CITY OF GOODYEAR CITY COUNCIL ACTION FORM AGENDA ITEM # DATE: 11/28/11 COAC NUMBER: 11-4729 SUBJECT: Approve and Adopt Resolution No. 11-1460 Approving and Authorizing the City Manager to Execute Job Creation and Infrastructure Agreement for Dick s Sporting Goods, Inc., a Delaware corporation, and Providing for an Effective Date. STAFF PRESENTER: Paula Ilardo, Economic Development Director COMPANY: CONTACT: RECOMMENDATION: Approve and Adopt Resolution No. 11-1460 approving and authorizing the City Manager to execute the Job Creation and Infrastructure Agreement for Dick s Sporting Goods, Inc., a Delaware corporation, dated November 28, 2011 relating to the building of a warehouse facility for its west coast distribution of retail sporting goods, which approves and authorizes the City Manager to provide job creation and infrastructure funding, an expedited development process, the funding of a limited amount of plan review and permit fees, and to support Dick s Sporting Goods efforts to obtain Foreign Trade Zone status; and providing for an Effective Date. EXECUTIVE SUMMARY: The Job Creation and Infrastructure Agreement addresses the terms and conditions applicable for job creation and infrastructure funding, limited plan review and permit fee funding under an expedited development process, and City support for Foreign Trade Zone status for Dick s Sporting Goods, Inc which is making a $55 million investment and creating jobs in our community. Because Phase I of this project will result in the installation of approximately three miles of off-site water line infrastructure improvements that will benefit several future users in the Palm Valley 303 business park, the City will pay a maximum of $500,000 towards that infrastructure. The agreement requires 150 new employees to be hired by Dick s within 36 months of being issued a final Certificate of Occupancy for Dick s to receive a maximum of $320,000 for job creation funding for the hiring of Goodyear residents and/or for the employee purchase of a new or resale home in Goodyear. An expedited development process is provided with funding for plan review and permit fees limited to a maximum of $400,000 in Phase I and a maximum of $250,000 for Phase II should Dick s expand within five years of receiving a final Certificate of Occupancy. Dick s has purchased enough land to eventually build a total of a million square feet on the site. COMMUNITY BENEFIT: The location of Dick s Sporting Goods west coast distribution facility in the City of Goodyear will provide numerous benefits to the citizens of Goodyear.
Construction sales tax will be generated by Dick s ground-up construction of a new facility with a footprint of approximately 623,000 square feet. Because Dick s is purchasing the facility from Sunbelt Holdings and Merit Partners rather than leasing, it means Dick s will have a longer-term presence in our city and will become a very important part of our corporate community. Merit Partners will be building an approximately 3-mile-long water line along Camelback Road from Falcon Drive to Dick s facility west of the Loop 303. This water line will serve future businesses, so will help attract more companies to the Palm Valley 303 business park bringing more jobs to Goodyear. Loop 303 is well suited for large distribution facilities such as a Dick s Sporting Goods and having both Sub-Zero and Dick s will begin to add mass to the business park to help attract other businesses. As a high-profile national retailer with a quality reputation, Dick s will serve as an excellent catalyst for further development at the Palm Valley 303 business park. Building and equipping the 623,000-sq.-ft. facility will result in a $55,000,000 capital investment which generates construction sales tax for Goodyear. Ground-up construction of such a large building should create a total of 625 direct, indirect and induced construction jobs with earnings of approximately $33,541,592 million and output of about $87,404,163 million. Dick s is expected to create approximately 300 jobs in Goodyear - at least 150 jobs in Phase I as well as 150 more in Phase II. Both higher paid management opportunities and jobs paying a minimum of $12.50/hour (including overtime) for hourly workers will be created resulting in an overall average annual wage of approximately $31.000. The City of Goodyear is encouraging Dick s to hire Goodyear residents by giving job creation incentives to Dick s only for the hiring of Goodyear residents. Goodyear is also encouraging the purchase of a Goodyear home by offering Dick s employees an incentive for purchase of new or used home in Goodyear. Dick s will bring at least $1,848,970 in direct tax revenue to Goodyear over the 10-year period of this agreement Dick s distribution center in Goodyear is expected to generate a total of approximately $264,882,428 million in direct, indirect and induced economic benefit to the community over a 10 year period. Dick s Sporting Goods will be the second company to take advantage of the Foreign Trade Zone status in Palm Valley 303 which will help promote the advantages of the FTZ s in Goodyear Dick s is known to be a very charitable organization which contributes to organizations and projects on a consistent basis to help the community. DISCUSSION: The City s economic development staff was contacted by GPEC in March 2011 about Project Green (Dick s Sporting Goods). In July 20ll, Mayor Georgia Lord and staff met with Dick s executives where a discussion ensued about possible incentives that would make Goodyear more competitive with Reno, Nevada; an expedited development Page 2 of 10
