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Home My WebLink AboutRES 07-47RESOLUTION NO. 07-47 A RESOLUTION OF THE MAYOR AND CITY COUNCIL OF THE CITY OF APACHE JUNCTION, ARIZONA, ADOPTING THE FINDINGS OF APPLIED ECONOMICS REGARDING PROPOSED DEVELOPMENT AGREEMENT BETWEEN THE CITY OF APACHE JUNCTION AND US 60 AND IDAHO, L.L.C. FOR APACHE JUNCTION GATEWAY DEVELOPMENT PROJECT WHEREAS, on December 4, 2007, the Mayor and City Council will be considering passage of a Notice of Intent to Enter into a Retail Development Tax Incentive Agreement with US 60 and Idaho L.L.C. for Apache Junction Gateway Development Project; and WHEREAS, A.R.S. § 9-500.11 requires a municipality, prior to entering into a such an agreement, to determine through the use of an independent third party that the anticipated revenue from the development is expected to be more than the proposed tax incentive; and WHEREAS, A.R.S. § 9-500.11 further requires a municipality to determine that without the tax incentive, the retail development would not have located in the city or town in the same time, place or manner; and WHEREAS, the contemplated retail tax incentives are provided as reimbursement for public infrastructure that will be dedicated to, accepted and controlled by the City upon completion of the project, as specified in A.R.S. § 42-6010; and WHEREAS, the City engaged Applied Economics to complete the required independent third party review and conformity with State law in conjunction with the proposed Development Agreement; and WHEREAS, Applied Economics completed its independent review and prepared a written report dated October 10, 2007; and WHEREAS, in its October 10, 2007 report, Applied Economics found that the Development Agreement meets the requirements of A.R.S. § 9-500.11 and A.R.S. § 42-6010 and projected that the tax incentives offered to the developer RESOLUTION NO. 07-47 PAGE 1 OF 2 could be paid in full approximately four to five years after the start of construction. NOW, THEREFORE, BE IT RESOLVED by the Mayor and City Council of the City of Apache Junction, Arizona, that: The findings of the independent third party review by Applied Economics, as disclosed in its October 10, 2007 report as attached in Exhibit A, be approved and adopted. PASSED AND ADOPTED BY THE MAYOR AND CITY COUNCIL OF THE CITY OF APACHE JUNCTION, ARIZONA, THIS 4TH DAY OF DECEMBER , 2007. SIGNED AND ATTESTED TO THIS 4TH DAY OF DECEMBER ATTEST: KATHLEEN CONNELLY City Clerk APPROVED AS TO FORM: rt.to7 RICHARD J. STERN City Attorney RESOLUTION NO. 07-47 PAGE 2 OF 2 , 2007. EXHIBIT A e APPLIED ECONOMICS October 10, 2007 Mr. Steve Filipowicz Economic Development Director City of Apache Junction 300 E. Superstition Blvd Apache Junction;AZ 85219 Dear Mr. Filipowicz, Applied Economics has been contracted by the City of Apache Junction to perform an independent third party review of the proposed development agreement between the City of Apache Junction and US60 and Idaho LLC for the construction of Apache Junction Gateway. This development agreement includes provisions for a sales tax incentive equal to 50 percent of general fund sales taxes generated by construction activity and taxable retail sales up to a total of $6.64 million.This amount, which the City would agree to reimburse the developer over a period of up to 8 years, is intended to cover the actual cost of infrastructure improvements completed by the developer as part of the construction of the retail center. The proposed project would be located on the southeast corner of US60 and Idaho Road in Apache Junction and would include a 595,000 square foot retail center on 80 acres with two anchor tenants, a theater and a variety of other retail establishments.Total construction costs are estimated at $150.42 million, including the cost of the two anchors who would construct their own buildings.The center is expected to open in December of 2009. Per A.R.S. 9-500.11, it is required that any tax incentives offered to retail businesses do not exceed the total amount of revenue to be generated to the City by the project.Based on the development agreement and additional information provided by the city and the developer, we believe that the project would generate a significantly greater flow of sales tax revenues than the total amount of the reimbursement and that the flow of tax revenues would be sufficient to cover the reimbursement amount in the allotted time period. In order to arrive at this conclusion we evaluated the following assumptions: •Retail sales per square foot; •Construction costs per square foot; •Development phasing; •Occupancy rates; •Local sales tax rates Once completed, the project could generate an estimated $1.7 million to $1.9 million in annual sales tax revenues to the city during the incentive period and over $4 million per year once the reimbursement amount had been paid in full and the project is built out.The incentive could be paid off in approximately four to five years after the start of construction. 4648 E Shea Boulevard, Suite A-260 * Phoenix, AZ 85028 * 602-765-2400 e APPLIED ECONOMICS Mr. Steve Filipowicz Page 2 of 2 The second component of A.R.S.9-500.11 requires that this development would not have occurred in the same time, place or manner in the absence of a tax incentive.Based on our knowledge of current and projected development in the expected trade area, and interviews with the city, we believe that this type of development would not have occurred in the same time or manner without the incentive.The cost of public infrastructure improvements required to make the site usable for this type of development would not have been feasible without reimbursements. Additionally, A.R.S. 42-6010 requires that sales tax incentives offered to retail businesses be provided as reimbursement for public infrastructure dedicated to and accepted and controlled upon completion of the project by the city.We have reviewed the cost estimates for the minimum public improvements and verified that they are consistent with the amount of the sales tax rebate shown in the development agreement. Based on our review, we believe that the agreement meets the requirements of A.R.S. 9-500.11 and A.R.S. 42-6010.Should you have any questions or concerns, please do not hesitate to contact us. Sincerely, _JaAcj)(11/eVI Sarah E. Murley Partner