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    D.3       
City Council Special Meeting - Includes Action Taken
Meeting Date: 08/16/2017  
Recommended by: Steven Weaver Prepared by: Steven Weaver, Deputy City Manager
Finance Director Review:    Celina Morris  
City Attorney Review:    Brett Wallace  
Approved by:    Larry Rains Date Submitted:   
Type of Action Requested:    Ordinance, Formal Action/Motion, Public Hearing

SUBJECT:
Approve the Development Agreement with Block Sports Company (Dreamport Villages)
RECOMMENDATION:
Staff recommends that the Mayor and Council approve two items. (1) Adopt the statutorily required findings concerning the proposed development agreement with Block Sports Company by motion and; (2) Adopt the first reading of the Ordinance authorizing the City to enter into a development agreement with Block Sports Company. Each approval requires a two-thirds majority of the Mayor and Council (5 votes).
DISCUSSION:
Over the past few months, staff has been negotiating a proposed development agreement with The Block Sports Company ("Block Sports") regarding the location of a theme park to be located in the southern part of Casa Grande between Jimmie Kerr Blvd. and CG Mountain. Once fully developed, the proposed development is expected to include a theme park, resort hotel, indoor and outdoor water park, indoor meeting and entertainment space, extreme sports park, adventure zone, rv park, restaurants, regional transit center, wild animal park and rides, welcome center, school and tech office park, retail, and office and residential uses. For a number of reasons, including sizable public infrastructure projects of a regional nature needed to fully realize the development of the project, the developer would be unable to build the project without reimbursement of certain public infrastructure to be dedicated by the developer from the City and, accordingly has asked the City to consider entering into a Development Agreement that would rebate a portion of the sales tax the development would generate, as well as set forth other matters relating to the development of the Property. The City, at the August 2, 2017 meeting, adopted a Notice of Intent to enter into such an agreement as required by law. Adoption of that notice does not obligate the Council to adopt the Development Agreement tonight.

The proposed Development Agreement before Council, in exchange for developer's construction of certain public improvements (refer to Exhibit C of agreement) and the completion of certain minimum resort district improvements (to include a 300 room resort hotel, 100,000 SF Indoor Water Park, and 40,000 SF Indoor Meetings and Entertainment Space), and minimum public infrastructure (to include the construction of Resort Parkway from the development to Selma Road), the City will reimburse the developer up to $124 million dollars for the specified public improvements from a portion of the sales taxes generated solely by construction and sales in the
development.

A copy of the proposed Development Agreement has been distributed to Council. Since the agreement is obviously lengthy, staff will try to focus on some of the major points of the Development Agreement:

1) The proposed initial term of the agreement is for 20 years with an automatic extension for another 20 years if the Developer has constructed the minimum resort improvement and minimum public improvements and any of the property remains undeveloped at the end of the initial 20 year period. The City has the right to terminate the agreement after the 10th year of the effective date if the developer has not completed the construction of the minimum resort district improvements or minimum public improvements.

2) Major amendments to the planned area development zoning on this property will require City Council approval (after consideration by the Planning Commission) and minor amendments will require Planning Commission approval. Major amendments include an increase in residential density, reduction in minimum open space in residential areas, the addition of any new land uses, and any deviation more than 1/4 mile off centerline of proposed arterial roadways. In addition, any increase in building heights on commercial buildings require Council approval. All changes to the PAD not designated as Major are considered Minor. In addition, Planning staff would have the authority to make certain administrative amendments to the PAD for minor deviations in standards not described above.

3) Development standards both for residential and non residential properties will vest for the duration of the Agreement, subject to certain standard exceptions designed to protect the health and safety of the development (for example, the Developer would be subject to the City's most recent building codes and fees throughout), as well as the ability for the City to add hillside development standards for slopes in excess of 8%. The landscape standards and comprehensive sign package for the development would be approved by the Planning Commission.