process; and support for foreign trade zone status. For the next five months, negotiations continued with a letter of intent agreed upon in October 2011, followed by this Job Creation and Infrastructure Agreement. Dick s will not just lease a facility in Goodyear, but rather will become an owner in our community. The company has purchased 55 acres of land in Goodyear from Sunbelt Holdings and Merit Partners generally located at the NEC of Cotton Lane and Minnezona Avenue along Loop 303 to the north of Sub-Zero. Dick s is planning to build its new West Coast distribution center (their only other distribution center is in Atlanta) on this acreage with a footprint of approximately 623,000 square feet in Phase I, with the possibility of expanding up to a million square feet within the next 5 years for Phase II. According to an economic impact study of Dick s Sporting Goods, Inc. done by ESI Corporation for the City of Goodyear, the ground-up construction and improvements are expected to create a total of 625 direct, indirect and induced construction jobs with a total payroll of approximately $87,404,163 million. Dick s is expected to create up to 150 fulltime jobs in Phase I, which is anticipated to begin operations in January 2013. To receive job creation funding for hiring Goodyear residents, the new fulltime employees must be paid at least $12.50 per hour (including overtime). Dick s must also pay at least 65% of health insurance premiums for the employee. Should Dick s expand operations within 5 years after receiving a final Certificate of Occupancy, it is expected that Dick s would hire another 150 employees, bringing the total jobs to 300. Total direct payroll over a 10-year period for both Phases I and II employees is expected to exceed $70,034,004 million. Dick s Sporting Goods will invest approximately fifty-five million dollars ($55,000,000) to acquire the land, construct the building, and acquire and install the equipment. Dick s, being such a high-profile national retailer, will serve as an excellent catalyst for further development at the Palm Valley 303 business park. Having both Sub-Zero and Dick s locate along Loop 303 begins to show mass and will draw more attention to the area. Merit Partners will be building an approximately 3-mile-long water line along Camelback Road from Falcon Drive to Dick s facility west of the Loop 303. This off-site infrastructure will also serve many future businesses in the area, so will help attract more companies to the Palm Valley 303 business park bringing more jobs to Goodyear. At build-out, this integrated, 1.600-square-foot business park has been projected in an Elliott D. Pollack & Company Economic and Fiscal Impact Report to generate up to $26.1 million per year in revenues for the City of Goodyear. Additionally, by Dick s locating in one of Goodyear s magnet Foreign Trade Zone (FTZ) sites, it brings awareness to businesses and the development community of the availability of these FTZ benefits for qualifying companies that will help generate additional employment opportunities in Goodyear. Page 3 of 10
Moreover, the City commissioned ESI Corporation to prepare an economic and fiscal impact analysis of Dick s Sporting Goods operation in Goodyear. The direct tax benefit to the City of Goodyear from construction sales tax, personal and real property taxes, and utility taxes over a 10-year period will be approximately $1,848,970. The direct, indirect and induced impact of the 300 new jobs created by Dick s Phase I and Phase II operations in Goodyear will total about $115,289,204 million in earnings. The total Dick s Sporting Goods manufacturing operation in Goodyear will have a significant impact on the local area economy with approximately $264,882,428 million in economic output. Recognizing the benefits the presence of Dick s Sporting Goods West Coast distribution operation would have for the area, City staff began negotiations with Dick s to accommodate the company s request for assistance. Under the terms of the proposed Agreement, Dick s is, among other things, required to perform in the following manner: commence site improvements and vertical construction within one hundred twenty (120) days of the Effective Date of this Agreement; meet the city s requirements for development including building the approximately 3-mile-long water line necessary to operate this facility; receive at least a temporary Certificate of Occupancy by December 31, 2012; invest a minimum of fifty-five million dollars ($55,000,000) within three (3) years of the date of the Agreement in constructing, improving, fixturing and equipping the Goodyear Facility; operate the Goodyear Facility continuously for a minimum period of five (5) years from