Title
Authorization to Enter into Development Agreement with IO Data Centers, LLC, for Construction of New Data Center Facility (Ordinance S-43487)
Description
Request to authorize the City Manager, or his designee, to enter into a development agreement and other agreements as necessary (collectively called the "Agreements") with IO Data Centers, LLC ("IO") or its City-approved designee ("Developer") for the development of a new data center on privately owned property, and related public infrastructure improvements, at the northeast corner of 48th Street and Van Buren Street. Further request authorization for the City Controller to disburse City funds in an amount not to exceed $359,000 and to accept and disburse funds received from the Developer for public infrastructure improvements as described below.
Report
Summary
Since 2009, IO has made more than $200 million in investments to its existing data center campus located at the southeast corner of Loop 202 and 48th Street, resulting in significant economic impacts to both the City and Region from these efforts. Growing as part of IO Data Centers nationally, this facility has now reached capacity with its occupancy of data center tenants and requires expansion to continue to grow this operation in Phoenix. To accommodate this growth, IO has acquired the approximately 11-acre parcel south of its existing facility, with plans to construct additional data center facilities in excess of 500,000 square feet. This additional growth will bring further investment of more than $200 million to this campus.
To accommodate this growth, improvements need to be made to the City-owned public infrastructure in the area surrounding the IO Campus, regardless of any potential development of the new facility. These improvements will mitigate drainage issues and bring existing public infrastructure in the area up to current City standards.
Based on discussions with the Street Transportation and Planning and Development departments, proposed material business terms are as follows:
1. The City and Developer shall share responsibility for the design, engineering, construction, acquisition and dedication of the following Improvements as generally described below:
a. Developer shall study drainage mitigation in the public right-of-way along 48th Street. Drainage mitigation may require additional construction in the area surrounding the IO Campus to allow for proper flows and drainage of water in the public area. Based on the Drainage Report, Developer may also choose (at its option) to mitigate drainage on the Expansion Parcel by raising the elevation of the Expansion Parcel in specified areas as well as the use of a retaining wall on site which construction on the Expansion Parcel shall be paid for by the Developer and is subject to the sole approval of the Planning and Development Department. Developer will complete the study for flows in the right-of-way along 48th Street as part of its on-site drainage study (the “Drainage Report”), utilizing consultants agreed upon by the City and Developer. The City shall reimburse Developer for the study costs associated with improvements in the public right-of-way, in an amount not to exceed $25,000.
b. The City shall design and construct the Improvements pursuant to City Code and state law, utilizing the "Drainage Report" and in coordination with the existing right-of-way improvements adjacent to the existing IO Building.
c. The Expansion Project will provide for all on-site retention as required by City Code.
d. The City shall widen and improve 48th Street between the northern boundary of the Expansion Parcel and Van Buren Street; improvements may also include, at the City's discretion, street lighting improvements, sidewalk and biking path improvements and landscaping improvements, and which improvements shall be at the City's sole cost and expense, except as otherwise set forth herein.
e. Developer will dedicate all rights-of-way and easements on property Developer owns or controls necessary for the Improvements. City will obtain all other necessary rights-of-way and easements to construct the above Improvements.
f. The City shall install or construct other Improvements as mutually agreed upon by Developer and the City.
g. Developer will maintain a bond, letter of credit, or other security satisfactory to the Street Transportation Director, or will pay the City in advance for the design and construction of street improvements, which Developer is required to perform pursuant to existing City Codes through a normal development process, along the east side of 48th Street between the northern boundary of the Expansion Parcel and Van Buren Street, including utilities or utility relocations for the Expansion Project. The cost of drainage mitigation requirements in the public right-of-way shall be solely borne by the City.
2. Unless paid for in advance as discussed in 1(g), Developer will make progress payments to the City to reimburse the City for Developer’s fair share of the design and street improvement costs along the east side of 48th Street and between the northern boundary of the Expansion Parcel and Van Buren Street in an amount to be agreed upon by the City and Developer, and not to exceed $587,000; such progress payments shall be made on a quarterly basis, based on actual construction progress made during the prior calendar quarter. Final payment to the City shall be due upon the completion of construction of 48th Street.
3. Developer agrees to participate in the Strategic Economic Development Fund (SEDF) and that Developer will provide documentation necessary for the City to track the tax revenue generated by the Expansion Project. The SEDF will fund construction of the portion of the 48th Street improvements not paid for directly by Developer and for the surrounding area flood mitigation, in an amount not to exceed $334,000.
4. The City's construction of the widening of 48th Street and flood mitigation improvements shall not commence until after issuance of construction permits to Developer for the construction of the Expansion Project, and receipt and acceptance of the Drainage Report as outlined below.
5. The City shall complete the design of the Improvements no later than nine months after its receipt and acceptance of the Drainage Report from Developer, which acceptance shall not unreasonably be withheld, conditioned or delayed. The City shall complete construction of the Improvements within one year of the completion of the design of the Improvements. In the event that any issue arises beyond the control of either Party, including but not limited to any unforeseen archaeological or environmental issue, that impacts the ability of the City to timely complete the design or construction of the Improvements, the foregoing time periods shall be extended, on a day-for-day basis, for any work stoppage caused by such unforeseen issue that is beyond the control of either Party. The City shall diligently pursue resolution of any unforeseen issues in a timely manner.
6. The Agreement shall contain other standard City terms and conditions, as mutually agreed to by the parties.
Contract Term
The contract term shall be for a period of five years from the date of the development agreement execution.
Financial Impact
The public improvements not paid by the Developer and costs related to the drainage mitigation study attributable to the public right-of-way, will be paid from the Strategic Economic Development Fund in an amount not to exceed $359,000. Remaining project costs will be paid or reimbursed by the developer. Funding is available in the Street Transportation Department and the Community and Economic Development Department Capital Improvement Program budgets.
Location
The project is located at the northeast corner of 48th Street and Van Buren Street.
Department
Responsible Department
This item is submitted by Deputy City Managers Paul Blue and Mario Paniagua, and the Community and Economic Development, Street Transportation and Planning and Development departments.