Title
Authorization to Amend Contract with IDM Companies for Reimbursement of Public Infrastructure Improvements for Sheeley Tech Center (Ordinance S-50402)
Description
Request to authorize the City Manager, or his designee, to negotiate and amend Contract 159118 and any other agreements as necessary (Agreements), with IDM Companies, or its City-approved designee (Developer), for the reimbursement of public infrastructure improvements.
Report
Summary
Developer acquired 34 acres for a 678-unit multi-family project on 99th Avenue between Thomas Road and McDowell Road, which is currently under construction. In connection with that project, City Council approved Ordinance S-48789 on June 15, 2022, which authorized the City to enter a development agreement with Developer. This resulted in Contract 159118, under which the City will reimburse the Developer up to $1 million for costs associated with boring and constructing a public water line under Loop 101.
Developer has now acquired 112 additional acres at the southeast corner of 99th Avenue and Thomas Road. This property is adjacent to Developer's multi-family project, and is currently farmland that has been owned by the same family for many years. Developer plans to develop a mixed-use retail and business park on these additional acres. The first phase of development will include 10 acres of retail and approximately 750,000 square feet (SF) of Class A Industrial space spread over five buildings. The second phase of development will include an additional 650,000 SF of Class A Industrial space.
The City anticipates that the contemplated multi-family, retail, and industrial developments will help to attract high-wage employers along Loop 101 and prevent retail leakage. The Loop 101 corridor has been under-developed for over 20 years, but the Phoenix real estate market has reached a critical point that now makes investment in this area a possibility. Due to the extensive cost of public infrastructure here in comparison to more-developed parts of the City the following updated business terms are being recommended:
- Developer will privately finance and construct the public infrastructure improvements, including half-street frontage of Thomas Road and 99th Avenue and a full street of 97th Avenue and water and wastewater lines, as approved by the Planning and Development, Street Transportation and Water Services departments.
- Agreements may include other such public infrastructure and related components (and costs thereof) as approved by the City's Community and Economic Development Director.
- These improvements must be in conformance with all applicable zoning and other land use regulations.
- The new project must start construction within 18 months of Council authorization.
- 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 to qualify for reimbursement.
- The City will reimburse Developer for public infrastructure improvements as listed above not to exceed a total reimbursement of $10 million.
- Agreements will include other terms and conditions as deemed necessary by the City.
The terms of reimbursement to Developer will be as follows:
- Reimbursement will be paid on a semi-annual basis, in arrears, from the City's eligible General Fund portion of the Transaction Privilege Taxes (TPT) collected and received by the City, as verified by the City, from the following categories generated by the development of Developer's properties: construction sales tax, retail sales tax, speculative builder tax and commercial lease tax.
- Reimbursement will not exceed actual verifiable costs for the approved improvements. Tracking of reimbursable costs will begin with the issuance of the first permits for the first phase of the project. Agreements will define the relevant project phases.
- The reimbursement period will begin upon Developer's completion of the public infrastructure for the first phase of the improvements (Construction Completion Date), and will continue for 10 years or until the Developer has received the maximum reimbursement, whichever occurs first.
- No other sources of funds will be used for reimbursement if resources are not adequate to meet the projected construction expenses.
The development of these properties is an important economic development opportunity that will transform the community and yield significant financial and public benefits for the City above and beyond the TPT revenues generated.
Contract Term
The amended development agreement will terminate 10 years after the Construction Completion Date or upon the date Developer receives the maximum reimbursement, whichever occurs first.
Financial Impact
The City's financial impact will be the reimbursement of the eligible General Fund share of the TPT generated from the site over 10 years with a maximum payment of $10 million. Financial terms of the Agreements will be reviewed by the Budget and Research Department to verify funding availability prior to execution of Agreements.
Concurrence/Previous Council Action
This item was recommended for approval by the Economic Development and Housing Subcommittee at its Nov. 8, 2023 meeting by a 4-0 vote. The City Council previously approved Contract 159118 via Ordinance S-48789 on June 15, 2022.
Location
Generally located west of Loop 101 and Thomas Road
Council District: 5
Department
Responsible Department
This item is submitted by Deputy City Manager John Chan and the Community and Economic Development Department.