Title
Authorization to Enter into a Development Agreement with IDM Companies for Reimbursement of Public Infrastructure Improvements (Ordinance S-48789)
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 IDM Companies, or its City approve designee (Developer) for the reimbursement of public infrastructure improvements. Also request to authorize the City Controller to disburse all funds under the terms of the Agreements.
Report
Summary
Developer is planning to develop a 678-unit multi-family project on approximately 34-acres (Site). The entire area of approximately 160-acres owned by the Sheely family was left without access to City of Phoenix water lines when the Loop 101 freeway was constructed and opened in 2001. Since that time the Sheely's have limited the activities that can take place on the property and development has been slow due to the significant cost of boring underneath the freeway in order to bring water to the west side of the freeway. Recently, Developer has planned a multi-family project and is planning on bringing the water line under the freeway at an estimated cost of nearly $2 million. This water line is of regional importance and will help planned projects south and north of the multi-family project, which include retail and employment developments.
Subject to City Council approval, the following major business terms have been negotiated with the Developer and would be implemented throughout the Agreements:
- Developer will privately finance and construct the public infrastructure improvements including the jack and bore of a water line, as approved by the Water Services Department, under the Loop 101 freeway (Project).
- Agreements may include other such public infrastructure and related components (and costs thereof) as approved by the City of Phoenix Community and Economic Development Director.
- These improvements shall be in conformance with the zoning for the Site.
- The Project must be completed within three years 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 in order to qualify for reimbursement.
- The City will reimburse the Developer for public infrastructure improvements as listed above in the following manner and will not exceed a total reimbursement of $1 million.
1. Reimbursements shall be paid on an annual basis and shall not exceed the amount of the eligible General Fund share of Transaction Privilege Tax (TPT) generated from construction sales tax and rental residential lease tax collected that year. These taxes shall be comprised of the taxes relating to (i) the construction of the Project, (ii) the construction and installation of the public infrastructure improvements and private infrastructure improvements constructed, and (iii) residential rental lease tax at the Project. In order to track eligible TPT for reimbursement, all contractors and subcontractors must secure an independent TPT license related solely to the Project. Developer has received a preliminary estimate to design, install, construct, and dedicate the public infrastructure improvements which is in excess of the $1 million reimbursement cap.
2. Reimbursement shall not exceed actual verifiable costs for the approved public infrastructure improvements.
3. 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 semi-annually, in arrears, with additional details to be specified in the Agreements.
4. Years 1 through 10: City will reimburse 100 percent of the General Fund share of TPT generated from new construction and business activity on the Site.
- 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.
This project is vital to activate an important stretch of freeway frontage in Phoenix that has been underutilized for over 20 years. Phoenix has reached a critical point in the real estate market that makes this investment a possibility and will bring significant investment to the retail and employment projects to the north and south of the multi-family project. The redevelopment of the Site 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 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 be a maximum of $1 million from the reimbursement of the General Fund share of TPT generated from the Site during the contract term. 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 Equity Subcommittee at their May 25, 2022 meeting by a 4-0 vote.
Location
Generally located west of loop 101 freeway, east of 99th Avenue, south of Thomas Road and north of McDowell Road.
Council District: 5
Department
Responsible Department
This item is submitted by Deputy City Manager Ginger Spencer and the Community and Economic Development Department.