the date Dick s receives a final Certificate of Occupancy for the facility; over the course of three (3) years after final Certificate of Occupancy cumulatively hire one hundred fifty (150) full-time employees, paying them a minimum of $12.50 per hour (including overtime); and will maintain at least 105 full-time employees for the remainder of the seven (7) year term of the Job Creation and Infrastructure Agreement. Dick s also agrees to contract with local Goodyear hotels for at least eight percent (80%) of the Company s annually budgeted room nights related to the Goodyear Facility. In exchange, the City agreed to: support Dick s efforts to obtain FTZ Status; pay up to a maximum of $500,000 for off-site improvements constructed during Phase I that are necessary to operate the Goodyear Facility such as the approximately 3-mile water line to Falcon Drive; provide assistance with the development process by waiving the cost of expedited plan review fees; waive up to a maximum of $400,000 in plan review and permit fees for Phase I plus waiving up to a maximum of $250,000 in plan review and permit fees for Phase II should Dick s expand within five (5) years of the issuance of the final Certificate of Occupancy for the initial phase; and to pay Dick s up to a maximum of $320,000 for job creation credits for the hiring of Goodyear residents and/or the employee purchase of a new or resale home in Goodyear; the City agreed to pay $3,000 for each eight (8) Employee Credits earned by Dick s for new employees hired before or after the Effective Date of this Agreement who meet the residency requirement and who work at the Goodyear Facility for a minimum of three (3) consecutive months in a full-time capacity with an individual employee qualifying for no more than eight (8) Employee credits, which is equal to two full years of employment. Additionally, the City Page 4 of 10
agreed to pay an additional $3,000 to the company for every employee, who after being hired by the Company, purchases a new or resale home within Goodyear after the Effective Date of this agreement and within three (3) years of the issuance of the final Certificate of Occupancy for the Goodyear Facility, and who resides in such home for a period of at least one (1) year. The Home Purchase Incentive is paid out of the maximum $320,000 for job creation or home purchase. There are specific conditions that must be met for any of these payments. All of the foregoing job creation payments will be made annually and only for employees who are paid at least $12.50 per hour (including overtime) and who receive comprehensive health insurance for which Dick s pays at least 65% of the premium, and who have worked at the Goodyear Facility for at least three consecutive months, and have met the residency requirements. The Home Purchase Incentive payments impose an additional requirement of twelve months of living in the residence within Goodyear. Should the company fail to make the Minimum Capital Investment of $55,000,000 within three (3) years of this agreement, the job creation payments shall be suspended until the minimum investment has been achieved. Infrastructure reimbursements will be made to Dick s or a designated third party beneficiary every six (6) months up to the maximum of $500,000 only after a minimum employment level of 105 employees has been achieved within the first year of operation. Based on the analysis of ESI Corporation and the fact that Dick s Sporting Goods is a well-known, high quality and high profile retailer, the City deems the performance based agreement to be beneficial to the City and in the best interest of its residents. Both higher paid management opportunities and jobs paying a minimum of $12.50/hour (including overtime) for hourly workers will be created. Employment opportunities available to City residents will increase with job creation funding for hiring Goodyear residents. In addition, the City believes that the location of Dick s Sporting Goods at the Palm Valley 303 industrial park in the designated Foreign Trade Zone will help market the City to the business community creating a catalyst for further employment opportunities in the City. FISCAL IMPACT: The anticipated annual fiscal impact of the Job Creation and Infrastructure Agreement is listed below. FY2012 $400,000 for plan review and permit fees Phase I FY2013 $160,000 for job creation Phase I $500,000 for infrastructure Phase I FY2014 $160,000 for plan review and permit fees - Phase I FY 2015 2019 $250,000 for plan review and permit fees Phase II Page 5 of 10
