BACKGROUND/DISCUSSION:
This item is for the consideration of a Chapter 380 Economic Development Agreement with AM & JK Development, LLC to construct a mixed-use development that includes streets, utilities, open space, retail and restaurant spaces, and possible future multifamily wholly located within the City of Saginaw.
AM & JK Development, LLC is represented as an experienced developer of retail and restaurant sites with their most notable regional development being the rehabilitated Mervyn’s shopping center, now H-Mart, and surrounding retail areas at the northwest corner of George Bush Tollway and Old Denton Road in Carrollton, Texas. This project is boasted as one of the most profitable commercial projects in that community.
This developer has purchased an approximately 27-acre tract north and west of the Saginaw Walmart, connecting Saginaw Boulevard with Old Decatur Road, and has recently received approval by both the Planning & Zoning Commission and City Council for zoning requested in their Planned Development. A major component of that Planned Development development plan, is a through-road that will connect Saginaw Boulevard to Old Decatur Road, allowing for internal property to become viable for retail and multifamily development. The internal roadway also will serve to connect the public to internal open space as well as provide an alternative throughway between two of the City’s most highly-trafficked thoroughfares.
As this through street is intentioned to create added public benefit both via increasing the viability of retail and restaurant development in Saginaw and as a public connector roadway, AM & JK Development, LLC has requested economic incentive in an amount approximately equal to that of the cost of construction of this street. Based on construction estimates reviewed and approved by Kimley-Horn, the anticipated cost of this roadway is an approximate value totaled at $2 million.
The terms of the agreement are as follows:
· AM & JK Development, LLC agrees to complete construction of the proposed through-street between Saginaw Boulevard and Old Decatur Road, complete construction of all on and offsite utilities required to service that roadway, obtain final acceptance of that roadway construction, and obtain at least three (3) Certificates of Occupancy for restaurants (not currently located in the City), at least two (2) of which must provide full table service to customers.
· AM & JK Development, LLC agrees to remain in good standing on all bills, taxes, permit fees, etc. required for development of the project.
· AM & JK Development, LLC agrees to convey approximately-totaled 4.402-acre tracts, as outlined therein, for public open space, to be maintained at a private cost internal to the development until the expiration date of the Agreement.
· AM & JK Development, LLC agrees to competitively bid the construction of the through road in a manner according to the requirements of State law for a public roadway.
· AM & JK Development, LLC agrees to assume all costs associated with construction of the through road and utilities to serve that roadway that may overrun estimates or incentive totals.
· AM & JK Development, LLC agrees to convey to and dedicate the completed through street to the City, including on and offsite utilities required to serve the street, as a public roadway free and clear of any encumbrances.
· AM & JK Development, LLC agrees to provide the City with a copy of construction bonds, including Performance, Payment, and Maintenance bonds.
· The Developer agrees to indemnify and hold harmless the City for any negligent, grossly negligent, wrongful, or strictly liable act or omission of the Developer or its agents or employees, arising out of Developer’s performance of the Agreement.
· The City of Saginaw agrees to make a grant payment to AM & JK Development, LLC of $2,000,000 with the following caveats:
o The first $1,000,000 can be paid as a dollar-for-dollar reimbursement for actual costs paid in construction of the roadway and associated utilities, following proof of payment via invoices and proof of work completed.
o The second payment of $500,000 will not be paid until within 90 days of full completion and acceptance of the roadway and associated utilities.
o The third and final payment of $500,000 will not be paid until after the third restaurant Certificate of Occupancy has been issued on the Property, with a minimum of two (2) of the restaurants offering full table service to customers, which must occur by December 31, 2026.
The attached Chapter 380 Economic Development Agreement includes termination and clawback provisions as accorded the City should any of the agreed upon performance terms not be met. The clawback is subject to adjustment based on the value of the land dedicated and the value of any roadway improvements already completed.
A conservative cost-benefit analysis of the project at completion estimates an approximate return on investment of +72.65% by year five, with a breakeven threshold of under 3 years. The resultant 10-year return is anticipated at just over $5.6 million above initial investment totals.
FINANCIAL IMPACT:
Total financial impact of $2,000,000 to be paid with $1,000,000 from the General Fund and $1,000,000 from the Utility Fund, in conjunction with development completion and performance terms as outlined in the approved Chapter 380 Economic Development Agreement.
RECOMMENDATION:
Move to approve a Chapter 380 Economic Development Agreement between the City of Saginaw, Texas and AM & JK Development, LLC, and authorize the Mayor to execute same on behalf of the City.