waste from the City's landfill.
Location
East of 35th Avenue and Elwood Street.
Council District: 7
Department
Responsible Department
This item is submitted by Deputy City Managers Mario Paniagua and John Chan, and the Public Works and Community and Economic Development departments.