Title
Development Agreement with Chevelle Properties LLC for Installation of Public Infrastructure (Ordinance S-49260)
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 Chevelle Properties LLC, or its City-approved designee (Developer), for the installation of public infrastructure improvements. Further request to authorize the City Controller to disburse all funds associated with this request.
Report
Summary
Developer is planning to bring a 32-acre destination office employment campus to Phoenix that will add or retain 1,100 high-wage jobs. Phase 1 of the campus will include approximately 300,000 square feet of new development representing a capital investment estimated at $198 million (Project). Developer is a national leader in its industry with annual revenues in the billions and thousands of locations across the United States. After a national search the Project is still contingent upon several items that will be finalized before the end of the year at which time the project will be publicly announced.
The City recognizes the resulting substantial economic impacts to the City and region by the Developer. This established and well known company will be able to call Phoenix home and provide thousands of quality jobs to residents. Nationally this project would be one of the first large scale office employment announcements since the pandemic and signifies a return to normal business and recovery from the COVID-19 pandemic. To support this new headquarters Project and expand the package that has been provided at the State level, staff recommends the following business terms:
- Developer agrees to build a 32-acre 300,000 square feet destination office employment campus estimated at $198 million in Phoenix.
- Developer intends to create or retain approximately 1,100 jobs.
- Within 24 months from execution of the Agreement, Developer shall satisfy all requirements for issuance of the public infrastructure permits for Phase 1 of the Project, pay all applicable fees related to the initial phase of development, and obtain the first infrastructure permit for Phase 1.
- City will reimburse Developer (upon completion of construction and acceptance by the City of public infrastructure improvements), up to $5 million maximum reimbursement amount from the General Fund portion of City's Transaction Privilege Tax.
- City will also use up to $1 million from the Strategic Economic Development Fund as a reimbursement source for the public infrastructure improvements, in the amount of $100,000 per year for up to 10 years. City's total reimbursement from all sources will not exceed $5 million.
- Public infrastructure improvements include street frontage and intersection upgrades as required by the Street Transportation Department, water and sewer main extensions along the frontage of the Project, any other floodplain and other regional traffic improvements as detailed in the Agreements.
1. Reimbursements from the City's Transaction Privilege Tax shall be paid on an annual basis in arrears and shall not exceed the amount of the City's General Fund portion of the Transaction Privilege Tax collected that year that the City verifies were collected and received from the Project. These taxes shall be comprised primarily of the taxes relating to the construction and installation of the public infrastructure improvements, private infrastructure improvements, and build-out of the Project. In order to track Transaction Privilege 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.
2. Reimbursement from the Strategic Economic Development Fund shall be reimbursed in the amount of $100,000 annually and shall not exceed $1 million.
3. Reimbursement shall not exceed actual verifiable costs for the approved public infrastructure improvements and combined reimbursement will not exceed $5 million.
4. 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.
5. Years 1 through 10: City will reimburse 100 percent of the eligible General Fund TPT revenue generated from new activity at the Project.
- 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.
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 not exceed $5 million, combined, from the Strategic Economic Development Fund and the City's General Fund portion of eligible TPT revenue generated from the Site for 10 years. Financial terms of the Agreements will be reviewed by the Budget and Research Department to verify funding availability prior to execution.
Location
Developer is conducting due diligence on locations in the city of Phoenix and a final site will be selected prior to entering into a development agreement.
Department
Responsible Department
This item is submitted by Deputy City Manager Ginger Spencer and the Community and Economic Development Department.