RESOLUTION 11-1460 A RESOLUTION OF THE MAYOR AND COUNCIL OF THE CITY OF GOODYEAR APPROVING AND AUTHORIZING THE CITY MANAGER TO EXECUTE JOB CREATION AND INFRASTRUCTURE AGREEMENT FOR DICK S SPORTING GOODS, INC.; AND PROVIDING FOR AN EFFECTIVE DATE. WHEREAS, the Company is one of the largest retailers of sporting goods in the United States with approximately 447 stores in 42 states and over 26,000 employees nationwide; and WHEREAS, the Company conducted a search to locate its west coast distribution facility; and WHEREAS, the Company identified the City as its preferred location for its distribution facility that will accommodate its immediate and long-term expansion plans and otherwise meet its business needs, including the construction of an approximately 623,000-square-foot footprint facility to be generally located at the northeast corner of Cotton Lane and Minnezona Avenue, Goodyear, Arizona (the Goodyear Facility ) as more particularly described in Exhibit 1 attached hereto; and WHEREAS, the location of the Company s operations at the Goodyear Facility should involve the Company s investment of over fifty-five million dollars ($55,000,000) in acquiring the property upon which the Goodyear Facility will be located, and in developing, constructing, improving, fixturing, and equipping of the Goodyear Facility; and WHEREAS, the Company anticipates that over the course of three (3) years, its operations should cumulatively provide up to 150 new jobs to the City and State of Arizona at an estimated minimum hourly wage of $12.50 (including overtime pay) with the overall average annual wages for new employees equaling at approximately $31,000; and WHEREAS, the City commissioned ESI Corporation to conduct an economic and fiscal impact analysis of the Company operations at the Goodyear facility; and WHEREAS, ESI Corporation estimates the direct tax benefit to the City of Goodyear from the construction sales tax, personal property tax, real property tax and utility tax generated by the Company during the first ten (10) years of operation will be approximately $1,848,970; and WHEREAS, ESI Corporation estimates the direct, indirect and induced economic impact of the new jobs created by the Company operations in Goodyear will total Page 6 of 10
approximately $115,289,204 million in payroll and more than $264,882,428 million in industrial output over the next ten (10) years; and WHEREAS, the City recognizes that there is a direct economic benefit to the City by the employment of its residents and/or the relocation to the City by new residents employed by local businesses, and/or the purchase of a new home or resale home in Goodyear; and WHEREAS, the Parties understand that the decision of the Company to locate in the City and acquire the property upon which the Goodyear Facility will be located is based on the City s willingness to provide assistance to the Company regarding job creation; design review and permit fees, and expedited development process; and public infrastructure reimbursement; and WHEREAS, under the terms of the Job Creation and Infrastructure Agreement for Dick s Sporting Goods, Inc. (the Agreement ), Dick s is, among other things, required to perform in the following manner: commence site improvements and vertical construction within one hundred twenty (120) days of the Effective Date of this Agreement; meet the city s requirements for development including building the approximately 3-mile-long water line necessary to operate this facility; receive at least a temporary Certificate of Occupancy by December 31, 2012; invest a minimum of fifty-five million dollars ($55,000,000) within three (3) years of the date of the Agreement in constructing, improving, fixturing and equipping the Goodyear Facility; operate the Goodyear Facility continuously for a minimum period of five (5) years from the date Dick s receives a final Certificate of Occupancy for the facility; over the course of three (3) years after final Certificate of Occupancy cumulatively hire one hundred fifty (150) full-time employees, paying them a minimum of $12.50 per hour (including overtime); and will maintain at least 105 full-time employees for the remainder of the seven (7) year term of the Job Creation and Infrastructure Agreement. Dick s also agrees to contract with local Goodyear hotels for at least eight percent (80%) of the Company s annually budgeted room nights related to the Goodyear Facility; and WHEREAS, under the terms of the Agreement, the City has agreed to the following financial commitments: support Dick s efforts to obtain FTZ Status; pay up to a maximum of $500,000 for off-site improvements necessary to operate the Goodyear Facility constructed during Phase I for such improvements as water, sewer, roads or line extensions to the property line; provide assistance with the development process by waiving the cost of expedited plan review fees; waive up to a maximum of $400,000 in plan review and permit fees for Phase I plus up to a maximum of $250,000 in plan review and permit fees for Phase II should Dick s expand within five (5) years of the issuance of the final Certificate of Occupancy for the initial phase; and to pay Dick s up to a maximum of $320,000 for job creation credits for the hiring of Goodyear residents and/or the employee purchase of a new or resale home in Goodyear; the City agreed to pay $3,000 for each eight (8) Employee Credits earned by Dick s for new employees hired before or after the Effective Date of this Agreement who meet the residency requirement and who work at the Goodyear Facility for a minimum of three (3) consecutive months in a full-time capacity with an individual employee qualifying for no Page 7 of 10