4) The City would agree to reimburse the developer for public infrastructure actually constructed by the Developer in the amounts expended by the Developer for construction (exclusive of financing costs), up to a maximum reimbursement amount of $124 million dollars. All reimbursements will be paid by solely from retail sales and construction sales tax generated on the property, which the City would not have received if not for the construction of the public infrastructure and the subsequent development of the property. No taxes from outside Dreamport Villages would be used for reimbursement. The portion of the retail sales tax that may be reimbursed is limited only to the non-dedicated portion of the City's sales taxes and, as noted, is further restricted to sales generated within the development. Under the current sales tax structure only 49% of the non-dedicated taxes generated will be reimbursed to the Developer. Construction sales tax will be reimbursed at 27.5% of taxes generated. Reimbursement payments shall be made quarterly after the revenue has been received by the City, with payments being limited to the earlier of (a) full reimbursement has been made to the Developer; (b) 80 quarterly payments (20 years of payments) have been made to the Developer; (c) a maximum of 25 years from the effective date of the agreement; of (d) the termination of the agreement.

5) Before any sales tax reimbursement is paid to the developer there are certain improvements that have to be constructed at a minimum and must be completed by no later than 10 years from the effective date of the agreement . The agreement refers to these as the "Minimum Resort the effective date of the agreement . The agreement refers to these as the "Minimum Resort District Improvements." They include (1) a resort facility and/or other hospitality facilities consisting of, in aggregate, at least 300 rooms, 40,000 square feet of indoor meeting, multipurpose, and/or entertainment spaces, and a full service restaurant; and (2) a 100,000-square foot indoor waterpark to include a wave-pool, swimming areas, water slides and flotation devices (i.e. for a Lazy River and for certain slides).

6) The Agreement codifies many of the state statute provisions relating to Development Fees and provides the Developer with a method to ask for portions of the public infrastructure that the Developer will install to be included within the City's Infrastructure Improvements Plan (IIP). If included in the IIP, the Developer - if it builds the infrastructure - would be entitled to a credit for those improvements per state statute. Any Impact Fee Credits for the reimbursable Public Improvements would be deducted from the amount of available sales tax rebates. Impact Fee Credits for other eligible improvements would be in accordance with state law and current City Code.

7) The agreement outlines some standards related to noise, fireworks, lights, and signs. For example, permissible noise generated from concerts, amusement rides and entertainment uses are measured from residentially zoned property outside the planned area developments and shall be limited to certain dB(a) for different hours of the day. Fireworks shows shall not be later than 11 p.m. with the exception of the 4th of July and New Year's Eve, although the City Manager can grant a later time for special events. City Staff will, if this development agreement is improved, be recommending certain changes to the City Code regarding lighting, signage, and noise relating to the development and generally within the City.

8) The Developer may request to include additional property to the development if acquired and needed to create consistency throughout its theme park. If requested, approval of the City Council would be required to annex the property into the Agreement and approve the zoning and development standards for the Property.

9) City Acquisition of necessary property - Because the Developer will be constructing infrastructure outside its property area, it may be necessary to acquire and build right-of-way in other areas of the City. Prior to requesting the City to exercise its powers to acquire the property, the developer must make commercially reasonable efforts to obtain it. In the event, however, the developer is unable to obtain such property, Developer may provide written notice to the City, and City, at Developer's sole cost and expense, would be required to purchase, accept dedication of, or use its powers to acquire any necessary right-of-way and other property rights required for construction or maintenance of the Public improvements. Although the City would be obligated to acquire the property under the agreement, Council approval of the methods of acquiring are required by City Charter.

10) The agreement gives the developer the option to request to form special districts through Community Facilities Districts (CFD), Municipal Improvement Districts (MID), Revitalization Districts, or apply for other tax credits through Foreign Trade Zones, and Government Property Lease Excise Tax (GPLET). The decision whether to allow for the districts is at the Council's sole discretion and pursuant to state law.

