Discussion and possible action to adopt RES. 2024-05 authorizing the City Manager to execute a First Amendment to the Trailhead Development Agreement and Addendum No. 1 containing a retail development sales tax incentive to reimburse construction of public infrastructure for property located at 83rd Ave and Happy Valley Road, pursuant to ARS 9-500.11, Version 2.

Since entering into the Development Agreement (DA) in June 2022, the cost of offsite public infrastructure construction and specific challenges with this project site have impacted the ability to implement this economic development project. Civil engineering challenges related to storm water shed from the adjacent area and inflationary costs to relocate City and private water district lines have contributed to an increase in offsite improvements from an estimate $3.8M to $6.9M.

Therefore, for the construction of certain public infrastructure, staff recommends entering into a retail development tax incentive to reimburse the Developer an amount of the unrestricted portion of the transaction privilege (sales) tax solely generated within the property, in connection with the construction, development, or operation levied. 

If adopted, City will pay Owner on a quarterly basis 100% of the City’s eligible portion of construction related TPT excluding .3% transportation tax (1.5% after the .3% reduction)), 50% of all Retail (1.8%) and Restaurant/Bar TPT (2.8%), and 25% of all Grocery Retail TPT (1.8%) received by the City that the City verifies as generated within the Property. Reimbursement period shall not exceed 72 months, and the reimbursement amount shall not exceed $2M.

Before entering into a retail development tax incentive agreement, the city of Peoria must make a finding by a two-thirds vote of the governing body without the use of consent calendar that includes both of the following:

1.     That the proposed tax incentive is anticipated to raise more revenue than the amount of the incentive within the duration of the agreement.

-        This is verified by the study conducted by Applied Economics which indicates that over the 10-year term of the agreement, the project is estimated to provide $17M in tax revenue, far exceeding this $2M incentive.

2.     That in the absence of a tax incentive, the retail business facility or similar retail business facility would not locate in the city the same time, place or manner.

-        This is verified by the Developer who has indicated that in the absence of a tax incentive, the project will not locate in the City in the same time, place, or manner.

• December 12, 2023 - Sales Tax Reimbursement Notice of Intent adopted by City Council.

• August 8, 2022 – Trailhead Development Agreement Addendum No. 1 executed, assigning new Owners.

• April 2022 - Economic and Revenue Impacts Analysis conducted by Applied Economics.

• April 7, 2022 - Trailhead Development Agreement approved by City Council.

Staff recommends that council approves RESOLUTION NO. 2024-05 adopting the First Amendment to the Trailhead Development Agreement and Addendum No. 1, including a Sales Tax Reimbursement for Public Infrastructure.

An Economic and Revenue Impacts Analysis was conducted by Applied Economics in April 2022.