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Title:
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Development Agreement with Mack Real Estate Group for Installation of Public Infrastructure and Public Space Improvements (Ordinance S-47763)
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Title
Development Agreement with Mack Real Estate Group for Installation of Public Infrastructure and Public Space Improvements (Ordinance S-47763)
Description
Request to authorize the City Manager, or his designee, to negotiate and enter into a development agreement and any other agreements as necessary (Agreements), with Mack Real Estate Group, or its City-approved designee (Developer), for the installation of public infrastructure and outdoor public space improvements, and the dedication of public right-of-way or easements. Further request to authorize dedication of land with roadway and/or public improvements to public use for public right-of-way purposes via a separate recording instrument. Additionally, request the City Council to grant an exception pursuant to Phoenix City Code 42-20 if necessary to authorize inclusion in the documents pertaining to this transaction of indemnification and assumption of liability provisions that otherwise would be prohibited by Phoenix City Code 42-18, as Arizona State Land Department form documents include such provisions. Also request to authorize the City Controller to disburse all funds under the terms of the Agreements.
Report
Summary
Developer was the successful bidder at a recent Arizona State Land Department auction for approximately 224 acres. The subject of the current request pertains to approximately 160 of the 224 acres located north of the northeast corner of 19th Avenue and Pinnacle Peak Road (Site) that the Developer intends to develop into an industrial manufacturing park (Project). To facilitate this redevelopment, the Developer will make several public infrastructure improvements, creating new public access through the Site, and facilitating pedestrian connectivity and activity.
Subject to City Council approval, the following major business terms have been negotiated with the Developer and would be implemented through the Agreements:
Developer will privately finance and construct the enhanced public infrastructure improvements.
Developer will install and construct a public east-west street (including landscaping and appurtenant amenities) for public access through the Project at approximately West Alameda Drive and 19th Avenue and convey such access to the City in a mechanism approved by the City.
As the Project plans develop, and at Developer’s discretion, Developer may install and construct one or more public north-south streets (including landscaping and appurtenant amenities) for public access through the Project at locations selected by Developer and the City, and convey such access to the City in a mechanism approved by the City.
Agreements may include other such public infrastructure and related components (and costs thereof) as approved by the City of Phoenix Community and Economic Development Director.
These improvements shall be in conformance with the zoning for the Site.
Developer must comply with Title 34 of the Arizona Revised Statutes in constructing the improvements to qualify for reimbursement, and the specifics and cost of the public infrastructure improvements must be pre-approved by the City in order to qualify for reimbursement.
The City shall provide a Team to the Project to ensure responsiveness with construction plan review and inspections.
The City will reimburse the Developer for public infrastructure improvements as listed above in the following manner and will not exceed the maximum total cumulative amount of $6 million (the “Maximum Reimbursement Amount”).
Reimbursements shall be paid on an annual basis and shall not exceed the amount of Construction Sales tax collected that year. The Construction Sales Tax shall be comprised of the taxes relating to both (i) the construction and installation of the public infrastructure improvements and any private infrastructure improvements constructed in connection with the development of the Project, and (ii) the construction of vertical and other on-site improvements on the Site from time to time (whether by Developer or by third parties such as technology support companies, and including any tenant improvements). In order to track the Construction Sales Taxes eligible for reimbursement, all contractors and subcontractors must secure an independent City of Phoenix Transaction Privilege Tax (TPT) License related solely to the Project. Developer has received a preliminary estimate that is in excess of the $6 million estimate to design, install, construct and dedicate the public infrastructure improvements.
Reimbursement shall not exceed actual verifiable costs for the approved public infrastructure improvements.
Reimbursement would not begin until after the Developer completes the public infrastructure improvements at the Site and the City has accepted those improvements. Reimbursements would be made annually, in arrears, with additional details to be specified in the Agreements.
Years 1 through 5: City will reimburse 100 percent of the TPT revenue generated from new construction and business activity.
Years 6 through 10: City will reimburse 50 percent of the new TPT revenue generated at the Site from new construction and business activity as well as 50 percent of the increase in TPT revenue generated at the Site from existing tenants in years 6-10.
No other sources of funds would be used if the above resources are not adequate to meet the projected construction expenses.
Agreements will include other terms and conditions as deemed necessary by the City.
This property is a vital component of Deer Valley’s Industrial development shown on the Phoenix General Plan and is also crucial to providing industrial space for the Taiwan Semiconductor Manufacturing Company's main suppliers. The redevelopment of the Site is an important economic development opportunity that will create several hundred new jobs over time for the community, and will yield significant financial and public benefits for the City of Phoenix, above and beyond the TPT and Construction Sales tax revenues generated.
Contract Term
The development agreement will terminate 10 years after the Developer's completion and the City's acceptance of public infrastructure improvements.
Financial Impact
The City’s financial impact will be the reimbursement of eligible City of Phoenix new TPT revenue generated from the Site. This includes 100 percent of the TPT revenue generated from new construction and business activity in years 1-5; 50 percent of the new TPT revenue generated at the Site from new construction and business activity in years 6-10; and 50 percent of the increase in TPT revenue generated at the Site from existing tenants in years 6-10. Financial terms of the Agreements will be reviewed by the Budget and Research Department to verify funding availability prior to execution.
Location
Generally located from 19th to 7th avenues from the Alameda Road alignment and the property line north of Pinnacle Peak Road.
Council District: 1
Department
Responsible Department
This item is submitted by Deputy City Managers Ginger Spencer and Mario Paniagua, and the Community and Economic Development and Street Transportation departments.