Title
Authorization to Enter into Agreements with Chicanos Por La Causa (Ordinance S-44141)
Description
Request to authorize the City Manager, or his designee, to enter into a development agreement, lease agreement and other agreements as necessary (Agreements) with Chicanos Por La Causa, an Arizona non-profit corporation (CPLC) , or its City-approved designee, for the development of a mixed-use project focusing on employment-generating uses, with ancillary community-serving uses, on approximately 35 acres of land in Sky Harbor Center; and for the City Treasurer to accept funds related to this item.
Report
Summary
At its July 6, 2017 Formal meeting, City Council directed staff to begin negotiations with CPLC for the use of approximately 35 acres of land in Sky Harbor Center. The land is located on the northeast corner of 16th Street and Buckeye Road and the northeast corner of Sky Harbor Circle North and Buckeye Road (Site). The Site was purchased by the Aviation Department in the 1980's as part of the West Approach Land Acquisition (WALA) program and includes the historic Sacred Heart Church.
CPLC plans to develop the Site in phases and will focus on bringing high-wage jobs and other employment-generating uses to the area while incorporating ancillary community-serving uses such as local retailers and restaurants. CPLC also intends to work closely with the community to incorporate the history of the area through public plazas and other amenities. All development must be in compliance with Federal Aviation Administration (FAA) regulations, including noise compatible and must not contain residential development or any other uses restricted by the FAA. Parking, logistics, and distribution are not permissible as primary uses.
Subject to City Council and FAA approval, the following major business terms have been negotiated with CPLC and would be implemented through the Agreements:
- The development agreement and lease must be executed within 12 months of City Council authorization and Phase 1 must be completed within 24 months thereafter.
- City will lease approximately 35 acres of land to CPLC. Pursuant to a separate agreement, which would be brought forward to City Council for its own authorization, the area identified as area 2 on the attached parcel map (Attachment A), which includes the historic Sacred Heart Church, may be leased directly to the Roman Catholic Diocese of Phoenix (Diocese). Should an agreement be reached with the Diocese, both CPLC and the City agree that Area 2, and any obligations associated with the rehabilitation, activation and ongoing maintenance of that area outlined in the business terms below, will not be included in the Agreements. If an agreement, evidenced by a signed Letter of Intent, for the lease of this area with the Diocese is not reached within 90 days of Council authorization, or any lease agreement entered into ends or terminates prior the end of CPLC's lease term, the historic Sacred Heart Church and land identified as Area 2 will be included in CPLC's leasehold for the remainder of the term under the same rental rate and terms identified below.
- CPLC will build an 80,000-square-foot corporate headquarters facility for CPLC, which may include other tenants, on Parcel 1 and the rehabilitation and activation of Sacred Heart Church on Parcel 2 (collectively, Phase 1). CPLC may substitute the development of its corporate headquarters facility with a tenant, or tenants, of comparable square footage on Parcel 1, or a different parcel, approved by the City.
- CPLC will have 26 months from issuance of the Certificate of Occupancy for a prior structure to design and construct each subsequent structure. Each structure will be a minimum of 25,000 square feet, unless otherwise approved by the City.
- If CPLC fails to develop and complete construction of each structure on the Site within the timeframes noted above, City may terminate those portions of the Site, as well as any other vacant portions of the Site, from the lease.
- City will lease the Site to CPLC for a term not to exceed 50 years.
- CPLC will pay the following fair market value for the Site, as required by the FAA, lease rates ("Rent") (see Attachment A for parcel map):
- Parcel 1: $1.05 per square foot per year, or approximately $748,274 annually.
- Parcel 2: $0.00 per square foot per year.
- Parcel 3: $1.05 per square foot per year, or approximately $528,522 annually.
- Parcel 4: $1.02 per square foot per year, or approximately $258,958 annually.
- Rent will be adjusted annually, commencing the second year of the lease, either by fair market value or the consumer price index, whichever is greater.
- CPLC will pay 10 percent of annual gross sales for a convenience/gas station operation and a fuel flowage fee of $0.10 per gallon.
- For all other retail/commercial activity, CPLC will pay a percentage of annual gross sales as follows:
- $0.00 to $1 million = 0 percent of annual gross sales.
- $1 million and above = percentage to be negotiated, but at no time will the percentage exceed 10 percent.
- Rent on the Site will commence 24 months following the effective date of the lease, or upon issuance of a certificate of occupancy, whichever occurs first.
- The Agreements will include other terms and conditions as needed, and deadlines for performance benchmarks and phasing may be modified at the City's discretion.
Contract Term
The lease term will not exceed 50 years, with no options to extend. In addition to termination for non-compliance with general lease terms, the City may terminate the lease for failure to meet performance benchmarks.
Financial Impact
The project will have no expense impact on the General Fund. CPLC will pay initial Rent of approximately $1.5 million per year. Rent will begin 24 months after execution of the lease, or upon issuance of a certificate of occupancy, whichever occurs first. All improvements will revert to City ownership at the end of the lease.
Public Outreach
CPLC held two community meetings seeking input on a potential development plan. The first meeting was held on Oct. 2, 2017 and the second was held on Oct. 16, 2017.
Location
The Site is generally located on the northeast corner of 16th Street and Buckeye Road, and the northeast corner of Sky Harbor Circle North and Buckeye Road.
Council District: 8
Department
Responsible Department
This item is submitted by Deputy City Manager Deanna Jonovich and the Aviation and Community and Economic Development departments.