Title
Amend Business Terms for Redevelopment of Del Rio Former Landfill at 1150 E. Elwood St. (Ordinance S-47957)
Description
Request to authorize the City Manager, or his designee, to amend the approved business terms for entering into a development agreement, ground lease, easements and other agreements as necessary (collectively, the Agreements) with Arizona Fresh Holdings, LLC, or its City-approved designee (Developer), for the lease and redevelopment of the 156-acre City-owned Del Rio former landfill site located at 1150 E. Elwood St. (Site). Also, request an exception pursuant to Phoenix City Code section 42-20 to include indemnification and assumption of liability provisions where necessary in the transaction documents that would otherwise be prohibited by Phoenix City Code section 42-18. Further request authorization for the City Controller to disburse funds related to this item.
Report
Summary
In October 2020, City Council authorized Agreements with the Developer to redevelop the Site into a mixed-use project that includes: an Agri-Food Innovation Center with a wholesale produce distribution center; retail; education; research facilities; and, an approximately 20-acre City park (Project).
As the site design has continued to progress, the Developer has performed additional due diligence including a geotechnical report to determine the viability and pricing estimates for the Project and public infrastructure improvements. Additional costs are included in the estimates to account for the generally approved building techniques and methods on former landfill sites including dynamic compaction and vapor layers, to name a few. To facilitate this redevelopment, the Developer will make several public infrastructure improvements, creating new public access through the Site, establishing access to the Rio Salado and new 20-acre public park and facilitating pedestrian connectivity and activity. The three public roadways the Developer will construct include the scenic Rio Salado Parkway, 12th Street alignment connecting Rio Salado to Elwood Street, and a half-street of Elwood Street along the Project border. Combined, these roadways including curb, gutter and sidewalks are estimated at more than $21 million.
Upon approval of these proposed business terms, staff will incorporate the changes into the Agreements with the Developer:
- Indemnification/assumption of liability: City to obtain an exception pursuant to Phoenix City Code section 42-20 to include indemnification and assumption of liability provisions where necessary in the transaction documents that would otherwise be prohibited by Phoenix City Code section 42-18.
- Developer will privately finance and construct the enhanced public infrastructure improvements.
- Developer will install and construct a public east-west street, a public north-south street and frontage along Elwood Street (including landscaping and appurtenant amenities) for public access through the northern edge of the Project along the Rio Salado at 7th Street to approximately the 12th Street alignment, a road that bisects the Project from the Rio Salado to Elwood Street at approximately the 12th Street alignment or otherwise approved by the City's Street Transportation Department, and half-street frontage along Elwood Street and convey such access to the City in a mechanism approved by the City.
- Agreements may include other such public infrastructure and related components (and costs thereof) as approved by the Community and Economic Development Director.
- The improvements shall be in conformance with the applicable zoning, approved plans and regulations.
1. Reimbursement to the Developer shall be paid on an annual basis, for a period of 10 years, and shall not exceed the verified amount of General Fund Construction Sales tax and General Fund Commercial Real Estate Property Rental, Leasing, Licensing tax (collectively "TPT") collected that year. The TPT shall be comprised of the taxes relating to both (i) the construction and installation of the public infrastructure improvements and any private infrastructure improvements constructed in connection with the development of the Project, and (ii) the construction of vertical and other on-site improvements on the Site from time to time (whether by Developer or by third parties such as technology support companies, and including any tenant improvements). In order to track the TPT eligible for reimbursement, all contractors and subcontractors must secure a separate City of Phoenix Transaction Privilege Tax License related solely to the Project.
2. Reimbursement shall not exceed actual verifiable costs for the approved public infrastructure improvements.
3. Reimbursement will not begin until after the Developer completes the public infrastructure improvements at the Site and the City has accepted those improvements.
4. Reimbursements would be made annually, in arrears, with additional details to be specified in the Agreements.
5. City will reimburse 100 percent of the City's General Fund share of TPT generated from new construction and business activity over the 10 year period as confirmed by the tax licenses.
6. Developer must comply with Title 34 of the Arizona Revised Statutes in constructing the improvements to qualify for reimbursement.
7. Specifics and cost of public infrastructure improvements must be pre-approved by the City in order to qualify for reimbursement.
8. City's reimbursement will not exceed the maximum cumulative amount of $4 million (the "Maximum Reimbursement Amount").
- No other sources of funds would be used if the above resources are not adequate to meet the projected construction expenses.
- City staff also recommends extending the time period from City Council authorization to enter into Agreements from 12 months to 18 months.
- Agreements will include other terms and conditions as deemed necessary by the City.
- Other than the changes referenced above, all other terms and conditions of the previously approved Ordinance S-46989 remain the same.
Elliot D. Pollack & Company, a real estate and economic consulting firm, conducted an economic and fiscal impact study showing the Project will generate an estimated $868.6 million in annual economic activity, benefiting the City and region. This innovative project will transform a former landfill site, and the South Phoenix area, from a food desert to a food innovation hub. The Project will create approximately 1,400 construction and 1,500 ongoing operations jobs respectively, with an estimated capital investment of over $191 million.
Contract Term
The ground lease term of 100 years remains unchanged. The term of the development agreement will be for no more than 20 years.
Financial Impact
The financial impact of these new business terms are limited to the 10 years of the City's General Fund share of TPT reimbursement, as defined above. Financial terms of the Agreements will be reviewed by the City's Budget and Research Department to verify funding availability prior to execution.
Concurrence/Previous Council Action
City Council originally approved the Project through Ordinance S-46989 on Oct. 7, 2020.
Public Outreach
Public outreach related to the 20-acre park is taking place in September and October 2021.
Location
1150 E. Elwood St.
Council District: 8
Department
Responsible Department
This item is submitted by Deputy City Manager Ginger Spencer and the Community and Economic Development Department.