Title
Authorization to Enter into a Development Agreement with Republic Services, Inc. and CN Associates A, LLC and CN Associates K, LLC (Ordinance S-49884)
Description
Request authorization for the City Manager, or his designee, to enter into a development agreement (Agreement), and to execute any other agreements, instruments or documents necessary with Republic Services, Inc., and its affiliates or subsidiaries (Republic) and CN Associates A, LLC and CN Associates K, LLC (Crown), or their City-approved designees, for the installation of public infrastructure improvements and a performance-based job creation reimbursement. Further request authorization for the City Controller to disburse funds under the terms of the agreement.
Report
Summary
Republic Services, Inc. started trading on the New York Stock Exchange in 1998 and merged with Phoenix-based Allied Waste in 2008. Republic has approximately 40,000 employees across the country, with approximately 2,100 jobs in Arizona, and operates 71 recycling processing centers and 206 active landfills across the country. After a competitive search involving multiple states and regions, Republic expressed its desire to expand into a new U.S. corporate headquarters in Phoenix. Republic's offices are currently located at Loop 101 and Mayo Boulevard in Phoenix. Republic is currently working with Crown to potentially acquire approximately 7-10 acres in the Desert Ridge area of Phoenix near 56th Street and the Loop 101 to potentially construct a new state-of-the-art corporate headquarters.
This proposed expansion will result in up to more than 1,600 retained and created jobs located at, reporting to or taking oversite from it’s corporate headquarters that will be phased in over a 15-year period. A third-party economic analysis indicates a 10-year direct-revenue benefit to the City of more than $15.8 million. The City recognizes the resulting substantial economic impacts to the City and region from Republic’s expansion efforts. To remain competitive on a national level, and ensure these quality job positions are retained and created in Phoenix, staff is recommending to enter into one or more Agreements with Republic and Crown for the creation of a new U.S. corporate headquarters in Phoenix. The proposed terms of an Agreement are as follows:
- Republic will expand its corporate headquarters within the City of Phoenix, in a newly constructed office building of approximately 240,000 square feet, in the area known as Desert Ridge located along East City North Drive (Site).
- Republic intends to retain approximately 1,000 existing jobs and create an estimated up to 600 additional net new jobs for its corporate headquarters within 15 years of completion of the new office. The City realizes up to 600 new jobs is a program model estimate and this Agreement is not contingent upon the exact total job creation.
- The City will offer a performance-based job creation reimbursement through the Strategic Economic Development Fund (SEDF). The City will provide $2,500 to Republic, in arrears, for each net new job created and located at, reporting to or taking oversite from the Site. The average annual salary of the up to 600 new jobs is estimated at $97,000. Certain other terms and conditions will be outlined and captured in the Agreement. The total reimbursement amount will not exceed $1,500,000 over the term.
- Entering into the Agreement and participation in the job creation fund does not preclude Republic from working with the City's Workforce Innovation Opportunity Act (WIOA) Program or any other local and/or state program.
Crown or its affiliate or subsidiary is the land owner of "CityNorth", an approximately 100-acre mixed-use development, stretching from 56th Street to Desert Ridge Marketplace, along Loop 101, and with a master plan that includes more than 2 million square feet of office space, as well as multi-family, retail and dining options, and other commercial uses. Crown broke ground on some of the infrastructure improvements at CityNorth in 2020 and has been marketing the site for these mixed-uses. Upon completion of their agreements, Republic will cause the construction of a 240,000 square foot Class A office building. To accommodate for this growth, and Republic's new headquarters, additional public infrastructure improvements are required. Through the Agreement, Crown will construct the additional public infrastructure improvements and the City will reimburse Crown a maximum of $2.4 million (Reimbursement Cap). The reimbursement will take place upon completion of construction, the City's acceptance of the public infrastructure improvements, and the dedication of a public easement and improvements to the City. The public infrastructure improvements include a traffic signal, streetlights, pedestrian amenities, landscaping and sidewalks.
- Crown will privately finance and construct the Public Improvements.
- Crown 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 improvements must be pre-approved by the City in order to qualify for reimbursement.
- Reimbursement will be paid on an annual basis, in arrears, from the following sources during the term: 100 percent of the City's eligible General Fund portion of the Transaction Privilege Taxes (TPT).
- The maximum reimbursement amount for the public infrastructure improvements, as they relate to the Project, will not exceed $2.4 million.
- Reimbursement shall not exceed actual verifiable costs for the approved Improvements.
- The term shall begin upon commencement of the first phase of the improvements, as made evident by the issuance of required permits (Construction Commencement Date) and continue for a period of not to exceed 10 years or upon the date Developer has received reimbursements totaling the Reimbursement Cap, whichever is less.
- The development agreement and any other agreements as necessary will include other terms and conditions as deemed necessary by the City.
Contract Term
The term of the Agreement will be approximately 15 years from completion of the building, with performance requirements of 15 years for employee job creation and 15 years for the public improvements.
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 15 years with a maximum of $2.4 million in payments. Financial terms of the Agreement will be provided to the Budget and Research and Finance departments for review prior to execution of the agreements. An additional sum of up to $1.5 million for job creation will be provided from funding programmed in the Strategic Economic Development Fund.
Location
Desert Ridge, Phoenix Ariz.
Council District: 2
Department
Responsible Department
This item is submitted by Interim Deputy City Manager John Chan and the Community and Economic Development Department.