11) Developer agrees to dedicate, upon the request of the City, real property for the location of a permanent fire station and/or a police substation on the Property. If the developer dedicates permanent fire station and/or a police substation on the Property. If the developer dedicates property they are entitled to receive dollar for dollar credit against the applicable Development Impact Fee. The City shall provide fire, police, and emergency services to the Property on the same terms and conditions as provided to other properties in the City.

12) City agrees to reasonably cooperate with and support Developer's efforts to obtain all required approvals and federal and state grants, for a new Amtrak station to be located on the Property, at no cost to the City.

13) The Developer intends to develop on the property a private wastewater treatment plant with sufficient capacity to serve each phase of development on the Property. It will be owned, operated, and maintained by the Developer. In the event the Developer wishes to connect the Property, or a portion of the Property, to the City system, the parties would meet to determine the appropriate method of connection.

14) The Developer intends to build a private lake to provide water recreation in the Property. In the event the Developer elects to develop public reservoir improvements in addition to or in lieu of the private lake, the Developer and the City, at no cost to the City, shall cooperate and take all actions necessary to obtain all approvals and permits as required.

15) The Developer may request the City's cooperation in planning cohesive roadway theming and landscaping plan for rights of way located on or immediately adjacent to the Property. The City agrees to reasonably cooperate and all landscaping installed in our right of way will - as in most cases - be maintained by the City.

16) The Developer may request that the City grant a non-exclusive license to access to City owned property and trails, including those properties commonly known as the Casa Grande Mountains, to conduct tours utilizing horseback and other non-motorized vehicles on the trails. This non-exclusive license would ensure that the general public has access to the trails and mountain. In the event Developer elects to conduct these tours they would have the obligation to build or maintain the trails.

Prior to entering into a retail tax incentive agreement, state statute requires that the Council, by a two-thirds vote (at least 5 members), adopt the following findings: (1) that the proposed tax incentive is anticipated to raise more revenue than the amount of the incentive withing the duration of the agreement; and (2) that in the absence of a tax incentive, the retail business facility or similar retail business facility would not locate in the City in the same time, place, or manner. These findings, a copy of which are in the materials, and which staff believes are appropriate given the size and nature of the public infrastructure Developer would construct, the limited nature of the reimbursement to a portion of the sales taxes generated solely from the development, and the magnitude and complexity of the development, must be made prior to considering the Development Agreement. These findings are also supported and must be verified by the independent third-party analysis performed by Applied Economics, a copy of which is in the materials, which demonstrates the potential significant impact the development can have on the City of Casa Grande.

If the Council makes the findings, the Ordinance approving the Development Agreement would also need a two-thirds vote of the members of the Council (5 votes) in order to be adopted.
FISCAL IMPACT:
The fiscal impacts of this agreement are numerous. The City, as the property is developed, would receive several significant public infrastructure projects constructed by the Developer. The City would be required, should developer meet its commitments to develop the property, to reimburse the developer for the actual costs of constructing the infrastructure, not to exceed $124 million. The total amount of sales tax returned to the developer, however, will depend on the sales generated at the site, as payment is expressly tied to revenues generated from the new money generated by the development. The City will have no liability to the developer if the site does not develop, or if the revenues during the term of the agreement are not sufficient to repay the full reimbursement amount. Additional revenues as the property is developed and continues are expected to be significant. In addition, however, higher costs can also be expected as a result of the development, including additional roadway maintenance (after dedication), police and fire service and other general governmental costs. While exact estimates of the impact of the development are difficult to ascertain, staff believes that the revenues generated by the development will be sufficient to offset any costs and provide revenues to the City for its general operational costs, which are heavily subsidized by sales taxes.
ALTERNATIVES:
1. Direct staff to negotiate different terms in the agreement
2. Do not approve the development agreement.
Attachments
Ord. 3033
Development Agreement

  

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