Title
Resource Innovation Campus Agreements Authorization (Ordinance S-51535) - District 7
Description
Request to authorize the City Manager, or his designee, to enter into a development agreement (Agreement), and to execute any other agreements, instruments or documents necessary with Krause Interior Architecture, Inc. and its affiliates or subsidiaries (Krause) or their City-approved designees, for the proposed development on the Resource Innovation Campus resulting from participation in the Reinventing Cities program. Further request to authorize the City Controller to disburse all funds related to this item and authorize the City Treasurer to accept funds associated with this request.
Report
Summary
Since May 2022, the Public Works and Community and Economic Development departments have been collaborating with C40 Cities - Reinventing Cities Competition. Reinventing Cities is an initiative led by C40 to stimulate sustainable development and to celebrate innovative solutions to environmental and urban challenges. Through the program, cities identify underutilized sites that are ready to be transformed and invite creative multi-disciplinary teams, including architects, planners, developers, investors, environmentalists, start-ups, academics, and community associations, to submit proposals that can serve as a model for city landmarks of the future.
The City worked with C40 to run an international call for projects to develop 20 of the 40 acres at the Resource Innovation Campus (RIC). The RIC, and its associated waste diversion program, was approved by Phoenix City Council in 2015 to be used for the call for projects. Located at 27th Avenue and Lower Buckeye Road next to the City-owned transfer station, the RIC is dedicated to the creation and growth of a circular economy that will fulfill the City’s goal of diverting waste from the landfill. The RIC will help Phoenix reap the economic development benefits of attracting manufacturing processes and conversion technologies that transform waste into resources and is an integral part of achieving the 2050 Sustainability Goal of creating zero waste through participation in the circular economy as outlined in the 2021 Phoenix Climate Action Plan. In December 2023, a selection committee comprised of key City leadership identified the winning team and proposal for the site.
The winning team and proposal are led by Krause Interior Architecture, Inc. The proposal includes development in two phases, the first of which includes a short-term ground lease for two pilot programs to determine the viability of the long-term concepts. Upon proof of viability, the second phase will include an approximately 90,000 square foot building expected to include space for research and development labs, designated incubation/acceleration space, workforce training and development programs, and shared collaborative workspaces, as well as land designated for resource clustering focused on circular economy and by-product synergies (Project). To test emerging technologies; kick start entrepreneurial activities; and complete the necessary environmental assessments, staff proposes entering into agreements in two phases. Should the Project move to Phase II, the total Project would be located on approximately 20-acres at build out. The following key business terms, and other terms and conditions will be incorporated into a Development Agreement and other necessary agreements.
Phase I
• Phase I will consist of a ground lease of not more than five years.
• Phase I will allow for two research and development pilots that will divert waste from landfill and generate revenue for Phase II. The first pilot will be focused on processing municipal solid waste and difficult to recycle plastics (#3, #4, #6, #7) and converting them to products such as bio char, bio diesel fuels, and naphtha. The second pilot will be focused on processing bio solids and sludge and converting them into products such as bio crude oil, class A bio char, and liquid fertilizer. This second pilot is in conjunction with the Water Services Department and will use feedstock from the City’s wastewater treatment plant. Both pilots’ goals are to test new and emerging technologies and the feasibility of creating high-value products from waste streams to enable circularity, and help the City achieve its 2030 and 2050 waste diversion goals.
• The two pilots will utilize up to 2.5 acres of the Special Operations parcel located just east of the southeast corner of 35th Avenue and Elwood Street within the RIC.
• The lease terms will include a rent that meets fair market value appraisal for the land site for a pilot, with credit towards rent provided for the waste materials that are diverted from the landfill and the City.
Phase II
Phase II will include an amendment to the lease and execution of an operations and maintenance agreement to enable development of the 20-acre site as detailed in the winning proposal received under the C40 Reinventing Cities Competition. Upon the Developer proving viability of Phase I and providing verifiable documentation to the Community and Economic Development and Public Works Directors of the financing entity and the terms of adequate financial ability to complete construction of the Project on the full RIC Project Site, the following terms will apply to Phase II.
• The lease will be amended to extend the lease from five to up to 99 years and the land subject to the lease will be expanded from the original 2.5 acres to 20 acres.
• Prior to executing the lease amendment, Developer shall submit to the City a site plan and pre-application for development of the full Project Site.
• The rent for Phase II lease area will be established with the initial appraisal, considering a fair market value rate that may be reduced by the direct costs to the Developer of the environmental assessments and remediation, and public infrastructure work that is valuable to the City, and completed by Developer in accordance with Title 34. Any infrastructure or environmental work must be approved by the City in advance to be eligible for credit. The annual rent may be reduced with credit towards rent provided by the waste materials that are diverted from landfill and the City’s other waste streams, which provide a direct financial value to the City.
• Developer will privately finance and construct the Project at their sole upfront cost and expense.
• Developer will construct a public park/open space to tie into the Rio Reimagined development project. These public improvements may be creditable towards the annual rent and will be constructed in accordance with Title 34.
• Developer will construct an education room/tour space and gallery or meeting space for public use.
• Phase II must start construction within 24 months of entering into the amended lease.
• City will retain the right to approve tenant sub lessees at the Project Site, which approval will not be unreasonably withheld.
Contract Term
The Phase I term is for five years. Phase II will amend the term up to a maximum of 99 years.
Financial Impact
The City’s primary financial impact for Phase I will be the feedstock provided by the Public Works and Water Services departments in the form of municipal solid waste, difficult to recycle plastics, wastewater bio solids, and wastewater sludge.
Concurrence/Previous Council Action
The Economic Development and Housing Subcommittee meeting recommended approval on November 25, 2024 by a vote of 4-0.
Location
East of 35th Avenue and Elwood Street.
Council District: 7
Department
Responsible Department
This item is submitted by Deputy City Managers Mario Paniagua and John Chan, and the Public Works and Community and Economic Development departments.