TOAV OPA with Big Lots (June 9, 2015)
TOWN OF APPLE VALLEY TOWN COUNCIL STAFF REPORT
To: Honorable Mayor and Town Council
Date: June 9, 2015
From: Orlando Acevedo, Economic Development Manager, Economic Development Department
Subject: OWNER PARTICIPATION AGREEMENT FOR A 1.3 MILLION SQUARE FOOT DISTRIBUTION CENTER PROJECT IN THE NORTH APPLE VALLEY INDUSTRIAL SPECIFIC PLAN AREA
That the Town Council: 1) Approve an Owner Participation Agreement (OPA) between the Town of Apple Valley and AVDC LLC, for the development of a 1.3 Million Square Foot Distribution Center Project, and authorize the Mayor, Town Manager and Town Attorney to execute said Agreement; and, 2) Adopt Budget Amendment Request No. 2015-34 to appropriate funding from the NAVISP Infrastructure Fund to said Project.
The Town Council is requested to enter into an Owner Participation Agreement (OPA) for the development of a new 1.3 million square foot distribution center on 106-acres (Project) within the North Apple Valley Industrial Specific Plan area. The Project location is south of the Walmart Distribution Center and the Victor Valley College Public Safety Campus; it is bordered to the north by Lafayette Street and to the east by Navajo Road. The proposed OPA, between the Town and AVDC, LLC, sets forth the terms and conditions for the proposed financial assistance to be provided for the Project.
Acting on behalf of the corporate end user, who remains confidential at this time, AVDC has informed the Town that the new distribution facility will be designed with enhanced technology systems, and equipment that will improve support for their stores and their growth opportunity in eCommerce. The construction of the facility will be designed and managed by The Haskell Company, Jacksonville, FL. Finalization and submittal of the development plans are underway with construction expected to start in September 2015 and will take about 18 months to complete. The construction project, including land, is estimated to cost approximately $115 million and will employ 300 skilled tradesmen at peak of construction. AVDC anticipates they will be transitioning from their current operation to the new facility in early 2017.
The proposed Apple Valley Distribution Center will employ 400 to 500 associates with a total annual payroll of approximately $10 million.
Other Project benefits will include:
- Total permit and development impact fee payments by AVDC to the Town estimated at more than $2,800,000.
- Total street construction and improvement costs estimated at $2,304,333.
- Annual property taxes estimated at more than $600,000. For reference, Walmart Distribution Center generated $618,000 in total property tax in 2013.
- Significant utility and water infrastructure construction and extensions to service this Project and adjacent properties.
- Demonstration and endorsement of the North Apple Valley Industrial Specific Plan area as a competitive and viable location for future industrial attraction.
To solidify the Town’s competitive site location to Project representatives during their site selection process, Town staff looked to financially offset the significant level of off- site infrastructure improvement costs that would be required of this Project at this site. To better inform this consideration, staff was able to reference recent community surveys to gauge the interest and spending priorities of Apple Valley residents. According to the Town’s 2011 Community Opinion Survey:
When asked to prioritize among a series of projects and programs that could be funded by the Town of Apple Valley in the future, providing incentives to attract new employers and jobs to town was assigned the highest priority (71% high priority), followed by improving the maintenance of streets and roads (52%), and hiring more police officers (41%).
These survey results have provided staff with a high level of confidence that the public investment detailed within the OPA accomplishes the two highest spending priorities of our residents and furthermore is consistent with the Town Council-adopted
Vision 2020 document, which prioritizes
Adequate and Well Maintained Infrastructure, a
Thriving Economy, and a
Strong Transportation System atop the Council’s areas of focus.
Moreover, according to peer-surveys, publications and testimony of site selection consultants, there are generally several critical factors that go into assessing the strength of a potential site, including for example; workforce skills and labor availability, transportation infrastructure and access, availability of utilities and infrastructure, tax structure and regulatory environment, construction and operating costs, and a streamlined permit process. In some cases, companies looking at new development sites will expect the infrastructure costs to the site to be paid by the local municipality. According to Site Selection Magazine’s 2013 Site Selection Survey,
Transportation infrastructure and particularly transportation access was the second most frequently cited critical location factor. In this context, a number of consultants also mentioned proximity to clients and markets as a critical location factor. Importantly, because not all projects are the same or offer the same benefits, the same survey stated,
Two-thirds of consultants surveyed said that it was very important for a location to have the flexibility to craft a customized incentives package for a specific project.
Understanding both the community survey results and the critical factors that go into a successful selection of a site, the Town Contribution proposed in the OPA is designed to improve transportation infrastructure availability to the proposed Project site and surrounding area, both to meet the needs of this specific Project and to offer general benefit to future industrial projects within the NAVISP area.
Accordingly, the OPA presented herein will fund public regional street improvements adjacent to the Project site; namely Navajo Road, LaFayette Street and Daschund Road.
The total street construction costs are estimated at $2,304,333. As the Developer, AVDC will pay an estimated $849,000 and the Town would fund the remainder utilizing $265,079 from the Transportation Impact Fee credit otherwise paid by the Project, and an estimated $965,274 from available NAVISP Infrastructure Funds. An estimated $225,000 will be deferred until such time as Daschund Road is needed. For a comprehensive summary of the improvements, please see OPA Attachment 2: Scope of Development.
This public infrastructure investment paid by the Town helps pave the way for the development of this Project and opens the door to attract additional industrial projects and job opportunities to Apple Valley-benefiting not only our community but residents and job-seekers throughout the entire High Desert region. In summary, the Town is providing an infrastructure investment of less than $2,150 per job ($965,274 investment divided by 450 jobs).
Finally, the Town is sensitive in providing the Developer with a stable and predictable financial assessment, in as much as possible, of project costs and development fees and the OPA further states that the Town agrees to apply fees as outlined in the FY2014-15 Municipal Fee Schedule and that the Developer Improvements will be exempt from any fee increases promulgated prior to issuance of a Certificate of Occupancy. Furthermore, the Town agrees to defer the Developer’s payment of Development Impact Fees until completion of the Project, prior to the issuance of the Certificate of Occupancy.
A copy of the OPA is attached for review and approval.
As such, staff recommends adoption of the form motions.
Since first obtaining this lead nearly nine (9) months ago, staff has worked diligently with Project representatives during a rigorous site selection and analysis process. Town staff was pleased to recently learn that Apple Valley had been tentatively selected for the Project location and has continued to-date to be successful during the due diligence phase in demonstrating that Apple Valley is the best and most viable location for the Project.
This selection is a testimony to the pro-business leadership of the Town Council, the Town’s financial strength, as well as a grand endorsement of Apple Valley’s industrial market, strategic logistics location, lower land and development costs, and as importantly, Apple Valley’s concierge assistance during the pre-development phase and overall streamlined entitlement process which will assist the end-user in meeting their aggressive development timeline.
The funding for this Owner Participation Agreement comes from two sources: a credit of the Transportation Impact Fee paid by the Project, estimated at $265,079; and a direct contribution from the Town from the NAVISP Infrastructure Fund account, estimated at $965,274.
- Budget Amendment Request