more than eight (8) Employee credits, which is equal to two full years of employment. Additionally, the City agreed to pay an additional $3,000 to the company for every employee, who after being hired by the Company, purchases a new or resale home within Goodyear after the Effective Date of this agreement and within three (3) years of the issuance of the final Certificate of Occupancy for the Goodyear Facility, and who resides in such home for a period of at least one (1) year. The Home Purchase Incentive is paid out of the maximum $320,000 for job creation or home purchase; and WHEREAS, under the terms of this agreement, there are specific conditions that must be met for any of these payments. All of the foregoing job creation payments will be made annually and only for employees who are paid at least $12.50 per hour (including overtime) and who receive comprehensive health insurance for which Dick s pays at least 65% of the premium, and who have worked at the Goodyear Facility for at least three consecutive months, and have met the residency requirements. The Home Purchase Incentive payments impose an additional requirement of twelve months of living in the residence within Goodyear. Should the company fail to make the Minimum Capital Investment of $55,000,000 within three (3) years of this agreement, the job creation payments shall be suspended until the minimum investment has been achieved. Infrastructure reimbursements will be made to Dick s or a designated third party beneficiary every six (6) months up to the maximum of $500,000 only after a minimum employment level of 105 employees has been achieved within the first year of operation. THEREFORE, BE IT RESOLVED BY THE MAYOR AND COUNCIL OF THE CITY OF GOODYEAR, ARIZONA, AS FOLLOWS: Section 1. That the recitals set forth above are hereby adopted as findings of fact and incorporated as if fully set forth herein. Section 2. The Mayor and Council of the City of Goodyear find that the Agreement with Dick s serves a public purpose and provides substantial benefit to the public in that it will, among other things: increase and diversify the employment opportunities within the City; encourage the creation of jobs that provide comprehensive health insurance benefits of which at least 65% of the premiums are paid by the employer and that pay at least $12.50 per hour (including overtime); encourage the employment of Goodyear residents; encourage the purchase of a home within Goodyear; directly increase the City s tax revenues based on Dick s fulfillment of its obligations under the Agreement; will increase the City s tax revenues resulting from the economic activities of businesses that support Dick s distribution operations; will serve as a catalyst for the further development of Palm Valley 303; and having this high-profile, nationally known retailer s west coast distribution center locate within the City will enhance the City s reputation and marketability in its continued efforts to foster economic development. Section 3. The Mayor and Council of the City of Goodyear find that the direct benefits the City will receive under the terms of the Agreement equal or exceed the cost Page 8 of 10
of the City s obligations under the Agreement as the maximum obligation the City can incur under this Agreement is $820,000 in direct payments ($500,000 for infrastructure and $320,000 job creation/home purchase) and $650,000 in waived permit fees for both Phases I and II; and in return, and according to its economic analysis, the City will receive approximately $1,848,970 in direct tax revenues from utility taxes, construction sales taxes, and real and personal property taxes generated by Dick s during the first ten (10) years of operation, without taking into account the increase in City tax revenues that will result from the economic activities of businesses that will support Dick s operations during the period of times Dick is contractually obligated to operate or the increase in City tax revenues that will result from economic activity of Dick s employees who will be physically located within Goodyear and will patronize local businesses. Section 4. The Mayor and Council of the City of Goodyear find that the Job Creation and Infrastructure Agreement for Dick s Sporting Goods, Inc., attached hereto as Exhibit A, is in the best interests of the residents of the City of Goodyear. Section 5. The Job Creation and Infrastructure Agreement for Dick s Sporting Goods, Inc. is hereby approved and the City Manager is hereby authorized and directed to execute the agreement on behalf of the City of Goodyear. Section 6. The City Manager and City Staff are hereby authorized and directed to take any and all actions necessary to carry out the intent of this Resolution and the terms of the Job Creation and Infrastructure Agreement for Dick s Sporting Goods, Inc. Section 7. This Resolution shall be effective upon the date it is passed, adopted and approved by the Mayor and Council of the City of Goodyear. Resolution 11-1460 Continued on Following Page Page 9 of 10
PASSED, ADOPTED AND APPROVED by the Mayor and City Council of the City of Goodyear, Maricopa County, Arizona, this 28 th day of November, 2011. Mayor ATTEST: APPROVED AS TO FORM: City Clerk City Attorney Page 10 of 10