Title
Mayo Clinic Arizona Hospital Development Agreement Amendment (Ordinance S-50276)
Description
Authorization for the City Manager, or his designee, to amend the 1996 Mayo Clinic Development Agreement (DA) with Mayo Clinic Arizona (Mayo) to allow any unused construction sales tax credit to be applied to public infrastructure reimbursement in accordance with the terms and conditions of the Discovery Oasis development agreement (Discovery Oasis DA) in addition to existing authorized reimbursement for permit/plan review fees under the 1996 Mayo DA.
Report
Summary
The City and Mayo entered into the DA on January 3,1996, City Contract No. 72047. The DA provided for the construction of the Mayo Hospital Campus, which continues new phases today. Mayo is currently completing construction on a new $748 million capital investment into the Hospital Campus. Modifications to the DA have been approved by the City Council on five separate occasions. The original DA represents a 50-year term.
At its March 2, 2022 Formal Meeting, City Council approved the terms of a subsequent development agreement with Mayo for the construction of Discovery Oasis. Discovery Oasis is planned to be a 228-acre bioscience and healthcare park surrounding the Hospital Campus. The terms of the Discovery Oasis DA provide for reimbursement of public infrastructure that is approved by the City. The funds for reimbursement will come from the General Fund share of the Transaction Privilege Tax (TPT) created by the project. The amount of reimbursement to Mayo for the public infrastructure improvements will not exceed $40 million.
As part of the 1996 DA, the City committed to constructing 64th St. from the Loop 101 freeway to Bell Road when certain conditions were met. Given the new development of Discovery Oasis and the continued Hospital Campus expansion, the need for the construction of 64th St. is imminent. Further, significant amounts of public infrastructure including additional construction on Mayo Blvd., 56th St. and 64th St., as well as drainage, water and wastewater infrastructure are required for the future development of this Mayo/Discovery Oasis campus and will benefit the surrounding area.
Contract Term
Due to the significant amounts of public infrastructure required to allow both the Hospital Campus and Discovery Oasis to maximize their development, staff proposes amending the 1996 Hospital Agreement with following terms:
- In addition to any use by Mayo of the construction sales tax credit under the DA, the construction sales tax credit may be used to reimburse Mayo for the following: (1) any portion of the cost to construct the 64th St. improvements that Mayo is required to pay under the Discovery Oasis Agreement; and (2) for any of the Public Infrastructure Reimbursements as defined in the Discovery Oasis Agreement. Mayo can use the Unused Reimbursement Credit under the DA until any one of the following is triggered (a) the date the Discovery Oasis DA expires or (b) the date the Unused Reimbursement Credit is exhausted or (c) the $40 million Discovery Oasis DA cap is met.
- For the purposes of public infrastructure improvement reimbursement only, the Hospital Development Agreement termination date will be modified to automatically terminate with the earlier of the date the Discovery Oasis Agreement expires or the date the construction sales tax credit is exhausted.
- During the additional term created by this action, only public infrastructure improvements will be reimbursable. All other terms and conditions of the 1996 DA will remain in effect and sunset with the original date of that agreement.
Financial Impact
There is no additional financial impact to the General Fund. The maximum reimbursement from the eligible General Fund share of TPT revenue from the Discovery Oasis DA will remain at $40 million.
Concurrence/Previous Council Action
Authorization to enter into the original Mayo Clinic Development Agreement was received on Sept. 20, 1995, through Ordinance S-23079.
Location
Generally located on approximately 225 acres at the southeast corner of 56th St. and Mayo Blvd.
Council District(s): 2
Department
Responsible Department
This item is submitted by Deputy City Manager John Chan and the Community and Economic Development Department.