HomeMy WebLinkAboutRES 08-36RESOLUTION NO. 08-36
A RESOLUTION OF THE MAYOR AND CITY COUNCIL OF THE CITY
OF APACHE JUNCTION, ARIZONA, ADOPTING THE FINDINGS OF
APPLIED ECONOMICS REGARDING A PROPOSED RETAIL
DEVELOPMENT TAX INCENTIVE AGREEMENT BETWEEN THE CITY
OF APACHE JUNCTION AND EMPIRE SOUTHWEST, L.L.C.
WHEREAS,on November 18,2008,the Mayor and City
Council will be considering passage of a Notice of Intent
to Enter into a Retail Development Tax Incentive Agreement
with Empire Southwest, L.L.C.; and
WHEREAS,A.R.S.§9-500.11(D)(1)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 over the
term of the agreement is expected to be more than the
proposed tax incentive; and
WHEREAS,A.R.S.§9-500.11(D)(2)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,if the development agreement is approved by
Council, a retail tax incentive in an amount not to exceed
$300,000.00 will be reimbursed to the developer solely for
public infrastructure that will be dedicated to,accepted
and controlled by the City upon completion of the project,
as allowable under A.R.S. § 42-6010; and
WHEREAS,the City engaged Applied Economics for an
independent third party review to meet State law
requirements; and
WHEREAS,Applied Economics completed its independent
review and prepared a written report on November 5,2008
(attached as Exhibit A); and
WHEREAS,in its November 5,2008 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
RESOLUTION NO. 08-36
PAGE 1 OF 2
projected that the tax incentives offered to the developer
could be paid in full approximately two 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 November 5, 2008 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 18TH DAY OF NOVEMBER , 2008.
SIGNED AND ATTESTED TO THIS 18TH DAY OF
ATTEST:
KATHLEEN CONNELLY
City Clerk
APPROVED AS TO FORM:
oc el it -708
RICHARD J. STERN
City Attorney
RESOLUTION NO. 08-36
PAGE 2 OF 2
NOVEMBER
Mayor
, 2008.
EXHIBIT A
APPLIED
ECONOMICS
November 5, 2008
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 Empire Southwest for the construction of a new heavy equipment sales,
leasing and maintenance facility.This development agreement includes provisions for a sales
tax incentive equal to 50 percent of general fund sales taxes generated by retail sales and leases,
excluding construction, up to a total of $300,000.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 their
facility.
The proposed project would be located on the northeast corner of Winchester Road and 34th
Avenue in Apache Junction and would include a 57,000 square foot facility for heavy equipment
rentals, sales and repairs.Total construction costs are estimated at $7.5 million.The facility is
expected to be operational in 2009.
Per A.R.S. 9-500.11, it is required that any proposed tax incentive is anticipated to raise more
revenues than the amount of the incentive within the duration of the agreement.We have
reviewed all relevant assumptions regarding projected taxable activities by Empire and prepared
an analysis of the future revenue stream to the city over the next eight years.Based on our
review, 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.
Once completed, the project could generate an estimated $200,000 in annual non -construction
sales tax revenues to the city during the incentive period and over $500,000 per year once the
reimbursement amount had been paid in full.The incentive could be paid off in approximately
two years after the start of construction.
There is an additional provision in the development agreement stating that city sales tax
collections from Empire and all similar equipment rental businesses in Apache Junction must
exceed $150,000 in every year in which reimbursements are paid to Empire,otherwise
reimbursements will be postponed to the next year in which this condition is met.Given that the
annual total sales tax generated by the project is estimated at approximately $500,000 per year,
4648 E Shea Boulevard, Suite A-260 * Phoenix, AZ 85028 * 602-765-2400
e APPLIED
ECONOMICS
Mr. Steve Filipowicz
Page 2 of 2
this condition is not expected to be a constraint barring any significant decreases in projected
sales and leases by Empire.
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 and with Empire Southwest, 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 reimbursement shown in the development agreement.
Based on our review, we believe that the agreement between the City of Apache Junction and
Empire Southwest meets the requirements of both 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 me.
Sincerely,
_JaAcch
Sarah E. Murky
Partner
4648 E Shea Boulevard, Suite A-260 * Phoenix, AZ 85028 * 602-765-2400