Title
Authorization to Enter into Agreements with HPPC, LLC, Holualoa 157, LLC, and the to-be-formed Park Central Community Facilities District for Participation in Construction, Operation and Maintenance of a Public Parking Garage at Park Central Mall (Ordinance S-44953)
Description
Request to authorize the City Manager, or his designee, to negotiate and enter into a three-party development agreement and inter-governmental agreement (CFD DA), or other agreements as necessary, between the City of Phoenix (City), HPPC, LLC and Holualoa 157, LLC (collectively, Developer) or its City-approved designee, and the Developer proposed Park Central Mall Community Facilities District (District or CFD), outlining the parties' participation to finance, construct, operate, and maintain a public parking garage (Garage) at Park Central Mall (Phase 1, Phase II, and the Catalina Parcel, approximately 36 acres) (Site). Further request authorization for the City Treasurer to accept and for the City Controller to disburse funds related to this item.
Report
Summary
With the City Council's approval on May 16, 2018, the City and Developer have been pursuing the establishment of the CFD for the Garage at the Site per City Ordinance S-44626. The Developer has submitted an application requesting the formation of the CFD and staff has recommended proceeding with the formation of the CFD to City Council. If approved by City Council and subsequently approved by the CFD Board, the following major business terms have been negotiated and would be implemented through the CFD DA:
Formation of the CFD and Construction of the Garage:
- Developer agrees that formation of the CFD is solely for the construction, operation and maintenance of the Garage, and not for any other infrastructure related to development of the Site.
- The CFD Board will consist of the Mayor, City Council, and two Developer designated members pursuant to A.R.S. title 48-702.
- Developer will obtain, at Developer's sole risk, design and cost estimates for the Garage in compliance with A.R.S. title 34.
- If District determines all conditions have been met to issue bonds for the design and construction of the Garage.
- Developer will donate the land needed for the Garage to the District.
- The District will issue up to 25-year assessment bonds (Bonds) for the construction of the Garage.
- District will reimburse Developer for applicable design, construction and other costs previously incurred by Developer associated with the construction of the Garage, provided that Developer complies with A.R.S. title 34 in connection with incurring those expenses and provides satisfactory documentation of its compliance to the City and District.
- The proceeds from the Bonds will be used to build a Garage with approximately 1,500 spaces and will be constructed with the possibility of adding approximately 500 additional spaces.
- These additional spaces will be paid by Developer, and/or another entity, not the City or CFD.
- A portion of the Bonds will be set aside in a capitalized interest account to pay the debt service on the Bonds as described below.
- The Garage will be partially screened by the adjacent apartments and architecturally screened for the balance of its frontage.
Garage Revenue and Operations
- All Garage revenue as outlined below will flow into the CFD's parking garage account (Parking Garage Account) which will be held by the Bond trustee for a term of 25 years.
- At the end of the 25-year term, the money in the Parking Garage Account will be retained by the City.
The following revenue sources will be placed into the Parking Garage Account to service the Bond debt:
- All revenue from parking users (Parking User Revenue) including, but not limited to, all revenue from Park Central tenants, including Dignity Health and other users of the Garage during business hours, revenue from the apartment parcel and all revenue from holiday, weekend, and evening events, including special events.
- During year 1, the capitalized interest account portion of the Bond proceeds will be used to pay debt service on the Bonds.
If Parking User Revenues do not equal the amounts listed below, Developer will fund the shortfall into the Parking Garage Account (Developer Contribution):
- Years 2-5: $720,000 per year.
- Years 6-7: $792,000 per year.
- Years 8-25: $942,000 per year.
City contribution into the Parking Garage Account will be as follows (City Contribution):
- Years 1-6: 100 percent of the City of Phoenix portion of eligible transaction privilege tax (TPT) up to 2.3 percent (5.3 percent on the hotel sales tax) from Phase II, the Catalina Parcel and the ground up (new) development on Phase 1.
- Years 7-25: 50 percent of the City of Phoenix portion of eligible TPT up to 2.3 percent (5.3 percent on the hotel sales tax) from Phase II, the Catalina Parcel and the ground up (new) development on Phase 1.
- Other: 50 percent of the City of Phoenix portion of eligible TPT up to 2.3 percent (5.3 percent on the hotel sales tax) generated from and received by the City from structures on Park Central Phase 1 that existed as of Aug. 29, 2018, beginning after the final “Reimbursement Payment” is made under City Contract 148204 and continuing for the remaining term of the Bonds.
The CFD will be required to apply a special assessment to all properties within the CFD to cover any revenue shortfall necessary to service the Bond debt.
Use of the Garage
- Dignity Health is entitled to 250 reserved spaces, plus an additional approximately 500 spaces, per an existing, separate agreement.
- Developer will retain a perpetual easement for parking spaces for the benefit of the owners and tenants of Phase 1, Phase II, and the Catalina Parcel, on terms subject to review and approval by the City and CFD.
- When the Bonds are paid in full, subject to applicable laws and approval by the CFD Board and City Council, the CFD would be dissolved and the City will acquire title to the Garage and underlying land, at no additional cost to the City, subject to the parking easements and agreements described above.
- Acquisition of the Garage by the City assumes no archaeological, environmental, or other issues with the Garage or underlying land.
- The City will have the right to use the Garage as much as possible for weekend/evening events at City parks, including, without limitation, Hance Park and Steele Indian School Park, for special events and for sporting events at the downtown arenas upon reasonable notice by the City.
- The DA will include other terms and conditions as needed.
Financial Impact
The City's financial impact will be contribution of eligible City of Phoenix sales taxes generated and received from the properties located within the District. This includes 100 percent of the new sales tax years 1-6, 50 percent of the new sales tax thereafter, and 50 percent of sales tax received from existing structures on Park Central Phase 1 (those structures existing on the site as of Aug. 29, 2018) beginning after the final “Reimbursement Payment” is made under City Contract 148204 and continuing for the remaining term of the Bonds.
The redevelopment of Park Central is an important economic development opportunity that will create several thousand new jobs for the community and will provide significant financial benefit for the City of Phoenix, above and beyond sales tax revenue generated.
Concurrence/Previous Council Action
City Council authorized the City Manager at its May 16, 2018 Formal meeting to participate in an application requesting formation of the Park Central CFD (S-44626).
Public Outreach
Staff has met with and received letters of support for the establishment of a community facilities district from the Midtown Neighborhood Association, Phoenix Community Alliance and Dignity Health.
Location
The CFD is located on the Park Central Mall site generally bounded by Osborn Road to the north, Central Avenue to the east, Catalina Drive to the south and 3rd Avenue on the west.
Council District: 4
Department
Responsible Department
This item is submitted by City Manager Ed Zuercher, Deputy City Managers Deanna Jonovich and Mario Paniagua, and the Finance, Community and Economic Development and Planning and Development departments.